Archives for 2015

Do You Have an Exit Plan?

“Exit strategies may allow you to get out before the bottom falls out of your industry. Well-planned exits allow you to get a better price for your business.” From: Selling Your Business by Russ Robb, published by Adams Media Corporation Whether you plan to sell out in one year, five years, or never, you need an exit strategy. As the term suggests, an exit strategy is a plan for leaving your business, and every business should have one, if not two. The first is useful as a guide to a smooth exit from your business. The second is for emergencies that could come about due to poor health or partnership problems. You may never plan to sell, but you never know! The first step in creating an exit plan is to develop what is basically an exit policy and procedure manual. It may end up being only on a few sheets of paper, but it should outline your thoughts on how to exit the business when the time comes. There are some important questions to wrestle with in creating a basic plan and … [Read more...]

What Is Burnout?

Burnout can come with a business that's successful as well as with one that's failing to grow. The right time to sell is before the syndrome becomes a threat to the effective management of a business. What are the warning signs of burnout? • That isolated feeling. The burnt-out owner has been “chief cook and bottle washer” for such an extended period of time that even routine acts of decision-making and action-taking seem like Sisyphean tasks. These owners have been shouldering the burdens alone too long. • Fuzzy perspective. Burnt-out owners are so close to their work that they lose perspective. Prioritizing becomes a major daily challenge, and problem-solving sometimes goes no further than the application of business Band-Aids that cost money in the long run rather than increase profits. • No more fun. Of course, owning a business is hard work, but it should also include an element of enjoyment. The owner who drags himself or herself through every day, with a sense of dread – or … [Read more...]

Happy Employees Can Increase Profits…and Value

Happy employees mean happy customers and clients. An unhappy employee can mean loss of business or worse. How does a business owner create happy and contented employees? It all starts with the hiring process – hiring positive people to start with certainly helps. Offering as many benefits as your business can afford is also a plus. However, one of the big keys is simply for the business owner to treat employees well, and appreciate their contributions. Some owners expect their employees to have the same dedication to the business as they do. They are not owners and don't have the same privileges as an owner does. In most cases, the business is an owner's life, whereas the employee has a life outside of the business. It is important that the owner understands this difference. In the long run, positive and happy owners have happy employees. But if being a good role model doesn't do the job with workers who remain negative, your only recourse is to get rid of them. Reward your people with … [Read more...]

Take a Look at Your Lease

If your business is not location-sensitive, that is, if your business location is immaterial to its success, then the following may not be important. However, lease information is usually helpful no matter what the situation. The business owner whose business is very dependent on its current location should certainly read on. If your business is location-sensitive, which is almost always true for a restaurant, a retail operation, or, in fact, any business that depends on customers finding you (or coming upon you, as is often the case with a well-located gift shop) – the lease is critical. It may be too late if you already have executed it, but the following might be helpful in your next lease negotiation. Obviously, a very important factor is the length of the lease, usually the longer the better. If the property ever becomes available – do whatever it takes to purchase it. However, if you are negotiating a lease for a new business, you might want to make sure you can get out of … [Read more...]

Rating Today’s Business Buyers

Once the decision to sell has been made, the business owner should be aware of the variety of possible business buyers. Just as small business itself has become more sophisticated, the people interested in buying them have also become more divergent and complex. The following are some of today's most active categories of business buyers: Family Members Members of the seller's own family form a traditional category of business buyer: tried but not always “true.” The notion of a family member taking over is amenable to many of the parties involved because they envision continuity, seeing that as a prime advantage. And it can be, given that the family member treats the role as something akin to a hierarchical responsibility. This can mean years of planning and diligent preparation, involving all or many members of the family in deciding who will be the “heir to the throne.” If this has been done, the family member may be the best type of buyer. Too often, however, the difficulty with the … [Read more...]

A Buyer’s Quandary

Statistics reveal that out of about 15 would-be business buyers, only one will actually buy a business. It is important that potential sellers be knowledgeable on what buyers go through to actually become business owners. This is especially true for those who have started their own business or have forgotten what they went thorough prior to buying their business. If a prospective business buyer is employed, he or she has to make the decision to leave that job and go into business for and by himself. There is also the financial commitment necessary to actually invest in a business and any subsequent loans that are a result of the purchase. The new owner will likely need to execute a lease or assume an existing one, which is another financial commitment. These financial obligations are almost always guaranteed personally by the new owner. The prospective business owner must also be willing to make that “leap of faith” that is so necessary to becoming a business owner. There is also the … [Read more...]

Why Your Company Needs a Physical

Many executives of both public and private firms get a physical check-up once a year. Many of these same executives think nothing of having their investments checked over at least once a year – probably more often. Yet, these same prudent executives never consider giving their company an annual physical, unless they are required to by company rules, ESOP regulations or some other necessary reason. A leading CPA firm conducted a survey that revealed: 65% of business owners do not know what their company is worth; 75% of their net worth is tied up in their business; and 85% have no exit strategy There are many obvious reasons why a business owner should get a valuation of his or her company every year such as partnership issues, estate planning or a divorce; buy/sell agreements; banking relationships; etc. No matter what the reason, the importance of getting a valuation cannot be over-emphasized:An astute business owner should like to know the current value of his or her company as … [Read more...]

Should You Be Selling Your Company…Now?

The answer to the question asked in the title is, “It all depends!” There are all sorts of studies, surveys and the like suggesting that as more and more “baby-boomers” reach retirement age, the market will be flooded with companies for sale. The consensus is that with these privately-held company owners reaching and nearing retirement age, the time to sell is now. In one survey, 57 percent of business owners said that their age was the motivating factor for exiting their business. In another one, 75 percent of owners with revenues between $1 million and $150 million stated that they looked to sell within the next three years. Reading all of this information, one gets the feeling that over the next few years almost every privately-held business will be on the market. While there are always going to be those who feel that Armageddon is coming, or that all of these companies are going to be on the market on the day that baby-boomer owners hit 65, there are some compelling reasons to sell … [Read more...]

How Does Your Business Compare?

When considering the value of your company, there are basic value drivers. While it is difficult to place a specific value on them, one can take a look and make a “ballpark” judgment on each. How does your company look? Value DriverLowMediumHigh Business TypeLittle DemandSome DemandHigh Demand Business Growth LowSteadyHigh & Steady Market Share SmallSteady GrowthLarge & Growing ProfitsUnsteadyConsistentGood & Steady Management Under StaffedOkayAbove Average FinancialsCompiledReviewedAudited Customer BaseNot SteadyFairly SteadyWide & Growing Litigation SomeOccasionallyNone in Years SalesNo GrowthSome GrowthGood Growth Industry TrendOkaySome GrowthGood Growth The possible value drivers are almost endless, but a close look at the ones above should give you some idea of where your business stands. Don't just compare against businesses in general, but specifically consider the competition. As part of your overall exit strategy, what can you do to improve your company? © … [Read more...]

The Confidentiality Agreement

When considering selling their companies, many owners become paranoid regarding the issue of confidentiality. They don't want anyone to know the company is for sale, but at the same time, they want the highest price possible in the shortest period of time. This means, of course, that the company must be presented to quite a few prospects to accomplish this. A business cannot be sold in a vacuum. The following are some of the questions that a seller should expect a confidentiality agreement to cover: What type of information can and can not be disclosed? Are the negotiations open or secret? What is the time frame for which the agreement is binding? The seller should seek a permanently binding agreement. What is the patent right protection in the event the buyer, for example, learns about inventions when checking out the operation? Which state's laws will apply to the agreement if the other party is based in a different state? Where will disputes be heard? What recourse do you have if … [Read more...]