Blog

Do You Know What Kind of Business Owner You Really Are?

Does your business have real, long-lasting longevity or is your business a temporary entity that will vanish the second you stop working on it?  In his insightful article in The Business Journals entitled, “Are You Living for Today as a Business Owner or Building Value?” author Kent Bernhard asks a very important question of readers, “Are you a lifestyle business owner or a value accelerator?” 

Many business owners have never stopped to ask this very important, yet basic, question regarding their businesses.  So, let’s turn our attention to this key question that all business owners must stop and ask at some point.

As Bernhard points out the core issue here is how a given business owner defines the idea of success for him or herself.  As Chuck Richards, the CEO of CoreValue Software notes, “At the end of the day, a lifestyle business is just a job.” 

Richards goes on to note that this is fine for many people.  But if this is the case, it is a choice that one is making.  Therefore, lifestyle business owners should be aware that they are, in fact, clearly making a choice.

Business owners who are lawyers, consultants and accountants often fall into the category of those with a “business as a job.”  They fail to accumulate enough assets for their business to really be more than a job.  Summed up in another fashion, the business generates enough revenue to provide a comfortable lifestyle.  However, it does not have the infrastructure or equity to remain profitable, or even in existence, once they walk away.  As the owner and operator of the business, they are vital to its very existence.  This means that the business only has value so long as the owner is working in the business on a regular basis.  As a result, the owner may never really be able to exit the business.

As Bernhard points out, “To build a business as an asset, you have to become a value accelerator who looks beyond whether the business’ profits are sufficient to maintain your lifestyle.  It means looking at the business as an entity outside yourself.”  Those who fall into the value accelerator category, focus on figuring out creating value for the business as a financial asset that can operate independently. 

Making sure that your business can continue on without you means that you have to build it, and that involves having a coherent and focused plan.  Plan in advance and know how you will exit your business.  To ultimately create value for the business entity itself, a plan must be in place that allows for your successful exit.

Copyright: Business Brokerage Press, Inc.

Natee Meeplan/BigStock.com

How To Structure Your Earn-Out (Without Getting Burned)

Kristin Delwo co-founded Stacks, a software used by librarians.  Though the software was still early in its life, Delwo wanted to scale quickly and decided to look for a deep-pocketed acquirer.  Delwo was too early in her life-cycle to attract an all cash offer so agreed to sell her business putting much of her consideration “at risk” in an earn-out.

In this episode, you’ll learn:

  • The biggest mistake to avoid when structuring your earn-out contract
  • How to value a company when you’re buying out an existing partner
  • The best way to get buy-in from employees when moving from a consulting to a product-based company
  • The one strategic reason Delwo chose to partner with EBSCO instead of building her own sales force
  • The one fundamental decision Delwo made to set herself up for success in the sale

Listen Now

Kristin Delwo approached her business exit with a flexibility.  She was willing to accept different options because she knew it would help her company scale.  Having Structuring Flexibility is a key driver of ensuring a personally satisfying exit.  Find out how personally ready you would be if you exited your business tomorrow.  Take your free, 5-minute PREScore™ questionnaire now.

_____________________________________

If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

Business Buyers Can Leverage SBA Lending

Finding the money to start your own small business can be a challenge.  Over the decades, countless people have turned to the Small Business Administration (SBA) for help.  A recent Inc. Magazine article, “Kickstart Your Business Dreams with SBA Lending,” by BizBuySell President, Bob House, explored how SBA lending can be used to the buyer’s advantage.

The article covers the basics of an SBA loan and who should try to get one.  House notes that the SBA doesn’t provide loans itself, but instead facilitates lending and even micro-lending with a range of partners.  The loans are backed by the government, which means that lenders are more willing to offer a loan to an entrepreneur who might not typically qualify for one.  The fact is that the SBA will cover 75% of a lender’s loss if the loan goes into default. 

Entrepreneurs can benefit tremendously from this program.  In some cases, an SBA loan even means skipping the need for collateral.  SBA loans can be used for those looking to open a business, expand their existing business or open a franchise.

House points out that getting an SBA loan has much in common with receiving other types of loans.  For example, it is necessary to be “bank ready.”  By “bank ready,” House means that all of your financial documentation should be organized, clear to understand and ready to go. 

Next, a buyer would need to check that he or she qualifies, find a lender and fill out the necessary SBA forms.  In order to be eligible for an SBA loan, it is necessary that the business is a for-profit venture and that it will do business in the United States.  Once the necessary forms have been submitted, it can take between 2 to 3 months for an application to be processed and potentially approved.  

The simple fact is that the SBA helps thousands of people every year.  If you are looking to buy a business or expand your current business, then working with the SBA could be exactly what you need.  Of course, business brokers are experts on what it takes to buy.  Working with a broker stands as one of the single best ways to turn the dream of owning a business into a reality.

________________________________________________

Whether you are looking to exit your privately held business, represent an acquisition-minded corporation, value your business, or are personally interested in owning or building value in your own company or franchise, Colonial Business Brokerage offers the professional services that successfully bring buyers and sellers together.

 

Copyright: Business Brokerage Press, Inc.

wrangler/BigStock.com

When Your Best Acquirer Is Already On The Payroll

Would you consider selling your business to an employee?

They’d probably fit the bill – good understanding of the business, passionate about your mission, and more likely to continue your legacy – but, they likely won’t have the cash to front such a large transaction either.

When Lori Moen decided to step back from her business, Viking Trophies, she sought out large, strategic acquirers — but nobody showed interest.  That’s when she looked internally and found her General Manager was interested in taking over.

In this episode, you’ll learn:

  • The pros (and cons) of selling to an internal employee
  • What to look for when structuring the financing (hint: you may need to lend some of the money)
  • 3 different selling options – including the benefits of each
  • The sneaky terms and conditions to look out for when selling your business to an employee
______________________________________

If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

How One Consulting Company Used The ‘Netflix Model’ To Transform

Boyd Davis – and his three co-founders – created Kogentix with a mission to provide the same behavior data that recommends the ‘next show to watch’ on Netflix… in industries like banking and groceries.

They started as a consultancy and soon realized in order to grow they would need to transform their services offering business into a product-based model.

Find out how this change helped them grow from zero to 240 employees in just three years, and ultimately sell Kogentix to the biggest digital marketing agency in the world: Accenture.

In this episode, you’ll learn:

  • What value awaits you in a product-based company
  • How to finance your growth using an unusual debt Instrument
  • The buzzwords you should be using to describe your business (and when they don’t matter)

Listen Now

________________________________________

If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

When To Hire A President To Run Things

Jim Brown had been running TerrAlign, a software company that helps clients optimize their sales territories,  for more than two decades when he decided to promote Ken Kramer to run things as the company’s President.

Kramer was so good at leading the business that Brown ultimately asked him to manage the process of selling it. TerrAlign was subsequently acquired by MapAnything in December 2018. Then in April 2019, MapAnything was itself acquired by Salesforce.com.

In this episode, you’ll learn:

  • Where to find your second-in-command (Hint: they might already work for you)
  • How to structure a compensation plan that aligns your President to your goals
  • How to protect yourself when your acquirer gets acquired
  • Ways to ensure your business will run successfully without you
  • How to build a company that acquirers want to buy
  • How Kramer was compensated to get to the finish line of the acquisition

Listen Now

_______________________________________

If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

How Employees Factor into the Success of Your Business

Quality employees are essential for the long-term success and growth of any business.  Many entrepreneurs learn this simple fact far too late.  Regardless of what kind of business you own, a handful of key employees can either make or break you.  Sadly, businesses have been destroyed by employees that don’t care, or even worse, are actually working to undermine the business that employs them.  In short, the more you evaluate your employees, the better off you and your business will be.

Forbes’ article “Identifying Key Employees When Buying a Business”, from Richard Parker does a fine job in encouraging entrepreneurs to think more about how their employees impact their businesses and the importance of factoring in employees when considering the purchase of a business. 

As Parker states, “One of the most important components when evaluating a business for sale is investigating its employees.”  This statement does not only apply to buyers.  Of course, with this fact in mind, sellers should take every step possible to build a great team long before a business is placed on the market.

There are many variables to consider when evaluating employees.  It is critical, as Parker points out, to determine exactly how much of the work burden the owner of the business is shouldering.  If an owner is trying to “do it all, all the time” then buyers must determine who can help shoulder some of the responsibility, as this is key for growth.

In Parker’s view, one of the first steps in the buyer’s due diligence process is to identify key employees.  Parker strongly encourages buyers to determine how the business will fair if these employees were to leave or cross over to a competitor.  Assessing if an employee is valuable involves more than simply evaluating an employee’s current benefit.  Their future value and potential damage they could cause upon leaving are all factors that must be weighed.  Wisely, Parker recommends having a test period where you can evaluate employees and the business before entering into a formal agreement.

It is key to never forget that your employees help you build your business.  The importance of specific employees to any given business varies widely.  But sellers should understand what employees are key and why.  Additionally, sellers should be able to articulate how key employees can be replaced and even have a plan for doing so.  Since, savvy buyers will understand the importance of key employees and evaluate them, it is essential that sellers are prepared to have their employees placed under the microscope along with the rest of their business.

______________________________________________

Whether you are looking to exit your privately held business, represent an acquisition-minded corporation, value your business, or are personally interested in owning or building value in your own company or franchise, Colonial Business Brokerage offers the professional services that successfully bring buyers and sellers together.

Copyright: Business Brokerage Press, Inc.

fizkes/BigStock.com

What to Do When Something New Attracts your Attention

Jessica Tindel and her partner started Dream Enrichment Classes, a business offering after school programs in math and art 13 years ago. Tindel built the business to 60 part time instructors and 5 full time office staff when a new business caught her attention. Stretched thin and drawn to the potential of her new idea, she decided to sell. In this episode, you’ll discover:

In this episode, you’ll learn:

  • How “add backs” can significantly boost the value of your company
  • The two things Tindel recommends every partnership agreement should include
  • How many years a buyer will consider when evaluating the performance of your business
  • The definition of “good will” and how to make sure you get paid for yours
  • Who owns the cash in your company when you go to sell it (you may be surprised by the answer)
  • The two things Tindel wished she had done differently if she could sell her business all over again.

Listen Now

____________________________________

If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

7 Big Questions to Ask Yourself Before Moving Forward

The first step towards successfully selling a business is finding a qualified business broker to work with.  Sellers should also ask themselves an array of important questions.  A recent article, “7 Questions to Answer Before Selling Your Business,” published by Good Men Project, has a great overview of questions sellers should answer before moving forward.

Author Troy Lambert believes that at the top of the list is one very simple and powerful question, “Are you ready?”  For example, your financial reports should be ready to show.

The second question is, “What’s it worth?”  Determining what a business is worth means you’ll need a professional business valuation.  A great deal can go into evaluating your business and you need an expert to help you determine that value.

Third, Lambert believes that prospective sellers should ask themselves, “How’s the health of my industry?”  He emphasizes that honesty is key here for a variety of reasons.  If your industry is in a transition period, for example, then it might be better to wait until a better time to sell.

The fourth question on Lambert’s list is, “How long will it take?”  In short, you need to remember that selling a business can take a long time.  Successfully selling your business may even mean that you have to stay on and work with the new owner during a transition period.

The fifth key question is, “Who is my buyer?”  You don’t want to waste a lot of time with potential buyers who are simply not a good fit.  Finding the right buyer for your business helps to ensure that a deal will be finalized.

Sixth, Lambert wants sellers to think about how they will get paid.  Are you willing to finance part of the deal?  What about balloon payments over time?  Understanding, before you put your business on the market how you want to be paid and how flexible you can be in terms of payment is essential.

For most sellers, selling a business will stand as the largest financial decision of their lives.  With this realization comes more than a little pressure.

Considering the enormity of the decision, having good advice is simply a must.  A seasoned and experienced business broker understands what it takes to buy and sell a business.  Working with a business broker is an easy and efficient way to begin the process of selling your business.  Brokers know what it takes to successfully sell a business and can help you answer these questions and many more.

________________________________________

Whether you are looking to exit your privately held business, represent an acquisition-minded corporation, value your business, or are personally interested in owning or building value in your own company or franchise, Colonial Business Brokerage offers the professional services that successfully bring buyers and sellers together.

Copyright: Business Brokerage Press, Inc.

dolgachov/BigStock.com

The Other Half Of The Equation

To have a happy and lucrative exit, you need two things:

1.  A business that is ready to sell

2. An owner that is personally ready to sell

…Yet so many owners fail to consider the latter and wind up crippled with depression because of their regret to exit – which is exactly what happened to one owner after he accepted a $26 million offer.

How can that be possible?

In this week’s special episode, host John Warrillow shares insight into the 4 key drivers of a satisfying exit, including the tragic lessons learned from other owners and the steps you can take as a business owner today to ensure the next chapter of your life will not be riddled with regret.

Listen now

In this episode, you’ll learn:

  • The 4 factors that lead to a happy and lucrative business exit
  • The “Happy, Rich or Famous?” paradox
  • The single most important trick to a satisfying exit
  • 5 ways to maximize the value of your business now
  • The single biggest regret most owners have when they exit (and how to avoid it).

_________________________________________

If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.