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How One Bad Boy Clause Landed an 8-Figure Deal

Can you actually thrive in an industry you don’t know much about?

According to Erik Van Horn, former franchise owner of Sola Salon Studios, you sure can.

Achieving his success as a franchise owner always looking for the next deal, Van Horn stumbled across the salon industry in 2014. Though a new-found territory, Van Horn and his business partners invested in Sola Salon Studios and grew to own 12 locations in Orange County, California by 2018.

All the while, Van Horn remained a ‘non-expert’ in the industry and only dedicated a couple of hours each week to the business he was able to evolve into a multi-million-dollar enterprise.

So, how did he reach an eight-figure exit?

In this episode, you’ll learn:

  • The ‘Bad Boy Clause’ and why Van Horn recommends it for partnerships
  • How to calculate your ‘Dream Number’
  • How to protect yourself from landlord and lease delays
  • “TI” dollars and what they could mean for your business.
  • The idiosyncrasies and nuances of selling a franchise

Listen Now

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

Wisdom From Wall Street: How To Buy, Then Sell

Matt Slaine is an investor who grew up on Wall Street. In pursuit of his next move (and an intent to own), he decided to purchase a company, instead of starting one.

What followed was a journey of identifying his perfect candidate (Progressive Business Media, a B2B media and communications company in the home furnishings and gift space,), buying it in 2012 – and, (true to style) investing in the business to ensure it could one day thrive without him.

Find out how Slaine used his wisdom from Wall Street to turn Progressive Business Media into a 100-employee company that would successfully sell through an unsolicited acquisition offer.

In this episode, you’ll learn:

  • The best way to find a business to buy
  • How to build up the value of your business over time
  • Slaine’s best advice for making your business less dependent on you
  • How you can thrive in a “dying” industry
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If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

The Hidden Downside Of This Common Management Idea

Cross selling new products and services to your existing customers may be a great marketing strategy, but if your goal is to increase the value of your business, the added revenue may do nothing for your company’s value – and may even lower it.

In order to be acquired for a premium, consider committing to a product, service, or a bundle that does one thing well. Your aim should be to make that offering so irresistible, that an acquirer will stop at nothing to get their hands on it. This focus will help you build a team around your product or service and ultimately make your company a whole lot more attractive when it comes time to sell.

However, most companies do the opposite. They take their initial success and water it down by cross-selling additional products, leveraging their relationship with their customers to sell them merely good offerings on the back of their great product or service. The problem with wandering too far a field is that while add on products may increase your revenue, they decrease your attractiveness to a strategic acquirer. Like being asked to buy a cable package of hundreds of channels when all you want is a few, acquirers don’t like buying things they will not use and therefore often walk away from a deal where a great product has been watered down with dozens of less attractive products or service lines.

How Stelligent Lost Its Focus (and found it again)

For example, take a look at Stelligent, a company in the business of helping website owners configure their software for the servers that host it. There was a time when big companies used to install their software deep, deep into operations – but the emergence of ‘The Cloud’ changed that. Led by companies like Salesforce.com, workers now get access to the software they use anywhere they have access to a web browser.

Just as you might rent an apartment in a building, software developers pick one of the big cloud service providers like Microsoft Azure, Google Cloud, or Amazon Web Service (AWS) to rent space to host their code.  Since Azure, Google, and AWS all take a different approach to hosting, an entire industry has been created to help developers configure their software for the cloud service provider they pick.

Paul Duvall, co-founder of Stelligent, is one of the pioneers of this industry called Dev Ops – or, Development Operations. Duvall started Stelligent in 2008 with his then silent partner Rob Daly. The goal was to help developers accelerate how quickly they could bring their software to market.

Stelligent was a typical consulting company, selling the time of the engineers Duvall hired on contract as his business required them. If customers were going to host their software with Azure, he would employ engineers familiar with Azure. Likewise, if customers planned to host with AWS, he’d bring in a group familiar with AWS.

By 2013, Stelligent had a half dozen contract workers and hovered around one million in annual revenue, as project demand ebbed and flowed. Duvall felt he was running on a treadmill. Each new project Duvall won required him to build a whole new team.

Around that time Rob Daly, fresh from exiting his last company, joined Duvall and took over as CEO of Stelligent. Daly had enjoyed success starting and growing other companies and encouraged Duvall to complete The Scalability Finder, par of module two within The Value Builder System™. The exercise revealed it would be impossible for Stelligent to scale into a valuable business if they were to continue to have to train a new team for each project. Instead, Daly reasoned that they should specialize in configuring software for only one of the cloud providers and build a team of full-time employees who were experts.

Duvall initially hesitated, worried they would be walking away from a lot of business. He eventually capitulated, and for the first few months he feared he might have been better to trust his gut. They lost projects as customers came to Stelligent asking for help to configure their software for one of the other cloud service providers.

However, as time went by, Stelligent began earning a name for itself as the AWS specialists. As Amazon’s website hosting service grew in popularity, so did demand for Stelligent’s services. Over the next three years, Stelligent blossomed into a multi-million-dollar business with 30 full-time employees.

By early 2017, Denver-based HOSTING Inc. saw how quickly AWS was growing and concluded that by acquiring Stelligent, they could leapfrog their competition and become a market leader in AWS almost overnight. Later that year, HOSTING acquired Stelligent for around two times revenue — about double what a typical consulting company would hope to command for a similar-sized business.

The story of Stelligent is a reminder why you should focus your limited resources on becoming so good in your niche that an acquirer reasons it would take too long – or cost too much – to compete.

Most small businesses with limited cash, can only afford to get that good at solving one problem for their customers. That kind of focus is the opposite of what most sales and marketing pundits preach but it may be the one thing that will make your company irresistible to an acquirer.

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

 

Is Your Business Really Worth Handing Over to the Next Generation?

Before you begin your business, you should be thinking about how you will hand that business over to someone else.  No one runs a business forever.  Whether you sell your business or let a relative inherit it, at some point you will need to step away. 

When you finally do separate from your business, it is critical that you are certain that it is worth handing over.  In his January 2019 article in Forbes magazine entitled “Make Sure Your Business is Worth Handing Over,” author Francois Botha dives in and explores this very topic.

In this article, Botha emphasizes that family businesses should not “fall into the trap of prioritizing job creation for their children.”  Instead, that the priority should be to perpetuate the business.  Botha cites the co-founder and chairman of The Leadership Pipeline Institute, Stephen Drotter, who feels that the main goal of any business needs to be its suitability.

Drotter established five principles designed to assist family businesses as they seek to prepare for succession.  The first principle is to “Identify and Fix Your Problems.”  Current ownership should deal promptly with any business problems before passing a business on to a new generation.

The second principle Drotter covers is to “Adjust Your Management to the Strategic Evolution of Your Business.”  Businesses evolve from the creation of a product to sell to focusing on sales, marketing and distribution to finally addressing a plateau in sales which facilitates the need for multi-functional management.

The third principle cited by Drotter is “Talk to Your People About Them.”  In this principle, communication with employees is key.  Getting to know and understand employees is vital.

“Be on the Lookout for Talent Everywhere,” is the fourth principle.  There is no replacement for skilled and motivated employees, and you never know where you may find them.

Finally, the fifth principle, “Provide Development” emphasizes that “almost everything is learned, and somebody often taught that which is learned.”  Employee skill must be seen as a key priority.

Making sure that a business is ready for transition to the next generation involves careful preparation and a good deal of advanced planning.  The sooner that you begin asking the right kind of thoughtful questions about the current state of your business and what will benefit it moving forward, the better off everyone will be.

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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.

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When It Makes Sense To Accept Equity Instead Of Cash

Darby founded customer software consultancy Matched Pattern in 2017 but had become exhausted by the hamster wheel of constantly chasing new business to keep his consultants busy.

As a project-based consultancy, Darby’s exit options were limited so he decided to swap his equity in Matched Pattern for shares in Matched Pattern, a company with a desperate need for software engineers.

In this episode, you’ll learn:

  • When it makes sense to accept equity instead of cash
  • The hardest part of running a service business
  • The best tip Darby received before even starting his business

Listen Now

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

 

Erase the Stress of Selling Your Business by Finding the Right Buyer

There is no denying the fact that life is much, much easier when one can find the right buyer for his or her business.  Buying or selling a business can be a stressful affair, but much of that stress can be eliminated by getting the right support.

The Concept of the “Right Buyer” 

In the recent Inc. article entitled, “How to Find the Right Buyer for Your Business and Avoid Negative Consequences,” Bob House builds his article around a relatively simple and straightforward, but powerful, concept.  House’s notion is, “the right buyer is worth more than a big check.”

House correctly points out that far too many sellers become fixated on exiting their business and grabbing a big pay day.  In their focused interest in the sum they will receive, these sellers ignore a range of other important details.  In part, sellers often miss the single greatest variable in the entire process: finding the most qualified buyer.  The simple fact is that if sellers want to reduce their long-term stress, then there is no replacement for finding the most qualified buyer, as the wrong buyer can be “headache city!”

Plan in Advance

As House points out, it is only prudent to determine what you want out of a buyer well before you put your business up for sale.  For example, if you don’t want to offer financing, then that is a decision you need to make well before you begin the process. 

Additionally, House wisely places considerable interest on pre-screening potential buyers.  Pre-screening is a great reason to work with an experienced and proven business broker who can assist with the process.  As a business owner your time is precious.  The last thing you want are a lot of window shoppers wasting your time. 

Keep Your Focus on Your Business 

Remember, while your business is up for sale, you still have to run your business.  Quite often, business owners have difficulty running their business and navigating the complex sales process simultaneously.  The end result can be disastrous, as revenue can drop and business problems can arise.

Working with a business broker means that you are dramatically reducing your potential stressors throughout the sales process.  A business broker will ensure that potential buyers are pre-screened and that only serious buyers are brought to you for consideration. 

Currently, the market conditions are great for sellers.  If you are considering selling, now is the time to find a business broker and jump into the market!

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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.

Warren Buffet’s Advice On Creating A Valuable Business

Warren Buffett invests in companies with a “competitive moat” which he defines as a durable competitive advantage. Most founders start with a unique idea for their business which becomes diluted as the owner chases revenue at the expense of their original vision.

Take Mitch Durfee for example. Durfee started Grunts Moves Junk, a junk removal and moving company, to help his local community and provide his fellow veterans with a job upon returning from deployment.

But while the business was generating $1.4 million in annual revenue after just two years, Durfee was also losing sight of his initial vision. Durfee was trying to please his customers by offering services completely outside of his original business idea. A 7-figure revenue looked nice on paper, but Durfee was racking up $100,000 in debt, stretching his 20-employee team too thin and struggling to keep up with payroll.

To an acquirer, the business was worthless.

After hitting rock bottom, Durfee made one critical decision that completely rebuilt his company and enabled him to sell Grunts Move Junk successfully last year.

In this episode, you’ll learn:

  • One key decision with the power to transform your company
  • Why a fast-growing business can still be worthless
  • How you might need to scale back your business in order to boost its value

Listen Now

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

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.

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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.

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.

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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.

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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