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8 Things That Drive the Value of Your Company

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Value Builder System™.

If you’re like a lot of entrepreneurs, you use your Profit & Loss statement as your report card at the end of the year.  You may even use your P&L to figure out what your company is worth by applying a multiple to your profit.  But having worked with and surveyed more than 40,000 entrepreneurs, we have seen examples of companies that fetch up to three times more than the average price for companies in their industry.  Likewise, we’ve seen cases where company’s business value is worth less than half the average multiple of their peer group.

Why would one company be worth two or three times more than a similar company in the same industry?

We have discovered that there are eight factors that actually impact your company’s value more than the industry you’re in.

Schedule a free strategy session where you’ll learn how to:

– Optimize the eight drivers of company value;

– Maximize your company’s overall value;

– Find strategic buyers for your business;

– Structure your business to maximize its value;

– Accelerate the pace of positive word-of-mouth for your business using the same technique as companies like Eventbrite, Intuit, Google and Apple;

– Boost your company’s cash flow in the same way Harley Davidson finances its business;

– Differentiate your business using the same methodology Warren Buffet looks for in the companies he invests in;

– Minimize your company’s reliance on your personal involvement using some of the strategies Tim Ferriss used to reduce the time he spent in this business to just four hours a week.

Do you want to improve the value of your business?  Call us today at (443) 982-7332 or schedule your free strategy session here.

10 Questions Everyone Should Ask Before Signing on the Dotted Line

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Buyer Articles, Buyer FAQ, Buying a Business.

Before buying any business, a seller must ask questions, lots of questions.  If there is ever a time where one should not be shy, it is when buying a business.  In a recent article from Entrepreneur magazine entitled, “10 Questions You Must Ask Before Buying a Business”, author Jan Porter explores 10 of the single most important questions prospective buyers should be asking before signing on the dotted line.   She points out to remember that “there are no stupid questions.”

The first question highlighted in this article is “What are your biggest challenges right now?”  The fact is this is one of the single most prudent questions one could ask.  If you want to reduce potential surprises, then ask this question.

“What would you have done differently?” is another question that can lead to great insights.  Every business owner should be an expert regarding his or her own business.  It only makes sense to tap into that expertise when one has the opportunity.  The answers to this question may also illuminate areas of potential growth.

How a seller arrives at his or her asking price can reveal a great deal.  Having to defend and outline why a business is worth a given price is a great way to determine whether or not the asking price is fair.  In other words, a seller should be able to clearly defend the financials.

Porter’s fourth question is, “If you can’t sell, what will you do instead?”  The answer to this question can give you insight into just how much bargaining power you may have.

A business’ financials couldn’t be any more important and will play a key role during due diligence.  The question, “How will you document the financials of the business?” is key and should be asked and answered very early in the process.  A clear paper trail is essential.

Buying a business isn’t all about the business or its owner.  At first glance, this may sound like a strange statement, but the simple fact is that a business has to be a good fit for its buyer.  That is why, Porter’s recommended question, “What skills or qualities do I need to run this business effectively?” couldn’t be any more important.  A prospective buyer must be a good fit for a business or otherwise failure could result.

Now, here is a big question: “Do you have any past, pending or potential lawsuits?”  Knowing whether or not you could be buying future headaches is clearly of enormous importance.

Porter believes that other key questions include: “How well documented are the procedures of the business?” and “How much does your business depend on a key customer or vendor?” as well as “What will employees do after the sale?”

When it comes to buying a business, questions are your friend.  The more questions you ask, the more information you’ll have.  The author quotes an experienced business owner who noted, “The more questions you ask, the less risk there will be.”

Business brokers are experts at knowing what kinds of questions to ask and when to ask them.  This will help you obtain the right information so that you can ultimately make the best possible decision.

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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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A Step by Step Overview of the First Time Buyer Process

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Buyer Articles, Buyer FAQ, Buying a Business.

A recent article on Businessbroker.net entitled, First Time Buyer Processes by business broker Pat Jones explores the process of buying a business in a precise step-by-step fashion.  Jones notes that there are many reasons that people buy businesses including the desire to be one’s own boss.  However, he is also quick to point out that buyers should refrain from buying a business that they simply don’t like.  In the quest for profits, many prospective owners may opt to do this, but it could ultimately lead to failure.

Step One – Information Gathering

For Jones, there are seven steps in the business buying process.  At the top of the list is to gather information on businesses so that one has an idea of what kind of businesses are appealing.

Step Two – Your Broker

The second key step is to begin working with a business broker.  This point makes tremendous sense; after all, those new to the business buying process will benefit greatly from working with a guide with so much experience.  Business brokers can gain access to information that prospective business owners simply cannot.

Step Three – Confidentiality and Questions

The third step in the process is to sign a confidentiality agreement so that you can learn more about a business that you find interesting.  Once you have the businesses marketing package, you’ll want to have your broker schedule an appointment with the seller. It is vitally important that you prepare a list of questions on a range of topics.  There is much more to buying a business than the final price tag.  By asking the right questions, you’ll be able to learn more about the business and its long-term potential.

Step Four – Evaluation

In the fourth step of the business buying process, you’ll want to evaluate all the information that you have received from the seller.  Once again, a business broker can be simply invaluable, thanks to years of hands-on experience, he or she will know how to evaluate a seller’s information.

Step Five – The Decision

In the fifth step, you’ll need to decide whether or not you are making an offer.  If you are making an offer, you will, of course, want it to be written and include contingencies.

If your offer is accepted, then the process of due diligence begins.  During due diligence, you and your business broker will look at everything from financial statements to tax returns.  You will evaluate the company’s assets.  Again business brokers are experts at the due diligence process.

Buying a business is an enormous commitment.  Making certain that you’ve selected the right business for you is one of the most critical decisions of your life.  Having as much competent and experienced help as possible is of paramount importance.

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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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5 Reasons Why Your Business Is Too Dependent On You

Posted by & filed under Build Business Value, Building Business Value, Business Owner.

If you were to draw a picture that visually represents your role in your business, what would it look like? Are you at the top of an organizational chart, or stuck in the middle of your business like a hub in a bicycle wheel?

The Hub & Spoke model of The Value Builder System™ is a driver that shows how dependent your business is on you for survival. The Hub & Spoke model can only be as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid these types of managed businesses because they understand the dangers of buying a company too dependent on the owner.

Here’s a list of the 5 top warning signs that show your business could be too dependent on you.

1. You are the only signing authority

Most business owners give themselves final authority… all the time. But what happens if you’re away for a couple of days and an important supplier needs to be paid? Consider giving an employee signing authority for an amount you’re comfortable with, and then change the mailing address on your bank statements so they are mailed to your home (not the office). That way, you can review everything coming out of your account and make sure the privilege isn’t being abused.

2. Your revenue is flat when compared to last year’s 

Flat revenue from one year to the next can be a sign you are a hub in a hub-and-spoke model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business dependent on its owner reaches capacity at some point. Consider narrowing your product and service line by eliminating technically complex offers that require your personal involvement, and instead focus on selling fewer things to more people.

3. Your vacations… don’t feel like vacations

If you spend your vacations dispatching orders from your mobile, it’s time to cut the tether. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without affecting your business.

4. You know all of your customers by first name 

It’s good to have the pulse of your market, but knowing every single customer by first name can be a sign that you’re relying too heavily on your personal relationships being the glue that holds your business together. Consider replacing yourself as a rain maker by hiring a sales team, and as inefficient as it seems, have a trusted employee shadow you when you meet customers so over time your customers get used to dealing with someone else.

5. You get cc’d on more than five e-mails a day 

Employees, customers and suppliers constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval or that you have not made clear when you want to be involved in their work. Start by asking your employees to stop using the cc line in an e-mail; ask them to add you to the “to” line if you really must be made aware of something – and only if they need a specific action from you.

Do you want to improve the value of your business?  Call us today at (443) 982-7332 for a free Strategy Session.

A Must Read Article on Having Children Take Over the Family Business

Posted by & filed under Business Owner, Business Valuation, Exit Planning, Seller Articles, Seller FAQ, Selling a Business.

 

In a recent Divestopedia article entitled, “Kids Take Over the Business? 8 Things to Consider,” author Josh Patrick examines what every business owner should know about having their children take over their business.  He points out that there are no modern and accurate numbers on what percentage of businesses will be taken over by the children of their owners.  But clearly the number is substantial.

Patrick emphasizes as point number one that allowing a child to take over a business right after finishing his or her education could be a huge mistake.  After all, how can a parent be sure that a child can handle operating the business without some proven experience under his or her belt?

Point number two is that businesses frequently create jobs for the children of owners.  The flaw in this logic is pretty easy to see. This job, regardless of its responsibilities, isn’t in fact a real job.  Senior decision-making roles should be earned and not handed out as a birthright. The end result of this approach could create a range of diverse problems.

The third point Patrick addresses is that pay should be competitive and fair when having children take over a business.  Quite often, the pay is either far too high or far too low. This factor in and of itself is likely to lead to yet more problems.

Business growth must always be kept in mind.  When having your children take over a business, it is essential that they have the ability to not just maintain the business but grow it as well.  If they can’t handle the job then, as Patrick highlights, you are not doing them any favors. Perhaps it is time to sell.

Another issue Patrick covers is whether or not children should own stock.  If there are several children involved, then he feels it is important that all children own stock.  Otherwise, some children will feel invested in the business and others will not. In turn, this issue can become a significant problem once you, as the business owner, either retire or pass away.

In his sixth point, Patrick recommends that a business should only be sold to children and not given outright.  If a child is simply given a business, then that business may not have any perceived value. Additionally, if a child or children buy the business, then estate planning becomes much more straightforward.

In point seven, Patrick astutely recommends that once a parent has sold their business to their child, the parent must “let go.”  At some point, you will have to retire. Regardless of the outcome, you’ll ultimately have to step back and let your children take charge.

Finally, it is important to remember that your children will change how things are done.  This fact is simply unavoidable and should be embraced.

Working with an experienced business broker is a great way to ensure that selling a business to your child or children is a successful venture.  The experience that a business broker can bring to this kind of business transfer is quite invaluable.

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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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How To Avoid The Idiot Tax

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Business Valuation, Exit Planning, Seller Articles, Seller FAQ, Selling a Business, Valuation, Value Builder System™.

Kenan Hopkins spent 7 years paying what he calls “the idiot tax”, until he learned the more efficient way to run a business.

Kenan Hopkins founded his delivery food service company, Blue Ridge To Go, with no real management skills, no idea how to run a business, a lump of personal credit card debt, and the worst branding ever – all his words.

Though off to a rough start, he was able to transform his messy company into a new brand – Valet Gourmet – and by 2016 was approaching $4 million in revenue with the lowest delivery driver turnover across the industry.

When he was ready to sell, find out how Hopkins’ talent for industry forecasting, along with a quick text message to an industry friend led to a successful deal.

In this episode, you’ll learn:

  • How to avoid paying the ‘idiot tax’ for years
  • The one reason your employee turnover rate is likely high
  • How your brand can impact the value of your company
  • Why a seven-figure exit can be a lonely place

Listen Now

Hopkins received the price he wanted by confidently being able to show his interested buyer how much Valet Gourmet was expected to grow in the next year. How to quantify your Growth Potential is explored in Module 4 of The Value Builder System™. Get started for free right now by getting your score.

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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.

Embracing Technology to Boost Your Business

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Business Valuation, Exit Planning, Seller Articles, Selling a Business.

Forbes author Keith Gregg’s, February 8, 2019 article, “Using Tech to Enhance and Sell a Business,” has a range of interesting ideas that business owners should explore and embrace.  Gregg looks at three big ways that business owners can use technology to help them get the most out of the sale of the business.  He explains how important it is to address these three areas before placing your business on the market.

Upgrading Systems

The first tip Gregg explores is to upgrade systems.  Upgrading systems can be particularly important for attracting younger buyers.  It is common for businesses to be successful without proprietary technology or procedures, but that doesn’t mean that technology should be ignored.

Important information should be digitized, as this data will be vital for the new owner to grow the business over the long haul.  Incorporating software that can track and analyze data across the business is likewise valuable. Using software, such as customer relationship management and financial management software, will showcase that your business has been modernized.

Business Valuations

Determining the value of your business can be tricky and laborious.  Gregg recommends opting for a business valuation, as he feels, “business valuation calculations can remove much of the guesswork from the process.”

You should expect a business valuation calculator to include everything from verified data on comparable business deals, including gross income and cash flow figures and more.  There are even industry-specific calculations that can be used as well. The main point that Gregg wants to convey is that business owners should use tangible and proven data to sell their businesses.  Like upgrading systems appeals to younger buyers, the same holds true for using verified data to sell.

Take Advantage of the Digital Marketplace

Gregg’s view is that perhaps the single greatest technology for business owners to leverage is that of the digital marketplace.  Sites that link businesses with prospective buyers can help to streamline and expedite the sales process. Through such sites, it is possible to go deeper than a specific industry and even explore sub-sectors, thus enhancing the chances of finding the right buyer.

Technology can be used to help sell businesses in a variety of ways.  An experienced and proven business broker will leverage a whole range of tools to assist business owners when selling their businesses.  When you opt for a proven business broker, you can expect to receive offers from serious and vetted buyers and, in the process, save a great deal of time while maintaining confidentiality.

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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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4 Drivers Of A Satisfying Exit – 4 Real-Life Examples

Posted by & filed under Business Owner, Exit Planning, Seller Articles, Selling a Business.

Built To Sell Radio speaks to many different business owners with unique stories. Some share cautionary tales of the mistakes they still dwell on today; others share a great story about what they believe was (and will remain as) the best day of their life.

But beyond the different stories, there is one consistent theme across every single interview: everyone striving for a happy (and lucrative) exit. How they get there is a different story.

Have you considered what a happy exit looks like for you? There are four key drivers to consider that – if left unseen – could leave you with regret.

Future Vision

Most owners get pushed out of their business, but the happiest exits occur when an owner has an equal or greater number of pull factors.

Shaun Oshman is the founder of iSupportU, a Colorado-based IT support company. He decided he wanted to lead a life slightly less ordinary. He was 39 and his company was generating a couple of million dollars of revenue when he decided that by the age of 40, he wanted to be living on a boat sailing around the world.

Oshman’s company garnered an offer of 2-3 times Sellers Discretionary Earnings (SDE). A fair, but far from fantastic multiple for his business. So why is Oshman so happy? Because he had a vision for the future that he was excited about and 2-3 times SDE allowed him to make that dream a reality.

Listen here.

Structuring Flexibility

Structuring Flexibility describes an owner’s willingness to consider multiple exit scenarios. A lot of founders make the mistake of approaching their exit with a rigid vision of how they see their exit.

Stephanie Breedlove built her payroll company by focusing on parents who wanted to pay their nannies. She built her business to $9 million in annual revenue when she started acquisition discussions with Care.com. Breedlove originally wanted an all cash offer but as she kept negotiating, she became more open to the idea of accepting part of her proceeds in shares – she ended up selling her $9 million business for $54 million – part of which was paid in Care.com stock. Had Stephanie clung rigidly to only one option for selling, she may never have received such a lucrative payday.

Listen here.

Personal Detachment

Personal Detachment is the degree to which your ego is dependent on the status of being an owner of your company. Factors here can lead to an owner becoming unwilling or unable to let go.

Steve Murch has had four exits including his first and most spectacular, the sale of VacationSpot.com to Expedia for $87 million. Since then, Murch has gone on to sell four other businesses including most recently, the sale of his recipe app BigOven (which enjoyed 13 million downloads and 4 million subscribers) to the grocery giant, Aisle Ahead Inc.

Far from being a workaholic, as Murch described during our interview, he has built an amazing life for himself away from his businesses: he’s a cyclist, skier, involved father and the head chef in his house (which is how he came up with the idea for BigOven in the first place!).

Listen here.

Team Involvement

Team Involvement is the ability to be proactive about how you want to treat your team as part of the exit process. This is a deeply personal issue for founders, some of whom would prefer not to tell employees for fear of word getting out among competitors.

Bobby Martin found this out the hard way when he sold his company, First Research to D&B for $26 million. The sale was a financial success for Bobby and his co-founder but emotionally it was crushing. He had started First Research with friends and promoted a collegial atmosphere through First Research’s growth. When negotiations with D&B heated up, he felt guilty not to be able to tell his long-standing employees — many of whom were his closest friends. After the sale, Martin went through a bout of depression and he described during our interview and in his bestselling book The Hockey Stick Principles, spent a year in clinical therapy getting over the loss he felt from selling out.

Listen here.

Do you want to improve the value of your business?  Call us today (443) 982-7332.

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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.

Thinking About Succession Planning

Posted by & filed under Business Owner, Exit Planning, Seller Articles, Seller FAQ, Selling a Business.

If you haven’t been thinking about succession planning, the bottom line is that you should be. In the February 20, 2019 Divestopia article, “All Companies Need to Look at Succession Planning,” author Brad Cherniak examines the importance of succession planning. Owning and/or operating a business can be a great deal of work, but it is imperative to take the time to develop a succession plan.

Succession Planning is for Businesses of All Sizes

Author Cherniak wants every business owner to realize that succession planning isn’t just for big businesses. Yet, Cherniak points out that the majority of small-to-medium sized businesses, as well as their senior managers, simply don’t focus much on succession planning at all.

Many business owners see succession planning as essentially being the same as exiting a business. Cherniak is quick to point out that while the two can be linked and may, in fact, overlap, they are by no means the same thing. They should not be treated as such.

Following an Arc Pattern

Importantly, Cherniak notes, “Succession planning should also be linked to your strategic planning.” He feels that both entrepreneurs and businesses managers follow an arc pattern where their “creativity, energy and effectiveness” are all concerned. As circumstances change, entrepreneurs and business managers can become exhausted and even a liability.

The arc can also change due to a company’s changing circumstances. All of these factors point to “coordinating the arcs of business,” which includes “startup, ramp-up, growth, consolidation, renewed growth and maturity,” with whomever is running the business at the time. In this way, succession planning is not one-dimensional. Instead it should be viewed as quite a dynamic process.

Evaluating Each Company Individually

Cherniak highlights the importance of making sure that the team matches the needs of a company as well as its stages of development. Who is running a company and setting its direction? Answering these questions is important. It also is of paramount importance to make sure that the right person is in charge at the optimal time.

Companies and their circumstances can change. This change can often occur without much notice. As Cherniak points out, few small-to-medium sized businesses focus on succession planning, and this is potentially to their detriment.

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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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You Have Built An Amazing Business…Now What?

Posted by & filed under Exit Planning, Seller Articles, Seller FAQ, Selling a Business.

As a business owner, I know you’re ready for anything. But recent data shows us that even the most affluent and successful founders struggle with one common problem: the regret of how they handled leaving their company. In fact, 75% of owners say they regret their decision to exit after just one year (based on how the process was handled), and only 5% are satisfied with their net proceeds.

I don’t want to see you included in those numbers. By completing a simple, 8-minute questionnaire, we can ensure you have a happy (and lucrative) exit: www.colonialbb.com/prescore.

PREScore™ (or Personal Readiness to Exit Score) is an 8-minute, online questionnaire that evaluates your readiness to exit your company on a personal level. Using an exclusive algorithm – developed by analyzing more than 40,000 business owners – PREScore™ will calculate your readiness to exit by identifying your status on each of the 4 drivers of a satisfying exit.

Simply put, the 12 questions that make up PREScore™ are often overlooked by business owners like yourself, potentially leaving you unprepared and in a state of crisis in your life post-exit. PREScore™ helps you to identify those at-risk areas and ensure you’re ready for a satisfying exit.

.. And don’t be alarmed! You don’t have to be ready to exit in a month, or even a couple of years – this is simply a foundation to help you understand the steps you might need to take in order to achieve a satisfying exit.

I know you’ve put in tremendous effort to get your company where it is today – let’s lay the foundation to prepare you personally for a successful transition into your next chapter while ensuring your business – and your people – will continue to thrive without you.

The next eight minutes could profoundly impact the second half of your life…are you ready?

If you have any questions about this tool, don’t hesitate to contact us. It only takes a few minutes to go through the assessment and all your answers are strictly confidential. Try it out now and find out how to gain more freedom while also increasing the value of your business.

Take your free PREScore™ here: www.colonialbb.com/prescore.

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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.