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A Must Read Article on Having Children Take Over the Family 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

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

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

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

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?

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.

Could the Red-Hot Market for Businesses Be Cooling Down

The economy is red hot, and that fact is translating over to lots of activity in businesses being sold.  However, it is possible that this record-breaking number of sales could cool down in the near future. In a recent article in Inc. entitled, “The Hot Market for Businesses is Likely to Cool, According to This New Survey,” the idea that the market for selling a business is cooling down is explored in depth.  Rather dramatically, the article’s subheader states, “Entrepreneurs who are considering selling their companies say they’re worried about the future of the economy.”

The recent study conducted by Pepperdine University’s Graziadio School of Business as well as the International Business Brokers Association and the M&A Source surveyed 319 business brokers as well as mergers and acquisitions advisers.  And the results were less than rosy.

A whopping 83% of survey participants believed that the strong M&A market will come to end in just two years.  Perhaps more jarring is the fact that almost one-third of participants believe that the market would cool down before the end of 2019.

The participants believe that the economy will begin to slow down, and this change will negatively impact businesses.  As the economy slows down, businesses, in turn, will see a drop in their profits. This, of course, will serve to make them more challenging to sell.

The Inc. article quotes Laura Ward, a managing partner at M&A advisory firm Kingsbridge Capital Partners, “People are thinking about getting out before the next recession,” says Ward.  The Pepperdine survey noted that a full 80% of companies priced in the $1 million to $2 million range are now heading into retirement. In sharp contrast, 42% of companies priced in the $500,000 to $1 million range are heading into retirement.  Clearly, retirement remains a major reason why businesses are being sold.

Is now the time to sell your business?  For many, the answer is a clear “yes.” If the economy as a whole begins to slow down, then it is only logical to conclude that selling a business could become tougher as well.

The experts seem to agree that whether it is in one year or perhaps two, there will be a shift in the number of businesses being sold.  Now may very well be the right time for you to jump into the market and sell. The best way of making this conclusion is to work with a proven and experienced business broker.  Your broker will help you to analyze the various factors involved and make the best 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.

How to Lose $200 Million

You’ll never know the ideal time to sell your company — but in many cases, it’s when someone’s willing to buy it.

Rand Fishkin, the bestselling author of Lost & Founder, learned this lesson the hard way when his company Moz received a $25 million dollar offer from HubSpot despite only expecting to do around $8 million in sales that year. HubSpot was offering three times forward revenue for Moz and Fishkin thought four times revenue would have been more reasonable. HubSpot’s bid included some cash and a hefty amount of their stock. With strong conviction that his company was worth more, Fishkin declined the offer.

HubSpot shares would go on to grow in value more than tenfold, while Fishkin struggled to manage his company after an $18 million injection of venture capital. Fishkin grappled with depression and ended up stepping down from Moz. During our interview, Fishkin reveals that today, his liquid net worth is around $800,000 – a far cry from the roughly $200 million he stood to gain had he accepted HubSpot’s offer.

What follows is a candid and heart-wrenching tale of ‘the one that got away’ told by Fishkin with humility and grace. You’ll learn:

The best time to sell is when someone’s buying
The early mistake that landed Fishkin in nearly half a million dollars of debt
The one mistake to avoid when approaching venture funding
The math behind venture capital and why it’s almost always a mistake to seek it out

Listen Now

Being ready to sell when someone wants to buy your company requires that you have a business that’s ready to sell. That’s one of the main benefits of going through the 12 steps of The Value Builder System™. Complete Step 1 for free right now by getting your Value Builder 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.

 

5 Ways To Package Your Service

If you’re a service provider, it can be difficult to separate the service from the provider. Your customers might demand you, which means you can’t scale your business beyond the number of hours you’re willing to work.

In the absence of a point of differentiation, offering generic services leads consumers to evaluate the people doing the work. Referring to your service in a generic way e.g. “graphic design services”, or “lawn care services”, means you’re lumping yourself in with the other providers of the same service.  A quick scan of your LinkedIn profile will reveal that you are likely an expert in your industry which means prospective customers will often demand you, rather than your underlings.

The secret to overcoming this dilemma is to “productize” your service. This involves marketing your service as is if it were a thing. When people start buying the thing, rather than the people providing it, you can grow well beyond the hours in your day.

Proctor & Gamble is the granddaddy of product marketing, so grab a tube of Crest toothpaste and follow their process for productizing your service:

  1. Name it

Crest is the brand name and it is always written in the same font. Having a consistent name avoids the generic, commoditized category label of “toothpaste.” Do you have a catchy name for your service?

  1. Write instructions for use

Crest gives customers instructions for best teeth cleaning results. If you want your service to feel more like a product, include instructions for getting the most out of your service.

  1. Provide a caution

The Crest bottle tells you that the product is “harmful if swallowed.” Provide a caution label or a set of “terms and conditions” to explain things to avoid when using your service.

  1. Barcode it

The barcode includes pricing information. Publishing a price and being consistent will make your service seem more like a product.

  1. Copyright it

P&G includes a very small symbol on its bottle to make it clear the company is protecting its ideas. Do you Trademark the terms you use to describe your service?

Productizing your service is the first step to separating your service from its provider and the key to getting your service company to run without you.

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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.

3 Strategic Reasons Big Companies Buy Small Ones

Ottawa-based phone company Versature was acquired by net2phone in the fall of last year. In this episode of Built to Sell Radio, you’ll hear Versature co-founder Jonathan Moody describe:

• The surprising downside of offering too many things
• The impact your geographic location can have on the value of your company
• How Moody and his partners survived due diligence

Listen Now

One of Versature’s strengths was its recurring revenue. Not only did it give the company a stable income, but even banks recognized it as a key driver of company value when Moody and his partners sought new funding. Module 5 of The Value Builder System™ explores how you can incorporate recurring revenue into your business. Get started for free right now by completing Module 1.

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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.