The term “growing the business” seems to be the term of choice for business people who discuss expansion. Unfortunately, in too many cases, this growing never goes beyond the seedling stage. Business people also talk about “thinking outside the box.” Again, that concept encompasses so much – what box? How far outside? – that it really can be an unfocused way of planning. So many random ideas can come out of such discussions and thinking that nothing really gets accomplished.

It might be a much better idea to focus on one small thing that would increase business. For example, you feel strongly that mailing a circular to your existing customer base or to the immediate neighborhood would increase business, but you never seem to have the time to do it. Why not plan on mailing 1,000 circulars to possible customers over the next 30 days? This means devoting about one hour, two or three times a week, to take this project to fruition. Don’t worry about next month – take one month at a time.

Since it’s said to take about 21 days to create a habit, several months should set the stage for the rest of the year. This will also help predict whether a mailing will indeed increase business. If it doesn’t, take the same time you did to work on the mailing and come up with another idea. What you have done is to “bank” the time you created for the mailing program so that it’s there for you to develop and implement the next plan.

A caveat: don’t work on something that you know you won’t finish, no matter how great the idea. For example, calling all the prospects for your product or service may be a great idea and one that would most likely expand the business. However, you know that is not what you like to do – so, forget it.

Implementing just one plan at a time and staying focused on it is the key. It may be easier to come up with 25 ideas outside the box, but if none ever get implemented, they might as well have stayed inside the box and never have been exposed to the light of day. Work on what you consider to be the best idea, and spend the same time you did on the mailing and develop it. It’s the habit of spending the one hour for two to three times a week that is critical. This creates time for a true growing of the business.

If you’re looking for help with expanding your business, call Colonial Business Brokerage.  In addition to being an innovative leader in the sale of privately held companies, we also have programs and workshops that are designed to build value in your business prior to sale. Our programs and workshops are designed to enhance areas within your business that drive up your company’s value, covering areas such as Profitability, Scalability, Recurring Revenue, Customer Satisfaction, Social Media Marketing and more.

Colonial Business Brokerage would love to help you sell your business, but we’d rather help you sell your VALUABLE business.  Give us a call or drop us an email and we can discuss how to expand your business and build value today.

Call Colonial Business Brokerage today at (443) 982-7332 or drop us a note here.

We look forward to hearing from you!

Photo Credit:  Copyright: iqoncept/Bigstock.com

Happy employees mean happy customers and clients. An unhappy employee can mean loss of business or worse. How does a business owner create happy and contented employees? It all starts with the hiring process – hiring positive people to start with certainly helps. Offering as many benefits as your business can afford is also a plus.

However, one of the big keys is simply for the business owner to treat employees well, and appreciate their contributions. Some owners expect their employees to have the same dedication to the business as they do. They are not owners and don’t have the same privileges as an owner does. In most cases, the business is an owner’s life, whereas the employee has a life outside of the business. It is important that the owner understands this difference.

In the long run, positive and happy owners have happy employees. But if being a good role model doesn’t do the job with workers who remain negative, your only recourse is to get rid of them. Reward your people with praise, and every once in a while give them a dinner gift certificate for two – or their birthday off – anything to let them know you appreciate their work. It’s an inexpensive way to increase profits and subsequently the value of the business. When a potential buyer checks the business, and they will, being waited on by a happy employee can seal the deal.

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

Call Colonial Business Brokerage today at (443) 982-7332.

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Many executives of both public and private firms get a physical check-up once a year.  Many of these same executives think nothing of having their investments checked over at least once a year – probably more often.  Yet, these same prudent executives never consider giving their company an annual physical, unless they are required to by company rules, ESOP regulations, or some other necessary reason.

August was a roller coaster ride for stockholders.  Triple digit wins followed by even larger losses left the average investor reeling and were a good reminder that markets move in both directions.

Valuations of privately held business have also been somewhat turbulent of late.  The average offer extended to users of The Value Builder System was 4.2 pretax profit in Q1, 2015, but dropped to 3.9 in Q2.

Does that mean you have missed the opportunity to sell your business at the peak?

Maybe.  But should you be worried?  Probably not.

The thing many of us forget is that when you sell your company — possibly your largest asset and the biggest wealth-creating event of your lifetime — you have to do something with the money you make.

These days, that means you’ll have to turn around and invest your windfall into an asset class that is arguably somewhat bubbly in historical terms.  The stock market has more than doubled since 2009.  The price of residential real estate has been growing at a rate of 1 percent per month in many major centers.  The same trend can be seen in many markets that offer exclusive beach houses or ski chalets.

Who Is Richer: Samantha or Scott?

Indulge us in a hypothetical example.  Let’s look at two imaginary business owners, each running a company generating a pretax profit of $500,000.  Let’s imagine that Samantha sold her business into the teeth of the recession for three times her pretax profit back in 2009.  She would have walked with $1.5 million pretax to invest in the stock market.

Now let’s imagine business owner Scott who decides to try and time the market.  Scott waited out the recession and sold his business last month for four times pretax profit, walking away with $2 million before deal costs.  At first glance, Scott looks like the winner because he sold at the peak and got four times profit instead of Samantha’s three times.  But when we take a closer look, Samantha would probably be better off today.  Assuming she had invested her $1.5 million in the stock market back in 2009, when the Dow was trading below 7,000 points, she would now have more than $3 million, or a third more than Scott, who waited and sold at the “peak.”

Timing the sale of your business on the basis of external markets is often a zero-sum game, because unless you’re going to hide the proceeds of a sale under your mattress, you’re probably buying into the same market conditions from which you’re selling out.

A better approach is to optimize your business against the eight value drivers acquirers look for when they buy a business, regardless of what’s happening in the economy overall.

Find out how you score on the eight factors that drive your company’s value by completing the Value Builder questionnaire here colonialbb.com/vbs.

When was the last time you had your blood pressure tested?

Taking your blood pressure is one of the first things most doctors do before treating you for just about anything.  How much pressure your blood is under as it courses through your veins is a reliable indicator of your overall health, and it can be an early indicator of everything from heart disease to bad circulation.

Does it tell the doctor everything they need to know about your health?  Of course not, but one powerful little ratio can give the doctor a pretty good sense of your overall well-being.

Likewise, your business’ Sellability Score can be a handy indicator of your company’s well-being.  Like your blood pressure reading, your company’s Sellability Score is an amalgam of a number of different factors and can help a professional quickly diagnose your company’s overall health.

Predicting Good Outcomes Too

When a doctor takes your blood pressure, they not only rule out possible nasty ailments, they can also use the pressure reading to forecast a healthy life ahead.  Similarly, your Sellability Score can predict good things for the future.  For example, based on more than 17,000 business owners who have completed their Sellability Score questionnaire, we know the average multiple of pre-tax profit they are offered for their business when it is time to sell is 3.7.  By contrast, those companies that have achieved a Sellability Score of 80+ are getting offers of 6.6 times pre-tax profit.

In other words, if you have an average-performing business turning out $500,000 in pre-tax profit per year, it is likely worth around $1,850,000 ($500,000 x 3.7).  If the same company improved its Sellability Score to 80+, and simply maintained its profitability at $500,000 annually, it would be worth closer to $3,300,000 ($500,000 x 6.6).

Are you guaranteed to fetch 6.6 times pre-tax profit if you improve your Sellability Score to 80?  Of course not.  But just like blood pressure, one little number can tell you and your adviser a whole lot about how well you are doing, and your adviser can then prescribe an action plan to start maximizing your company’s health – and its value down the road.

Heart disease is known as “The Silent Killer” because most people who haven’t been to the doctor have no idea what their blood pressure is.  People can walk around for years with dangerously high blood pressure because they haven’t bothered to get it tested.  The first step on the road to health is to get tested.  If you have a great score, you can sleep well at night knowing you have one less thing to worry about.  If your score is not where it should be, then at least knowing your performance can get you started down the road to better health.

If you’re interested in getting your company’s Sellability Score, along with a customized 28-page report detailing your results for free, please visit https://colonialbb.com/questionnaire-request.

What is your business blood pressure?  Find out today…

https://colonialbb.com/questionnaire-request

Warren Buffett looks to invest in companies with a “deep and wide competitive moat” around them, which gives the business pricing authority. We call this differentiated positioning “The Monopoly Control” and it is one of the eight factors that drive your company’s value.

If you’re wondering how Mr. Buffett would evaluate your company’s competitive moat, get your Value Builder Score and free customized report here.

You already know that your company’s revenue and profits play a big role in how much your business is worth.

Do you also know the role cash flow plays in your valuation?

Cash vs. Profits

Cash flow is different than profits in that it measures the cash coming in and out of your business rather than an accounting interpretation of your profit and loss.  For example, if you charge $10,000 upfront for a service that takes you three months to deliver, you recognize $3,333 of revenue per month on your profit and loss statement for each of the three months it takes you to deliver the work.

But since you charged upfront, you get all $10,000 of cash on the day your customer decides to buy.  This positive cash flow cycle improves your company’s valuation because when it comes time to sell your business, the buyer will have to write two checks: one to you, the owner, and a second to your company to fund its working capital – the cash your company needs to fund its immediate obligations like payroll, rent, etc.

The trick is that both checks are drawn from the same bank account. Therefore, the less the acquirer has to inject into your business to fund its working capital, the more money it has to pay you for your company.

The inverse is also true.

If your company is a cash suck, an acquirer is going to calculate that she needs to inject a lot of working capital into your business on closing day, which will deplete her resources and lessen the check she writes to you.

How To Improve Your Cash Flow

There are many ways to improve your cash flow – and therefore, the value of your business.  One often overlooked tactic is to spend less on the machines your company needs to operate.

In the restaurant business, for example, there is an often repeated truism that it takes three bankruptcies at a single location before any restaurant can make money.  The first owner of the restaurant walks in and – with all of the typical optimism of a new entrepreneur – pays cash for a brand new commercial kitchen complete with fancy stove, commercial grade walk-in coolers, etc., as well as all new dishware, pots and pans, thus depleting his cash reserves before opening night. Within a year, the restaurant owner runs out of cash and declares bankruptcy.

Then along comes a second entrepreneur who decides to set up her restaurant at the same location and buys all of the shiny new equipment from owner number one’s creditors for 70 cents on the dollar, figuring she has made a wonderful deal.  But the outlay of cash is still too great and she too is out of business within a year.

It’s not until the third owner comes along that the location actually survives.  He saves his cash by buying all of the equipment off the second owner for 10 cents on the dollar.

The moral of the story is: find a way to reduce the cash you spend on equipment, however you can.  Can you buy your gear used on sites like eBay?  Can you share a very expensive piece of machinery with another non-competitive business?  Can you rent instead of buying?

Profits are an important factor in your company’s value but so too is the cash your company generates.  We call this phenomenon The Valuation Teeter Totter or See Saw and it is one of the eight key drivers of the value of your company.

Curious to see how you’re performing on all eight drivers?  Get your Sellability Score here: colonialbb.com/score