Tag: Business Sales

Offense or Defense? Small Business Owners Play Both!

As we approach the end of the regular college football season, most Americans are ready to cheer on their favorite teams during December’s conference championship games and the bowl games beginning later in the month and continuing into early 2014.

Professional football fans are right in the middle of the regular season, which will culminate on February 2 at Super Bowl XLVIII in New Jersey.

Amateur and professional football players generally have one specific position to manage and focus almost entirely on playing offense or defense. Small business owners, however, do not have the luxury of devoting all their time and energy on one specific task.

Entrepreneurs wear many different hats and often change them throughout the day, if not more frequently.

Entrepreneurs must be ready to tackle any situation or challenge that each day (or hour) brings.

A small business owner plays offense and defense. Often he’s the head coach, leading the team and making crucial decisions. Sometimes, she’s part of a special team, bringing unique skills and unconventional thinking to a project. Other days, he might be the quarterback, making a lightning-fast decision and finding the best team player to take the next step.

Companies must carefully weigh their environment and decide when an offensive strategy will work best and when a defensive position might be more helpful.

Launching a new product or service should involve a marketing strategy that is bold (an offensive posture); at other times, it might be best to bring in your public relations crisis management team. Although the latter may start as a defensive move, having the right message broadcast at the right time can quickly move you back to a more comfortable place (ownership of the ball).

An entrepreneur who can easily adapt from one position to a completely different one without changing stride is likely to be an exceptional and proactive manager of his resources. Employees tend to gravitate toward these types of leaders and want to be part of this style of team management.

No matter what the size of your business, it’s a tough field in today’s economic climate. Technology changes, which is good but can also produce additional expenses. Competition may increase as new companies enter the field and charge far less than the average, just to “get going.” Customers become fickle. And so on.

View your business and each day as a head coach. Strategize in advance, be aware of unexpected challenges and send your strongest players out to keep the offense up and the momentum moving!

The Value of Organization and Time Management

How often do you find yourself looking for that important – yet somehow misplaced – piece of paper? Do you promise yourself that you’re going to become better organized, but find the days, weeks and months slipping by with too much work to do and not enough time to start that new filing system or categorize your overflowing email messages?

Everyone can benefit from good time management skills, but these practices are particularly valuable for entrepreneurs, who typically wear many hats on any given day and don’t ever seem to have a second to spare.

Here are some tips that successful small business owners and time management experts have shared with us:

The best and the worst of times -To better assess what changes might be most helpful for you, it is crucial to understand how you spend your time each day. Where are you not making the best use of your time? Another way to approach this is to note what you are doing differently on the days you find yourself most productive.

Are you diligent at daybreak or mentally best at midnight? Do you need solitude and a deadline to focus, or do your best ideas seem to be found after social interaction or when you’ve taken the time to simply let your mind wander?

But it’s Leap Year, so I got an extra day – Every day has 24 hours, and there’s nothing you or I can do to modify that. It is up to each of us to manage our behavior: it’s the only way to better cope with the finiteness of time.

Eliminate those distractions that are not helping you become productive. Find a system that works to help get – and keep – you on track (there are many available, so choose something you feel comfortable with and will use). Set realistic goals toward better time management. Streamline your inbox and organize physical and electronic files of information.

Routine tasks need handling, but perhaps they need time limits. A perfect example of this is reading and responding to email. If you keep an eye on incoming email messages all day long and then stop to respond immediately, there might be room for improvement by simply limiting the times you read and reply. Many small business owners put email at the top of their list as an area that truly needs better organization and time management.

What’s really important – Make that decision and prioritize each day accordingly. Many small business owners feel they accomplish more if they begin with the most difficult challenge. Usually this is the very task one wants to avoid but by facing it first, with fresh energy and a clear mind, you might find it wasn’t so bad after all. When using this approach, deadlines are often met ahead of schedule.

Let someone else do it – Determine which jobs could or should be outsourced, and then allow someone else to do the work. Tedious or simple tasks could be contracted out to free up your time for something more precious, and those areas that fall outside your comfort level and areas of expertise should definitely be left to the professionals.

Just say “no” – Only you can decide where your time should be spent. In addition to running your company, you want to ensure you enjoy quality time with family and friends. Most entrepreneurs are also involved in their communities, which is a wonderful way to serve others while networking to help grow their companies.

But, how much time do you really have? Many self-motivated business owners find it difficult to turn down requests to serve on boards or volunteer in other capacities. By thinking about your time restraints in advance, and realizing how much energy will be required for various community activities, you might find yourself making different choices going forward.

This pie is always being cut in different proportions: one year may be a great one for volunteering, as your youngest child heads off to college; another year might be too busy with helping your parents move, hiring new employees and wanting to spend more time with your spouse.
Be true to yourself as you give of your time and talents.

What I need most – Don’t neglect spending time just on you. Understand your physical and mental limitations and respect those times you need to take a break. When you find your schedule slowing, embrace it (that might be a great time to review your progress and switch priorities).

One final note is that some flexibility must be considered with anyone’s schedule, but by spending a few moments each day organizing and staying on track, you are creating habits and routines that will enable you to stay calm and focused as you manage your small business (and your life!) now and in the future.

Small Business Buyer’s Wish List

We recently presented a wish list for a typical seller of a small business. Now, it’s the buyer’s turn. 

Entrepreneurs – whether they are buyers or sellers – generally agree on several factors that make the business transfer process more seamless overall.

A buyer wants:

  • A solid business – Although that phrase may be somewhat subjective, buyers are searching for stable companies with a track record of success. The savvy buyer approaches the situation just as a lender would: requiring a history of financial data that is able to be verified. Filed tax returns are the preferred record for conducting due diligence. It is also important that a business be established. Most lenders require a minimum of three consecutive years of financial history and prefer that the company was under the same ownership (the current seller) for these three years.

 

  • Reasonable seller expectations – This comes into play at the first moment a buyer begins looking at a business for sale. Does the seller receive an adequate income from his company? Are his revenues increasing or, in this economy, at least staying consistent from year to year? Is his business priced appropriately? Will the seller consider offering some financing?

 

  • Disclosure during the due diligence phase – Buyers hope sellers will share the items requested in a timely fashion and be able and available to answer questions or present further information where necessary. Courtesy and common sense should prevail during this delicate phase of the business transfer process.

 

  • A smooth closing – Just as the seller wishes, the buyer also wants the closing to be a positive experience for both parties involved. It is a time of celebration, not a venue for uncertainty, debate or hesitation. Closing attorneys experienced in the business transfer process assist immensely with a seamless closing. By the time everyone is seated at the closing table, all questions should have been answered, all pre-closing paperwork completed and the buyer and seller should be confident this is a win-win situation for everyone involved.

 

  • A seller who stays involved (for a while) – While a typical buyer probably has some new ideas for the business, almost all buyers want training and initial support from the seller. Buyers want to be successful and retain employees and customers wherever possible and practical. Buyers look for sellers who will spend a week or two showing them the ropes, and buyers are especially appreciative if a seller remains available at a later date should an unexpected question arise. Buyers generally do not want sellers to be involved for a long period of time, unless they have previously presented the seller with an offer of employment. A buyer wants to feel comfortable and prepared as he assumes control of his new enterprise.

 

As I mentioned in Murphy’s previous blog, my experiences working with buyers and sellers who are forthright, reasonable and agreeable have been the most enjoyable and produced the most successful closings. When buyers and sellers have realistic expectations — initially and throughout the business transfer process — and maintain a professional and positive attitude, they typically find the transactions to be pleasant and seamless.

Small Business Seller’s Wish List

In the spirit of the season, we offer a wish list for a typical buyer and seller of a small business. Entrepreneurs who are selling their companies, as well as those looking to purchase, generally agree on what would make the process more seamless overall.

Today’s blog focuses on what the seller wants:

  • A qualified buyer – This not only means someone with the financial resources to meet a down payment and secure financing, it also describes someone with experience owning or managing a business — perhaps with some knowledge of the industry itself. A qualified buyer more than likely has established ties to the geographical area and if married or in a domestic relationship, has the support of his partner.

 

  • An appropriate offer – A seller appreciates an offer that is solid, reasonable and timely. Sellers expect contingencies to be a part of the offer, but also anticipate these to be realistic. One of the most common contingencies is a lease transfer with equitable terms for the buyer.

 

  • A practical due diligence phase – Sellers are pleased to answer questions and share pertinent data during the due diligence phase; however, buyers should take care not to pose queries or make statements that may be perceived as an insult to the seller. Common sense should dictate how the buyer should best introduce discussions on past decisions the seller made or how the business is run on a daily basis. Buyers should prepare their due diligence requests in writing and as soon as possible after the offer has been accepted.

 

  • A smooth closing – The closing should be a time of celebration for both parties, not a time for second-guessing, bickering or hesitation. Hiring a closing attorney experienced in the business transfer process helps immensely. By the time everyone is seated at the closing table, all questions should have been answered, all pre-closing paperwork completed and the buyer and seller should be confident this is a win-win situation for everyone involved.

 

  • An efficient transition – Most sellers, particularly those who created the business from the ground up, truly want to see the business continue to grow and prosper. Sellers want their buyers to be successful, and most will work hard to ensure the buyer is completely comfortable with all facets of the business during the training period that begins after the closing. This transition phase often involves introducing the new owner to suppliers and customers and showing the buyer everything related to running the business, from how to operate office equipment to the best way to manage employees’ schedules.

 

As a business broker, I have most enjoyed working with buyers and sellers who are forthright, reasonable and agreeable. Having realistic expectations on both sides and keeping a professional and positive attitude throughout the business transfer process goes a long way toward reaching a successful closing.

What Do Business Brokers Sell?

The great majority of business brokers are what we call general business brokers. They sell businesses mostly priced under $500,000. That figure does not include the inventory of the business or the actual real estate if it is owned by the business. Almost all surveys of average selling prices of businesses sold by business brokers show that the average selling price is less than $300,000.

Industry Breakdown:
General Business Brokerage – Businesses priced under $500,000, annual revenues of less than $750,000, and with fewer than 10 employees. This category represents almost 80 percent of all businesses.

The Larger Business – Business priced between $500,000 and $3 million, annual revenues between $750,000 and $2 million, and fewer than 100 employees. This category represents about 11 percent of all businesses.

The Mid-Size Company – Businesses priced between $3 million and $20 million, annual revenues between $2 million and $30 million, and between 20 to 100 employees. This category represents approximately 9 percent of all businesses.

The Larger Company – Businesses priced over $20 million, annual revenues over $30 million, with over 100 employees. This category represents slightly over one percent of all businesses.

How Many Businesses Are There?
Business Size:

  • 1-4 employees: 6,600,000 = 62%
  • 5-9 employees: 1,900,000 = 18%
  • 10-19 employees: 987,000 = 09%
  • 20-49 employees: 680,000 = 06%
  • 50-99 employees: 250,000 = 02%
  • 100-249 employees: 132,000 = 01%
  • 250-499 employees: 32,000 = <1%
  • 500+employees: 34,000 = <1%