Selling Your Small Business

9 Years Gone, Everyone’s A Ground Zero Stakeholder

9 Years Gone, Everyone’s A Ground Zero Stakeholder
Ground Zero, depending on whom you talk to, is a scar on this city where horror still lingers, a bustling hive symbolizing the resilience of a nation, or simply, for those who live and work nearby, a place where life goes on.

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Business briefs: Private equity firm to buy Peak 10

Business briefs: Private equity firm to buy Peak 10
Peak 10 Inc., a managed services company that operates data centers in Nashville and several other cities, has struck a deal to sell a majority stake to Welsh, Carson, Anderson & Stowe private equity.

Read more on The Tennessean

Intel buying German chip-maker’s wireless unit

Intel buying German chip-maker’s wireless unit
Intel Corp. is buying the wireless communications unit of Germany’s Infineon Technologies AG for $1.4 billion in cash, the second deal in as many weeks that allows the chip-maker to expand beyond the struggling personal computer market. Wireless – Intel Corporation – Infineon Technologies – Personal computer – Intel

Read more on Boston Globe

Small Business ? Growth Stage 3B: Meeting Demand

Yes, crazy demand is a problem that you want to have. But when you are in the trenches, there is nothing fun about it (Well it is for me, but I’m a freak). Things are going crazy, you are going crazy – You are simply too busy to think, never mind think strategically.

In this phase, it will seem like everything has gone to crap – Probably because it has.

I would love to be able to write an article that shows you how to meet demand across any industry, but the truth is, there are so many case specific scenarios that this post would be better fit for a hardcover book, than a few page blog post.

What I am going to do for you however, is tell you about a few things that you really need to watch for during this phase. These are all from my own experience and are serious issues regardless if you sell yourself as a service, manufacture a product, create information products, or are a marketer and drop-shipper.

Step up or Step Aside – Leadership needs to come in

This is a problem for lots of people, and there are two main reasons. First, to most, the business is their baby and represents their own blood, sweat, and tears. You have been in from the beginning and the success is directly the result of your effort, and your decisions. The draw of having your hands in the cookie jar and being in charge of everything is just irresistible. It’s hard to step out of that role.

Second, some people are just not good leaders. The skill set that is required to develop something is not the same as the skill set required to lead the troops and keep your head up in the strategic clouds. I believe you can learn to be a good leader, but to be a great leader, it takes both practice and an innate ability.

Whichever the case, someone is going to have to step up and away from the day to day and start to worry about the big picture. The simple truth is that there are just not enough hours in a day to do everything that needs to be done. If you try, you will fail and probably burn out in the process. To make matters worse, it is nearly impossible to wear both the strategic hat and the “doer” hat at the same time. I’ve tried several times and failed miserably in every case.

If you choose to become the “big picture guy” yourself…

Find some bright folks you trust, and put them in charge of that area you used to head up. Early on, their ability to communicate and make you feel comfortable are going to be more important than the actual skills they posses to do the job. Once you are ok with the concept of not being hands-on anymore, you can worry about finding the exact right person for the job.

If you choose to bring in a “big picture guy”…

Frankly, this is where people like me come in.  You will want to either hire, or most likely partner with a person who can come in and help you to the next level. The reason I recommend partner is, because at this point, you REALLY want someone worth their salt, and they are not cheap. Players in this range are used to the six-figure income, and are not likely to join you for less than that. Bringing them on as a partner allows you to either pay substantially less as a base salary with a percentage of sales as the remainder, or even bypass salary all together for a flat percentage of sales (how I usually do it). The percentage they demand will be higher, but on the upside, if you don’t make money, they don’t make money.

The key to bringing on a new player at the stage is trust. Start small and shift more and more power over to them as you feel more comfortable. Do not micromanage or tell them how to do their job. Remember you brought them on because your DON’T know how to do it. Let them do their thing and come back to you. They probably won’t do it the same way as you, but their way will probably be better.

I haven’t really pitched myself in about 1000 pages of articles, so I might as well now. Seriously, give me a call. I might be able to help.

Strategy and systems will save your ass, not manpower.

Simply throwing more bodies at a problem is rarely the answer. It might be PART of the answer, but without organized systems in place, the utility of each new player added to the team will decrease the productivity of ALL players by an order or magnitude. Roles will overlap, things will get lost in translation, morale will plummet, and productivity will be a fraction of it’s true potential.

Here’s how you do it.

Have your strategy person, either you or me (hint hint) start evaluating your business model. Are there any things that could be done that will simultaneously increase your profit margin, reduce costs, and reduce the time to sale. If it’s all 3, then that is your low hanging fruit. As that subsides, start to look at the things that might satisfy 1 or 2 of the criteria and start attacking them.

I’m not saying that bring in more people is not a good idea. I usually is. What I AM saying is that blindly throwing more bodies into the works usually makes things worse.

An example from my questionable past

A few years back I partnered with a rockstar investment real estate broker in exactly this stage of the game. Sales were skyrocketing, demand was through the roof, but there was simply not enough hours in a day for him to get it done.

He was a super intelligent guy and a true freak-of-nature salesman, but he was definitely lacking in both the big picture view and leadership role.

After meeting him a few times and tossing some ideas around he agreed to bring me on as a partner. Because throwing me a salary would be too much for him, we agreed that I come on as a limited partner at first with 1/3 of the future net profits going to me. Once we doubled his sales, we would become full 50/50 partners. It was a pretty big leap of faith for him, and I appreciate his trust, but ultimately it wasn’t too much skin off his back since ultimately if I didn’t produce results, I didn’t get paid either.

His niche was selling properties (usually condos) in the $100-150k ballpark to both investors and parents/students of UF. The market was hot enough at the time that if you bought a condo your freshman year and lived in it with a few roommates, the rent and appreciation on the unit would pay your entire tuition for 4 years and still leave you with about $40k left over. It was an easy sell, and he sold LOTS.

The problem was that all real estate sales take about the same amount of time for the broker, regardless if it is a $100k sale or $1M sale. (In truth, usually the bigger ones are easier because buyers at the level are pretty familiar with the game. More legal, but less drama)

I realized right away that this was not a sustainable growth model.

After a bit or research and planning, I created a plan to take on no clients unless the property was over $500,000 and we had a very good chance of getting both sides of the commission. As you can imagine, for a top producer this is a HUGE change. He was ingrained to take any business, anyway he could.

My logic was that because he was so fantastic at converting calls to qualified leads, we set up a referral program to front our tier 2 prospects to other agents in exchange for 25% of the final commission. That allowed us to keep in place turnkey marketing programs targeted to smaller profit centers, and still earn a healthy side income on very little work.

With this strategy in place, we were allowed once again to focus on a new marketing plan to help roll in larger, more profitable clients.

We still continued to get calls every day for smaller clients, and many times, we had the perfect buyer ready to roll within the hour on the sale, but we had agreed to only focus on larger clients, REGARDLESS of how quick or easy we knew the sale would be. For weeks he would look over at me with puppy dog eyes begging to take on this easy client, and I would point to our business strategy on the wall. Eventually he got the idea and stopped whimpering.

As things began to take off, I began to further refine our strategy to squeeze every penny out of our time. We hired one assistant to take first tier phone calls and to set appointments freeing up his time. We also hired another general assistant that would do much of my front end marketing work and to keep track of all the new developments and marketing metrics. We finally brought in another new realtor who had just graduated with a degree in finance to manage many of the showings and to add another level of granularity to incoming prospects before they made it to either Tom or I.

The result:

Year 1 sales: $200k

Year 2 sales: $400k

Year 3 sales: $1.2 Million

It’s important to note that we didn’t bring on any help until year 3. As you can see we were able to DOUBLE sales with no additional help other than me. That was refocusing strategy and tweaking systems. But we did need to bring in help to take it to the next level. As I said, there is a time and a place to throw in more bodies, but it has to be to support the plan, and just not for the sake of more manpower.

Stay tuned. Next Article is going to be about declawing your competition.

And, don’t forget to check out the whole Small Business Markeitng Series. Get em while they are still free!

Stay cool

JJ

Philip Henry McCrory Jr., pharmacist and coffee entrepreneur, dies at 65

Philip Henry McCrory Jr., pharmacist and coffee entrepreneur, dies at 65
Philip Henry McCrory Jr., who was not only the director of the state’s pharmacy but also an entrepreneur who developed a thriving business selling chilled coffee concentrate, died Wednesday of cancer at his Metairie home. He was 65. Philip Henry…

Read more on New Orleans Times-Picayune

Planning to Sell a Business

Many times, business owners make the decision to sell a business and too quickly dive into a listing arrangement without considering all of the consequences. 

As a business owner looking to sell a business, here are a couple of issues to keep in mind if you want to sell your company quickly and at a good price.

Deal with a professional
As a business seller it is in your best interest to deal with a business broker, intermediary or specialist that focuses on the selling of businesses.  Oftentimes, owners list their companies for sale with an individual who normally focuses on residential real estate and are disappointed when their business doesn’t sell.  If you want to sell a business, it’s better to deal with a specialist.

Selling a business requires a unique skill set and the process is much different than selling a piece of real estate.  For instance, business sales are usually kept confidential so dealing with a business sales specialist will benefit you by working with a professional that has an existing network of potential buyers interested specifically in businesses for sale.  There is also more technical expertise required (example – business valuation for the purpose to sell a business is much different than determining the value for a piece of real estate, the negotiation is usually much more involved, there are typically more deal terms to be negotiated, due diligence must be managed and the overall transition facilitated).  If you are looking to sell a business please choose to deal with a professional that specializes in business sales.

Declare your income
Too often, business owners don’t ‘declare’ a portion of their business income in order to have a lower tax bill.  This is highly unadvisable.  For starters, CCRA would not be too happy if they discovered such activity.  Secondly, from a purely economic point of view, it costs you, as a business owner, in the long run when you go to sell a business.  For instance, suppose you decide not to declare $10,000 in earnings and keep this instead as cash ‘off the books’.  If your overall small business tax rate was 23% you would be saving about $2,300 in taxes.  Alternatively, supposing you did declare the full amount you would pay $2,300 in taxes and be left with $7,700 in ‘declared’ income.  However, supposing your business was valued at 2x earnings you would be gaining $15,400 in supportable business valuation when the day came to sell the business.

The point is that it may seem appealing in the short-run to cheat and not declare income but it really does pay to be honest.  Businesses with undeclared earnings are much more difficult to sell and much more difficult to justify a valuation on.  Business buyers always like to see properly documented and supportable earnings. 

Do some analysis on your business
When you decide to sell a business, it is important to be able to tell a narrative to potential buyers about your business.  Do some analysis and try to anticipate what an interested buyer might ask you.  For instance, if profit margins have been decreasing, find out why.  If sales have been decreasing, get to the root of it.  Perhaps you had a period where you lost a staff member and have since resolved the situation. 

Find out the story behind the numbers to paint an accurate picture to a buyer.  Remember that no business is perfect and most reasonable buyers don’t expect it to be.  Don’t try to gloss over any blemishes your business may have.  Be forthright. Buyers expect you to be honest and if you’re not then that would raise a red flag that could potentially de-rail a deal.

Research and Markets: Toys & Games in Mexico

Research and Markets: Toys & Games in Mexico
DUBLIN–(BUSINESS WIRE)–Research and Markets (http://www.researchandmarkets.com/research/c5ff79/toys_games_in_me) has announced the addition of the “Toys & Games in Mexico” report to their offering. The Toys & Games in Mexico industry profile is an essential resource for top-level data and analysis covering the Toys & Games industry. It includes data on market size …

Read more on Business Wire

Characteristics of Small Business Definition

A literature review of 23 papers, which have been published from 1958 to 2002, revealed an inconsistency regarding both characterization and definition of small business. The variety of definition used in these papers unable to set an agreeable format for small business definition. The current article objective is to suggest some guidelines that can help reduce the level of ambiguity. The method to reach that objective is through the analysis of five significant parameters that have been used by different scholars to define small business. Each of these parameters is being characterized and analyze in order to clarify the existing status and for suggesting the less ambiguous alternative for using that parameter.

First, the business must be independent: For that matter, a subsidiary or a branch can’t be considering as independent business. Second, the business is not dominant in the industry it’s operating in: Part of ’Monopolistic Competition’ definition can be used to characterize the parameter – There are many sellers and they believe that their actions will not materially affect their competitors. Third, firm size (number of employees): This parameter is obviously the most popular among scholars for defining small business; nonetheless its use varies dramatically. If you’re in U.S. then an employer of up to 500 employees will still be consider as small business, contrary to U.S. in Europe most countries use the limit of 50 employees to define business as small. Taking into account that across the world ninety percent of the operating businesses are employing less then 20 employees, it seems that 50 employees is a more suitable limit. Moreover, business with more than 50 employees is employing operational and managerial techniques, which become more and more similar to those of large businesses. Characterize the upper limit brings us half way; in order for us to go all the way, lower limit should be characterize as well. A rule of thumb in that regard is that business with less then five-to-ten employees don’t even have the minimum operational and managerial structure, which can be treated as small business, any business with less then five employees is inadequate for any analysis, and should be named micro-business. Fourth, firm age: The use of firm age by scholars meant to characterize the minimal period of time needed for a business in order to form some operational and managerial backbone, otherwise, there was a risk that data collected for statistical analysis wont be suitable. Biggadike (1979), supported by Miller and Camp (1985), conclude that a new venture needs in average eight years for achieving profitability. The barrier of eight years should be analyzed depending on several factors, such as the industry that the firm operates in or the initial capital raise for starting the new venture. Moreover, Biggadike based his definition on the basis of the period needed to generate profitability, which is only one among numerous measures of performance. Taking all into account, a conservative estimation will be that business can be still considering as new if the period from establishment is two-to-five years. Fifth, annual revenue: What can be considering as acceptable annual revenue for small business? In order to be able to characterize this parameter, a preliminary step of defining the industry that the business relates to must be taken. There is a substantial difference regarding the revenue in different industries. For example – Annual sales of five million dollars generate by a car dealer must be treated entirely different then when this same revenue produces by any type of consulting firm. The source of revenue is of great importance; revenue from selling goods can’t be treated as revenue from selling knowledge or labor. Subject to that remark, and for the vast majority of small businesses that operates in either manufacturing or trade (retail, wholesale) industries, annual revenue of ten million dollars can be used as proximity for characterize the upper limit. This annual revenue correlate with the upper limit of 50 employees used as characteristic for firm size.

Your Small Business Target Marketing Must be Built Around Your Unique Selling Proposition

Copyright (c) 2008 Paul Flood Marketing, LLC

When you create your marketing programs, do you believe your investment should only get your name out there and build your brand. There’s an ongoing debate among marketers about the value of this strategy.

Those of us in the direct response crowd disagree with that thought process because the typical small business owner usually lacks the resources to wait for prospects to need their service. We believe marketing investments should generate leads or clients with branding being an added benefit of the investment.

An additional problem with pure image or brand advertising is that it is very difficult to track and measure its effectiveness. In my mind, if I am going to invest in my company, whether it is in advertising, direct mail, new equipment or staff, I want to know my return on my investment and believe clients should also be able to do so.

Is there a happy medium between the two camps where we can serve our clients with marketing that builds brands and gives prospects a reason to buy now? Is there a small business target marketing strategy that accomplishes both objectives? Absolutely!

The tool to make this happen is the Unique Selling Proposition, or USP. A good USP is pure marketing gold and creates a compelling reason for the consumer to act immediately. They will think, “I need this” or “I need more information about this amazing product.”

Let’s go back a couple of decades so we can illustrate this point with a couple well-known examples: If Federal Express just ran ads that were about their name and logo, they would have gotten name recognition, but that’s about all. Instead they said to their prospects “When it absolutely, positively has to be there overnight.”

Did the compelling USP work? Most people will agree it worked rather well for FedEx.

Will it work for a small business? Well, several years ago, a man named Tom Monohan was in one of the most competitive businesses that also traditionally has one of the highest failure rates – The restaurant business. He was in the most competitive arena of this market – pizza. The marketing message Tom created was a lot more compelling than the name of his pizza parlor is.” His message was, “Fresh hot pizza in thirty minutes or less – or it’s free.” I think we can agree that Dominos Pizza did well with their USP!

People, businesses included do not care about you, your name or your brand. They care about what you, your product or your service will to do for them. Once they’ve made the decision to buy, your name increases in psychological importance, but not until then.

Remember that your small business target marketing has very specific objectives and they are to deliver prospects or clients. If they are not designed to do so, you can either hope that you will get more clients or throw out useless ads and switch to ads and marketing designed to bring you profits.

The marketing designed to generate profits starts with your USP and tells your targeted prospect why they should buy from you and do so now.

An Internet Auctions: a Great Way to Start a Small Business

There is no real secret to the eBay success story; it is all out in the open with small marketing tools that are available to the willing. Because of this tool, more and more people are finding out just how profitable Internet auctioning can really be. It is not out of the question for someone to sell something simple, just one time to realize the potential for a sound small business. for help visit www.auction-entrepreneur-kit-comThis business has the room to grow on the Internet, and it is very easy to capitalize on.

You can be very sure that you will not get very far if you continually sell junk on ebay however, you can indeed make a very profitable small business if you set it up correctly and use the tools provided. Not only can Internet auctions be profitable and a great way to start a small business, it can be very entertaining as well. There is nothing quite like going after something you want, when you see other people going after it too. It is the thrill of the chase so to speak. If you are trying to reach out to the serious business people that can be found in the eBay community, you surely will not draw them with junk.

On that note it is a good idea to ensure you devise marketing plan that will some profit and growth, if you are to be taking seriously. Not unlike all business ventures, online auction and ebay business takes time to develop and make into a success. Business is not merely handed to you, and this is no exception to that rule. It takes a lot of time and energy, to make things work right. It is not uncommon for a large business that is already established to make a splash in the ebay realm for more business. This will only broader their reach, and business scope. Given the extremely high volumes of people that visit ebay on a daily basis, this is a great opportunity for a large company to stretch out their client base. Consider this, there are approximately 90-95 million ebay users, and an estimated 900 dollars for every second in the day.

Nowhere else can you find a bigger network than ebay, it is estimated that just over two million items daily are added to the marketplace. Well over ten million bids are placed everyday, this momentum is growing at such an alarming rate that it is impossible for companies to not notice and take advantage, can visit www.auction-extreme-package.com Are Internet auctions profitable? Yes they are indeed, and they are here to stay, jump on the bandwagon and start the business you have always dreamed of. The web is an entirely different universe, one where everyone has the chance to be on top if they really want to.