The saying “loose lips sink ships,” doesn’t have ancient origins. While it sounds like one of those sayings that has been around forever, the saying was actually invented during World War II. It was taken quite literally. The idea was that a lack of secrecy could lead to the loses of actual ships or other wartime deaths. So in other words, this saying was serious business. It should come as no surprise that this saying is alive and well in the business world.
Few things are more important than safeguarding your business from leaks. Leaks can, simply stated, spell disaster for your business. Leaks can be particularly damaging if you are looking to or are in the process of selling business. A leak that you are planning on selling your business can have a range of consequences. Everyone from employees to customers, suppliers and, of course, prospective buyers and competitors could all take notice and this could have ramifications.
Yet, confidentiality stands as a bit of a Catch-22 situation. Sellers want to get to the best price possible for their business and that means letting prospective buyers know that the business is for sale. The greater the number of potential buyers contacted, the greater the chances of receiving top dollar. However, the more potential buyers that know you are interested in selling, the greater the risk of a leak. Clearly, this situation represents a considerable dilemma.
As a buyer, you may discover that owners can be overly, perhaps even irrationally concerned, about leaks. It is important to remember that for most owners, the business represents their largest asset and often their greatest professional accomplishment in life. In other words, they have a lot riding on their business. It is important to remind sellers that the less time a business is on the market the lower the risk of a leak. Also, the longer the negotiations go on, the greater the risk of a leak.
Sellers should always remember to keep all important documents related to the potential sale or sale literally under lock and key. Everything should be considered confidential and only transferred to buyers in a highly secure fashion. Confidential information shouldn’t be emailed or faxed, as this makes a leak much easier. Sellers and buyers alike should remember that they shouldn’t discuss the sale or potential sale with anyone. Confidentiality should be stressed at all times.
Working with a business broker is one way to dramatically reduce the risk of a leak occurring. For business brokers, confidentiality is a cornerstone of their operations. Business intermediaries require buyers to sign very strict non-disclosure agreements. While loose lips may sink “ships,” there is no reason that your business, or the one you are interested in buying, has to be one of those ships.Read More
If you own a business, then ownership transition should definitely be a central topic in your planning. A few years ago, MassMutual Life Insurance Company conducted a very interesting and thought-provoking survey of family-owned businesses. Obviously, family-owned businesses have their own unique needs and challenges. The MassMutual Life Insurance Company survey certainly underscored this fact. While the survey was conducted a few years ago, the information it contained is more relevant and actionable than ever. Let’s take a closer look at some of the key conclusions and discoveries.
One of the most important findings of the survey was that a full 80% of family-owned businesses are still controlled by the founders. The survey also discovered that 90% of family-run businesses intend to stay family-owned in the future.
Lack of Leadership Plans
Leadership is another area of great interest. Strikingly, approximately 30% of family-owned businesses will in fact change leadership within just the next five years. Moreover, 55% of CEOs are 61 or older and have not chosen a successor. When a successor has been chosen that successor is a family member 85% of the time. Succession is often a murky area for family-owned businesses. A whopping 13% of CEOs stated that they will never retire.
Failure of Proper Valuations
According to the survey, valuation is another surprise area. 55% of companies fail to conduct regular evaluations, meaning that they are essentially flying blind in regards to the true value of their company. Adding to the potential confusion is the fact that 20% of family owned businesses have not completed any estate planning and 55% of family-owned businesses currently have no formal company valuation for estate tax estimates.
Lack of Proper Strategic Plans
The financials for family-owned businesses are often just murky as their succession issues. The MassMutual Life Insurance Company survey also discovered that 60% of family-owned businesses failed to have a written strategic plan and a whopping 48% of family-owned businesses were planning on using life insurance to cover estate taxes.
Simply stated, many family-owned businesses are not organized properly and are, in the process, not fully taking advantage of their opportunities. In short, family-owned businesses are frequently insular in their approach to a wide range of vital topics ranging from succession and leadership to valuation, planning and more. In the long term, these vulnerabilities may serve to undermine the business making it harder to sell when the time comes or opening it up to other problems and issues. Family-owned businesses are strongly advised to work with professionals, such as experienced accountants and business brokers, to ensure the long term profitability and continuity of their businesses.Read More
If you ask a business owner what their most previous resource is, they’ll usually give one of a few answers. Money is the most common, while others say their employees, community, or family. What is less stated is the one resource that can never be replenished or gained back – time. Once you waste your time with something, you can never get it back again. Some busier business owners understand this, but newer ones haven’t yet learned how to utilize their time effectively.
Business Coach Jeff Lovejoy of Atlanta spoke about effective Time Management techniques at the Nov. 28 meeting of the Georgia Association of Business Brokers. GABB meetings start at 10:30 a.m. at the Atlanta Realtors Center at 5784 Lake Forrest Dr. NW, Atlanta, GA 30328. The meeting was preceded at 9:45 a.m. with a free networking session with coffee and pastries sponsored by GABB Affiliate Leigh Milton, Senior Vice President, Small Business Administration Lending, of CharterBank.
Business owners that don’t have enough time to do things usually have the same problems: they don’t delegate tasks well, they don’t prioritize tasks, and/or they aren’t well-organized in their day-to-day life. These issues are as simple to fix as they are common; most of the time, you only need to make a slight change in how you accomplish or go about completing certain tasks in order to squeeze more productivity in the time that you use.
Every person responds differently to the many time-management solutions that exist. If you aren’t sure how to go about using your time more effectively, consider applying some of the following tips. That will help you gain a greater understanding of what does and doesn’t work for you.
1. Plan out your day
If you find that your day tends to be rather chaotic, consider investing in a planner and writing out how your day will progress. Don’t try to rigidly adhere to it (since unexpected events can cause your plans to change), but make an effort to stick to it as best as you can. For added effect, sort out your tasks by priority and urgency. This will help you directly visualize the relative importance and impact of each task.
2. Break down large tasks into smaller ones
Having a colossal task in front of you can be very overwhelming. If you have to clean your entire house within a day, you might not even know where to get started. Instead of looking at it as cleaning the house, instead break it down by room. This way, you still get the work done while making it seem much more reasonable.
3. Organize your life
This goes somewhat in hand with item #1, but this tip speaks in a more general sense. If you aren’t using a filing cabinet, get one. If your inventory is a mess, start tracking it. Make use of technology – computers can be your best friend! Organizing your home and business life won’t just make things run more smoothly – it’ll positively affect your psyche. there is a big difference when you come home to a very dirty desk versus a clean one.
Yep, we’re going to say it again. If you don’t know how to tell somebody to do something, learn. You cannot be in four places at once, so find three other employees and tell them to do three of those tasks. Micro-managing is both a morale and a productivity killer, and many bosses fall afoul of this in some way. If your employees can’t be trusted to perform a certain task, that is YOUR fault. Train them well so that they can, and your life will be made so much easier.
5. Don’t strive for perfectionism
Instead, strive for excellence. Pushing your team to do better is a fantastic goal, and one that will enable your business to reach new heights. But straight perfectionism is impossible – we’re only human, after all. Demanding perfection from your team will only contribute to stress and a lack of trust in faith in you as a leader. Business owners who demand perfectionism are also frequently micromanagers; that is a toxic combination that will do a lot of damage to your team’s psyche over the long term.
6. Just say no.
That’s it. The two most powerful words ever spoken, and you can say them at any time. You don’t necessarily need to give a reason for it, either – if you don’t want to do something or don’t want something done, just say no. You are never obligated to say yes to somebody or something.
About Jeff Lovejoy: With more than 25 years of experience building and leading corporate teams in the financial industry under his belt, Jeff brings a passion like no other to the practice he formed in 2008 as a Public Speaker and Business Coach with ActionCOACH.
Jeff has found that a great many smart people are unable to find their way to true success. While their innate or developed skills and talents have carried them to a point of significant achievement, they still can’t quite reach that golden ring.
By helping them define and develop processes and systems and an infrastructure to support their goals, Jeff helps clients in closing that final gap, often reaching culmination in both their professional and personal life.
By Loren Schmerler, CPC, APC, President, Bottom Line Management, Inc.
Longtime GABB member Loren Schmerler answers seven questions business owners often ask him.
- How much is my business worth?
The correct answer is the price a Buyer offers you that you are willing to accept. It makes no difference whether you are making money or losing money. It makes no difference whether sales are increasing, declining or flat. It makes no difference how much blood, sweat and tears you have put into your business. It makes no difference how much money you have invested in the business. It makes no difference how much money you owe to the bank or to yourself. It makes no difference what a business valuation or appraisal says. It makes no difference what your hard assets are. It makes no difference what your customer list or client list contains. It makes no difference what your patents or service marks cost you. It makes no difference whether you are a Franchiser, Franchisee, Licensor, Licensee, Distributor or Independent Contractor. The bottom line is that what you finally accept is what your business is worth.
- How long will it take to sell my business?
The correct answer is no one knows for sure. But I tell my clients that the average time is seven months from listing to closing. For companies that sell for $1 million or more, the average is nine to twelve months. But I also explain that the quickest I ever sold a business was one week, and the longest it ever took me to sell a business was six years. Additionally, I explain that price and terms sell a business. The lower the price the more affordable the business will be. The lower the down payment, the more people will be able to consider it. The greater the amount of owner financing, the easier the business will be to sell.
- Is there anything I can do to make my business more desirable?
The answer is yes. The most important thing you can do is to put your ego aside and not make the business dependent upon you. Ideally, the goodwill of the business should be at the lowest level that interfaces with customers or clients. This means that you want to hire and keep employees that make your customers happy with high quality work and excellent customer service.
- Is there anything I should not due during the listing period?
The answer is that you should not slack off in any way. You need to stay focused and operate your business as if it will never sell. You need to work as hard or harder no matter how burned out you feel. Do not make any major changes during the listing period. Try to retain all good and excellent employees and remove those that are not contributing as they should. Try to keep your inventory fresh and eliminate any obsolete items. Keep your equipment and machinery well maintained and properly functioning.
- What is due diligence?
It is the process where the Buyer examines all your books and records , gets approved by the Landlord, gets approved (if applicable) by the Franchiser, Licenser, Distributor, bank, etc. Your books and records need to be current and “bullet proof.” Your tax returns for payroll taxes, sales tax, state income tax, federal income tax, county income tax, city income tax and any other municipality taxes are 100% current. Your various licenses need to be current whether or not the buyer will have to apply for their own. You want to fully disclose everything and not leave any skeletons in the closet.
- What else do you suggest I do to impress a Buyer?
Have a job description for each employee. Put together a Policies and Procedures Manual. This will make the corporate buyer feel more comfortable about taking over the reins. Make sure all your employee reviews are current. The last thing a new owner wants to do is to sit down in a vacuum with an employee who is expecting a raise. Make sure you clean everything that is dirty. Make sure you fix anything that is broken. You do not want the Buyer to wonder what else might be a potential problem. Prepare a business plan and/or marketing plan to show the Buyer how he or she can grow the business. Put together a transition plan that shows the Buyer how you will assist them daily for a period of 28 days. The Buyer may not want you for the full transition period, but at least you are showing that you have thought it through and are willing to make yourself available.
- What happens if I agree to do some owner financing and the Buyer misses a payment?
The way the closing attorney prepares the paperwork, if a Buyer misses a rent payment or a note payment, it is considered an event of default under the note. This will allow you to take back the business in a worst-case scenario or enter into serious discussions to protect your financial interests. While the best outcome is a Seller getting paid all their money and a Buyer being successful, you must plan for the worst and hope for the best. But I also tell my clients that they should never sell their business to a person they feel will not treat their employees, customers, clients or vendors properly. If you ever get a knot in your stomach during the negotiation that is the time to throw in the towel and let me gently explain to the Buyer that you do not feel it is a good fit.
I hope this list of questions and answers has been helpful. I offer a free no obligation consultation 7 days/7 nights should you wish to discuss the sale of your business or the purchase of another business. Loren Marc Schmerler, CPC, APC, President, Bottom Line Management, Inc., 404-550-1417 www.BOTLINE.com.Read More
The reasons for selling a business can be divided into two main categories. The first is a sale that is planned almost from the beginning or by an owner who knows that selling is or should be a planned event. The second is exactly the opposite – unplanned; the sale is motivated by a specific event such as health, divorce, business crises, etc. However, in between the two major reasons, are a host of unpredictable ones.
A seller may not even be thinking of selling when he or she is approached by an individual, group or another company, and an attractive offer is made. The owner of a business may die, and the heirs have no interest in operating it. A company may bring in new management who decides to sell off a division or two; or maybe even decides that selling the entire business is in the best interests of everyone.
A major competitor may enter the market, forcing an owner to elect to sell. And the competition may not just be another company. The owner of a business may realize that an external threat is such that the company will lose a competitive advantage. New technology by a competitor may outdate the way a company produces its products. Two competitors may merge, placing new pressures on a company. The growth of franchising and big box stores can promote themselves on a much larger scale than a single business, no matter how good it is. National advertising can create the perception that a large business’s pricing, inventory or service is better than the smaller competitor, even if it isn’t.
Although these issues may not push a business owner or company management to consider selling, they are certainly causes for consideration. Unfortunately, most sellers fail to create an exit strategy until they are forced to. Professional athletes want to go out on top of their game, and business owners should do the same.