Are You Prepared to Exit Your Business?

One thing is inevitable when someone enters a business - they will exit at some point in the future. Whether the exit is planned or not, and whether the exit is voluntary or involuntary, it will happen.

Many business owners have a desire to successfully exit their business in the future, but the future feels a long way off. Consequently, contemplation of and planning for a successful exit is never properly addressed. There are many things that can be done to increase the value of the company if they are done well in advance of a potential transaction. Regardless of when you think you will exit, you should start planning for it today. Some of the major items that require attention in this process are structure, timing, due diligence, valuation, impact on operations, and terms.

There are two basic structures of business exits - stock sale or asset sale. A stock sale, also referred to as a partnership or membership interest sale in partnerships and LLCs, means the new owner takes over all of the assets, liabilities, and inherent equity in the firm. An asset sale means that only the assets are acquired and put into a new legal entity, leaving the selling entity to pay off its liabilities and close down its operations. Both types of transactions have pros and cons to the buyer and the seller. Asset sales are much more common in today's business environment. Family-owned businesses may execute these transactions from one generation to the next.

The timing of the exit can be critical to the result for both the buyer and the seller. If the industry in which the business operates is slow or struggling, it may not be the most opportune time to exit because potential buyers will only be interested in buying distressed companies that are selling for prices far below their worth.

Both the buyer and seller should separately conduct the due diligence required to make both parties involved in the transaction comfortable with each other's representations. This can be a painful process, especially if the company's accounting and other books are not in order. The business owner should learn about the buyer and if they are the type of person or entity with which they want to do business and to whom they are comfortable to hand over their pride and joy - their business. The buyer's due diligence may be sparse or thorough, but will drive towards the same result - is what they are buying really what they thought it was.

What method, metric, or formula should be used to determine the value of the business? This depends on several factors, including the standard valuation for the industry in which the business operates and the intentions of the buyer for the business once they take ownership of it. A multiple of EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) is a common method along with multiples of revenue, net income, units produced, and more. The underlying theme of what someone is willing to pay comes down to the value of the current and future cash flows the business will generate. If the business is in a complementary or synergistic position to the current business of the buyer, then the cash flow model may include more than just what the business can generate, but also how it will help the other related business as well.

What are the intentions of the buyer with your business? The seller has every right to understand the answer to the question. Perhaps the buyer intends to dismantle the business after it is bought and fire all of the employees. Or the buyer may want to drastically change the operating business to add value to other core competencies of the buyer. In addition, the structure of transaction may seriously impede the company from making the progress it should.

The terms of the transaction are obviously important when considering what is best for everyone involved. How the reigns are handed over to the new ownership is part of this consideration. A common practice of a buyer is to require the seller to remain employed with the new company for a minimum of three years and promise to not compete with the company in the future. The structure of the payment for the business can have serious cash flow and taxation implications that need to be addressed before the paperwork is signed. The key is to look at all of the terms of the transaction and make sure they will accomplish the objectives of all parties involved.

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Do You Have What it Takes to Be a Successful Entrepreneur?

Entrepreneurs think differently than the 9 to 5 masses. It's not that there's anything wrong with being a 9-5'er or thinking like an employee-after all, good employees are more or less the bread and butter of what makes the world go 'round. But to be a successful entrepreneur does require thinking from a slightly different perspective.

It's not about the boss...it's about the bottom line.

You can't be a successful entrepreneur or small business owner without thinking about the bottom line. One of the initial culture shocks that many employees who choose to become their own bosses face is that they now must make all of the financial decisions that go along with operating a successful venture (and they must make them correctly to avoid untimely failure).

Sure, as an entrepreneur, you'll have all of the freedom in the world to be your own boss, but this requires a keen responsibility to keep the bottom line healthy, too. Entrepreneurs must understand that the buck stops with them and no one else...it is their game to win or lose!

Entrepreneurs don't think about putting in the time.

Again, there's a great deal of freedom that comes with giving up the 40 hour work week in favor of the freedom to work when you want, where you want, and how you want. This is probably one of the most popular advantages of being an entrepreneur. But there's more to the story.

Entrepreneurs are blessed with flexibility-but building a profitable business does take time. In fact, it would be safe to say that almost all entrepreneurs work well over 40 hours per week. The good news is that the work is often second nature when you're doing something you're truly driven to do. As an entrepreneur, if you find yourself watching the clock, you might not be following the path that's best for you.

Leverage is essential to solo-preneurs.

Starting a new business all by yourself requires thinking in terms of leverage. You can't do it all, but you've still got to figure out the right balance-because ultimately, it all must still be done. The key is leverage. This means leveraging your time, finances, sanity, and more.

While not all entrepreneurs have a staff of employees on board, most do find it helpful and necessary to outsource non-core tasks on a frequent basis. As a solo-preneur, your time and talent is absolutely precious territory and must be used to the maximum. This means that typing up that sales presentation or spending hours updating the website might not be the best use of your time when an outsourced partner can do it for a fraction of what your time is worth to you.

And that brings us to one final note-oftentimes, as an entrepreneur, it's easy to think in terms of lofty long-term financial goals. This is a good thing, as having a winning vision does provide the inspiration to keep moving forward. But in the meantime, it's very important to assign a dollar value to your time. Thinking in these terms will help you make decisions on what tasks are best for you to handle or best to leverage and outsource instead.

Entrepreneurship presents many challenges to those not practiced in this way of thinking. Do you have what it takes?

You may never know unless you try!

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Tips For an Entrepreneur

Great potential entrepreneurs should start with a great business plan which will lead to adequate funding as well as better guidance to their team. These tips will help to create that great business plan.

Seek Expert Help

In the world of business plans there are those that are prepared by professionals to the entrepreneur's specifications and there are those that are created from scratch by the entrepreneurs themselves. The first category have the advantage of being carefully reviewed by experts, containing deeper and more detailed research, and having strategies that have been tweaked and improved. Furthermore, experts, such as business plan consultants, know what funders are looking for in a business plan and can pass that expertise on to you. Although it is always possible to create your own business plan that holds up, you will be fighting an uphill battle against professionally prepared plans, so it is in your best interest to join the pack.

Think (Hard) Before Writing

The first time that you consider how your marketing or operations will work should not be when you sit down and put pencil to paper on that section of the plan. Your marketing, operations, and other business activities should all stem from a unified strategy and the competitive advantage you seek to create. You should craft these elements and receive feedback on them well before the time comes to write. The writing itself should be a simple process after the detailed preparation you have done.

Use a Flexible Financial Model

If you create your own Excel financial model you may find that, once you have developed the financial statements, it is painstaking to make simple changes to the underlying assumptions because of the way it is set up. If you are not extremely experienced with Excel formulas this is a distinct possibility. Instead of creating the financial model from scratch, find an appropriate and customizable financial model, whether from a business plan template or another source, which will allow you to play with different numbers. The financial model should allow you to make simple changes and see the effects automatically populate through the linked income statement, balance sheet, and cash flow statement. The software exists to do this and you are wasting valuable time if you do not seek it out and use it.

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What is a Monopoly?

Everyone's heard of the term monopoly, even if only in the context of the popular board game. Most people have negative feelings about the term, but might not know why. And while many people know what a monopoly is, many more do not, even though they can be greatly affected by such a condition.

Put simply, a monopoly exists when one company or individual controls a type of good or service to the point where they can affect the access consumers have to it. That is, one source is able to control how people get a product or service, and can determine how much it costs and how available it is, since there is no competition for the goods.

One of the most famous examples of monopolies in US history is Standard Oil. Standard Oil was founded and run by John D. Rockefeller, America's first billionaire, and the company effectively controlled petroleum in the United States for decades.

While the US is a capitalist country and therefore favors free trade, there are laws in place to protect consumers from the predatory practices of monopolies. While large market shares do not necessarily indicate monopolies, and monopolies are not, strictly speaking, illegal, taking unfair advantage of the situation is. If a company is exhibiting abusive behavior, they could be running the risk of being brought into court for having an illegal monopoly. In general, abusive behavior can be categorized as the following:

• Predatory pricing, or selling the product or service at such a low price that other companies cannot afford to compete
• Limiting the supply of the goods or service, to drive up price
• Refusal to deal, or limiting who can buy the product or service
• Tying products, or forcing consumers to buy one product in order to have access to another, distinct product

If a company or individual is abusing the power of their monopoly, the US government may step in to protect consumers. In the case of Standard Oil, the company was forced to dissolve itself into several smaller companies to ensure that there was competition in the marketplace, thus allowing consumers a choice and preventing one company from controlling the price and distribution of much-needed oil. Some of the companies formed out of Standard Oil still exist, namely ExxonMobil and Chevron.

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Entrepreneur Qualities Vs Opportunist Tactics

What exactly are entrepreneur qualities? Do you think you have the qualities of an entrepreneur to be successful? Why not take the test below to see if you are an entrepreneur or an opportunist?

Entrepreneur Qualities

Answer these questions truthfully to find out if you think like an opportunist or an entrepreneur:

1. Entrepreneur Traits:

* Can you 'think outside the box'?

* Do you have a clear vision of what you want to achieve?

* Do you have a plan in place in order to get what you want?

* Do you have a marketing strategy in place?

* Are you focused only on that one business model?

2. Opportunist Thinking:

* Do you find yourself hopping from one project to the next?

* Do you buy lots of eBooks and software on a monthly basis?

* You don't have a set plan, you just go with the flow?

* You don't exactly know what you want, maybe some extra money?

These are just a few questions you can ask yourself and see which one you fit into. If you find that you are an opportunist thinker, don't worry! You can easily make the transition from opportunist to entrepreneur (or internet business owner which I prefer to call ourselves).

When I think of an entrepreneur, I think of Richard Branson. I'm no way anywhere near his level, but I am an internet business owner with a clear vision of what I want to achieve and have a plan of how I'm going to get there.

I did used to be an opportunist (without realising it), but I changed my way of thinking and I believe I have some entrepreneur qualities which help enormously in driving my internet business forward.

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