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.

Read More...

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!

Read More...

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.

Read More...

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.

Read More...

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.

Read More...

Starting a Business in Middle-Age

People over fifty are setting up their own businesses at a growing rate. They are doing so for various reasons like redundancy, a job market that's geared more to youth making it difficult for them to get back into it. They may have just had enough of taking orders and being subject to the daily discipline of working for someone else. Or they may have just decided that the time was right to follow their dreams.

The job market may be geared for youth but the self-employment market has no such discrimination. Anyone can start a business and the good news for mature people thinking of taking this route is that you have the skills to succeed.

Skills like communication and self-confidence are crucial to succeeding in business, mature people have usually honed their social skills and are comfortable in social situations, and happy to pick up the phone and talk to clients and potential customers.

Starting a sole business is relatively easy and can be done for little initial cost by utilizing the internet and cheap technological solutions. There's also plenty of excellent software out there designed to help you run your own business from bookkeeping software to accounting.

Another advantage of being middle-aged is that the kids will have left home leaving you with plenty of space to set up an office and storage area. Make use of empty bedrooms and create your own work area to run your business from.

Deciding what you're going to do is the major step. We all have skills that we have acquired over a lifetime of work. If these skills are no longer relevant, like shovelling coal into steam engines, for example, it's not a problem; learn some new skills.

Look at what you are interested in. If you have an interest in programs like Photoshop for example, take an online course and get to know it inside and out. This is a great skill to have and is always in demand. Look at what your interests are. It's not necessary to start a business around something you are interested in but it's better if you can.

The passion you will have for things you have an interest in will drive you through the down times of running your own business. Middle-aged people today do not have to lie down and die because the job market has shunned them. There's never being a better time to start your own business and enjoy a happier and healthier lifestyle where you are in total control.

Read More...

From J-O-B To Fire Your Boss!

So your tired of your J.O.B. (Just Over Broke) and you want to Fire Your Boss. I want to help prepare you for what lies ahead. Some of you will have done a bunch of preparation for the big day. Others will simply find themselves at a point one day at work when they say, "I've had it, this is it I'm outta here!!" While I can't say I didn't have the latter, I did, however, prepare myself for what was to come. Only to find out I didn't prepare enough. So I'm going to give you a few quick points to have in line before you Fire Your Boss.

1) Do what you Love: I know, I know this is almost a cliche. However, it is the most truthful statement in forging out your own piece of the pie. Some of the most highly paid individuals are doing what most would consider a vacation. Tiger Woods, Kobe Bryant, Tom Brady. Each of these people play a game and make hundreds of millions of dollars. The same is said for entertainers; go ahead, think of your favorite musician or actor. These people sing, dance and play make believe and are compensated VERY well. Granted, these people also have a tremendous amount of talent to go along with their chosen profession. I've got a question for you, what came first, the talent or the profession.

2) Work: Be prepared to work more now than you did when you had a boss. That's right, now you have to do the same amount of work that the entire business was doing before. It won't be like this for long, but in the beginning you have to be the one to set up everything. This is normally when we lose most people. People tend to leave their J.O.B. for greener pastures of days on the beach and sleeping late. Saying things like, "What's gonna happen, I'm not gonna get fired." This is the kiss of death. Let's go back to the athletes and entertainers for a moment. Do you think they just decided they were going to choose that profession and then the next day they were signing contracts with the Yankees. NO, they spent their entire lives WORKING to be the best and now their compensation reflects that work. Some may say they are overpaid, but they are only getting what the market will allow.

3) Change: That's right, what made you good at your J.O.B. is not enough for you to Fire Your Boss. While you might have been stressed at work, the stress of owning and operating your own business is completely different. Your boss treating you like an incompetent child may be frustrating, but not having any money to pay your bills is more frustrating. The only difference is that now you have nobody to point the finger at except yourself. This is by far the most difficult process new entrepreneurs have. They expect that the mindset they've had is going to be good enough. Wrong!! Take the athletes and entertainers again. Everyone of them is used to being the best player or star on there team or cast. Then they hit the big time and EVERYONE is the best. It's time to take your game to another level. This means your mentality has to change, which means you have to change. What you are doing now is what has gotten you to where you are. So, in order to go further you have to do something different! Keep practicing, this game is never over and there are no time outs.

Making the transition from J.O.B. to Fire Your Boss truly is a life changing experience. You'll notice things you once thought were huge deals barely even matter. Your ability to make decisions and handle large tasks will begin to grow. And as you practice and practice and practice, your compensation will also garner what the market will allow. This process can absolutely free up your life if you're willing to take the necessary steps. Do yourself a favor and find a mentor, this always helps to shorten the learning curve. I hope this helps you on your Journey. Until next time, Happy Marketing!

Read More...

Tips to Build a Successful Consulting Engineering Firm

Many of these firms know who their paymasters are. They had been able to develop very excellent working relationship with their clients that make them kept returning with more assignments. Even though they have excellent working relationships, they always clarify the scopes of works required right from the beginning of the project.

This is very important as many clients have high expectation towards their consulting engineers. It is alright to be frank with them as to what you could or could not do. If certain projects or assignments are beyond your capability, you should acknowledge your own shortcomings and advice them to employ other experts. Many said that "honesty is the best policy", and this advice still stands today.

You may end up losing the project to another engineering consultant firm, but it is still better than to secure the job but unable to perform. Many customers appreciate your frankness and openness and would likely return to you for other projects. You also avoid the risk of being entangled in law suit filed by the client.

When you first submit your proposal to a potential client, be as clear as possible about your scopes of work. You should always be affirmative in describing to the client on why he should engage you instead of other engineers. Present clearly the benefits of engaging you versus the cost.

Some consulting engineers also committed the mistakes of spending too much time trying to convince a prospect client. However, there are no fixed rules on how much effort you should spend. Just stick to your business sense and let your intuition guide you.

There are also many engineers who established their own consulting engineering firm thinking that they no longer need to work for somebody else. This is wrong. In fact, instead of just working for one boss previously, you will now have many "bosses" as all your clients are your paymasters.

You may need to work twice as hard but always bear in mind that whatever effort that you have put into your own firm, one day you will enjoy the fruit of your own labour. It may take many years before you can see your business prosper, but the satisfaction gained from building an enterprise by itself is already a satisfying process.

Practicing engineering consultancy is a lifelong process and you should constantly upgrade yourself. This is called continuing professional development. Otherwise, you may find that other business could easily overtake you.

Read More...

How Effective Business People Succeed

These days, it's quite challenging to make it big in business. There are many factors you have to contend with. There's your competition, and of course, the poor performance of the world economy as well. However, some business people still manage to hit the jackpot. We could all learn a thing or two from the qualities of these successful entrepreneurs.

While some people are just naturally adept at handling businesses, there are quite a number who have to work hard at their trade. This just proves that successful entrepreneurs aren't always born, they're made. So if you want to get started on being part of that exclusive group, check out these qualities of successful entrepreneurs.

1) Resourcefulness

When the going gets tough, the tough gets resourceful. As an entrepreneur, you'll sometimes come across a situation wherein you don't have everything you need. These are the times when resourcefulness is crucial.

Find a suitable replacement for what you lack and then proceed. Or if you find yourself in a bind, you have to be resourceful enough to make the situation work to your advantage.

If you're just starting out, don't expect everything to be spoon fed to you. Most of the time, you'll have to go looking for what you need yourself!

2) Bravery

Most people don't think that entrepreneurship has anything to do with bravery, but you'd be surprised at how courageous a lot of successful entrepreneurs are.

One of the more subtle qualities of successful entrepreneurs, bravery applies to any situation where a person has to take a risk. Those who want to stay in the safe zone won't make it big.

If you want to be successful, you're going to need to cross the danger zone every once in a while. Of course, bravery is not the same as impulsiveness. You still have to think things through and plan carefully before making any kind of leap.

3) Taking Responsibility

One of the great qualities of successful entrepreneurs is being responsible. I have lost count over the number of people who seem so excited about their business at first, only to leave everything else to someone else's hands after the first month.

If you want your business to flourish, you have to be responsible for everything that happens to it. You have to train and delegate trustworthy and dependable people to handle your business operations; or else, you risk losing everything to bad management. This has happened so many times before. Don't add your business to the statistics.

By adapting these qualities of successful entrepreneurs, you'll definitely have a higher percentage of achieving success!

Read More...

7 Steps to Success

Every great business started with an exceptional idea. The better developed the plan the better the chance of success. For everyone that wondered if there is a surefire design for business success I can only say every plan is different, but a few common steps will be important to tapping the potential of any business idea.

1. Dream Big - Part of the reason many business plans fail is they don't dream big enough. They seem content to pattern what they do after something that has already proven successful. What is it about your dream that sets it apart from everyone else? What will you provide that no one else does?

2. Don't Rush - Like a good pot of stew let your idea simmer for a while. As you retrace your steps through the plan you may find concepts that need adapting and little considered ingredients begin to enhance the flavor of your dream.

3. Know Who You Are - Take the time to cast your business vision into an understandable set of directives. The better you understand yourself as a business the better you can brand your concept in the minds of potential and actual customers.

4. Triple Check Laws Related to Your Idea - You may want to hire an attorney for this or simply engage in multiple calls making sure you have all the applications and licenses you need to take your business live.

5. Determine Whom You Developed the Business For - This means you need to know whether your focus will be in the money you will make or the people you will serve. As backwards as it may sound it is likely you will make more money by focusing on the customer. When they are satisfied they reward you with repeat business and referrals.

6. Never Assume You Have Arrived - There will always be revisions needed in your business. This may mean an alteration in product line up, a change in website design or even the potential addition of new products. Long-term resting is not an option.

7. Marketing is a First and Foremost Duty - Contrary to what you may have heard products do not simply sell themselves. No matter how good your product may be there is great importance in letting people know about it. Don't be timid. I know it may feel uncomfortable, but toot your own horn. Get testimonials and publish them. If you believe enough in your product to start a business based on that manufactured good then you should be equally excited to find ways to tell others.

This isn't a one-size-fits-all concept, but I do believe the points are applicable to a greater or lesser degree to virtually all businesses. No one wants to fail, but not every entrepreneur takes the time to methodically interpret the architecture of the business plan. If they do they may not take the time to take the chisel to status quo ideas in favor of something that might become known as a revolutionary idea or concept. Many such concepts are the brainchild of entrepreneurs who waited long enough to understand and observe the brilliance of at least one prime business ingredient that is often overlooked.

Read More...

The Number One Skill Entrepreneurs Need

Would you like to know the number one skill for entrepreneurs? Well it's the same one that all CEO's need - to understand the company P&L and Balance Sheet. Right about now some of you may be grumbling. Some may even be thinking that you are no good with numbers and that your dreams of being an entrepreneur are crushed. I ask that you not be so mellow dramatic and if you are freaking out, then you need to first focus on your mindset shift before you can go any further.

The truth is you need to understand the numbers whether you plan on keeping your business at six figures or grow it to eight figures and beyond. In fact understanding the numbers is a key strategy employed by GE in its leadership academy. And you all know that there have been more CEO's to come from GE than some of the top business schools combined! The numbers help you to fully understand and therefore influence things like, your margins, business cycle, purchasing trends, overall sales, expenditures and so on. In essence it gives you full control over your companies and therefore your own success.

So what's the first step to understanding the numbers, if you are numbers challenged? Rest assured you do not have to go back and get your MBA. In fact the easiest way is to start by pulling out the spreadsheet or Quickbooks report and look at the basics, profit and loss. Look at where all the money comes from, when it comes in and where it all goes. If you are really intimidated enlist the help of your CPA or bookkeeper, they love numbers. Ultimately, you need to grow comfortable looking at, working with and understanding those numbers - regardless of their size.

It's time to face the numbers. Go, pull those reports and start studying!

Read More...