The Business Edge Blog

October 19, 2012

For Sale: Your Business – but for how much? Part 1

In the beginning it was just you – and maybe a partner or two.  The business ran on blood, sweat and tears, with some heart and soul thrown in – and a chunk of your personal financial resources as well.

It’s no surprise that when the time comes to sell the business and retire, some owners just aren’t prepared.

The emotional investment is why it’s so difficult for most people to sell their business.  Sometimes a valuation produces a figure that is only a percentage of what the owner is expecting and needs for retirement.

How can you increase profitability and make it more desirable for a buyer, make it more transferable, and help convince the buyer that the business will remain intact post-transfer?  Front Range Business Inc, a Boulder-based brokerage firm that facilitates selling owner-operated businesses suggests engaging a business coach.

They cite many examples where a business coach has helped to double the value of a business over a twelve month period.  The work I do with my clients – either for their own growth or in preparation for sale – includes the same work Front Range Business Inc recommends; formalizing and documenting processes; creating employee, service and other procedure manuals; staff training; and most important of all, working ON the business, not FOR (or IN) the business.  Owners typically are so caught up in the day-to-day operations that they overlook the big picture.  Owners need to focus on marketing, training and where they want to take their business, then plan the route that will get their business to the final destination: a successful and profitable sale.  I suggest that my clients keep their exit plan in mind as they make decisions years prior to their planned retirement date.

When owners start thinking about an exit there are a number of big questions to consider.

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Stay tuned for Part 2 where I’ll cover these questions and other considerations!

Feel free to comment on your thoughts about preparing your business for sale by posting your thoughts below.

Until next time – Remember to mind your business!

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August 2, 2010

How to Make a Profit – Part 1

It may sound silly, but many business owners forget that they are in business to make a profit.  That means making money! 

 Most business owners don’t have a plan for how they are going to make a profit this year, this quarter or this month.  I often start learning about my new clients by asking them to describe where their money comes from.  I ask them to look at the different areas of their business and how much money each brings in.  Many have never stopped to look at their business in this way.  We then look at the profitability of each of the areas.  All of this is leading up to developing a Profit Plan for the next 12 months.  The Profit Plan is just what it sounds like: a plan for making profit.  Making a profit is what distinguishes a business from a hobby.

The Profit Plan is the answer to how to make money in your business.  If you can’t plan it out on paper, chances are you won’t be able to do it in real time with your hectic schedule.  What is a Profit Plan?  Bankers and Accountants would call it a Budget or Forecast.  It’s a financial projection of your revenue and expenses for the next 12 months.  Let’s call it a Profit Plan, because once you subtract all of your expenses from your revenue you should have a profit left over.  If not, you need to figure out how to increase your sales or reduce your expenses.

A Profit Plan covers the numbers as well as the underlying assumptions.  For each line item under revenue and expenses, you should have a written assumption that explains how you arrived at that figure.

Developing a Profit Plan provides the following benefits for your organization:

1.  It Pulls Everyone Together: Chances are you as the owner can not put together a full profit plan without input from key people.  You’ll need to have discussions with each one.  It gets all the key players in your organization focused on the future which is the only place you can make a difference.

2.  It Allows For Ownership: Everyone can be assigned responsibility for one or more line of the Profit Plan.  For example, you can proclaim someone as the Utility Czar and her job is to make sure that your actual Utility expenses come in below the projected figure.

3.  It Prevents Monday Morning Quarterbacking: For all of us who are sports challenged, that is the phrase used when people analyze football games the day after and second guess decisions made during the heat of the game.  Usually it is someone on the outside of the organization who plays this role.  If you have all the key people on your team involved in the planning process, they have to each sign off on the plan.  The fact that things are written down prevents them from going back and second guessing how figures were determined.

If you are just getting starting with the concept of developing a Profit Plan, I’ll share with you that the first year is always the hardest because you will be starting from scratch.  Each successive year gets easier because you build on the prior year’s experience.

In the next issue I’ll talk about what to do once your Profit Plan is pulled together, so stay tuned……

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