Women's Business Blog

Entrepreneur's Tip of the Week: Motivate the Troops!

Labor Day is over! It is time to get back to work. Back to growing your business and planning that exit strategy that will one day be yours. But first, it is time to re-energize the staff (the troops). Whether you are a small business with only one employee or a larger business with more than 50, it is your job, as the entrepreneur, to lead the way for the fourth quarter. Too often entrepreneurs believe that employees need to ease themselves back into the work day after a four-day weekend and particularly a long hot summer. Of course, if I were your coach your employees wouldn't be working any differently in the summer than they do any other time of the year.

But, let's get real and assume that the hot days of August have caused your business to be slow and those working for you have been following your lead in kicking back -- oh, just a little. So what to do to get them ramped up?

Schedule a mandatory office meeting - I prefer first thing in the morning but allow your business model to determine the best time for your meeting. Let everyone know that the purpose of the meeting is to share ideas of how to exceed fourth quarter goals for new business, revenue and filling the pipeline for 2011. Of course, this means that your employees already know what your companies' goals are because you have been communicating them right along. If not briefly layout benchmarks for what each person or each department needs to achieve for fourth quarter in your invitation to the meeting - reminding each that it is the minimum of what is expected.

Prepare an agenda that includes a discussion of each person and/or each department and make sure to spend time focusing on the successes of each. Again, the purpose of your meeting is to motivate the troops and people are motivated with praise not criticism. Ask for help. Ask for new ideas. People are more energized when they participate in the game than when they merely sit on the sidelines and are told to watch. You can't be a leader if you don't have followers and you can be followed if you don't have somewhere to go. Be enthusiastic about the future of the business and allow others to share in your excitement. Enthusiasm is viral. Use yours to motivate the troops.

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Entrepreneur's Exit Strategy Tip of the Week: Recurring Revenues

What are buyer's of businesses looking for? Recurring revenues. Do you have them? Probably not. Can you create a plan to institute them as part of your business? YES. So why aren't you thinking creatively and doing it? It will benefit you in the short term and in the long term it WILL assist you in selling your business.

Let's take a look at a business model that doesn't have recurring revenues and demonstrate what can be done to create them. The  small business consultant. Most consultants work on a project basis, meaning they price the service by the project. Most also, if savvy enough, require payment at least in thirds. A third when the contract for the project is agreed to and signed, a third at the middle of the project and a third at the end of the project. This keep revenues coming in and minimizes the chance of doing work and not getting paid for it. However, depending on the type of consulting, and if some of the work is being outsourced, this scenario of a payment schedule may still require some creative bookkeeping to keep the business flush with cash. I recommend  that you require monthly payments, and that those payments begin at time of signing. This means you, the small business consultant, are being paid before your render the work each month. I also suggest that every contract require a 60 day cancellation notice. In this way, if your client decides for any reason not to continue working with you you will have 30 days pay in the bank and will only need to bill for the remaining 30 day payment. Unfortunately, it is a fact of life that with or without a contract clients do cancel before a project is completed. However by planning how you receive income you will have recurring revenues from all your clients When your financials are reviewed they will show that your business strategy rewards how your business is valued as your income is more likely to show stability.

Every entrepreneur should be thinking about how to institute recurring revenues into their busness. No matter what you sell - product or service - think about how to provide a maintenance/service agreement or annual consultation for a price determined in advanced and able to be placed on your books. Now you know why so many businesses today are selling you maintenance contracts and agreements. It's the frosting on the cake in their business and you can find a way to do it too. Buyers will stand in line to purchase businesses with recurring revenues. Make it part of your exit strategy today.

 

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Entrepreneur's Exit Strategy Tip of the Week

Every small business owner and/or entrepreneur must be thinking in the terms of an exit plan when making business decisions. Every decision you make in your business will affect how you may eventually exit the business. Remember, the majority of business owners DO NOT exit their businesses by plan. Too often an exit is forced on the owner, heirs and the business. Why is this true? Very simply because business owners/entrepreneurs believe that they are invincible. They do not plan for having a major disability or, more seriously, their own death. Does that scare you? It should. Founding or buying a business means taking responsibility for its success and failure. I can't stress strongly enough the importance of separating yourself from the business. As the CEO of the business, it is your task to make sure that the chief executive officer (YOU) are in condition for the job at all times and if not have a alternate plan ready to go. Yes, business owners do get sick. They can become disabled. And, business owners, like all other human beings, can and will die. The successful entrepreneur has a plan in place for each of these situations and every decision made for the business takes these serious potential scenarios into consideration. For example, when an entrepreneur decides that the timing for an acquisition is appropriate for the business, (s)he must also be sure that the timing is appropriate for the CEO (the entrepreneur) and have a backup plan ready to roll if the timing for either entity should change. The story of the entrepreneur who waited for the right recruitment firm to come along so she could acquire it and expand the geographic reach of her firm is an example of how timing for the business is right yet timing for the CEO wasn't. Once the acquisition was complete the CEO had a sudden death in the family and was temporarily taken away from the business. With no alternate plan for a temporary CEO to guide the transition, the newly merged businesses did not mesh during the critical first stage and the business lost strategic employees to a competitor. Within six months after the acquisition it became clear the two businesses were not compatible and the deal actually hurt rather than helped a potential exit strategy for the future. This story is just one of many that demonstrates the importance of planning for every potential scenario for your business. As the bumper sticker says S __ __ __ Happens! As CEO it is your job to plan for it.

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Entrepreneur's Tip of the Week: Branding

Every entrepreneur understands, or at least should understand, the importance of branding. However, knowing that a strong brand is critical to your success and actually figuring out how to create one are two different things.

The first question is do you brand your business, the product or yourself? To some this question may be very simple. A strong company brand like the checkmark Nike has developed is recognized by as many as 60% of adults around the world. That is branding at is finest.

A new unique product or service might naturally cause the entrepreneur to brand the product or service. A quick example of this is the iPod, iPhone and iPad. This brand is already very strong and easily distinguishable and will certainly be expanded further by Apple.

But there is also the situation when the entrepreneur is what needs branding. Great examples are Martha Stewart, Oprah and Donald Trump. In these cases, the consumer is given an awareness of what all the products and/or services produced by or for these individuals will be like in quality, price and value. Take one moment to think about what comes to mind when you think about one of the three names referenced here. Once again that is what successful branding is all about. And, you can do it too!

First, ask yourself what is it you want others to know about when they hear the company name, the product name or your name? Which of these three is most important to the success of the business? If the business brand becomes strong will it help or hurt an eventual exit. Think Reebok's sale to Adidas. I am not suggesting that the Reebok's brand helped or hindered a sale. I am suggesting you consider your exit while thinking of branding your business name. If your business will produce a variety of products do you want each to have its own brand or a similar brand so that the consumer believes to have one means collecting them all. Apple has certainly become the master in this style of branding. And, if you decide that you are the brand what will this mean when it comes time to sell the business? The first objection must entrepreneurs hear when they begin the exit process is that the business is all about them and that the without them at the helm the business will lose its value. This is a critically important decision you must make when branding yourself rather than the business.

However, every successful serial entrepreneur that has ever gone the rounds of venture capital seems to have mastered a little bit of branding themselves. Once again - branding is all about letting others know what the quality and value is of the entity by just seeing the symbol or mentioning the name.

I recommend reading Branding For Dummies because it doesn't get more basic than this and you can't afford not to start building a brand.

More on branding to come..............

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Entrepreneur's Tip of the Week: Begin with Your Exit in Mind

You've decided to start your own business because you have a "killer" idea that just can't fail. You've worked all your life for other people and learned what it takes to run a business as the CEO - Chief of Everything Officer - to get it off the ground. You know that your idea will fill a void in the marketplace and has shelf life - meaning it won't become obsolete and can be scaled. You've saved enough to invest in your dream business and you have friends and family that believe in you and want a part of the dream. You've taken the time to map out your idea by writing a detailed business plan which will also help you in obtaining bank financing as you get ready to launch and perhaps VC funding if you require it. The business plan demonstrates that you will be cash positive at the end of the first year of business and by end of year two you'll be making more money than you are now by working at your current employment. You're ready to start pitching the idea to funders, clients and vendors and you believe you have done everything an entrepreneur must do before launching their company.....but wait....what is your exit plan?

Many entrepreneurs are shocked by this question. Their answer is, "I have waited all my life to start my own business. I don't plan to ever sell it." Or, "I want to run my own business until I retire and then have my children take over the business." Or, "I know that I will be very successful and someone will want to buy my business because it will be very profitable."I say, "Really? Really?"

And, what if you become disabled or sick or your children don't want to take over your business or you aren't successful because you don't have what it takes to run your own business or when you are ready no one else has any interest in doing what you do? If you plan on ever getting VC money you better realize now you will need an exit plan. VC's are only interested in how they will get a return on their investment. As an entrepreneur you should be interested in the same thing....don't you agree?

The savvy entrepreneur plans his/her exit at the beginning. (S)he recognizes who the potential buyers in the market are for the business and may plan to partner in a small way with them sometime early in the company's life. (S)he certainly watches carefully what is happening in his/her industry and the industries that align with his/her business. It is never too early to plant seeds for an exit. 

Of course, if the plan is for a family succession, the entrepreneur must get the family involved in the business as soon as possible. It is best to get family trained outside the business before bringing them in so that there is an opportunity to learn a variety of best practices from the industry.

An employee succession plan also requires planning but this is best worked through with your business advisors to make sure it is executed in the best interest of the business and you.

Having an exit strategy in place will also assist the entrepreneur with plans for growth. Decisions can be made knowing that they fit into a long term plan for a successful sale. For example, if your exit plan is to sell to a large competitor it makes no sense to make your investment for growth in a direction that is incompatible with that business. You will be able to reap a greater return if your buyer is able to leverage your business in as many ways as possible. The principle of economies of scale is important to consider.

Finally, every business plan, like every roadmap, must have a beginning, a middle and an end. You may not be able to identify the who you will sell to, or the when you will sell, but planning for the how much is a responsibility you can't ignore. Begin your business with the exit in mind.

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Entrepreneur's Tip of the Week: 3 Steps to Exiting the Business

There is no greater joy or feeling of success for an entrepreneur than to have a thriving, revenue-producing, high margin business. Even during these tough economic times, entrepreneurs are finding ways to make money and build their businesses. Too often these same entrepreneurs are not taking the time to plan for an exit from the business. The fact is smart entrepreneurs plan for their exit when profits are at their highest or when cash flow is tight. Your job as an entrepreneur is to have a strategy regardless of your economic cycle and be prepared to exit when you have the opportunity. Unfortunately, too many entrepreneurs don't have an exit strategy and never sell. It is estimated that only one out of every six businesses sell. So, what happens to the other five? The owner gets burnt out, cash strapped, and/or dies and the doors close.

You have a choice. You can plan an exit strategy or you can take your chances and fall into the category with the majority of entrepreneurs and let life happen. If you choose to plan, then let's get started with your first 3 steps to your exit.

First, because you are an entrepreneur and put your blood, sweat and guts into your business your business screams YOU. You will be told that your business can not stand without you because the business is you and therefore has no value without you. Of course, almost every business is started by a passionate entrepreneur who is known by its customers, clients, vendors and community as the driver of the business. But this is as true of John Doe of John Doe CPA & Associates as it is for Bill Gates of Microsoft. The success of the business was, of course, the result of the entrepreneur's passion, enthusiasm, reputation, intelligence, and complete focus and attention. But every business can, and will if planned carefully, take on its own momentum because of its product(s) and/or service(s). Just look at Microsoft! You, the entrepreneur must hire a rainmaker so that you are not considered the only one who can sell whatever it is you are selling. If your business can afford it, it is best to have at least two key employees driving sales and business development other than yourself. Buyers are looking for proof that the product(s) and or service(s) offered by your business can be sold by someone else than you.

Second, in planning an exit is the relationship of the people in your business to you and the company. Many entrepreneurs have started their businesses with key employees who have been instrumental in the success of the business. As the entrepreneur begins to plan an exit,(s)he understands how important these key employees are to a potential buyer. Whether or not you contract time with the buyer after your exit your key employees are critical to the sale. In planning for an exit, an entrepreneur should have all employees sign a contract with the business as well as a noncompete. This can be a very informal document that states the allegiance of the employee to the company. It in no way should be threatening to the employee as its purpose should be as much in their best interest as in the best interest of the business. Loyalty is a two-way street...or at least should be. The contract for key employees should include some type of incentive or bonus plan creating the purpose for the document in the first place. Employees understand the need for confidentiality, particularly in today's competitive environment. And, most, will understand and appreciate your desire to behold them to you and the business. Don't make the mistake of many entrepreneurs and believe that their allegiance to you will withstand the change of ownership in the company! You and your employees DO NOT THINK alike! You are the boss. They work for you. If and when you sell your business, they will work for the new owner and their commitment to the company is part of the value you will receive in the sale. Don't under estimate the importance of this step in your exit strategy.

Third, make sure a potential buyer can follow the money. This step is so simple yet so many entrepreneurs miss it completely. Buyers want to know how the cash flow in your business works. How, when, where and what is the income. And how, when where and what are the expenses. The gross revenue in your business is only one reason a buyer wants to purchase your business. More importantly, the buyer wants to know what the true net revenues are and how your cash flow works. Most entrepreneurs in every size business play with their cash flow. They certainly have the right to do so. However, when it comes time to bring a buyer in to review the numbers the buyer is unable to follow the money. So, in your exit strategy planning you must make sure a potential buyer can follow the money easily for at least three years. Not only will it make the difference in getting you a sale it will most likely get you more money for the business. You can be the most talked about business on the planet but if your numbers don't make sense a buyer will not move forward with an offer to purchase.

Begin today with these first 3 steps to exit your business and you'll be on your way to a successful exit strategy.

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4 Lessons for Women Positioning Their Businesses For Sale

Raise your hand if you know of someone who owned a business and closed it down for one reason or another. This happens much too often. Research suggests 4 out of every 10 businesses ends up closing down rather than selling.

As a business broker, and more importantly, as a former small business owner who grew several small businesses and sold them this is how you are going to do it!

Lesson #1 - develop  a business plan – a roadmap telling you where you are going – perhaps I should say GPS system to be current – but in any case a layed out plan for where you are going – that system needs to be given a destination - an exit – letting you know where and when to get off.

There can be great variables in each step. So, it is key that you start as early as possible if you want to exit successfully.

Companies with a plan learn that there is a timeline for the business and a timeline for the sale.  Thinking about your exit strategy from the very beginning will maximize your value regardless of the business conditions at the time of sale

Lesson #2 - plan for the process to take time. You will need 3 years of P&Ls and tax returns for potential buyers. Some business owners treat their companies like an ATM machine. Taking out cash anytime, any place for anything. If your books don’t look like they support your business a buyer sees a red flag. The financials can be recast to show the true income and expenses, but this doesn’t help you make the case for your price. So keep clean books.

Even when a buyer is found it takes time for the terms to be negotiated.

Some times this can go quickly if the seller wants to change careers/retire and/or move on and the buyer wants to completely takeover. But if employee contracts, seller finance, non-competes and many other variables are in question this can take more time.You need time for due diligence to be completed.

Lesson #3 - pricing your company. Your broker will analyze your business and compare it with other sales of similar companies and perhaps evene get a third party appraisal. Remember that it is not what you ask for your business that matters it is what a buyer will pay for it.

With the appropriate valuation you will be able to get the right price for your company, but remember the terms and conditions of the sale are just as important. 

Lesson # 4 -confidentiality is the hallmark of the business brokerage business.

As they say:

“What happens in the business broker’s office stays in the business broker’s office”

But unlike Vegas, selling your business should not be a gamble. Selling your business should be a well thought out plan designed for you to win. Don't worry about word getting out that your business is for sale. In the business world - everything is for sale at the right price. You've put your blood sweat and tears into your business, so when the plan, time, price and conditions are right you are ready to cash out and then you can shout it to the rooftops.

 

Exit Strategy: 5 Tips for Women Business Owners

Plan the end at the beginning. Every entrepreneur knows the importance of a business plan - a roadmap of where you are going and how you are going to get there. But just like any itinerary, the critical piece to the plan is the destination. In the case of a business, that destination is the sale.

(1) always run your business as if it were for sale. Take care of your customers and your employees as if they were family. Get them to sign contracts whenever possible.

(2) be clear on your goals for a sale. Are you interested in staying with the company long term? Do you want to cash out completely? Do you want to earn more money if the company grows after you are gone? Do you want your employees to have security for at least a short time after you leave?

(3) keep quiet until the deal is finalized. Employees have enough to worry about. Business deals fall apart every day at the last minute. No one benefits from information that is premature in this circumstance.

(4) find a buyer that provides you with a sense of comfort and get promises in writing. Again, often a lot is said while you are selling the business and the buyer is buying the business. But the only thing that counts is what the finally document reads. Get it in writing! 

(5) put yourself and your future first. It's your trip. Make sure it is worth the investment.