As you may know, Margarita and I sold our previous business (Scenario Design) in 2005 and started our new journey with a year off to travel the world and replenish our creative batteries. What a beautiful year that was. I remember it like it was yesterday. As a speaker, I tell that story many times per year and the question that I get every time without fail is: “How did you sell a service business that was so revolved around you and your talent?” And, the answers are below in this blog post. Whether you want to sell your business one day or not, this post helps you build a business that could be sold one day should you choose to.
Now, selling a business is a financial transaction, but more importantly, it is a process of presenting a company as “desirable” and “marketable”. Creating an understanding of the true value of the business to buyers in the market should be your end goal.
Business owners sell their businesses for many different reasons, including retirement, to spend more time with family, or to start a different business. B2B marketer and author John Warrillow claims that the number one reason business owners sell is illness. For many, selling their business is the most important transaction of their lives besides buying or selling their home. Regardless of why they are selling, business owners can take some specific actions to make sure their businesses are attractive to buyers, in order to maximize the financial results from selling.
In his book “The Complete Guide to Selling a Business”, Attorney and author Fred S. Steingold advises business owners to spend some time improving their offerings for sale. He suggests that owners start by improving profitability, changing from a lifestyle model to a wealth-generating model, and getting paperwork in order – and I agree with that 100%.
We decided to sell at the beginning of September 2005 and the deal was done by December 2005. Yes…you heard right, it only took a few months. Having said that, Margarita and I had spent years building systems and procedures to facilitate our processes and efficiency for our own sanity, without knowing that one day…we were going to be grateful for that in more ways than one. Below are 3 important points to consider should you want to build a business that could be sold one day.
1. Improve Profitability
Buyers looking for businesses look for a consistent record of profitability. Steingold recommends that owners who do not have profits year-over-year should wait to try to sell and work on earning at least a year or two of steady profits. Tory Johnson agrees, and cites a client that had difficulty selling because of inconsistent profits, and took 18 months to work on profitability issues, before being able to sell the company for more than double its original sales price.
Steingold cautions owners to not try and hide losses or fake profits. He says to work on improving profitability by actions such as resolving outstanding legal problems and customer disputes, getting accounts receivable in order, and getting rid of unnecessary inventory. Improving profitability is just one way to protect yourself when preparing for a sale. Other things that help potential buyers view businesses as more secure and stable include adding some protections from a company such as Life Lock. You can visit the Life Lock page, which goes into depth on their custom security solutions for business.
Steingold also advises managing receivables with an aging chart that shows 30, 60, and 90 days of outstanding accounts and good collection processes to demonstrate that receivables can be collected. Then collect as many outstanding accounts as quickly as possible. He says having a stock reduction sale produces cash for other business improvements, gets rid of old or stale goods, and cleans up storage or warehouse space.
2. Change the Business Model
Most businesses are not sellable because of inconsistent profits and unattractive business models. There are two types of businesses in my opinion: lifestyle businesses and wealth-generating businesses. Many entrepreneurs and small business owners build lifestyles that pay them salaries and dividends and a boatload of luxury, but otherwise small returns on their investment. Lifestyle businesses rely almost completely on the owners for their value and operations, making them unattractive to buyers and difficult to sell. Wealth-generating businesses are built with solid management teams and financial and operational systems that enable the businesses to operate independently of the owner’s involvement. These types of businesses are attractive to buyers because they won’t lose any operating capacity if the owner is not around and that is precisely what Margarita and I did 8 years ago. We tweaked our lifestyle business into one that was attractive to buy as a result of our team, systems and healthy financials.
3. Prepare Clear Paperwork
Buyers want proof of good business operations and profitability. Financial statements and other important paperwork such as contracts, leases, and inventory counts should present the best possible picture of healthy operations. If they don’t, Steingold advises business owners to work with an attorney and an accountant to clear up any problems in these areas, and improve the paperwork buyers will ask to see. He suggests that a three or five year plan is a good thing to include when cleaning up paperwork, since it gives an overview of business owners’ vision for growth and profitability that will engage buyers.
Leap of the Week
What’s one thing that you could change or elevate right now to help you build a business that gives you more freedom?
I read this post recently by Craig Jarrow, The Time Management Ninja and thought I would share it with you as it struck a cord. We’ve just launched The LeapZone Game - an exponential growth mastermind group - and one of the key factors of the game is “accountability” and the importance of sharing goals with a few trusted peeps.
There has been some debate in recent years about whether you should tell others your goals. In fact, there are camps of thought that you will be less inclined to complete your goals if you talk about them. And others that believe that you shouldn’t have goals at all.
I won’t debate that here, but will re-state that I believe that not having goals is a recipe for mediocrity. I am also a firm believer that it’s not only healthy to talk about your goals…it’s vital.
Here are 5 Reasons You Should Tell Others About Your Goals:
1. Clarify Your Goals: Often, we think we know our goals. However, by telling them, by spelling them out, you find out what they really are. You might find that your goals aren’t exactly what you thought they were.
2. Drive Accountabilty: It’s easy to let yourself down. And we are quick to forgive our inner selves. But, it’s not so easy to let others down. Telling others about your goals brings a new level of accountability.
3. Make Them Visible: Telling others about your goals makes them visible. It gets them out of you and into the public realm. Whether you share with just close friends or with the world, you have gotten your goals out of your head.
4. Set a Deadline: Goals without a deadline are just dreams or wishes. They are just thoughts. Tell others about what you intend to accomplish and by when.
5. Empower Yourself: Telling your goals to others gives you a sense of permission. In a way, you are officially giving yourself permission to pursue. Talking about your goals can give you the green light to move forward.
Now, I can’t know if I will successfully achieve all my goals. But, one thing is for sure…I will set myself up for success from the start with:
1. Weekly actions that align with my goals.
2. A daily ritual that allows me to be at my best.
3. A business architecture that does not allow me to drift from what’s important and/or non-negotiable.
And by stating my important goals to others, I feel much more empowered and accountable to do what is needed to reach them.
LEAP OF THE WEEK: I invite you to share at least one of your big juicy goals with someone or better yet, if you want some public encouragement, tweet me @LeapZone. Then the whole world will know your goals. (now, if that’s not accountability…I don’t know what is!)
Cheers to kicking some serious butt together!
Thank you to Craig Jarrow from Time Management Ninja for this great reminder….and for inspiring me on a weekly basis with his valuable content.
“I was planning on going to the gym tonight, but a client called…”
“I was going to go for a run, but I’m too busy today…”
Sound familiar? Given that entrepreneurs usually have incredibly packed schedules, it can be challenging to create room for a fitness routine. I’ve already discussed 4 ways you can sneak exercise into your workday with next to no scheduling adjustments. Here I’ll focus on creating room specifically for fitness. That means getting more work done in less time, so you have more time left over for fitness (and other things you enjoy)!
Here are 4 ways you can get your work done more quickly, creating space for health and fitness. (Remember that a healthy body is an important business investment! Good health means good productivity, creativity, and energy.)
1. Delete distractions.
Getting rid of things that decrease your productivity is just as important as learning skills to increase productivity. Learn to say “no”, don’t multitask, turn off your e-mail when you need to concentrate on other projects, and use a notebook to record ideas so they don’t take up valuable real estate in your head. Try to minimize anything that will distract you from the task at hand.
2. Optimize your mind for ultimate performance.
Your mind is one of the most effective weapons against procrastination, stress, distractions, and time wasting. Hone your mental superpowers and increase productivity by practicing meditation – simply sit comfortably and focus on your breath for 5 minutes. You could also create a vision board to keep yourself on track for achieving longer-term goals.
3. Optimize your workspace for ultimate performance.
Our surroundings affect our mental state, which means a cluttered workspace can lead to a cluttered mind (and thus, lowered productivity). Foster productivity and inspiration at your workspace by letting in lots of natural light and fresh air, having a “home” for all your office supplies and desktop items, creating an effective filing system, and giving your workspace an overhaul clean-up every 2 or 3 weeks.
4. Use your secret weapons: productivity-boosting apps.
Getting more done in less time isn’t about stockpiling as many secret weapons as possible. Rather, it’s about finding a select few that work for you in boosting productivity. Some examples are Evernote (keep all your notes and interesting tidbits in one searchable database), Freedom (block access to the internet when you need to get work done), Menubar Countdown (keep yourself on schedule and on track), and Remember the Milk (To Do list and task management).
Bonus tip: Remember to schedule, schedule, schedule! I’ve mentioned the importance of scheduling before, but it bears repeating. As Isabelle always says, treat yourself as your own best client. Schedule time for your fitness, and treat those times as you would any other business commitment.
LEAP OF THE WEEK:
Choose one of the above tips to implement this week, and use your extra time for a quick walk outdoors, a 20-minute yoga session at home, or any other revitalizing fitness activity you enjoy. Which tip will you start with?
P.S. For more info on getting more done in less time, check out my brand new e-book, Productivity Gems.
www.leaptv.com – Isabelle loves to laugh, especially at herself. Experience the steam-releasing fun the LeapTV crew has in the making of every episode. MORE Bloopers!!!
TO VIEW THIS VIDEO ONLINE, CLICK HERE:
I read an update from business guru Verne Harnish a little while back. I love his updates as he always introduces his readers to very neat people. That week, he featured Brad Feld, the famous venture capitalist and co-founder of the TechStar movement. Brad had recently produced an insightful online seminar for Verne on his book Do More Faster…and what caught my eye was another of Brad’s books entitled Startup Life: Surviving and Thriving in a Relationship with an Entrepreneur. I thought, “YES!” we are quite an odd bunch and living with us entrepreneurs (usually Type A people, 100% dedicated to making a difference) can’t be that easy…right?
Let me share with you (Coles notes style) the Top 10 Quick Tips useful for any busy entrepreneur to try:
1. Never Schedule High Priority Activities or Deadlines on Fridays:
Doing so will likely create a scenario that drifts into Friday night, Saturday, and then Sunday. Always be realistic about the ebb and flow of the work cycle.
2. Don’t Bring Up Charged Topics at Bedtime:
Your bedroom should be a sanctuary and a safe haven from the demands of the world. Never start a conflict when you and your partner are in bed and dozing off to sleep.
3. Laugh and Laugh Often:
We believe you can never hug each other enough, say you love each other too much, or laugh too often.
4. Apologize and Forgive:
Practice apologizing when you hurt your partner’s feelings. Offer forgiveness when your partner has been careless with your feelings. Know that you will try to be your best self but that you will often fail and will need to hone your apology skills.
5. Have a Life Dinner Once a Month:
Make a reservation right now at one of your favorite restaurants. Go out–just the two of you. Buy your significant other a gift. Turn off your cell phones and hand them to the other person. Spend a long slow dinner enjoying each other’s company.
6. Set Limits on Technology:
You do not need to do just one more e-mail right before bedtime. You really don’t. You need to sleep well and restore yourself and reset your brain chemistry during a nice night of rest. Those who need to take breaks from technology are often the least likely to do it.
7. Live Where You Want to Live:
Pick the place where you want to live and build your life around it. Contributors to the book, Mark and Pam Solon, say “We believe it’s important for young people embarking on their lives to realize that geography matters in your happiness quotient and that it can even out-weigh the highest-paying job opportunities.”
8. Life Is a Marathon, Not a Sprint:
Another contributor to the book, Dave Jilk, says “If I could send my younger self a message from the future, it would tell me to treat my career more like a marathon than a sprint.”
9. Commit to Each Other’s Dreams:
“Recognizing that one’s partner is pursuing their dream, they are satisfied down to their soul and, in so being satisfied, are that much more alive. That level of aliveness is a gift few partners can ever give, and successful couples recognize this,” says Tim Enwall and Hillary Hall.
10. Always Answer His or Her Calls!
While it might seem like a small gesture, the cumulative impact of doing so on a regular basis shows your partner they matter to you. To this last point, I watched an interview with Brad and during the interview his wife called and he took the call! People don’t really care when it’s your spouse.
LEAP OF THE WEEK:
I for one, need to tone down technology before bed time…what about you? What will be your focus for improvement based on this post? Don’t be shy, post your ideas and thoughts below. I would love to hear them.