A Life Well Managed
After you risk everything, fight the emotional and financial battle, and make it into the 10% of businesses that survive the startup phase, you find out it can be very lonely! This graph (by Derek Halpern, founder of Social Triggers) portrays the roller coaster of emotions an entrepreneur goes through probably on a daily basis. The million dollar question is: Who do you turn to for advice while you’re on the ride?
Who understands what you’re really going through? Most of your family and friends don’t know what it is like to have the bank or clients breathing down your neck on Tuesday before payroll. Where can you turn for a listening ear that DOESN’T have a vested interest in swaying your decision? read more…
When you’re selling to a strategic buyer rather than a financial buyer, you have to adopt a different mindset. The deal is not always based on a multiple of EBITDA and it’s not always just about negotiating the best price. There are some obstacles along the way that could cause you a long-term headache, especially if the deal doesn’t go through!
Understand your buyer
First, we should outline the basic differences between a financial buyer and a strategic buyer. Most financial buyers will use a multiple of EBITDA to come up with a valuation of your business. Buyers in this category consist of venture capital firms, hedge funds, family investment offices, and ultra high net worth individuals. The main goal of a financial buyer is to make a return on investment and EBITDA is not the only factor but is the main driving force behind most valuations.
With a strategic buyer on the other hand read more…
Before you even answer the question above, think about what it means to be exponential… does the cliche phrase, “hockey stick growth” come to mind? You’re probably thinking: “what does this have to do with me, my company or industry?” Well, a lot! In today’s fast past, information-driven economy, competitors are going to come from every corner (or basement)!
Just think, a book company (Amazon) is now competing with grocery stores, trucking companies, data centers, music companies, the film industry, tablet companies, and the list goes on…
The reason this is important to you: if you are dragging your feet to put together a 5-7 year exit plan, how confident can you be that your company (or industry) will even be relevant in the coming years EVEN IF you put together a perfect exit plan?
Life after business doesn’t have to mean you sever ties with your business all together. The Question doesn’t have to be “To Sell, or Not to Sell” In fact your current business could be vital to your next phase in life, or your ‘second half’ as our friends at the Halftime Institute call it. If you want a change, there is a lot more you can do than simply putting your business up for sale and there is a ton of introspective work you should do prior to making any of your decisions!
Your business is so much more than a financial asset – it is a platform – and from this platform you can build yourself a whole new future. read more…
Do you know what your company earns before taxes, interest, depreciation and amortization? If you don’t know, or it would take time to get to the exact number, your potential buyer or banker has the upper hand in any negotiation! You need to know your EBITDA number so you can create a narrative around why it is what it is. Without that narrative, you do not have any type of leverage and the buyer doesn’t have the full story.
Google maps is one of the most powerful tools on the planet… but it is literally worthless if you don’t plug in point B…. you need to know where you want to go!
At our very core to who we are, entrepreneurs love control, freedom, and the ability to be the director of our own narrative. Owning a business and putting the vision together, reviewing the quarterly financials and profit statements, and being clear with where your business is going allows you to be the master of your own universe.
What happens if you shift the question and ask where is your life going and how does the business fit into that plan? You need to have a plan or a guide that aligns your business and life goals together. To do one without the other just doesn’t make sense. read more…
Do your customers pay you right away!?
Recently I spoke at a conference and I said to the audience: “raise your hand if your customers use you as a bank”. You can probably guess just how many people in the room had their hands in the air!
Customers end up using you as a bank because you let them.
Not only does this impact normal day to day operations but it increases your need for capital to cover the expenses during the time it takes your customers to pay. This can be a nuisance, but what really hits home is how this directly affects the value of you business and how much money you take home when you sell!
It doesn’t matter how small or big you are – it’s all about communication and expectations. These are driven by priority, and if you don’t prioritize this it will negatively affect how much money you get at the end of the day.
Headline: How to survive in the wild west: M&As debunked
While you might not see a mergers and acquisitions advisor ride into town on horseback, you’ve still got to find a way to identify the cowboys. The trouble is, so many of the people you may turn to for help selling your business will call themselves a ‘M&A advisor’, but their skills could be wildly different to one another. Read on for an explanation of the two ends of the M&A scale, and for our advice on how to make the right choice for your business….
Handing over a family business is a notoriously difficult way of cashing in your chips, but it really doesn’t have to be. Keep reading to learn a very simple methodology that we’ve seen work time and again.
Stand firm: keep your profits
So many business owners assume they have to fold right at the beginning of any family succession plan, i.e. as soon as the planning starts they relinquish control of their business, they lose the share of the annual profit they’d been drawing for every year they owned the business. But why does this need to be the case?
Play your cards right and you can incentivize your children to buy you out with profits they’ve made for YOUR company. That way, everybody wins: you keep the income and cash flow you are used to, and then anything the company makes above and beyond that will be used to gradually buy your share of the company.
You kids are buying their way into the business with their own sweat equity! read more…
Flow is an absolutely fundamental part of both business and life after business. You might not call it flow, but you sure as hell miss it when it’s gone.
The definition of flow
In lay man’s terms, ‘flow’ simply means ‘being in the zone’. One of the main reasons entrepreneurs find it difficult to let go is the constant high feeling they get when day-to-day business puts them in a flow state…. it can be seriously addictive.
The man credited with pioneering flow as a scientific concept is a psychologist called Mihaly Csikszentmihalyi. This is his definition:
“Being completely involved in an activity for its own sake. The ego falls away. Time flies. Every action, movement, and thought follows inevitably from the previous one, like playing jazz. Your whole being is involved, and you’re using your skills to the utmost.” read more…
Entrepreneurship is a journey. Sounds obvious, right? I think most would agree if you asked them, however, the majority of entrepreneurs don’t act like it is. They are permanently stuck in the first half doing the fun stuff, but the game is really won and lost in the second half.
Bo Burlingham gives a great analogy in my podcast interview comparing entrepreneurship to a construction project. Entrepreneurs tend to focus only on growth (the building phase) and in turn fail to see the whole picture. Every project must be completed. Smaller details need to be managed and fine tuned before the project can truly be labeled “finished”.
No one wants to move into a building that is only full of 2x4s and insulation. Everyone expects there to be toilets, light switches, carpet etc. before they would even consider buying it. The true art is finishing a project and making everything come together. read more…
We all know how important trust is in our everyday lives, but not enough companies really understand the power and impact it has in business. You may think your employees are trustworthy… but do you show how much you trust them via the responsibility you give them? Or are you like most of us business owners and THINK about the trust you have in your employees but fail to communicate and act upon that trust?
Not only is trust a crucial trait of all top leaders and a vital part of profitable businesses… it can be one of the most important factors in successfully transitioning your company to next-level management or a new buyer. Trust, or lack thereof, can completely dictate the outcome of your exit plan. read more…
It might seem a bit of a waste to take a step back from your business… you know it better than anyone, right? But as true as that might be, you’ll seriously devalue your business if the day-to-day operation is dependent on you. Guaranteed.
I come across a lot of business owners who have this great sense of pride in knowing EVERYTHING about their business, which makes sense because the business that is there is a reflection of them and their accomplishments. “I’ve done it all, I know every customer, I’m willing to get my hands dirty, I’d never ask someone to do a job that I wouldn’t be able to do blah blah blah,” but there is one thing they forget… if they are the hub and everyone else is the spoke, all they have is one very stressful and risky JOB; not a company that is worth selling or that can run without them.
If everything has to go to you to operate, how can you leave? Is there anything really to buy or transfer? read more…
What would someone do if they had a blank check and owned your company?
Growth for growth’s sake can get a business into trouble, but if you want to maximize the sale value of your company, you have to put things in place to give the buyer the opportunity to take the company forwards. Even though it might be the end of the journey for you, remember that it’s the very start of the journey for them. Your company has to be equipped to take them somewhere.
Think transferable value or in plain english, transferable cash flow. If someone were to purchase your company, how fast could they x5 your current cash flow? read more…
So many entrepreneurs are addicted to growth for growth’s sake. Do you know why you are pursuing growth? Chasing the carrot at the end of the stick can be disastrous if you don’t know why you are doing it. You can easily put yourself in that classic cartoon scenario of the road runner where you keep running and you don’t notice you’re 10ft off the cliff, then you look down and…… sh*t!
The pursuit of growth really can be distracting if you don’t put it into the context of a bigger strategy or plan. Even the best in the business have run off the cliff before realizing where they were. read more…
Find the recurring revenue Holy Grail
Almost all business owners know they want recurring revenue and know they should have it, but how many of them actually try hard enough to get it? There are some key challenges that companies and owners must face when trying to reshape their revenue structure, and trust me it’s worth it!
But why is recurring revenue so important anyway? read more…
What would a 71% increase look like for you?
Yes, it is possible to ramp up the value of your business by simply understanding where your revenues come from. Get this right and your business can be worth way more than another business with exactly the same amount of profit and revenue.
It all boils down to risk. read more…
First off, what is an identity?
Can you change it or is it permanent? Is it what you stand for? What you do for a living? Your nationality? Where you live? One thing’s for sure: when you’re an entrepreneur, your business becomes your identity, and your identity becomes your business.
This word “Identity” is one of the words in the English language that is subjective to the person you ask… similar to the word ‘happiness’. The answer derives from read more…
One conversation could save you millions…
The normal tug of war that happens when trying to figure out whether you should do an asset sale vs a stock sale while you’re buying or selling a business doesn’t have to be as black and white as you think. There is a small tool that could save you millions of dollars, but that so many people simply don’t know about. This unsung hero goes by the name of ‘the 338(h)10 election.’
Buried away in the bylaws of our tax system, the 338(h)10 basically enables a stock sale to be treated as an asset sale for tax purposes. But what does this actually mean?
What is a lifestyle business?
Passion, control, flexibility, or pure necessity… all reasons entrepreneurs decide to pick up and start a company. Building the business was synonymous with having the lifestyle you wanted to live. Having the freedom to be your own boss and work on your own schedule is a luxury that so many of us dream about.
I was recently asked what is a lifestyle business, and how does that compare to the other types of businesses out there. So here it goes… read more…