Interesting, perhaps comical business quotes

For business owners the day-to-day operations of their enterprise can be exhausting.  Long hours and hard work are all part of the typical week.   So, when you have a chance to ponder the thoughts of others, take a read through some interesting, perhaps comical business quotes.   

Enjoy, and I would love to hear some of your favourites…

·         “Golf is a lot like taxes… you drive hard to get to the green and then wind up in the hole.” – Anonymous

·         “More and more these days I find myself pondering how to reconcile my net income with my gross habits.” – John Nelson

·         “He ended the job as he began it; fired with enthusiasm.” – Don O’Shaughnessy

·         “They usually have two tellers in my local bank, except when it’s very busy and then they have one.” – Rita Rudner

·         “Statistics indicate that as a result of overwork, business owners and executives are dropping like flies on the nation’s golf courses.” – Ira Wallach

·         “Tell your boss what you really think about him and the truth shall set you free.” – Patrick Murray

·         “People should be less concerned with the difference between good or bad and right or wrong and more concerned with sense and non-sense.” – Carl Jung

·         “They were a people so primitive, they did not know how to get money, except by working for it.” – Joseph Addison

·         “An Economist’s guess is as good as anyone else’s” – Will Rogers

And my current favourite…

·         “I want a one-armed economist so that the guy could never make a statement and then say ‘on the other hand…’ ” – Harry Truman

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

Does Your Business Have Inadequate Financial Records?

It’s probably safe to say, most people realize private businesses’ accounting records are kept to minimize taxes whereas public companies’ records tend to maximize earnings. 

This seems logical considering the average business owner would much rather pay as little as possible to Canada Revenue considering all the hard work they put into their business. This, on the surface, can seem problematic when you go to sell your business.

If tax records are the only ones you keep, your company is going to show minimum taxes and minimum earnings.  This makes for lower valuations, since Buyers will determine what they are comfortable paying for your business based on those earnings.

What is the solution?

The answer isn’t to pay more taxes, but rather to keep records so that they can be recast to show the business’ actual cash flow.

Unusual expenses, such as your teenage daughter’s cell phone, the antiquities you had shipped from South America for your home den or your spouse going to a convention as an assistant, should not be mixed in the advertising and promotion account.   Such expenses should be kept in separate accounts or religiously logged to allow future recasting. 

When should you start doing this?

Yesterday!  This should be done even if you are not contemplating selling now.  Buyers will typically want to recast for a minimum of the previous 3 years and many times for up to 5 years.

Are you positive that your business will not be transferred in the next 5 years?

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

There's no perfect business

There are some that are better for you than others.

The key is to find the right opportunity for you as a Buyer, and make it your perfect business.  Once a buyer has decided to do this, the question then becomes “What business is the perfect opportunity for me?”

Ask yourself “What is my reason for buying a business?”  The honest answer is sometimes hidden beneath our needs and wants, but the eventual outcome must address your underlying motivation for buying.

Ask and answer the following questions, before you start shopping… Is there a minimum level of income you require?  What level of cash do you have available for both the down payment and closing expenses?  What timeframe are you working with, are you a buyer today or in 6 months?  When would you be available to run the business?  Are you going to work in the business full-time or is you goal to be an absentee owner?

Then make a list of all the business types that do not interest you.  This will narrow the field and keeps you open to opportunities that you may have otherwise over-looked.  When shopping for a business opportunity knowing what you specifically want is great, but not a necessity.  Many buyers are not able to narrow their interests when they begin their search.

Once you complete the above start your search by scheduling an appointment with a business broker.  They can show a buyer a variety of businesses that are legitimately interested in selling and help them through the purchase process.  With plenty of businesses to choose from in today’s market, it is more important than ever to make sure that their efforts remain focused on choosing the right business for them.

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

The wrong price can be a big mistake

Too high is bad; too low is bad.

If the price is too high, buyers don’t think you are serious and won’t investigate the opportunity.  The offering can become inactive or worn-out, and has to be taken off the market or dumped below the market.

If it is too low you will leave something on the table.

Most sellers do not know the market value of their business. 

Unfortunately, the explanation isn’t always an easy one.  The truth is if you ask 10 people you probably will get 10 different answers on the valuation of a business.  There are a number of methods:

·         Book Value

·         Liquidation Value

·         Price to Earnings Ratio

·         Discounted Cash Flows

·         Etc.

The easy answer is, “Your business is only worth what someone is willing to pay you and what you’re willing to accept.”  The long answer is a lot more complicated.

The basic criterion of most buyers is return on investment (ROI).  This number will vary depending on risk, perceived inflation and other subjective and objective perceptions about the business and related market conditions.

One of the most effective valuation methods is known as “cash flow” since it considers the cash flow ‘return’ and selling price ‘investment’ in the equation.  Buyers typically are comfortable with this method because, at the end of the day, although they are buying a company, what they really are buying is its cash flow.

With an understanding of a business’ actual cash flow, different multipliers can be applied to determine a fair market range of value for the business.  Multipliers vary depending upon the type of business.  Of course many other factors can affect the multiplier.  For example, new products in the pipeline, strong market share and a diversified customer base positively affect the multiplier.

Conversely, out-dated inventory, declining market share and the risk that key personnel could leave the business and disrupt operations could have a negative impact.  Why?  Because they relate to risk, the higher the risk the more likely the buyer will insist on a higher ROI and lower multiple.

You’ll notice that this method contains no mention of the ‘terms’ of the transaction.  This is an incredibly important factor and needs to be considered in order to ‘prudently’ position your business to sell.   And one to be discussed in a future blog. 

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

Is Your Decision to Sell Firm?

One of the biggest mistakes business owners can make is the lack of a ‘Firm Decision to Sell’.  My advice… If you have not deliberated and come to the firm decision that you are going to sell, don’t start the selling process. 

Preparing to sell your business means more than simply straightening up the files and getting up-to-date with your bank statements.  In order to get the best price there a number of steps the Seller needs to take.  Often those steps may seem time consuming; however, done properly they can lead to improving their management practices and ultimately improve the desirability and value of their business. 

Plus, once a Seller and Buyer come to an agreement, often times the preparation to help sell the business can help the deal close quicker.

The #1 question buyers will ask is ‘Why are you selling’.  Sellers must always know their reason for selling and it must be firm in their minds.    Most sellers are motivated by reasons other than money.  For example, a pending retirement, a critical illness to themselves or family, pressure from a retired spouse, and burn-out are just a few popular reasons. 

Money and the right price are important, but if the Seller is not mentally prepared to sell, don’t.  

Selling a business can be a complex legal, financial, and emotional process.  Most know a successful business sale needs a motivated Buyer, but equally important it needs a motivated Seller.  A motivated Seller is someone who has a definitive objective in mind, someone who understands what’s involved in the process and someone who has a desire to reach the finish line. 

Don’t make the mistake to think this means a Seller will need to sacrifice on their business value.  It is a necessary ingredient to a successful transfer.

A business broker is a professional that Sellers should turn to for assistance when deciding to sell or as they deliberate over the prospect of selling.  This will give the Seller an opportunity to learn about the process, how Buyers are likely to view their business and prepare them to maximize their value.  

Also, not only does having a third party represent their interests indicate that they are taking this venture seriously; it can often lead to a number of buyers being interested in their business.

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

Picking An Exit Strategy That Is Best For You and Your Business

For many business owners, the exit strategy from their business consists of finding a buyer who is ready, willing and able to purchase their business under terms acceptable to both parties.  This enables the seller to move into a new phase of life where there is an end of responsibilities associated with the business and the beginning of different pursuits away from it.

However, for some owners, their exit strategy consists of executing a succession plan where they find a replacement that will be able to take the reins of the company and keep it pointed in the right direction.  This strategy will mean less time at the office and more time spent away but not a complete separation from their business.

Successors can be beneficial because they are usually eager to make their mark on the business.  Often, they can see upcoming trends more clearly.  When you combine their energy and insight, the new leader may even be positioned to grow the company. 

However, finding the right successor can be a challenge.  It begins with the outgoing owner figuring out what kind of person is best for the company, not themselves.

This is no easy task.  In fact, many experts recommend against trying to find a clone because when the replacement ends up in charge, it will be at a future date where different talents may be required.

Their next step should be to survey available people from both within and outside the company.  The prospective replacements’ skill sets not only need to be examined but also their willingness to take the job.

Once the chosen candidate is identified, the owner needs to determine the additional talents the replacement needs and come up with a plan to ensure they are developed.  When the successor is close to being ready, it is often a good idea to give the “understudy” a “dress rehearsal”.  For some owners, that can mean taking an extended vacation or beginning to work part-time.  For the exiting owner, they may still need to call the office every day, but between their calls, the successor will be making all the decisions.

With this exit strategy, while the outgoing owner is resolving some of his work-related issues, he may also unfortunately be creating some new problems.  The exiting owner needs to be aware of the sensitivities of those who were not chosen.  These employees may choose to leave the company or perhaps worse, stay and become trouble-making malcontents. 

Sometimes succession isn’t the best solution when it comes to a family run business.  An exaggerated example is the humorous commercial on television where “Chip” is a newly appointed Chief Executive Officer of a large company simply because he is the outgoing CEO’s son.  The results are disastrous.

I am not suggesting that this happens frequently in real life, but unfortunately, we’ve all seen similar situations where it has.  In some of these situations, the successor hasn’t been qualified while in others, they may have been qualified, but just not truly interested.  The results are usually the same.

Think about how the decision will be compounded if the owner has two or more children involved in the business.  The owner’s first decision of choosing who will take over the business is the “easiest” – if you can call it that?  The owner must select the child who has most consistently exceeded company goals, who has been the most innovative, who works better with employees, customers and vendors, who has more of the skills required as a CEO?

Now comes the harder part.  It’s one thing to pass over a non-family member.  It’s another when you have to choose one child over another.

Regardless of which path is followed, the decisions that are made can significantly affect both the life of the business and the outgoing owner so they need to consider all the consequences.

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

Buyer’s... take an honest inventory of skills

I’ve written a few times about the benefits of buying an existing business rather than starting a new one. 

By purchasing an existing business you can dramatically minimize the risks associated with starting one from scratch.   Existing businesses have a proven track record of profits, they may have a well-known brand, name, location, product mix, etc, and an established customer base for immediate cash flow.  Many new start-up businesses don’t make it through their first birthday and fewer make it to their 5^th anniversary. 

Whether your decision is to buy or start a business, I can suggest a few things that will help to ensure that you will be happy with your decision.

First, get a solid understanding of your financial situation.  While financing may be available, it is imperative that all aspiring entrepreneurs know how much money they are prepared to invest.  Plus, and perhaps more importantly, how much they expect to make. 

Second, take an honest inventory of your skills, knowledge and interests.  Things such as, do you enjoy interacting with people or are you more comfortable behind a desk?  Do you like being the leader, making decisions and managing people?  Do you have some technical expertise or talents that you can leverage?

Finally, one of the keys to a successful business is finding the right business for your personality. Adapted from Rhonda Abrams’ book, What Business Should I Start?  The E-Type Test will show you what of nine E-Type personality traits and working styles you identify with. Answer all the questions and your E-Type will be displayed in a pie chart. More information will be displayed as you mouse over the results.

Once you complete steps 1-3 start your search by scheduling an appointment with a business broker.  They can show a buyer a variety of businesses that are legitimately interested in selling and help them through the purchase process.  With plenty of businesses to choose from in today’s market, it is more important than ever to make sure that their efforts remain focused on choosing the right business for them.

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

How Outside Influences can hamper a business sale.

Selling a business takes many twists and turns.  During the preverbal dating stage relationships between buyer and seller are delicately created.  After buyers have dialled into a specific business of interest, they will meet the seller in order to speak candidly with the seller and find answers to their questions.

When a buyer is still interested in purchasing the business after a discussion with the owner, the broker will help draft an offer. Once an agreement is settled on, there begins the process of the buyer and seller fulfilling their conditions and contingencies within the deal, in order to close the transaction successfully.

Unfortunately, there are a number of reasons why a business sale doesn’t close successfully.  Some deals unravel because of the buyer or seller, and unfortunately some are caused by third parties.  The reasons are numerous but most can be resolved.

Landlords may become difficult to deal with when it comes time to transfer the lease or grant a new one.  This strangest example is of a high profile restaurant deal that fell apart because the landlord didn’t like the menu.

Sometimes, both buyers and sellers may receive overly aggressive advice from outside advisors.  Advisors should always remember and work towards the goal of putting the deal together, not erect roadblocks to derail it.  Something as innocent as a letter from a lawyer just prior to closing can break the chemistry between the principals.

Accountants can also influence a deal.  For instance, rarely have I met a buyer’s accountant who thought his client didn’t pay too much for a business.

Conversely, I’ve hardly met a seller’s accountant who felt that their client sold their business for enough money.

Professional business brokers are aware of the various ways a deal can unravel.  They can reduce frustrations by managing and depersonalizing the process.

For sellers, using a broker means they can continue to maintain their focus on making the business as profitable and attractive as possible while the business is marketed confidentially.  For buyers, using a broker allows them to follow a step-by-step process while remaining focused on choosing the right business for them and the pending matters associated with them operating it.

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

Protect yourself… confirm your deal in writing

What happens when you find a business that you are interested in? 

The business broker will set up a meeting with the seller once you select a business in which you are interested. This will give you an opportunity to speak candidly with the seller and find answers to your questions.

If you are still interested in purchasing the business after a discussion with the owner, the broker will help you draft an offer based on the price and terms you feel are appropriate.

The legal language that makes up your offer needs to be thorough. It will set out the basic terms of the proposed purchase and sale. 

When an issue or concern is particularly important to either party, that concern should be specifically addressed in the offer.  By addressing those concerns at this stage of the deal continuum, each party will have an opportunity to determine early on, before both parties have incurred considerable time and expense, whether the other party takes a strongly opposite position.  In other words, the “deal killers” should be identified and resolved early on, and in writing.

The comprehensiveness of the offer depends to some extent upon the business being bought and sold and the parties involved.  However, there are a number of conditions typically standard to a business transaction.  Two of the most important clauses in our offer make the transaction contingent upon your Lawyer reviewing the legal language of the offer and your Accountant's analysis of the financial statements.

As a Buyer, you will want your Accountant to review the financial data to verify the cash flow that has been represented by the Seller.  Your Accountant will probably want to see the Seller’s General Ledger, Bank Statements, Sales Tax Reports, etc.  There will be a specific time period to execute this review, upon receipt of the required documents.

If there is a promissory note, or vendor-take back, the Seller will also ask the Buyer to supply documentation in order to review their credit worthiness.

The legal language in the offer can be binding, non-binding, or both.  Regardless, your agreement should ensure it is subject to legal review, to confirm there is no legal language harmful to you.   Plus, both the Buyer’s and Seller’s lawyers will make sure that all the legal paperwork associated with business transactions gets done, and gets done properly. 

Professional business brokers are aware of the various ‘deal killers’ causing agreements to unravel.  Further, they utilize clear, concise documents that have been reviewed by transaction
Lawyers which are designed to protect both the buyer and the seller. For both Buyers and Sellers, using a broker allows them to follow a step-by-step process, structures legal and accounting review in a timely manner and keeps each party focused on the pending matters associated with the transfer day.

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

Buyers come in many forms

Business sellers must not fall into the trap of focusing all their efforts on a single prospect or target market, no matter how attractive they may seem.  There’s an important rule to remember when selling your business:  One buyer is the same as no buyers.  If the buyer knows he or she is the sole interested party, he or she is able to control the negotiations.  Creating and managing competition helps maximize the price buyers will pay for a business.

Also, in today’s uncertain market, it’s more important than ever to separate the time-wasters (i.e. those who think they might like to buy but aren’t ready for it) from the serious buyers.

As with any kind of marketing, when selling a business we need to understand the varying target markets.  There are numerous different types of buyers:

·         Strategic Acquirer – Not to be confused with competitors, these are buyers who may be interested in the synergy’s that might be created by purchasing another company.

·         Investors – Due to the volatility and poor performance of the stock market, many investors have realized that as a business owner, the return on their investments can be significantly greater when successfully operating their own company. 

·         Career Changers – Formally middle managers and executives who have taken early retirement packages are eyeing the advantages of being in business for themselves.  For some, it isn’t just the money they’re dreaming of; it’s the desire for more control over their investments, their time and their lives.

·         Employees – Employee Stock Ownership Plans can sometimes be beneficial to both parties, but they can easily backfire, especially if the deal falls through.  That can create hard feelings.  Another possible employee buyer is a present manager; however, he or she often doesn’t have much capital.

·         Competitors, Suppliers and Customers – Although much maligned because of the risks associated with divulging proprietary information to them, this group when handled appropriately can represent an attractive prospect list.

Attracting buyers for a business is no easy task.  Wide open promotions that a business is for sale can be disastrous, but the only way to find a buyer is to communicate that a business is for sale. A big reason sellers turn to a professional business broker when deciding to sell is to open up markets of potential buyers across the province, the country, as well as throughout North America.   By allowing a skilled business broker to confidentially guide sellers through the sales transaction step by step, owners will be able to concentrate on their job – making their business as profitable as possible.

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

Business Quotes that will make you go... hmmm

On the heels of another wonderful holiday long weekend I thought it would be appropriate to share some of my favourite quotes.  The truth is these long weekends often times are more tiring than relaxing and lightening up the weekly blog seems to be the appropriate thing to do. 

Enjoy, and I would love to hear some of your favourites…

    · “When I asked my accountant if anything could get me out of this mess I am in with my business, he thought for a long time and said, ‘Yes, death would help’” – Robert Morley

·         “I don’t want any yes men around me.  I want everyone to tell me the truth…. Even if it costs him his job.” – Samuel Goldwyn

·         “I always arrive late at the office, but I make up for it by leaving early” – Charles Lamb

·         “His insomnia was so bad, he couldn’t sleep during office hours” – Arthur Baer

·         “When a man tells you that he got rich through hard work, ask him ‘Whose?’ ” – Don Marquis

·         “You’ve got to be very careful if you don’t know where you’re going, because you might not get there” – Yogi Berra

·         “We didn’t actually overspend our budget.  The allocation simply fell short of our expenditure.” – Keith Davis

·         “Be kind, for everyone you meet is fighting a harder battle” – Plato

·         “Most of what we call management consists of making it difficult for people to get their work done.” – Peter F. Drucker

And my current favourite…

·         “The definition of a consultant: Someone who borrows your watch, tells you the time and then charges you for the privilege.” – Anonymous

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

What can I do to help sell my business?

There are many things to consider when you own your own business.  Probably the most difficult and emotional is their ‘Exit’ from the business.  Many entrepreneurs pour their heart and soul into their business, and the prospect of transitioning to retirement or other interests can be the most difficult and perhaps biggest decision of their life.  Below is a short checklist of thing you, the business owner, can do to help sell your business:

1. Ask yourself if this is the right time to sell. If a business' current financial picture doesn't match the owner's expectations, one or the other has to be adjusted.

2. As a seller, you must know your reason(s) for selling. It is one of the first questions a buyer will ask so you will need to be prepared to articulate your reason(s). Ideally, it is much better when the reason(s) are not urgent.

3. You will need to get your books in order. Prospective buyers will want to see at least three years of Tax Returns and Profit and Loss statements.

4. As part of getting your books in order, you'll need to understand your business' true profitability or cash flow. Since most businesses claim a variety of non-operational expenses (i.e. personal auto lease, personal discretionary expenses, etc.), you must make sure that you have supporting documentation for these.

5. You must also make sure all of your legal commitments are in order. You need to review all of your permits, leases, client and vendor contracts, etc. and understand their impact on the business. For example, if your business' location is key to its performance, a long term lease would be appealing to a buyer.

6. If you are absolutely vital to the business, efforts must be made to gradually delegate key responsibilities to various staff members, especially those related to customer relationships and revenue generation.

When a buyer is coming out to see your business for the first time, it’s important to make a good first impression. Buyers look for companies that show well because it can often be indicative of an orderly run business. The first impression can turn on (or off) buyers and add (or subtract) value from your business.

The common thread weaving through all of these steps is credibility. As a seller, if you want to keep buyers moving forward, you must show your respect by being open, honest and accurate about all things, both good and bad.

And finally, sellers should use a professional business broker to enable them to keep focused on successfully running it.  They can’t afford to let the business’ performance decline because they’re too focused on its sale.  This will only give buyers additional negotiating power to lower their offers.  Also, not only does having a third party represent their interests indicate that they are taking this venture seriously; it can often lead to a number of buyers being interested in their business.

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 

William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.