Small Business Succession Planning Strategies

Small Business Succession Planning Strategies

Transferring Ownership to Financial Independence

Selling-Succession Methods versus Emotional Needs

Understanding That The Emotional Has To Be Accounted For (Part 1 of 3)

The ownership of a business for most of us is not an antiseptic event.  We’re not cold-heartedly making an investment and then selling it off when it is at the right point to maximize money.

If you’re like most business owners, you’ve spent a good part of your adult life in your business.  And you haven’t been going through the motions all those years.  No, you’ve invested your mind, body, and soul into your business.  For many of us, we’ve spent more time…a lot more time…with our business than we have with anything else in our life.  What does this mean when we start seriously thinking about how we want our business life to end?

To me it means that we have to consider how this transition is going to affect us emotionally.  I mean really are we going to just completely drop what has dominated our life for all these years and think that we will go on as if nothing has happened?  I think not.

If you are wise about this, you will acknowledge and not reject that the transition out of being an owner is going to be tough.  In terms of your personal small business succession planning strategies and selling tactics it means understanding that each of the primary methods of creating financial independence from your business has its own particular emotional repercussions.

In my next post, we will go into these in more detail and look at a process you might use to deal with them.

Creating Your Formula For Selling a Small Business

Creating Your Formula For Selling a Small Business

FOCUSING ON THE NUMBERS

USING YOUR UNDERSTANDING OF NUMBERS TO DRIVE YOUR SUCCESSFUL BUSINESS SALE (PART 3 OF 3)

In the first part of this blog series, I made the case that empirical data on your business is a primary tool for overcoming buyer fear and driving a successful formula for selling a small business.  In the second part of the series, I discussed the kinds of information you need to be getting.  Now in the last part we want to talk about what to do with the information.

This could be a huge topic but I’m going to make it very, very easy for you.  Use it to manage your business.  Yes.  Just that.  Use it to manage your business.

What is going to make a buyer want your business before any others?  They’ll want it if you have a nice upward trend of sales and profits.  They will want it if you can show that you know who your customers are and your strategies for getting more of them.  They will want your business if you are consistently improving your operations, becoming more effective, and getting more out of your assets and people.

The numbers, the data you start collecting gives you the ability to work with your team so everyone knows just what is happening. There’s an axiom that says, “What we measure, we accomplish.”  If everyone knows what the key data is and what it represents, it is not a huge step to go to the discussion of what is being done and how that affects the data.  Think of it like being an athlete.  They’re always measuring their performance because it is the only way they know if their work is producing the results they want.

Businesses that have data, understand what the data says about what they are doing, and use the data with their teams to improve performance are highly desirable businesses to buyers.

Do you find this intimidating?  Maybe this kind of process doesn’t come to you naturally?  On the other hand, do you want the successful formula for selling a small business?  Then (as stated in Part 2) look for help and be willing to accept it.  There are all kinds of professionals who specialize in helping businesses make just these types of improvements.  It can make all the difference in getting the successful sale of your business.

Creating Your Formula For Selling a Small Business pt. 2

Creating Your Formula For Selling a Small Business

Creating Your Formula For Selling a Small Business

FOCUSING ON THE NUMBERS

WHAT ARE THE CRITICAL NUMBERS (PART 2 OF 3)

In my last post, I set the stage for why the use of numbers and metrics is important if we are going to have a formula for selling a small business that is successful.  In this post we will go into more specifics; namely the types of numbers and metrics and why they are important.  Then in Part 3 we will discuss how you use them to put yourself in a position for a successful sale.

Numbers.  Why are they important?  They’re important because they present empirical information on what has taken place.  They take you out of the world of opinion.  And they are the basis of metrics and accountability management which in turn are the keys to on-going performance improvement.  If you want to give comfort to a buyer and make their fears lessen, give them data, not opinion.  Give them tools to measure how you are doing, not opinions that everything is going great.

There are almost an infinite number of things that could be measured in a business.  As in most things, there are a few that are far more important than the others.   Just keep in mind that your business has certain major functions it has to do well to be effective. These are what you want to be measuring. However, there are certain overall categories that buyers are going to be looking for.  These are:

• Financial Information – This is usually Income Statements, Balance Sheets, and Cash Flow Statements and the ability to understand what is in these reports
• Sales Information  - This might be things such as sales activity (pipeline) information and sales history information (what’s been sold to whom and with what profitability
• Operations Information  -This is the information that shows exactly how you do what you do and can include information on production, productivity, quality, labor, etc.

If you are serious in wanting to have a successful business sale, my advice is get a professional to help you.  There are all kinds of advisers and consultants who specialize in helping businesses develop business information and help businesses to interpret that data.  If you’re serious about selling, if you are going to use numbers and metrics, then do it well and do it right the first time.  That means getting an expert.

Creating Your Formula For Selling a Small Business

Creating Your Formula For Selling a Small Business

Focusing On The Numbers

Understanding The Buyers Mentality (Part 1 of 3)

Most business owners see their business through tinted glasses…a point of view originating from a deep understanding of what their business is and all that has been achieved.  This is understandable but it sets the stage for one of the common reasons for business sale failure.  Simply put, no buyer can ever or will ever be able to share the depth of knowledge and passion that the owner has.  They come to your business with a very different frame of mind and it’s your job to understand it if you want to successfully create your formula for selling a small business.

There is a simple way if you are a business owner to put yourself in the right frame of mind.  Remember any time you’ve made a significant investment or purchase.  I’m willing to bet in that circumstance you were very cautious.  I’m sure you thought about all the ways the investment or purchase might not work out.  I’m guessing you spent a lot of time thinking through how you would do your purchase or investment to ensure that you didn’t lose money.  In short, you acted just the way a buyer is going to look at your business!

When a buyer, any buyer, approaches a deal, they will be making a major investment.  They will be worried about how it might not work out.  They will think a lot about how to ensure they don’t lose money. If you understand this mentality, you can use it to your advantage.  You can take off those tinted glasses and start looking at your business like an outsider would.

One of the primary tools we have to offset the buyer, fear-of-loss mentality is the use of and integration of metrics and empirical data into our business management.  You can have all the opinions you want but when you have numbers and data to back you up it is no longer opinion.  In my next two posts, I am going to discuss what types of numbers you should be focusing on (Part 2) and how to use those numbers to get the outcomes you want (Part 3).