Tips for Selling Your Business

Since every business ownership transfer is unique, sellers should ask themselves some important questions. There is also a common process for the sale of most small businesses. The more informed and prepared you are for the process, the more successful and less stressful the outcome of the sale can be. The following is a brief outline for the sale process of small, closely held companies. In some situations the principles can also apply to larger companies.

Three questions you should ask yourself before starting to sell your business:

1. Can Your Business Be Sold?

There are different elements of a business that make it attractive for buyers. For example, does it have a profitable history, a customer base that is loyal to the brand, an advantage over competitors (intellectual property rights, long-term contracts, exclusive distributorship), a solid foundation for growth, skilled employees and a desirable location.

2. Are You ready to Sell?

One of the most important questions to ask yourself when thinking about selling a business. You have to be emotionally ready to let go of your hard work. Also financially stable since the income from your business will stop once it has been sold. Some business owners suffer real remorse after the sale of there business to a new owner.

Here are some indicators the it might be time to sell:

1. You’re not having fun running the business anymore or you’re burned out. These are entirely legitimate reasons to sell your business.
2. You might be happy with the size and profits of the company and don’t want to invest any more capital into growing and expanding the business.
3. You might have build the business to a point that you’re not able to manage it efficiently anymore. It is not uncommon for owners to grow their business to a certain size and then realize that they lack the skill set to manage it efficiently.

3. What is Your Business Worth?

It is an art and science to sell a business. In no other area is this more evident than the valuation. Every seller wants to sell at the maximum value. But setting an asking price that is to high could signal the buyer that you may not be serious about selling.

There are a couple of different methods to value a business, but the most common formula for smaller transactions is a multiple of seller’s discretionary earnings also known as S.D.E. Using this type of market-based valuation, to find the S.D.E. involves recasting profit and loss statements, adding back owner’s salary, perks and nonrecurring expenses and then using comparable data for similar companies to calculate an appropriate multiple.

Prepare You Business for Sale

Buyers will scrutinize your business, but there are some things you can do to stay ahead.

First make sure all your books are in order. If you are not able to provide financial statements in a timely manner the deal could fall apart.

Before you go to market make sure you have the following ready to go.

• Last three years profit and loss statements.
• Last three years balance sheet.
• Year to date profit and loss statement.
• Current balance sheet.
• Last three years full tax returns.
• List of furniture, fixtures and equipment.
• List of inventories.
• Commercial property appraisal or lease agreement

Also making sure your business looks attractive to the buyer by sprucing it up. If needed make some cosmetic improvements, make sure your equipment is in good condition and in good working order, get rid of any outdated inventory.

Spread the Word

There are two primary marketing materials that are typically used to describe your business to potential buyers. The first is the “blind profile”, a one page document that offers a description and highlights of the business without revealing the business identity. The second is a comprehensive selling memorandum or prospectus that is send to serious buyers who have signed a confidentiality agreement.

Make Sure Potential Buyers Are Qualified

Make sure the buyer is able to complete the transaction, there is no bigger waste of your time the dealing with an unserious buyer who can not pay at the end. The best thing you can do is to have all interested buyers sign a confidentiality agreement before sending out any information about your business, other then the “blind profile”. You should also require the buyers to submit some basic information:

• Name and all contact information.
• Previous employment and business ownership.
• Educational background.
• Funds available to invest and sources of financing.
• Minimum monthly income requirement.
• Intended timeframe for completing a transaction.
• Reason for interest in your business.

Negotiating the Deal

After finding a buyer, provided a selling memorandum and had your initial meeting with them, it will be time to have an offer presented to you. This can be done by a non binding letter of intent or by the use of a term sheet. The primary terms of the deal should be spelled out clearly so that both parties can move forward in good faith.

Even though all sellers hope for a full price cash offer, in the real world this happens very rarely. Usually buyers make a down payment and then the remainder in installments to you or the lender. Don’t be disappointed if the offer does not meet your original expectations. As this case illustrates, a willingness to be creative with the terms of a transaction can go a long way toward a successful sale. Make sure you enlist an accountant and a lawyer to help you assess the tax consequences of the terms you suggest or accept.

Have realistic expectations when selling your business, this will avoid surprises and headaches during the process. It can be a stressful journey when selling your business but at the end it can be very tangible and rewarding. Once you’ve successfully sold your business, savor an accomplishment that not every entrepreneur gets to enjoy. Whether you’re lying on the beach, retiring by the lake or starting your next venture, you did it!

How to Develop A Business Logo that Makes Your Company Memorable

When it comes to brand definition, the logo your company has will take it far. That’s the reason you don’t need to develop a logo on a whim. No matter if you opt to create your own logo or hire a design team to do it for you, putting forth the effort in its development is vitally necessary to your company’s success.

Be aware that there are several kinds of colors, shapes, pictures and typefaces that can highlight your business, what it does and how it can assist customers/clients meet their expectations.

Highly Memorable Logos You Immediately Think Of

What are some of the businesses you think of when you see a logo?

• Golden Arches – McDonald’s (uses shape and color)
• Colored Apple – Apple Computers (uses picture)
• Coca-Cola Fonts – Coca-Cola (uses type-face)

When you start researching to get your logo, you’ll need to make some decisions about which direction you want to go for your business logo. While there is no right or wrong way, you need to remember that your logo is going to speak volumes about your company. This should be contemplated before settling on a design.

What Guidelines Does the Industry Set?

For the most part, there’s no set rules on the kinds of logos that ought to be used within a certain industry. In saying that, however, there are some basic logo rules you should follow. On the business spectrum, you have the high-tech sector, on the other end you have service-oriented sector. Somewhere along the middle, you’ve got the business to business sector.

• Service-Oriented Logos – These logos are generally rounded and smooth with the goal of creating an approachable, imaginative perception.
• High-Tech Logos – These are logos that are angular and chiseled with the goal of creating an innovative company perception.
• B2B Logos – These logos can include both the service-oriented and high-tech logos with the intention of appearing both innovative and safe.

Where your company falls along the spectrum will depend on your logo. After all, your logo is an extension of your company; it helps in identification, marketing promotions and building client/customer relationships. Be sure your logo is attractive and innovative enough to the different audiences who may be interested in your service/product. You want to positively stand out in the minds of your customers/clients.

3 Suggestions to Use for Your Logo Design

Remember, the logo you design using colors, pictures, colors and typefaces will define your business. Thus, it’s highly imperative that you choose wisely when developing one. There are three suggestions that can assist you in the development phase of your logo:

• Keep It Simple – Your logo needs to be simple enough so that it can be reproduced easily. Don’t include logos with fine details, gradation or lots of data. People will have a hard time remember these things, and you won’t be able to print them in small sizes.
• Color – Your logo needs to look good in both color and black. Don’t rely on color as the key design element in your logo since some things you reproduce the logo on may use only the color black.
• Typeface and Color – If you decide to incorporate color for the logo, choose the perfect color to represent your business. Your typeface should also be considered; choose one that represents and conveys the message of your business.

When you’re in the middle of developing your logo, it’s imperative you remember that your logo is not a changeable element. You can easily change up your business’ marketing message at any time; but, changing the image that’s represented your business is far more difficult to do. Therefore, you want a suitable logo for your business; one that’s powerful and alluring as well as distinctive.

10 Tips for Hiring the Perfect Employees

The success of any company is strictly connected to its employees and the value they contribute – some of them in a lesser way, others in large degree. Employing should be done very cautiously, meticulously and tactically simply because good recruitment and retention strategies are often times making for a competitive edge.

Here are the top ten tips on attracting best employees to your business and keeping them once they are already making part of your team.

1. Recruiting Constantly:

Successful companies are always looking for fresh talent. They know exactly which skill sets they need at the moment but also in the future, and which types of employees will fit the need. Even if they don’t have an opening for a particular position, they still look, because any employee might leave at any moment.

2. Knowing what is Necessary in a Candidate:

Knowing the essential skills and behavior patterns that will make an employee successful at a particular position is very important, so when hiring, a job description should be in place for each position. This helps in putting the interviews with potential future employees in the right frame, and also helps the prospect to learn more in advance about the skills required for the position.

At first, a job description simplifies the process of selecting the right employee. A good job description also guarantees that the prospect has a perfect understanding of accountability, authority and expected results, so in many ways this is also a valuable training sketch.

3. Interviewing Different Applicants:

Don’t employ the first candidate you like. Make sure you meet and talk with a large number of prospects – even the ones you won’t be interested in. If you think a particular applicant is not a very good fit for your business, use the interview process to get info about your competition or make a business-development opportunity. Your firm’s next association partner can appear on one of these interviews!

4. Asking Penetrating Questions:

If you want to find out if an applicant will be a good fit for your business, the only way to do so is to ask a lot of questions and learn if:

• they have an optimistic approach.
• they are highly energetic.
• they are dependable and have a good personality.
• they feel confident at work and in life.
• they are accountable and weather they are making excuses.
• they wish to learn and grow constantly.
• they are prepared to work with a team and follow the leader.
• they have a good track record.
• they can accept change  and move on with the organization.

5. Checking References:

The employment laws nowadays are very strict about how much info can be attained concerning past employment. Earlier employers cannot give out any info. The only thing they can share is the length of employment of their ex-employees. They cannot give out any info regarding talents, assertiveness, appearance or anything similar in the person’s job history while employed at a particular place.

6. Clarifying your Expectations:

New employees rarely know precisely what is going to be expected from them, how they will be evaluated, or with whom they will actually work with. It is imperative to communicate outlooks and metrics undoubtedly in a few words from the start.

7. Offering Attractive Compensation:

Money not only can buy a house or a car, but it also signifies appreciation and fairness. Gifted employees anticipate that their influences in the company will be recognized and their compensation will reflect their input into the business. If needed, do a compensation survey to find out if your employees are happy with their salaries.

8. Establishing a Buddy System:

Many times unnoticed yet steadily successful, mentoring schemes give workforces a sense of history and community upon entering a new business setting. By familiarizing beginners to the office surroundings straightaway, mentors make them feel significant and essential to the firm’s success.

9. Developing Individuals to Their Full Potential:

Many companies are leaving a remarkable amount of human potential unused for the reason that people are ineffectively managed.

Offer casual advice and coaching, cross training and occasions for progression. Train all new staff methodically in job requirements straightaway after hiring. Situating a new member of staff on the job to “sink or swim” consequences in frustration, chaotic work habits and an oversight of significant details. Strengthen the attitudes and conduct patterns you approve of.

A new member of staff is generally highly interested in new ideas and enthusiastically integrates and willingly accepts the managerial vision, mission and goals.

10. Conducting Exit Interviews:

Keeping of talent many times begins at the end of the process. An employee who is quitting will probably be more truthful and forthcoming than an individual who is still depending on your business’s salary. In order to guarantee really effective exit interviews, the management must create an environment of confidence long before the letter of resignation is failed by the employee.

7 Tips for Selling Your Small Business

The sale of a small business can be a long and complicated process that requires the assistance of outside help: an accountant, broker and possibly an attorney. The sale will probably take up a considerable amount of your time and energy as you attract the right type of buyers, handle all the paperwork and learn how to handle the profits wisely.

The outcome will depend on many factors: company value, timing, legal structure and finances involved. Consider the following 7 steps to make your small business sale easier.

1. Determine why you are selling your business.

This question is one of the first ones anyone interested in buying your business will ask. Why? They want to make sure you have a legitimate reason that does not signify that the business is struggling or failing. Below are a few of the most common reasons why someone would sell their company:

• You want to retire
• Ill health or death
• Strain and stress of working too hard
• Boredom or lack of interest in the company
• Disagreements between partners

You may want to sell your business if you are not making money with it, but this is not the best thing to tell potential buyers. Focus on the positive aspects of the business and its potential. Consider some of the following positive traits that will make the company attract more interested parties:

• Loyal customers and new markets opening up
• Steady income records
• Profit increase due to more sales or lowering costs
• Long-term contracts and business relationships

2. Focus on timing.

Selling a business takes more preparation than selling a product. It is recommended to start the process up to two years in advance. This gives you time to work on everything that will make your company more attractive to potential buyers: structure, customer base and finances.

Not only will a more profitable business result in a higher sales price for you, the tasks involved can make the transition to a new owner smoother for all involved.

3. Find out how much your business is really worth.

The easiest way to determine the true value of your company is to enlist the help of a business appraiser. Their experience will allow them to create a detailed report describing how much your company could possibly sell for.

You do not want to ask for either too much or too little when trying to sell your small business. Not only will this appraisal help you start the sale at the proper amount, it will also give potential buyers an independent review of the quality of the offer.

4. Consider using a broker.

If you are selling your company to a trusted friend, family member or an existing employee of the company, it might be a great idea to sell the company yourself. This helps you realize a greater profit since no broker commissions will cut into it. However, since business brokers earn that commission, it is in their best interests to get you the maximum amount of money for your business.

Using a broker can also leave you free to do the normal tasks required to keep the company running. Talk to a few brokers before deciding on the one you think will do the best job. Constant communication is a must so the business sale goes smoothly.

5. Ensure you have the proper documentation.

Gather your financial statements and tax returns dating back three to four years and review them with an accountant. In addition, develop a list of equipment that’s being sold with the business.

Also, create a list of contacts related to sales transactions and supplies, and dig up any relevant paperwork such as your current lease. Create copies of these documents to distribute to financially qualified potential buyers.

Your information packet should also provide a summary describing how the business is conducted and/or an up-to-date operating manual. You’ll also want to make sure the business is presentable. Any areas of the business or equipment that are broken or run down should be fixed or replaced prior to the sale.

6. Find quality buyers.

SCORE, an entrepreneurial nonprofit associated with the US Small Business Administration, states that business sales usually take from 6 months to 2 years to complete. Invest in quality advertising so you get the sale information in front of the most targeted people.

After you have grabbed the interest of a few possible buyers, forge ahead toward a sale with these tips:

• Line up more than one potential buyer in case negotiations fall through.
• Always maintain contact with them to update and gauge interest.
• Check the financial status and pre-qualification of potential buyers. You may decide to finance the sale yourself. Consult an accountant or attorney for help.
• Be prepared to negotiate the price, but do not stray far from the appraiser’s value and your desired reasonable sale price.
• Get everything in writing. Remember to use a nondisclosure agreement so the potential buyers cannot discuss your business or the sale with other parties.
• Use escrow once you get a signed agreement to purchase the business.

After the sale is complete, you should retain the following documents: the bill of sale transferring the company to the new owner, lease assignments if applicable and a security agreement in case of any seller-held liens on the business.

Some buyers may want a noncompete agreement as well. This means you would not be able to start a similar business in the area that could steal the old company’s customers or clients.

7. Learn how to handle the profits wisely.

Once the sale is complete and all that money is completely in your control take a while before spending it. Impulse buys during this time could destroy any retirement plans or reasons you had to sell the company in the first place.

First, study the tax laws to see what you will need to pay with the sudden influx of wealth. Next, make an appointment with a financial assistant or planner to learn about investment options and long-term income for retirement.

Putting your business up for sale not only takes a lot of professional planning. It can also be personally challenging and stir up emotions. If you have a good reason to sell and the market for companies like yours is hot, it can make the process easier.

Consider professional counseling from SCORE, the Small Business Administration and your local commerce organizations. In the end, the freedom and large sum of money you get from the sale will make it all worthwhile in the end.

10 Tips for New Business Owners

In a perfect entrepreneurial world, established and successful business owners would all share their advice and guidance with people just starting out. I encourage building these types of relationships as they do a lot of good in the business community. Here are the top 10 tips I would give to any new business owner.

1. Focus on One Business

There are thousands of business opportunities flying around, and a new business owner might get the urge to jump from one to another until they find something that works. The secret here is that most things work if you work at them. Choose one business model and establish it before you even think about moving to another.

2. Do What You Know and Like

If you have no interest in the business you start, you will not dedicate yourself to it and it will suffer. Do not chase business ideas just because they seem hot right now or make promised about big profits. A company you enjoy working for will be the one that you should own.

3. Master the 30 Second Pitch

You never know whom you will run into. Learn to pitch your business to chance encounters in 30 seconds or less. If they are interested after that, you can spend more time with them. If not, you will not make a bad impression or bore them.

4. Recognize the Need for Mentors

Confidence is good, but a dogged belief that you know best in all circumstances is not. Learn from mentors and established, successful business owners online and in your community. Build relationships with those who offer a real benefit to your company and professional mindset.

5. Keep It Start Up Simple

The best way to succeed financially in business is to operate within your means. Forget offices and company cars. With low overhead and supply costs, you have a higher chance to get into profit more quickly and a lower chance of having financial troubles. Save the $1,000 leather office chair for when you make it big.

6. Learn As You Go

No matter how detailed your business plan is, something will always throw it off course. There is not perfect plan of action you can envision that will keep everything running smoothly forever. When things go wrong or you make mistakes, learn from it. Spend enough time planning to know where you are going, and then maintain a flexible and open attitude to tweaking the plan as you gain more knowledge about what works and what does not.

7. Never Expect Handouts

Do not expect a small business loan without proving that your business idea works first. Don’t expect investors to call you up with offers, or even your mom to fork over some of her savings to help you out. The beginning of any successful business requires frugal choices and small budgets. After your business shows some promise, the chance of getting a loan or an investor increases.

8. Stay Healthy

New businesses take a lot of time and can cause a lot of stress, but if you wear yourself down to the sticky ends, you will not be of any use. Eat nutritious food, do some exercise and give yourself time to relax without thinking about the business. Be sure to spend enough time with your family as well, or relationships may suffer.

9. Keep Your Feet on the Ground

Let the results speak for themselves. Do not exaggerate about your success or share extreme future plans with everyone you meet. Be optimistic but realistic, and always let the outcome of your efforts be the real declaration of your success.

10. Recognize When You Need to Throw in the Towel

Not every business will succeed. Some new businesses can be chalked up to learning experiences before you move on to better things. Recognize objectively when things are beyond hope and make a financially responsible and professional exit. Learn from it. When your entrepreneurial spirit calls you to start up another business, remember the mistakes you made and do not make them again.