New owners frequently include the “nothing will change” promise in their opening remarks to the incumbent staff of a just-purchased business. Sometimes it’s the seller's attempt at making folks feel better ("Don't worry. They promised me that nothing will change.").
In the stress of the moment, this may seem like the right thing to say. It sounds calming and can be a confidence builder for the employees who have just been informed that they have a new boss. But in the long run, setting false expectations can cause more problems than it solves.
Business owners frequently suffer from loneliness. The responsibilities of running an organization can weigh heavily, especially when there are challenges to address. Who does an entrepreneur turn to for advice?
“The best-laid schemes o’ mice an’ men gang aft’ agley.” —Robert Burns
When starting the exit planning process, most business owners have an end in mind. It usually has three components: when they want to exit, how much they expect to leave with, and who they will sell the business to.
Sometimes they have to settle for two out of three objectives going as planned. Sometimes they can only get one.
The biggest single factor in successfully selling a company is the current condition of the financial markets. With the election of Donald Trump, those markets seem confident that good times lie ahead. If you are considering an exit from your business, should you accelerate your plans or slow them down?
Since the Great Recession, the Federal Reserve has poured new cash into the system at very low interest rates. This "cheap money" has trickled down to fund a wave of leveraged buyouts by financial professionals seeking a better return than that from more traditional investments.
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Everyone in business is either a Hunter or a Farmer. The working style that fits you best isn’t really a matter of choice, nor is it determined by your job description. It is ingrained by eons of cultural evolution.
Hunters are linear. It is their nature to focus on the kill. A hunter moves towards a goal, and on reaching it begins to immediately look for another objective to accomplish. A farmer’s work is cyclical, tracking the seasons from planting to harvest. Their evolutionary traits apply to an office environment as well as the outdoors.
Great employees are a wonderful asset, but their individual heroics may not be healthy for your company.
Sooner or later you will move on from your business. When you begin planning for your transition, what will your company systems sound like when described to a critical buyer?
We teach our kids that “money isn’t everything.” But selling your business is perhaps the biggest financial event of your lifetime. How important is money then?
Most owners are bombarded with solicitations from business brokers and private equity groups. The reason is simple: the cost of funds has been very low for a decade. Returns on bonds and deposits are in the low single digits. Many investors are searching for better returns, and privately held companies have become an attractive option.
Topics: Business Best Practices
Last month we discussed understanding the realistic value of your business. The current state of the financial markets is a big factor, but beauty is also in the eye of the beholder. Different buyers value acquisitions in different ways. Knowing the type of buyer that your company will attract is an important element in estimating its value.
There are three major classes of buyers: entrepreneurs, professional (or financial) buyers, and strategic acquirers. Each class seeks different opportunities, and pays based on different metrics.
Topics: Strategic Planning
A large percentage of business owners think they know the value of their business. Most of them are wrong.
Charlie runs into a colleague at a trade show. In reply to the "What's new?" question, his friend says "Well, I just sold my company. I got $4,000,000." Charlie knows that his company is about 25% larger than his friend's, so $5,000,000 is probably a good estimate of his company’s market value.
A few weeks later, Charlie is working with a financial planner to calculate his retirement needs. They review Charlie’s assets; his stock portfolio, house, 401K and some rent properties. Then the financial advisor asks “How about the business? What is your company worth?”