Be an Ethical Entrepreneur, Marketer, and Business Builder

The fundamentals of Buying, Building, and Selling a business

October 30, 2009 by Leave a Comment

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To my knowledge, there is no other blog or book or lesson or presenter who shows someone the basic pieces necessary to generate wealth with real world experience as I will. It’s the nuts and bolts of the whole buy, build, sell process.

There are basically 4 steps:

  1. Preparing – What you need to know prior to getting started.
  2. Buying – How to find, value, negotiate, and purchase a business.
  3. Building – What you can do quickly to increase the value of the business.
  4. Selling – The ins and outs of selling your business.

Preparing

Ironically, as my most recent blog has pointed out (it’s ironic because it took me 18 months to write the blog that I should have written first), the most important part is your mindset and your attitude. Next, you’ll also need to take the first 3 steps to becoming wealthy including, always spending less than you earn, understanding the difference between where you are and where you want to be is education, and framing your goals into  Do x Be = Have context. Possibly most importantly, you need to have a clear motivation for being an entrepreneur (even if it’s different than mine) and you need to appreciate that the ethical route is always the most profitable. And make sure you’re able to get over your fear of failure in trying new things.

It’s important to understand that there’s no better, quicker way to go from very little money (let’s say less than $5,000) to a lot of money. You can even take it to the next level and setup a business to generate $1,000,000 per year if that’s your desire. Recently, as part of another blog, I’ve outlined a basic plan for how someone can go from $5,000 or less to $1,000,000 primarily through business. To stress the point even further that buy, build, sell is the best way to generate wealth for the average individual, review my suggestion to skip getting your MBA and just buy a small business for your business education.

Buying

In the buy, build, sell strategy, the part that will have the greatest influence on your profit is the purchase price so learn as much as you can for this stage.

First, you’ll want to know some basic questions to ask the seller about their business and maybe even what questions to ask about any given business idea. Then you’ll have to understand how banks value a business in case you need to go to them for financing and also how EBIDTA can tie into business values (since sellers and business brokers may reference it). As you start looking for businesses, you need to have some ideas of where to find businesses for sale for little money down and how to deal with the business brokers once you find one you’re interested in.

Before you start making any offers, it’s very important that you get the seller (or broker) to like you since then they’ll be more likely to accept your business valuation. It’s very simple to turn someone down you don’t like anyway. Once you’re ready to make an offer, make sure you only purchase the assets and then put them into an LLC filing as an S-corp. If you do that, you won’t have to spend nearly as much time fighting with lawyers. But since you may need one anyway here are a few tips for getting the best rates from your lawyer.

When you’re just starting out you may be considering a partner but make sure you don’t take on a business partner unless absolutely necessary.

Building

In the building stage you’re going to need to know what to do your first 2 weeks onsite at a business you’ve just purchased. If you don’t already know the difference between profits and cashflow, I’m sure you’ll learn very quickly.

Immediately you need to work on polarizing your company’s culture, improving teamwork, and communicating effectively. Right out of the gate you need to start setting up your business for running without you through the effective use of technology, incentives, and empowering your team. If you don’t do that immediately, you’ll soon be asked to do lots of things “in” the business that will take away from you working “on” the business. This is vitally important because if you’re not working on the business you’re not taking the time necessary to double profits, improve marketing, teach your team the importance of NLP, create systems, processes and scripts, or improve closing ratios. In other words, your primary focus for building value in your business is going to entail 3 parts:

  1. Increasing Sales – through new and improved marketing and better conversion rates. In other words you have to make sure your system for taking a lead and converting it to a customer is top-notch. Don’t forget that your back-end sales (sales to existing customers) will always be your most profitable business. With that in mind, if you can buy an already profitable business that’s horrible at back-end sales you can quickly increase its value.
  2. Cutting Costs – look at all of your expenses and simply cut those that aren’t needed. We reworked our accounting and phone costs alone to save thousands of dollars per year.
  3. Improving Efficiencies – this is primarily about scripts, systems, and processes for every aspect of your business.

Don’t make the mistake I did and wait until cash gets tight to realize that cashflow is king and then start building recurring revenue while looking for quick, easy, cheap ways to generate immediate cashflow.

Chances are you’re going to run into some issues with team members so it’s helpful to know the proper way to fire someone without having to pay unemployment and effective ways to get your team members to do what they do best.

As you’re building your business you need to work on getting it to achieve critical mass by, in particular, hiring or training the 3 leaders every business needs to succeed.

In summary, you need to have a game plan from day one including an exit strategy or else you might end up like one of the 300 businesses in NYC who failed because they failed to plan for success.

Selling

Since this blog is getting long and selling isn’t much different than buying I’ll keep this short. You need to basically understand 3 things:

  1. How to value your business just the same as discussed in buying so you can justify your price.
  2. Where to list your business which is again the same places where you’d go to find a business for sale (such as bizbuysell.com)
  3. How to foster relationships so that when it’s time to sell, you have a few personal contacts in mind.

With regards to the 3rd, you may want to get to know other business owners in your area who have complimentary (or even competing businesses). You may also consider hiring a leader who would like to take over and own their own business some day. If you have a franchise like mine, you will also want to stay in touch with owners in other areas as they might want to expand their operations.

The goal with this post is to organize and direct the many varied posts I’ve written about my adventure buying, building, and now selling my business over the last 18 months. As I add more posts I’ll try to keep this summary updated so you can always reference it for new material.

To your generating-wealth-through-business success, Bryan

Filed Under: Business Buying/Selling Tagged With: , , , , , , , , , , ,

Are you putting yourself out there for criticism?

September 20, 2009 by 1 Comment

When you want to get better at something, there’s a big difference between tracking your own personal performance and exposing your strengths and weaknesses to your peers openly and publicly. That’s why all business owners should make a habit of exposing all the details of their operations to their colleagues. Why? Because no one runs their best race, plays their best game, or builds their best business behind closed doors. The pressure, the crowd, the feedback, and most importantly the competition always makes us better.

Granted, if you’re like me, your toughest competition is yourself and no one demands more of you than you. However, that’s not the point. The point is if you’re good at what you do you should share that publicly with others for 2 reasons:

  1. It will force you to be great.
  2. It will help others who have potentially helped you.

Now what do I mean by exposing yourself to the public? Do whatever you have to to make your ideas, best practices, and systems public. For instance:

  1. Give a speech.
  2. Do training for your colleagues
  3. Write a white paper on something for which you are an expert and pass it out to everyone you know who knows more than you.
  4. Write a blog.

You get the point. If you can’t receive feedback and criticism (maybe even praise if you really are good) than it’s not good enough. You have to be able to fail for this to be effective.

Let me give you an example of what I’m doing (in addition to this blog) and how it’s helped make me better.

Recently I’ve partnered up with my previous employer – a software company that provides niche software for my business – to host a training seminar for other businesses in the industry. The training is about a month away however knowing that I’ll have to expose my business and also provide value for all of those in attendance has put some pressure on me to produce something great. So this is what I did:

  1. Reviewed my biggest headaches. – Quite simply these are personnel and cashflow problems. Sound familiar?
  2. Reviewed my biggest goals. – Increase profits and limit the business’ dependence on me.
  3. Reviewed my plan for dealing with those headaches and goals. – Determine areas of weakness through efficient analysis of business benchmarks and then come up with a list of ways to improve each area of weakness.
  4. Developed a “system” for continually monitoring and improving my headaches and goals so it can be taught to others. – This is the hardest yet most important part. If I can’t break down my game plan into an easily taught system my business will never run without me.

Number 4 is really the only one that needs further explanation. My “system” was actually quite simple once I sat down for a few hours and thought it all through. It basically started with the big picture of my business – which just so happens to be the same big picture for every business – Brad Sugars’ Business Chassis as he teaches about in The Business Coach. He breaks down the 5 parts of every business that determine the profit of that business. You NEED to know these 5 numbers in your business to know where you’re doing well and where you’re lacking. The next step was to figure out how to use the software to determine those 5 numbers. Finally, I organized some ideas and suggestions on how to improve those numbers for each department in my business. My goal isn’t to provide all the answers on how to make each area better, but to help business owners understand how to find the areas of weakness so that they can then use their own knowledge, experience, and skills to make the most effective improvements.

Now the question that’s bugging me is why didn’t I come up with this game plan 18 months ago when I bought the business? I have no idea. It really only took me a few hours to plan out and it will certainly help guide my business (and hopefully others) in the future. Though I will never know the answer to that question, I do know that I finally took the time to lay out this detailed, systematic, and repeatable game plan because I was forced to prove to others that I am indeed an expert at my business.

The point of this blog is not to explain exactly what my training will encompass, but to encourage you to step out and take a risk by exposing your business acumen to the world and trying on the label “expert” for a few days to see if you can live up to it.

To your success as an expert, Bryan

Filed Under: Business Books, Business Psychology, Leadership Tagged With: , , , , , , , ,