“Planning is bringing the future into the present so that you can do something about it now.”
For most small business owners, the business is their single largest asset and the one they are counting upon to fund their retirement. So wouldn’t it make sense for them to plan when and how they expect to exit the business? You would think so, but many don’t . . . at least not in a disciplined, structured way. They may have a vague notion in their head that they will sell the business for X dollars, but to whom? To an investor? To a competitor? To the employees? And how do they know they can get the price they want for the business? In many cases, they don’t know. There is often a disconnect between what the owner wants for the business and what the business is actually worth.
For example, the owner of the ABC Company has worked hard for many years to build his enterprise, and now, he’s ready to put it up for sale. He already has visions of golf, fishing, traveling the world, and living out his days in comfort. But he is shocked when an offer from a prospective buyer comes in at half of what he counted on. He is further shocked when his advisors (lawyers and accountants) advise him that it is a good offer and he should take it. Everyone is sorry that the market price for the business isn’t what he hoped, but it is what it is. What’s he to do? Postpone retirement in hopes that he can get a better price later? Or proceed with the sale and scale back his retirement plans . . . fewer creature comforts, fewer rounds of golf, and less travel? Neither choice is very appealing, but the real sad part of the story is this: he didn’t have to be in this predicament if only he had done some intelligent exit planning.
First, understand who is the most likely buyer for your type of business. Then educate yourself about how that buyer will value your business. The buyer will, of course, be interested in any hard assets owned by the business . . . real estate, inventory, equipment, and the like. He will also be interested in profitability over the past three to five years. Have earnings been growing, flat, or in decline? He will be critically interested in cash flow, and he will want to know how well your people can keep the business moving when you are no longer there. All these factors enter into placing a value on your business, and depending on the industry, there are probably many other factors as well.
The point is, if you know how the various factors combine to place a value on your business, you can work to optimize those factors so as to maximize the value of the business. And you’ll know what those factors have to be to command the price you expect for your retirement.
It’s never too early to map out your exit strategy. If you’re not planning on exiting the business for 30 years, that’s great! That means you have plenty of time to work your business plan and have it producing the results you want for your exit. Don’t wait. Do it now or you risk ending up like the ABC Company.
For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.
Monday, February 22, 2010
Monday, February 15, 2010
Conflict Can Be a Positive Force
“No organization can make good decisions without conflict.”
“If everyone is thinking alike, someone’s not thinking.”
We tend to veer away from conflict. It can make us feel uncomfortable, or even downright shaken. It can inspire anger, anxiety, hurt feelings, and a lot of other negative outcomes. So we avoid it. We try to play nice and hope everybody else does the same. If we can’t say something nice, our mothers taught us, don’t say anything at all.
If we could create such a place . . . a place free of conflict . . . would you want to work there? Probably not because it would also be a place free of passion, free of divergent points of view, and free of lively debate. It would be pretty boring. And it wouldn’t be an industry leader, it would be at the back of the pack.
The fact is, properly managed, conflict moves a business forward. New ideas are vetted in the heat of debate. Ideas that survive the heat give us confidence that we may actually be on to something here. Ideas that wilt under a robust discussion probably don’t deserve to see the light of day. It’s the rite of passage that separates the good ideas from the not-so-good.
So how do we manage conflict so that it’s a positive force and not a detrimental one?
It starts with the simple notion that we can disagree without being disagreeable, and we build that simple notion into our culture. Mostly that means we have to make it “safe” for people to disagree or to take opposite points of view. So we vigorously defend our own position, but we don’t assign unworthy motives to our opponent. We assume that everyone is well-intentioned and honestly motivated. When people know they can stand up and say what they believe without being castigated or impugned, guess what? They will!
As part of any good decision-making process, we need to hear a variety of opinions. We need healthy, robust debate that brings out divergent thoughts without getting personal. If we manage that well, we get everyone’s best thinking, and when the smoke clears, we’re still friends, colleagues, and members of the same team.
For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.
“If everyone is thinking alike, someone’s not thinking.”
We tend to veer away from conflict. It can make us feel uncomfortable, or even downright shaken. It can inspire anger, anxiety, hurt feelings, and a lot of other negative outcomes. So we avoid it. We try to play nice and hope everybody else does the same. If we can’t say something nice, our mothers taught us, don’t say anything at all.
If we could create such a place . . . a place free of conflict . . . would you want to work there? Probably not because it would also be a place free of passion, free of divergent points of view, and free of lively debate. It would be pretty boring. And it wouldn’t be an industry leader, it would be at the back of the pack.
The fact is, properly managed, conflict moves a business forward. New ideas are vetted in the heat of debate. Ideas that survive the heat give us confidence that we may actually be on to something here. Ideas that wilt under a robust discussion probably don’t deserve to see the light of day. It’s the rite of passage that separates the good ideas from the not-so-good.
So how do we manage conflict so that it’s a positive force and not a detrimental one?
It starts with the simple notion that we can disagree without being disagreeable, and we build that simple notion into our culture. Mostly that means we have to make it “safe” for people to disagree or to take opposite points of view. So we vigorously defend our own position, but we don’t assign unworthy motives to our opponent. We assume that everyone is well-intentioned and honestly motivated. When people know they can stand up and say what they believe without being castigated or impugned, guess what? They will!
As part of any good decision-making process, we need to hear a variety of opinions. We need healthy, robust debate that brings out divergent thoughts without getting personal. If we manage that well, we get everyone’s best thinking, and when the smoke clears, we’re still friends, colleagues, and members of the same team.
For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.
Monday, February 8, 2010
Making It Safe for Your Customers to Buy
“Today’s decision makers are reassessing every spending and investment decision they make. They are looking for ways to reduce delay or cancel purchases and investment decisions, and they are seeking certainty that desired results will be achieved as planned.”
At a recent business meeting, one of the participants complained, “I’ve never seen so much indecision. Our customers just won’t pull the trigger. They get right up to the point of buying then back away, putting off the buying decision until next month or next quarter or longer.” That drew a lot of “me too” responses around the room, so it became a lengthy discussion topic. Why is this happening?
In these tough economic times, with budgets screwed down to the last dime, people are fearful. One poor buying decision could shake the whole organization and may cost jobs . . . including the job of the person who made the poor choice. So people are looking for safety . . . assurances that the product will perform as promised, that the expected ROI will be achieved, or that the anticipated cost savings will be realized. That’s not new. Sales people have always had to convince skeptical buyers that their product or service will perform as advertised. It’s the degree that has changed . . . buyers no longer want assurances, they want guarantees. They want their buying decisions to be bullet proof, and until they are, those decisions will be delayed, delayed, delayed.
So we need to make it “safe” for our customers to buy from us. How do we do that? The answer is probably different for every business, but the best example of an industry that really bent over backwards to attract skittish buyers is the auto industry. People weren’t even coming into showrooms because they were afraid of losing their jobs and of being saddled with big car payments. So what did some car companies do to make it “safe” to buy? They said, “No problem. If you lose your job, you can give us the car back.” Pretty radical stuff.
Iron clad guarantees of specific outcomes can be difficult if not impossible. There are too many variables that are outside the control of the seller. So focus on those things that are under your control and that you can guarantee. For instance, you may not be able to guarantee that a market research assignment will deliver the answers the client hopes for, but you can guarantee that you will assign your best, most senior researcher to the project, and that the answers will be accurate, validated, and above reproach. You can also guarantee the methodology that will be used to conduct the research and the controls that are in place to assure the quality of the data.
Traditionally, we probe buyers to discover where their pain is. Now it’s a little different. We have to probe for where their fear is and find ways to overcome it. The success of our sales effort depends on it.
For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.
At a recent business meeting, one of the participants complained, “I’ve never seen so much indecision. Our customers just won’t pull the trigger. They get right up to the point of buying then back away, putting off the buying decision until next month or next quarter or longer.” That drew a lot of “me too” responses around the room, so it became a lengthy discussion topic. Why is this happening?
In these tough economic times, with budgets screwed down to the last dime, people are fearful. One poor buying decision could shake the whole organization and may cost jobs . . . including the job of the person who made the poor choice. So people are looking for safety . . . assurances that the product will perform as promised, that the expected ROI will be achieved, or that the anticipated cost savings will be realized. That’s not new. Sales people have always had to convince skeptical buyers that their product or service will perform as advertised. It’s the degree that has changed . . . buyers no longer want assurances, they want guarantees. They want their buying decisions to be bullet proof, and until they are, those decisions will be delayed, delayed, delayed.
So we need to make it “safe” for our customers to buy from us. How do we do that? The answer is probably different for every business, but the best example of an industry that really bent over backwards to attract skittish buyers is the auto industry. People weren’t even coming into showrooms because they were afraid of losing their jobs and of being saddled with big car payments. So what did some car companies do to make it “safe” to buy? They said, “No problem. If you lose your job, you can give us the car back.” Pretty radical stuff.
Iron clad guarantees of specific outcomes can be difficult if not impossible. There are too many variables that are outside the control of the seller. So focus on those things that are under your control and that you can guarantee. For instance, you may not be able to guarantee that a market research assignment will deliver the answers the client hopes for, but you can guarantee that you will assign your best, most senior researcher to the project, and that the answers will be accurate, validated, and above reproach. You can also guarantee the methodology that will be used to conduct the research and the controls that are in place to assure the quality of the data.
Traditionally, we probe buyers to discover where their pain is. Now it’s a little different. We have to probe for where their fear is and find ways to overcome it. The success of our sales effort depends on it.
For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.
Monday, February 1, 2010
Embrace Change
“If there is no change, there’s no need to manage.”
What would happen in your business if one day your managers just didn’t show up? What would their subordinates do? Well, they would probably just do what they did yesterday. And if the managers still didn’t show up the following day, the subordinates would just continue doing what they had done all along. This could go on for quite awhile, and actually, things would probably run pretty smoothly.
Until something would change.
It might be a new technology, turnover of personnel, something different in the marketplace, or a new competitor . . . it could be a lot of things. But something changes and suddenly we can’t simply continue to do what we’ve been doing. We’ve got to adapt to the change, and that’s the job of management.
It’s tempting to blame outside factors when a company doesn’t perform as it should. We say, “It’s the economy,” or “It’s the high cost of energy,” or “It’s unfair competition from China,” or we make some other excuse that our company’s poor performance is somehow not our fault. But it is our fault. As business managers, it’s our job to anticipate, respond to, and adapt to change. It’s what we’re paid to do.
If we can’t compete with the Chinese on mass-produced products, maybe we change our focus to short-run, custom-made products. If the high cost of energy is hurting us, we look for conservation opportunities or introduce more energy-efficient equipment or come up with a pricing strategy to pass that cost through to our customers. The point is, it doesn’t matter whether change-induced problems are caused by external forces or not, it’s still our job as managers to solve them.
We can’t complain that it’s unfair this is happening to us and say, “Woe is us. We’re doomed!” That’s a recipe for going out of business. We need to accept change as a constant in our business lives, acknowledge our responsibility for dealing with it, and welcome it as a challenge.
For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.
What would happen in your business if one day your managers just didn’t show up? What would their subordinates do? Well, they would probably just do what they did yesterday. And if the managers still didn’t show up the following day, the subordinates would just continue doing what they had done all along. This could go on for quite awhile, and actually, things would probably run pretty smoothly.
Until something would change.
It might be a new technology, turnover of personnel, something different in the marketplace, or a new competitor . . . it could be a lot of things. But something changes and suddenly we can’t simply continue to do what we’ve been doing. We’ve got to adapt to the change, and that’s the job of management.
It’s tempting to blame outside factors when a company doesn’t perform as it should. We say, “It’s the economy,” or “It’s the high cost of energy,” or “It’s unfair competition from China,” or we make some other excuse that our company’s poor performance is somehow not our fault. But it is our fault. As business managers, it’s our job to anticipate, respond to, and adapt to change. It’s what we’re paid to do.
If we can’t compete with the Chinese on mass-produced products, maybe we change our focus to short-run, custom-made products. If the high cost of energy is hurting us, we look for conservation opportunities or introduce more energy-efficient equipment or come up with a pricing strategy to pass that cost through to our customers. The point is, it doesn’t matter whether change-induced problems are caused by external forces or not, it’s still our job as managers to solve them.
We can’t complain that it’s unfair this is happening to us and say, “Woe is us. We’re doomed!” That’s a recipe for going out of business. We need to accept change as a constant in our business lives, acknowledge our responsibility for dealing with it, and welcome it as a challenge.
For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.
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