Family business: Should I stay or should I go?

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I am working in the family business for my parents. I don’t have any shares and just general promises that someday it will be mine. I don’t agree with what my parents are doing and think they’re making some serious mistakes that could make this a tougher business in the future. What should I do?

THOUGHTS OF THE DAY: Kick them out. Leave. Work together to fix the problems. Decide how much you want to work in this business for the long term. Continue reading “Family business: Should I stay or should I go?”

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Stop Reacting and Start Planning

Seeing us – me, my employees, my managers – get bogged down with day-to-day issues. Know that as owner I should be planning and directing where the business is going. Realize that I can get myself in trouble by reacting instead of looking ahead. Also know that we can create problems by not taking action to fix it – whatever “it” is. What advice do you have to help me stay on top of priorities?

Thoughts of the Day: Identify the top objectives for the company and continuously review where you are versus those objectives. Set up systems for people to meet and share information. Celebrate progress. Organize teams to work on persistent problems.

What’s the sight-line on the horizon that everyone in your company is focused on moving towards? Get clear on that, and it’s easier to figure out if everything you’re doing is heading the company in the right direction. Without major goals it’s easy to drift off in the wrong direction.

Write down what you want the company to accomplish in the next 5 years. Consider the following:

  • double revenue, triple profit
  • add 1 new employee for every $150k of gross profit
  • operate within budget
  • reduce operating costs by 1% – 3% / year
  • add enough clients each year to allow the company to dump the bottom 5% – the least profitable, most troublesome
  • sell new products : old customers, old products : new customers
  • expand marketing reach annually while reducing the ratio of marketing spend / revenue. 

Set up a meeting schedule to review progress, discuss obstacles, agree on next actions to be taken.

 Meetings can be great. Improperly managed, they can also suck the energy out of any group. Limit meetings to an hour, max two hours. Break up long days of conferences into a series of 1-2 hour activities.

 Work with intention. Make sure enough of the right people are involved. In my experience, it is more likely that too few people will be invited to meet, than too many. Don’t be afraid to ask people to give up “work time” to attend meetings. People need to share information in order to function well.  

Use meetings to inform, brainstorm, analyze and problem solve. Different purposes require different formats. Information sharing meetings do best if data is presented in report handouts or overheads with handouts. Brainstorming meetings need a facilitator who can document what’s being said. Analysis and problem solving meetings need to be focused towards a desired outcome: to reach a conclusion, solve a problem, etc.

It helps to understand that we remember only 15% of what we hear, 50% of what we write down, and 85% of what we hear, write down and play back. Take notes in every meeting. Start meetings with a review of the previous meetings’ notes. Know whose job it is to take and disseminate notes. Get notes out within 1-2 days of the meeting’s conclusion.

Build a culture of success by taking time to acknowledge and celebrate progress towards goals. Use checklists of to-do’s to stay on track. Recognize groups of people who are getting their tasks done according to the commitments they’ve made.

Every organization runs into problems from internal and external sources. Teach employees to be comfortable bringing up issues in meetings. Take time to brainstorm the source of problems. Assign task groups to work on rooting the causes.

Build a culture of taking action. Reward people who fix problems before they escalate into something worse. Emphasize the value of always looking to make things better.

Everyone needs space and time to think, reflect, plan. Schedule it into your day. Lead by example. Show your employees that you have the discipline and skill needed to lead the business. Make it your #1 priority to set a schedule, meet regularly, encourage information sharing and take action to work the company’s plan.

Unclear about your company’s goals and check in structure? Give us a call!

Looking for a good book?  The One Hour Plan for Growth: How a Single Sheet of Paper Can Take Your Business to the Next Level, by Joe Calhoon

Want to print this article:  Stop Reacting and Start Planning

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Rethinking Retirement and Succession Plans

According to one survey, 36 percent of Americans say that they don’t contribute anything at all to retirement savings. According to another recent survey, 24% of American workers say that they have postponed their planned retirement age at some point during the past year.

Thinking about how I might retire from owning this business is giving me a headache. I don’t have enough money to walk away and not work again. I haven’t been able to fund retirement for the last 2 years, although things are getting better now. No one can run this business in my absence. And I have no idea who I’d sell it to, or why they would buy it.

Thoughts of the Day: Building an out is every business owner’s responsibility. It’s easier to plan if you think in long timeframes. Defining needs is a good place to start. Work on options to sell and reasons for buyers to engage in buying the business.

Building an out is every business owner’s responsibility.

Lots of business owners get into the business without a clear idea of how to get out. They get caught up in the day to day, working “in” the business rather than “on” it. Or, they confuse planning for exit with planning for their own mortality, which may be a subject they’d like to avoid at all costs.

Let me propose an alternative approach to thinking about exit. It’s the reason the business exists – to have a future. Build for a robust business future, without being tied to the owner, and the business will survive. Make the business dependent on the current owner, and it has little chance of continuing on past the current shareholders.

It’s easier to plan if you think in long timeframes. There are a number of tools that will help the business survive the long haul. Involve managers in the future planning and measurement of current results, to help them better understand how the business runs and where it’s going. That way they can step in and take on more responsibility.

Succession plans for the owner and other key managers will help the business weather a transition and minimize disruption. Trying to do it last minute makes it nearly impossible to do the transition well. Finding the right people to come in and take over is a special deal. Not everyone is right for the job. It is like finding a needle in a haystack.

Defining needs is a good place to start.

Be clear what it is that you want out of the business. How much money do you need in order to retire? Do you want to retire cold turkey, or would you like the option to work part time? How important is it to secure the future jobs for employees who have helped you get this far?

Work on options to sell and reasons for buyers to engage in buying the business. If you know what kind of money you want to take out of the business, you can then figure a number of other answers. How much money do you expect to get for selling the business? How big and how profitable would the business have to be to achieve that sale price? How much does the business need to grow in order to achieve the optimum exit? How much do you have to take out of the business and put away between now and retirement, to make up any gaps?

Get what you want from an exit strategy by working backwards, building a plan, and giving the plan enough time to come to fruition. Once you’ve laid out the planning parameters of size, profit / year and timeframe to exit, you can plot out how many employees you need to add, how many clients, how many additional products and services. Then it comes down to working the plan.

Do you have the right people on board to help you see this through? Getting people invested in planning for the future without you is going to be critical. Teaching people to see this as an opportunity to secure their futures in building a company that someone else would want to buy.

Do you have any idea who might buy the business? Unlike the first few years, where your focus is on getting the business built, in the later years, you want to customize business for future buyers. Building what they need, whether that’s sales, operations, human resources, or finance.

Looking for a good book? The Smartest Retirement Book You’ll Every Read by Daniel R. Solin.

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Should You Sell Your Business Now?

Wondering what I should do. Someone has offered to buy my business. Don’t really think that I’m ready to get out, but I am hearing a lot about tax rate changes that would reduce what I will get if I wait to sell until next year or later. Should I get out now?

Thoughts of the Day:  It’s not just about tax rates. Take a look at your options. There are lots of questions for you to consider. It comes down to short and long term goals and values.

It’s not just about tax rates.

In my opinion, as a society we spend way too much time worrying about tax planning and not nearly enough time on strategic planning.

Here’s a partial list of what our taxes go for. Roads, trains and buses to get employees to work and goods to market. Airports so we can fly away to visit customers and ship goods in and out quickly. Storm recovery to get us back to work and help with economic and physical damage repairs. Schools that educate our employees and the next generation. Police and judicial system to keep order. Military forces to defend our borders and keep goods safe as we import and export. Patent and copyright registration. Internet so we can communicate and transact business at speeds we only imagined a few years ago. This is a small portion of the benefits paid for by taxes.

Think of it this way. You pay for office supplies, rent, phone lines, employees, electricity, etc. You pay bills as they come due. Yet, when it comes to taxes something weird happens. We eagerly consume much of what the government has to offer. And then we look for ways to duck the bill. Instead let’s focus on strategic planning.

What will happen after you sell? What’s your goal?

  • continued employment for people who helped build the business?
  • see sweat equity turn into a legacy?
  • fund retirement?
  • contribute to well being for future generations?
  • shut the door or sell in a hurry, leave value on the table?

You’d be surprised how many owners choose the last option. They didn’t focus on the strategy of exit as much as they did on day to day operations.

Selling a business doesn’t happen overnight. If you don’t have buyers lined up and a business prepared for your exit, it’s too late to get maximum value this year. Selling a business that isn’t prepared for sale means you’ll leave more than tax savings on the table when you negotiate your exit price.

How do you figure out if it’s time to sell and who to sell to? What comes into play is

  • owner’s level of commitment to the business
  • growth and profit given current market conditions and available resources
  • business’ present state of readiness for sale
  • desire to have the company continue after you depart

Start with a realistic assessment.

  • Are you still willing and able to work hard to help the business thrive?
  • Can the business hit 15%/year growth AND increase profits?
  • Are sufficient reserves in place to keep the business safe?

If the answers to any of those questions is, “No”, it may be time to get out before things get any worse.

If the answers are all, “Yes”, stick around, build the business for tomorrow’s buyer, who wants to acquire a turnkey business. Build this:

  • management and procedures in place, run without the owner involved
  • profitable customers secured by contracts
  • a niche that is hard for competitors to break into
  • a productive, committed, educated workforce
  • up-to-date systems and equipment
  • profits set aside as reserves to demonstrate the company’s value and to build up cash to take with you when you do sell.

Looking for a good book? 11 Things You Absolutely Need To Know About Selling Your Business, by John F. Dini.

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Gearing Up to Sell the Business

I’m starting to think about selling my company. What can I do in a short period of time to prepare?

Figure out what you want from the sale. Make sure the financials tell the story you want to tell. Do what you can to get the business to run without you. Decide who will most likely value what you have, and who can afford the purchase. Build a team of advisors and a back-up plan.

Start with some basic questions. Do you want out, cash in hand? Do you have a minimum amount you need to make from the sale? Do you want a job with the new company? Are you planning to do additional work in the industry, or do you want to walk away and never look back?

Can I produce reports that show a clear picture of the business, both the strengths and the weaknesses? Do the details match my story of what I’m selling, and why? Do I have a financial advisor who can talk with a potential buyer and support the selling process?

How much of the company depends on me? Why would a buyer purchase the company, if the company is just me? Who can step up to do what I do? Do the people in my company have an incentive to stick around through a sale process?

Thinking through a list of potential buyers is crucial, and goes back to your earlier questions about what you want out of the deal and what are your company’s strengths and weaknesses. You probably know as much as anyone about other players in your industry. That’s an obvious place to look.

Once you’ve gone through industry players, start to list less obvious options. Who is looking to get into the industry? Who wants clients and client relationships like the ones your company has already built up? Who is looking for proven human capital talent? What processes does your company have in place, that you’re particularly good at, and who would find those a benefit in their business?

Get your financials well organized and clear so a buyer trusts what you’re telling them. Don’t be afraid of showing your company’s weaknesses, such as too much overhead, not enough sales, too much debt, not enough reserves. Many buyers look for problems they can fix and profit on. And the problems will come to the fore when you go through due diligence, so you might as well be upfront about them.

You may or may not want to tell your team that you’re thinking of selling. On the one hand, they’ll figure out something is up sooner or later anyway. On the other hand they may get nervous and start looking for a job. You can offer key employees an incentive to stay through the sale and transition. You can also get an idea from potential sellers as to what they’re looking to buy. If they’re looking for talent, it will be important for you to do some selling to your employees on the advantages of sticking with it.

When considering buyers, look for bigger, profitable companies. You want to be sure your potential buyer has the muscle to get the deal done. They are likely to be more sophisticated, and more demanding. Don’t let those traits discourage or intimidate you.

Review your list of current advisors. Do you have an accountant and a lawyer who have experience helping their clients negotiate their way through a sale? Do you have a business broker who can help build a target list of potential buyers? Who do you trust to advise you as you go through the ups and downs finding a buyer and closing a deal?

Consider your options, as you start to go through the selling process. Find more than one potential buyer, at least a primary and a backup. If you’re not sure you’ll get what you want out of the sale financially, make a plan for how you’re going to close the gap – with the business or outside of it. Negotiate from strength because you’ve already figured out how to deal with the variable.

Looking for a good book? Sell Your Business Your Way: Getting Out, Getting Rich & Getting On With Your Life, by Rick Rickertsen.

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