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Should You Earn a Return on Investment from your Business?

You’ve worked hard to build your company. How do you want to get a return on all that you have invested. Read on to get your questions answered about how to be successful and the 5 steps to take, starting now to get the best possible result.

Getting your ROI is a 5 step process. It’s not something you want to do all at once the year you suddenly have to sell or want to sell. To get the best return, give yourself several years to plan and then enact your saleability blueprint.

Step 1 – Know Your Options

Coming to terms with how you want to profit from owning a business could be an easy decision or one wrapped up many dilemmas.

It seems easy to say, “Yes, when the time comes, I’ll sell.” But gets complicated if you’ve got any of the following situations:

• A business partner
• A health problem
• Family associated with the business
• Employees  you would like to reward
• No family in the business
• A family member not ready/able to take over the business
• Promises made to employees or family about your interest in having them buy shares, or become an owner one day
• What your next act might be
• What you would do if you didn’t lead the business anymore
• What’s going on in your industry
• Confusion about what the business is really worth
• Potential “buyer interest” that is hard to evaluate
• An idea that selling is associated with a certain age
• A desire to sell part of a business but not have to deal with partners
• A passion to keep growing it and an interest in getting your ROI before it’s too late
• Confusion about who to call first to even look at any of these issues
• Mistrust of what you’ve heard about exiting, succession and selling that just doesn’t sit right
• Your frustrated with the mixed messages you are getting about what to do with your business just because you’re growing older
• You get phone calls and letters from brokers and advisors saying they have a buyer waiting in the wings and you wonder how come they know so much about your business
• You’re waiting for a son or daughter to step forward and tell you they want to take over
• You’re waiting for the market to change or your instincts to tell you this is a good time to sell

If you’ve got some of these concerns, then it’s really hard to take the right steps to get a return on investment. Our Decision Road Map program helps you navigate these choppy waters so you come out with a decision you feel certain about that meets all your needs and those around you.

During the Decision Road Map, you gain insight into:

1. How your company is valued, and why value is really what a willing buyer will pay, not what the accountant says.
2. What a buyer looks for and why;
3. How to think of your business like an investor;
4. Who might buy it, what they are looking for;
5. What it would be like to sell to employees vs another company;
6. How all these decisions will affect your personal financial situation, your company legacy, what you can sell your company for, your next act;
7. The changes you will have to make inside your business so it is transferrable to another buyer, of interest to their investment goals and worth what you want to sell it for during the time that ideal buyer is looking.

There are a lot of myths out there about selling a business. We will answer your questions and sort out what’s true and what isn’t. This FAQ might help you:

Q: Would I be able to sell my type of business?

A: Yes, if you have done the work that make’s it transferrable and worth what you want to sell it for and made it attractive to the ideal buyer. We wrote the book on how to do this.

Q. Can I sell some of position in my business?

A: Yes, that’s entirely possible, especially if you make it saleable and attractive to the ideal investor. Talk to us about what you want, we will show you what’s possible and what isn’t. Then you can make an informed choice. We will connect you to investors.

Q: I’ve been told by so many different advisors what my company is worth. Which number do I believe?

A: The short answer is, don’t bet you can sell it for any of the numbers  you’ve been ‘quoted’. Value is in the eye of the buyer. What you value and what they value will be very different. What your company is worth today is your baseline number. You need to add the ‘saleable value’ that a buyer is looking for. Then it will be worth what you want to sell it for to a buyer that wants it for that price. Our four-step proven system leads you through this complex maze.

Q: I’m thinking it’s time to sell this year. Who should I call to get the transaction done?

A: Us. Except that your business is not ready for the transaction. Don’t skip the step of preparing it so it is saleable. If you go to an investment banker, business broker or mergers and acquisitions advisor, they will determine whether they want to represent your business… or not. You may have to pay them to get that decision made. You are presenting them with a business that has not been made saleable so it’s pretty difficult for a valuation to be done that will reflect what you want to sell it for. Going to another broker for a second or third opinion does not change the fact that your business isn’t worth what you want to sell it for… yet.

Q: My partner wants to sell. I don’t. We can’t see eye to eye on this. What can I do?

A: You may be able to arrange to buy your partner out. Your business will need to be prepared so an investor or lender sees it as a good risk to invest in. Yes, sometimes the company can make the payments to support your personal buy out. But first, you and your partner need to have a facilitated open and frank conversation about what’s important to each of you AND the business. Let our trained coaches help you hear what the other is saying, and get your interests on the table so you can hatch a good plan before the company suffers a set back because the leaders are distracted with this problem.

Set up a 30 minute zoom call.

Q: I’ve already done a succession plan. I’ve got my holding company and my tax structure set up. I’m ready to sell. What’s the next step?

A: Actually, a succession plan is only part of the process of getting a return on your investment in your business. You have to know your company is in saleable condition before you attempt to put it on the market. There is nothing worse than trying to sell a business that has been shopped around and rejected. Ask for our Saleability Checklist to see if indeed your business is ready for the market.

Q: We have many distributors that we count on to sell our products. Many are getting to an age where they might want to exit. How can we make sure they don’t just close, leaving us without key channel partners?

A: You are right. This is a huge issue for many unsuspecting manufacturers. 50% of all businesses today are owned by aging boomers. Given that 90% will fail to find buyers because they didn’t know they should become saleable OR they had to exit suddenly due to health or industry changes, you should be very worried. Assess your vulnerability. Look at the 20% that drive 80% of your revenue. Of these 20%, how many have owners still active in the company who are over 55? Now you know whether an intervention is needed. We can work with groups of businesses on their Saleability Blueprints. Hold a conference. Invite us to speak. We’ll help your company and your distributors with a game plan that gives everyone financial certainty over their future.

Q: I want to make sure my company is worth what I want to sell it for when my ideal buyer is looking. How do I get that financial certainty?

A: Great question!  Let’s help you by sorting through all your questions and concerns so you know what you will have to change inside your business to make it worth what you want to sell it for so it is attractive to the next owner.

• Make your company saleable 2-4 years before your exit date.
• Depending on your next act, post sale, the business has to become far less dependent on you long before your exit date.
• The trick to getting a buyer and a premium? Become the acquisition your ideal buyers look for.

Your first step is to learn what it means to make your business saleable and decide if this is the future you want. There are many questions you will want to reflect on to make this choice. Your financial future will look very different if you join the 90% who hope to sell, don’t do the preparation and then can’t find a buyer.

Step 2 – Build the Blueprint

Once you’ve committed to this path, Step 2 is to build your Saleability Blueprint. The choices you make in this Blueprint will shape all your decisions from this point on.

It’s a complicated jig saw puzzle to examine all the impacts for each scenario that you are considering: What you want to do might not match up with what is happening in the market place. Your time frame might be shorter or longer than what’s possible to achieve. Your industry and your ability to stay abreast of changes will affect which buyer is best to aim for. The changes you make inside your business will be very different depending on the type of buyer you select. You must weigh the consequences of each decision on your tolerance for risk, your team, family needs, financial interests and a host of uncontrollable variables.

By working through the questions in our Blueprint (on your own or with us), you feel confident making your commitment to this path.

Step 3 – Implement Your Blueprint

Step 3 is to get help implementing your Saleability Blueprint as a project so your company makes the right changes to build in the economic value buyers search for. Can you lead the project? Are you good at helping your employees through change? Work to your strengths and get help in other areas.

What do you tell your employees as you implement these changes? You’re growing the company to the next level (it’s the same activities as making it saleable!). It’s exciting times in your business.

How to Get Started

Don’t wait, like so many other owners, thinking they can prepare for an exit to earn that return in the year they want to sell.

Start now. A saleable business delivers returns long before you sell. Good for the current investor(s). Good for the future buyer.

Want to ask questions or get started? Book a 30 minute complementary call.

Business Partnership Dilemmas?

So should you save or cease your business partnership? Is it worth it to try and find a facilitator to work through the years of baggage you hold against each other or just hire a lawyer and elect to use the shotgun clause to buy him or her out?

If you look back at what you’ve achieved together, you may think twice about dumping such an important resource for the firm. But at the same time, sometimes two business partners outgrow each other, or can’t make the magic together anymore. It may be time to split up.

But you won’t gain insight into which direction to take from a lawyer. You will start the process of ending the partnership and negotiating the payout. Then one of you will have to figure out how to grow the business again and recover from that big loss of cash you just paid out.

There are two questions business partners need answers to before deciding it’s time for an expensive divorce.

1. What problem would be solved if either of you left?  
2. What problem are you really trying to solve that isn’t being addressed?

Here are the top five reasons that partners want to divorce.

We’ve managed to come to terms with all these issues for our clients to their satisfaction. These are the underlying reasons that don’t get discussed but really need air time so you plan the next steps in a way that rewards everyone (instead of penalizing some), including the company.

• Square peg, round hole syndrome -The company needs a role fulfilled. One partner has the expertise and not the passion, or the passion and not the expertise.
• Unfulfilled Expectations – What you started out agreeing to build has not come to pass. You believe it’s because the other partner didn’t fulfill promises or pull their weight.
• The 49/51 Problem: You both thought that the 51% partner should lead the business. But the business needs a leader with more experience.
• Family & Merit – In the beginning you needed employees so family members jumped on board. When poor performance happened, each partner thought it was the other’s responsibility to fix it with their relative. Non-family employees are evaluated on merit, family are not. Now, no one is taking responsibility for anything.
• I want out – One partner is unhappy and wants to be bought out this year. They’ve left the business and now you’re shouldering the burden of running it but still paying the absent partner dividends.

If you have questions about where to go next with your business partner, don’t wait, don’t call a lawyer, talk to us first.

Schedule a 60 minute discussion to explore your first steps.