Posted by Kipp Krukowski on Mon, Apr 30, 2012 @ 10:51 PM
By: Kelcey Lehrich
Why would two companies in the same industry, with the same financial performance, command vastly different valuations? The answer often comes down to how much each business is likely to grow in the future.
The problem is that a lot of successful businesses reach a point where their growth starts to slow as the company matures. In fact, the price of doing a great job carving out a unique niche is that the specialty that made you successful can start to hold you back.
If you make the world’s greatest $5,000 wine fridge, you may have a successful, profitable business until you run out of people willing to spend $5,000 to keep their wine cool.
Demonstrating how your business is likely to grow in the future is one of the keys to driving a premium price for your company when it comes time to sell. To brainstorm how to grow beyond the niche that got you started, consider the Ansoff Matrix. It was first published in the Harvard Business Review in 1957 but remains a helpful framework for business owners today.
Sometimes called the Product/Market Expansion Grid, the Ansoff Matrix shows four ways that businesses can grow, and it can help you think through the risks associated with each option.
Imagine a square divided into four quadrants representing your four growth choices, which include selling…
1. existing products to existing customers
2. new products to existing customers
3. existing products to new markets
4. new products to new markets.
The choices above are presented from least to most risky. In a smaller business, with few dollars to gamble, focusing your attention on the first two options will give you the lowest risk options for growth.
Existing products to existing customers
It’s natural to feel like you’re being greedy when you go back to the same customers for more of their dollars, but the opposite can often be true. Your best customers are usually the ones who know and like you the most and are often pleased to find out that you – someone they trust – are offering something they need.
Greg is a hardware store owner who came to understand the Ansoff Matrix. Greg earns a 150% mark up on cutting keys but his cutter was hidden in a corner of the store where nobody could see it. As a result, he didn’t cut many keys. One day, Greg decided to move the key cutter and position it directly behind the cash register so everyone paying for his or her hardware could see the machine. Customers started seeing the cutter and realized – often to their pleasant surprise – that Greg cut keys.
Not surprisingly, Greg started selling a lot more keys to his loyal customers. The key cutter didn’t woo many new customers, but it did increase his overall revenue per customer.
If you want to sell more of your existing products to your existing customers, draw up a simple chart of your products and services. Don’t be afraid to dust off those old products that you haven’t paid much attention to lately. List your best customers’ names down one side of the paper and your products across the top. Then cross-reference your customer list with your product list to identify opportunities to sell your best customers more of your existing products.
New Products to Existing Customers
Another approach to growth is to sell new products to existing customers. For example, there is a BMW dealership owner in the Midwest whose typical customer is a family patriarch in his forties. When he felt like he had saturated the market for well-heeled forty-something men in his trading area, he thought about what other products he could sell his existing customers. But instead of defining his customer as the forty-something man, he decided to think of his customer as the financially successful family and his market as their driveway.
Instead of trying to sell more BMWs into a market of diminishing returns, he bought a Chrysler dealership so he could sell minivans to the spouses of his BMW buyers. He then realized that a lot of his customers had kids in their teens so he bought a Kia dealership to sell the family a third, inexpensive car.
Once you become successful, it can be tempting to sit back and enjoy your success. But in order to drive up the value of your business, you need to be able to demonstrate how you can grow, and the least risky strategy will be to figure out what else you could sell to your existing customers.
If you are curious to see how your growth stacks up and if you're building a business you could sell one day, take the 13 minute Sellability Score questionnaire: sellabilityscore.builtosell.com/?advisor=KL4XYJ8TDUGZ626
Posted by Kipp Krukowski on Thu, Apr 05, 2012 @ 09:54 PM
By: Kelcey Lehrich
If you were to draw a picture that visually represents your role in your business, what would it look like? Are you at the top of a traditional Christmas-tree-like organizational chart, or are you stuck in the middle of your business, like a hub in a bicycle wheel?
As anyone who has tried to fly United when O’Hare has been hit by a snowstorm knows, a hub-and-spoke model is only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid hub-and-spoke managed businesses because they understand the dangers of buying a company too dependent on the owner. Here’s a list of nine warning signs you’re a hub-and-spoke owner and some suggestions for pulling yourself out of the middle of your business:
1. You sign all of the checks
Most business owners sign the checks, but what happens if you’re away for a couple of days and an important supplier needs to be paid? Consider giving an employee signing authority for checks up to an amount you’re comfortable with, and then change the mailing address on your bank statements so they are mailed to your home (not the office). That way, you can review all signed checks and make sure the privilege isn’t being abused.
2. Your mobile phone bill is over $200 a month
If your employees are out of their depth a lot, it will show up in your mobile phone bill because staff will be calling you to coach them through problems. Ask yourself if you’re hiring too many junior employees. Sometimes people with a couple of years of industry experience will be a lot more self-sufficient and only slightly more expensive than the greenhorns. Also consider getting a virtual assistant (VA), who can act as a first line of defense in protecting your time. You can find a VA by filling out the request for proposal at
http://www.ivaa.org/.
3. Your revenue is flat when compared to last year’s
Flat revenue from one year to the next can be a sign you are a hub in a hub-and-spoke model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business dependent on its owner reaches capacity at some point. Consider narrowing your product and service line by eliminating technically complex offers that require your personal involvement, and instead focus on selling fewer things to more people.
4. Your vacations suck
If you spend your vacations dispatching orders from your mobile, it’s time to cut the tether. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without affecting your business.
5. You spend more time negotiating than a union boss
If you find yourself constantly having to get involved in approving discount requests from your customers, you are a hub. Consider giving front-line, customer-facing employees a band within which they have your approval to negotiate. You may also want to tie salespeople’s bonuses to gross margin for sales they generate so you’re rewarding their contribution to profit, not just chasing skinny margin deals.
6. You close up every night
If you’re the only one who knows the close-up routine in your business (count the cash, lock the doors, set the alarm), then you are very much a hub. Write an employee manual of basic procedures (close-up routine, e-mail footer to use, voice mail protocol) for your business and give it to new employees on their first day on the job.
7. You know all of your customers by first name
It’s good to have the pulse of your market, but knowing every single customer by first name can be a sign that you’re relying too heavily on your personal relationships being the glue that holds your business together. Consider replacing yourself as a rain maker by hiring a sales team, and as inefficient as it seems, have a trusted employee shadow you when you meet customers so over time your customers get used to dealing with someone else.
8. You get the tickets
Suppliers’ wooing you by sending you free tickets to sports events can be a sign that they see you as the key decision maker in your business for their offering. If you are the key contact for any of your suppliers, you will find yourself in the hub of your business when it comes time to negotiate terms. Consider appointing one of your trusted employees as the key contact for a major supplier and give that employee spending authority up to a limit you’re comfortable with.
9. You get cc’d on more than five e-mails a day
Employees, customers and suppliers constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval or that you have not made clear when you want to be involved in their work. Start by asking your employees to stop using the cc line in an e-mail; ask them to add you to the “to” line if you really must be made aware of something – and only if they need a specific action from you.
If you are curious to see if you're a Hub & Spoke manager and if you have a business you could sell one day, take the 13 minute Sellability Score questionnaire:
sellabilityscore.builtosell.com/?advisor=KL4XYJ8TDUGZ626
Posted by Kipp Krukowski on Sun, Mar 04, 2012 @ 12:26 AM
By: Kelcey Lehrich & John Warrillow
On June 1, 2011, both Floyd’s Coffee Shops in Portland, Oregon were busier than usual. The regulars were elbowed out of the way by new customers visiting the store for the first time to redeem their coupon and get $10 worth of coffee for $3.
This tempting offer was made because Floyd’s had been picked as the first-ever Google Offers “deal.” Google Offers is the company’s first baby step into the world of “social buying” style promotions where a special, limited time offer is made by a business hoping that the deal will spread virally and thereby introduce a new legion of customers to their business.
Google, of course, did not invent the deal-of-the-day category; they were goaded into it after their generous $6 billion dollar offer to buy Groupon was turned down.
Now Groupon is starting to feel the pinch after thumbing their nose at one of the world’s most valuable companies. According to
compete.com, Groupon’s traffic went from 33.7 million unique visitors in June 2011 to just 18.3 million unique visitors in January 2012. That’s a drop of almost half inside less than a year. Not surprisingly, Groupon’s stock is also down around 25% since its IPO last year.
Over-playing your hand
The moral of the story is to be careful not to over-play your hand when being approached by someone who wants to buy your company. Acquirers usually have deep pockets and, while you may think your business is unique, never underestimate the resolve of a big company with lots of cash.
They do have an alternative to buying you: they can simply compete with you.
Typically when they make the decision to walk away from the negotiation table they do not leave empty-handed. They come away with new-found insight on how you run your business, what works, and what flops; so they have an enormous head start to launch a competitive company.
And it doesn’t just happen in Silicon Valley. Take a hypothetical example of a home security company generating $500,000 per year in profit (before tax) installing and monitoring home alarms. One day a big alarm company comes along and says they want to buy the business and they’re willing to pay four times pre tax profit. The alarm company owner turns up his nose and demands six times earnings.
Now the suitor has a choice. They can try and negotiate with the owner, but that would undermine the economics of the model they’ve used to buy hundreds of similar alarm companies across the country, or they can simply hire someone to start an office to compete with him.
Let’s say they pick door number two and hire a young, aggressive manager. They guarantee her $200,000 a year in the first 12 months on the job while she is building her business. You have not only lost the opportunity to sell your business; you’re now competing against a young, motivated rival with a parent company who has an extra $1,800,000 ($2,000,000 withdrawn offer minus the $200,000/ year salary for their manager) that they didn’t use to buy you and they’re putting it towards helping your new competitor build her business.
If you’re lucky enough to get approached by a big company who wants to buy yours, remember that they are usually not choosing between buying you or buying your competitor. They are often choosing between buying you or setting up shop to compete with you.
Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is. After completing the questionnaire, you will immediately receive a Sellability Score out of 100 along with instructions for interpreting your results. Take the test here:
sellabilityscore.builtosell.com/?advisor=KL4XYJ8TDUGZ626
Posted by Kelcey Lehrich on Wed, Feb 08, 2012 @ 03:31 PM
By: Kelcey Lehrich & John Warrillow
Doctors in the developing world measure their progress not by the aggregate number of children who die in childbirth but by the infant mortality rate, a ratio of the number of births to deaths.
Similarly, baseball’s leadoff batters measure their “on-base percentage” – the number of times they get on base as a percentage of the number of times they get the chance to try.
Acquirers also like tracking ratios and the more ratios you can provide a potential buyer, the more comfortable they will get with the idea of buying your business.
Better than the blunt measuring stick of an aggregate number, a ratio expresses the relationship between two numbers, which gives them their power.
If you’re planning to sell your company one day, here’s a list of seven ratios to start tracking in your business now:
1. Employees per square foot
By calculating the number of square feet of office space you rent and dividing it by the number of employees you have, you can judge how efficiently you have designed your space. Commercial real estate agents use a general rule of 175–250 square feet of usable office space per employee.
2. Ratio of promoters and detractors
Fred Reichheld and his colleagues at Bain & Company and Satmetrix, developed the Net Promoter Score® methodology, which is based around asking customers a single question that is predictive of both repurchase and referral. Here’s how it works: survey your customers and ask them the question “On a scale of 0 to 10, how likely are you to recommend <insert your company name> to a friend or colleague?” Figure out what percentage of the people surveyed give you a 9 or 10 and label that your ratio of “promoters.” Calculate your ratio of detractors by figuring out the percentage of people surveyed who gave you a 0–6 score. Then calculate your Net Promoter Score by subtracting your percentage of detractors from your percentage of promoters.
The average company in the United States has a Net Promoter Score of between 10 and 15 percent. According to Satmetrix’s 2011 study, the U.S. companies with the highest Net Promoter Score are:
USAA Banking 87%
Trader Joe’s 82%
Wegmans 78%
USAA Homeowner’s Insurance 78%
Costco 77%
USAA Auto Insurance 73%
Apple 72%
Publix 72%
Amazon.com 70%
Kohl’s 70%
3. Sales per square foot
By measuring your annual sales per square foot, you can get a sense of how efficiently you are translating your real estate into sales. Most industry associations have a benchmark. For example, annual sales per square foot for a respectable retailer might be $300. With real estate usually ranking just behind payroll as a business’s largest expenses, the more sales you can generate per square foot of real estate, the more profitable you are likely to be.
Specialty food retailer Trader Joe’s ranks among companies with the highest sales per square foot; Business Week estimates it at $1,750 – more than double that of Whole Foods.
4. Revenue per employee
Payroll is the number-one expense of most businesses, which explains why maximizing your revenue per employee can translate quickly to the bottom line. In a 2010 report, Business Insider estimated that Craigslist enjoys one of the highest revenue-per-employee ratios, at $3,300,000 per employee, followed by Google at $1,190,000 per bum in a seat. Amazon was at $1,010,000, Facebook at $920,000, and eBay rounded out the top five at $530,000. More traditional people-dependent companies may struggle to surpass $100,000 per employee.
5. Customers per account manager
How many customers do you ask your account managers to manage? Finding a balance can be tricky. Some bankers are forced to juggle more than 400 accounts and therefore do not know each of their customers, whereas some high-end wealth managers may have just 50 clients to stay in contact with. It’s hard to say what the right ratio is because it is so highly dependent on your industry. Slowly increase your ratio of customers per account manager until you see the first signs of deterioration (slowing sales, drop in customer satisfaction). That’s when you know you have probably pushed it a little too far.
6. Prospects per visitor
What proportion of your website’s visitors “opt in” by giving you permission to e-mail them in the future? Dr. Karl Blanks and Ben Jesson are the cofounders of Conversion Rate Experts, which advises companies like Google, Apple and Sony how to convert more of their website traffic into customers. Dr. Blanks and Mr. Jesson state that there is no such thing as a typical opt-in rate, because so much depends on the source of traffic. They recommend that rather than benchmarking yourself against a competitor, you benchmark against yourself by carrying out tests to beat your site’s current opt-in rate.
Dr. Blanks and Mr. Jesson suggest the easiest way of increasing opt-in rate is to reward visitors for submitting their e-mail addresses by offering them a gift they’d find valuable. Information products – such as online white papers, videos and calculators – make ideal gifts, because their cost per unit can be almost zero. Using this technique and a few others, Conversion Rate Experts achieved a 66 percent increase in the prospects-per-visitor rate for SOS Worldwide, a broker of office space.
7. Prospects to customers
Similar to prospects per visitor, another metric to keep an eye on is the efficiency with which you convert prospects – people who have opted in or expressed an interest in what you sell – into customers.
Conversion Rate Experts’ Dr. Blanks and Mr. Jesson recommend you monitor the rate at which you are converting qualified prospects into customers, and then carry out tests to identify factors that improve that ratio. Conversion Rate Experts more than doubled the revenues of SEOBook.com, the leading community for search marketers, by converting many of SEOBook’s free subscribers into customers. Techniques that were found to be effective included (perhaps counter intuitively) restricting the number of places available; allowing easier comparison between SEOBook and the alternatives; communicating the company’s value proposition more effectively; and simplifying its sign-up process. The trick is to establish your benchmark and tinker until you can improve it.
Acquirers have a healthy appetite for data. The more data you can give them – in the ratio format they’re used to examining – the more attractive your business will be in their eyes.
Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is. After completing the questionnaire, you will immediately receive a Sellability Score out of 100 along with instructions for interpreting your results. Take the test here.
Posted by Kipp Krukowski on Fri, Jan 13, 2012 @ 04:43 PM
By: Kelcey Lehrich
In our experience, your age has a big effect on your attitude towards your business and how you feel about one day getting out. Here's what we have found:
For business owners between 25 and 46 years old
Twenty- and thirty-something business owners grew up in an age where job security did not exist. They watched as their parents got downsized, rightsized, or packaged off into early retirement, this has caused quite a jaded attitude towards the role of business in life. Business owners in their 20’s and 30’s generally see their companies as a means to an end and most expect to sell in the next five to ten years, similar to their employed peers who have a new job or employer every three to five years; business owners in this age group often expect to start a few companies in their lifetime.
For business owners between 47 and 65 years old
Baby Boomers came of age in a time where the social contract between a company and an employee was sacrosanct. An employee agreed to be loyal to the company, and in return, the company agreed to provide a decent living, good benefits, one golden watch, and a pension for a few golden years.
Many of the business owners we speak with in this generation think of their company as more than a income generation tool - they see their business as part of a community and thus, by extension, themselves as a community leader. To many boomers, the idea of selling their company feels a lot like selling out their employees and their community. This is is why so many Owners of companies in their fifties and sixties are torn inside about selling their business. They know they need to sell to fund their retirement, but they agonize over where that will leave their loyal employees.
For business owners who are 65+
Older business owners grew up in a time when hobbies were impractical or discouraged. You went to work while your wife tended to the kids (today, more than half of businesses are started by women, but those were different times), you ate dinner together at the table, you watched the news or read the paper, and you went to bed.
With few hobbies and nothing other than work to define them, business owners in their late sixties, seventies and eighties feel lost without their business, which is why so many refuse to sell their companies or experience depression after they do.
Of course, there will always be exceptions to general rules of thumb but we have found that – more than your industry, nationality, marital status, success leve, or educational background – your birth date defines your exit plan.
Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is, or isn’t. After completing the questionnaire, you will immediately receive a Sellability Score along with instructions for interpreting your results. Take the test here.
There is also a comprehensive report available after you take the Sellability Score, contact our office directly to receive the full report.
Posted by Kipp Krukowski on Fri, Dec 30, 2011 @ 12:21 PM
By: Kelcey Lehrich & John Warrillow
It seems like we’re at a fork in the road: there are some positive signs that the economy is entering the earliest stages of a long term expansion, but at the same time, if we dare read the headlines, it seems we’re destined to repeat 2008.
It’s precisely because we’re at this inflection point that we see a lot of business owners thumbing the eject button. If you’ve been thinking of selling your business, here are seven reasons to get out now:
1. You’ve lost the stomach for it
A lot of business owners took The Great Recession in the teeth. If you’ve got your business stabilized and the prospect of fighting through another recession leaves you panic-stricken, it’s time to get out.
2. The worst is behind you
Let’s say you were mentally getting ready to sell back in 2007. Then 2008 hit, and 2009 was your worst financial year in recent memory. You cut everything you could in 2010, showed a profit in 2011 and now you’re starting to see some profit and revenue growth. With your numbers going in the right direction, now might be just the right time to get out.
3. The tax man is coming
Governments around the world are looking for money to fund the cost of an aging population. In the U.S., the capital gains tax rate is set to go up after 2012.
4. Nobody is lucky forever
If you’re lucky enough to be in a business that actually benefits from a bad economy, congratulations. You’ve probably just had the three best years of your business life. But no cycle lasts forever and right now may be a great time to take some chips off the table.
5. The coming glut
As a business owner, demographics are not on your side. As the baby boomers start to retire, we’re going to have a glut of small businesses come on the market. That’s great if you’re buying, but if you’re a seller, you may want to get out ahead of the flood.
6. The closing window
It’s been tough for private equity companies to raise money since 2008; so many firms had their last successful round of fund raising in 2007. Many of these funds have a five-year window in which to invest; otherwise they are required to give the money back to the people who gave it to them. Some boutique private equity firms will make investments in companies that have at least one million dollars in pre-tax profits (larger private equity firms will not go below $3 million in EBITDA); so if you’re in the seven-figure club, you could get a bidding war going for your business among private equity buyers keen to invest their money before they have to give it back.
7. A good time to be liquid
The stock market has been swinging wildly lately which is why it would be nice to get liquid. With cash in the bank, you will be able to take advantage of a fire sale on the stocks of good quality companies should the market sink.
If you feel like a gambler at a blackjack table with everything riding on the outcome of one hand, it may be the right time to take a few chips off the table.
Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is. After completing the questionnaire, you will immediately receive a Sellability Score out of 100 along with instructions for interpreting your results. Take the test here:
sellabilityscore.builtosell.com/?advisor=KL4XYJ8TDUGZ626
Posted by Kipp Krukowski on Thu, Jul 07, 2011 @ 09:47 PM
Buying or selling a business and other major business decisions got delayed during the last election. Business experts say business owners are concerned about who will be in office and wonder if the newly elected politician will be friendly to business. Can you guess what will happen during the next election? You guessed it….small business owners will take a ‘wait and see’ attitude to decisions to expand, buy or sell a business. History will repeat itself again!
Unfortunately, as business brokers there is not much we can do to change this thinking, but my advice to those contemplating buying or selling a business is to do it NOW! Here is a summary of the last three years of small business ownership. In 2008 we had the election and had a ‘wait and see’ attitude. The last two years had the economy in reverse so owners did not want to sell or invest in business. This has created pent up supply and demand. THE TIME IS RIGHT NOW TO SELL YOUR BUSINESS OR BUY A BUSINESS! Next year will be too late because the election will make business buyers shift into the ‘wait and see’ mode.
After dedicating so much time, money, blood sweat and tears into building a business, many owners dream of the day when they will be able to sell for top dollar and enjoy a carefree retirement. For many, their companies are their main source of income and the cornerstone of their wealth. So when it comes to selling the enterprise, the stakes are high.
A recent survey of business activity nationwide shows that many sellers are taking advantage of the window of opportunity offered by today's favorable marketplace. In this recent survey, almost one-third of business owners responded that they are considering the sale of their business. The first question one might ask, given the relatively healthy financial climate, is WHY? Selling when times are good? The answer, for many sellers, can be a resounding YES! Here are some of the reasons why, followed by tips for getting the process started.
There are buyers out there The current economic upturn has depended to a great extent on trimming the corporate fat. Executives and middle managers out of work--and determined not to be "downsized" by big business again--are eyeing the advantages of being in business for themselves. Since 1990, the percentage has steadily grown of those corporate executives who leave jobs in order to become independent business owners. It isn't just the money they are dreaming of--it's the desire for more control over their lives.
How to find qualified buyers? The business broker is the professional to whom sellers turn when looking for serious, "qualified" buyers. The business broker not only helps match the right buyer with the right business, but also educates the buyer in the buy-sell process, alleviating concerns and keeping the transaction in steady forward motion. With plenty of buyers to choose from in today's market, it's more important than ever to identify the time-wasters and those who think they want to buy but really aren't ready to take the big step.
Cash-Out is better than burnout Burnout can come with a business that's successful as well as one that's failing to grow. The right time to sell is before the syndrome becomes a threat to the effective management of a business. What are the warning signs of burnout? Owning a business is hard work, but it should also include an element of enjoyment. The owner who drags himself or herself through every day, with a sense of dread--or boredom--should consider moving on to a fresh challenge elsewhere.
Sell in a positive market Other than burnout and its consequences, there are other factors that can lead to the "forced sale" of a business. Compelling personal problems (a divorce or death in the family, poor health), shortage of capital or outright failure of the business, the lack of heirs to take over--these are the traditional examples. Instead of waiting for unfavorable conditions, potential sellers should keep a eye out for that all-important right time for putting their business on the market. When might that time be?
The Small Business Administration (SBA), in researching selling trends, reports that three to five years is a long enough stretch for many of today's business owners. One in every three business owner plans to sell; many of them right from the outset. The business they've bought is not a legacy for their children--it's a shorter-term investment of their time as well as their money. The ability to present a healthy operation, with an owner in the position to hand over the reins to the next owner is a major advantage in the completion of a successful business sale. One of the surest ways to maximize the value of a business is not waiting too long to sell and selling before the next election season.
Written by Jeff Young, Business Intermediary Confidential Business Sale, Inc.
Posted by Kipp Krukowski on Sun, May 22, 2011 @ 02:10 AM
The Internet is credited for opening the floodgates to business opportunities that were never even dreamed of just a few short years ago. A “place” to do business is now irrelevant as long as you can get connected to customers. Many virtual business owners work from the home, but anyplace you can connect to the internet or get a signal on your cell phone can qualify as a virtual office. But what happens when you have a virtual business for sale? Will your virtual business command a premium price because it is a virtual business?
To get a better understanding of a virtual business, here is an example of a virtual business that is for sale in Pittsburgh. The owner lives in Pittsburgh but the buyer can be anywhere because it is a virtual business. Baseball Sports Agency For Sale. The assets in the business are the contracts and established relationships that the owner has developed in the virtual business.
When you sell a business, you transfer the assets, inventory, customers, systems and procedures to the new owner. There may be a building to buy or lease with the business. In a virtual business, there are usually less tangible items being sold and more intangible items like trademarks, websites, customer lists, software and telephone numbers. Yes, these are things that are the heart and soul of a virtual business.
Virtual businesses today are commonplace. Why go to a bookstore when you can purchase books cheaper online. Zappos has made buying shoes online the way to go. Netfix has reinvented the DVD rental business. The industries supporting virtual businesses are doing well. A perfect case in point is eBay. You could almost say eBay is built on serving virtual businesses.
EBay provides a marketplace for 750,000 businesses that sell online, the majority of which are virtual businesses or home-based businesses. Its PayPal unit enables countless businesses to operate virtually by streamlining their accounts payables and receivables, and even their eCommerce functions. For instance, with PayPal you can purchase needed business services and goods electronically, and issue invoices and get paid for them completely electronically. You also can use PayPal as a plug-and-play shopping cart for processing online eCommerce transactions. And Skype, also owned by eBay, allows virtual business team members to communicate easily and for free.
The traditional concept of employment is also changing with the virtual business concept. Independent contractors have replaced the traditional employees in many companies. High unemployment and an army of disgruntled employees allow companies to get work done with contractors and staffing companies. Virtual companies staffed with contract employees may seem like science fiction, but this is all part of the brave new business world of today. A concern is that when you sell a virtual business with contract employee’s, there’s a risk that these employees leave the business and may even become competitors of the new owner.
Virtual businesses often use a shared office facility to have a physical location to meet customers and conduct business. This is a smart new alternative to traditional offices and executive suites that combines the benefits of physical office space with the flexibility of virtual office solutions. The owner of a virtual business can work from home, out on the road, or wherever else their businesses take them while promoting a polished, professional image of themselves and their businesses.
The shared office facility may provide a full spectrum of address and mail services. Office and conference rooms are available for rent by the hour, day, week or a long term lease. The professional telephone answering service provides business men and women with a dedicated phone line with voice mail and a receptionist to answer and screen their calls. Calls can be seamlessly connected to customers putting them "in the office" wherever they are.
The strategic advantage of a virtual business will create demand for this growing business sector. Pricing and business valuation of a virtual business for sale may require business buyers and business sellers to challenge traditional methods and establish a new set of guidelines for virtual businesses. Business buyers will adapt to the notion that many businesses for sale have a virtual business address.
Written by: Jeff Young, Business Intermediary, Confidential Business Sale, Inc.
Posted by Kipp Krukowski on Sun, May 22, 2011 @ 01:53 AM
There's a great captive insurance agency for sale in Cleveland, OH. Here are six reasons why this business is a great opportunity:
- 100% Bank Financing! If you have a 700+ credit score, prior insurance experience, and no personal debt issues you may qualify for 100% bank financing for this purchase.
- Reduced Downside Risk! The parent company of this captive agency has a buy-back program for their agents that limits your risk.
- Growing Market! This agency resides in a growing Cleveland-area community. The real estate is available, but is not required to be purchased. You can move this business the day you buy it.
- Growth Opportunities! Beyond home and auto insurance there are dozens of financial products that this agency can sell including investments and life insurance. This book of business has not been heavily prospected for additional product sales.
- Strong Track Record! This agency has been open for more than a decade and the customer retention numbers are excellent.
- Transition Help! The current owner is willing to stay on and help train the new owner and the existing staff is both skilled and experienced making this a very easy transition.
If you want more information on this captive insurance agency for sale, please contact us. This insurance agency has provided a very nice living for the current owner for a number of years.
Posted by Kipp Krukowski on Mon, Apr 25, 2011 @ 03:20 PM
The first time is the most challenging, whether you are buying a car, home or ready to buy a business. A business for sale listing may catch your eye, but what do you do first? Pick up the phone and start asking the Business Broker questions about the business for sale. A professional Business Broker has the answers, even if you don’t have all the questions about the business for sale.
Questions for first time future business owners
Tell me about the business for sale.
How did you get started?
What services does your business provide?
Why are you selling your business?
What are the last three year's sales and earnings?
Who are your biggest competitors?
What are your industry trends?
What do you think are some things I can do to increase sales and profits?
How many employees do you have and are there any employees that are critical to the business?
How long will it take me to really learn this business?
The Process of Buying a Business
Confidential Business Listing/Initial Contact—The listing of the business for sale and your initial call to the Business Broker will provide general information. Consider this like reading the preface of a book. Does the information create an interest to continue? A business listing will typically provide enough information to generate interest while maintaining the confidentiality of the business and owner.
Non-Disclosure and Confidentiality Agreement—A prospective business buyer will sign a non-disclosure and confidentiality agreement before receiving additional financial information. In most cases, it is important that the sale of the business remains confidential during the sales process.
Financial Information Review—Business sellers can provide prospective buyers with a number of different items including the financial statements of the business for sale, tax returns, a list of assets of the business, business valuation reports and cash flow statements. How much and what type of information that is provided is dependent on the type of business and how sophisticated the business is. It is now time to review the information you’ve received in greater detail. You may want to do your own projections of earnings for the next three years based on the history of the company and your anticipated improvements. You may choose to do some research into the general industry if you are unfamiliar with it.
Meeting with Owner/Visit the Business-- If there is genuine interest in the business for sale, the Business Broker will arrange a meeting with the seller. This is typically held at the broker’s office, at a coffee shop or after-hours at the seller’s place of business. This is the time to ask general questions on anything and everything but not the time to begin negotiations on price and terms for the sale of the business.
The Offer-- Your offer to buy the business will typically be a conditional offer or in the form of a Letter of Intent (“LOI”). It will also contain specific requirements for the Seller as far as training and transition and non-competition clauses. With the offer, you will provide a reasonable deposit based on the purchase price. The purchase offer typically contains other provisions such as a stated due diligence period, deadlines for obtaining financing, and a specified closing date to buy the business.
Due Diligence Period—A reasonable amount of time is needed when buying a business to conduct due diligence. You and your advisors need to verify and review the information given to you including any information that may have been withheld prior to your offer.
Agree on Price and Terms--The details of your accepted offer of the business for sale or letter of intent will be forwarded to the lawyers for both parties for drafting and review of Definitive Purchase Agreement. The Definitive Purchase Agreement is the actual agreement of purchase and sale. It typically includes all of the conditions and clauses in the original offer or LOI plus any additional clauses and conditions you and the seller agree upon. This agreement is typically drafted by the buyer's lawyer.
Closing-- Close the purchase and begin your first day as the owner of your very own business. The seller will be available to assist in the transition of the business. Now you and your family are part of the American dream of owning your own business!
Here is one final piece of advice on buying a business. Be patient and persistent. The road from initial inquiry to closing the transaction is usually long taking weeks even months to complete. There may be several twists and turns in the road to buy a business but remain flexible, be thorough and determined to stake your claim in business ownership!
Written by: Jeff Young, Business Intermediary, Confidential Business Sale, Inc.