___ Concepts We Can Learn About _____ From How2Exit's Interview W/ Barbara Schenck - Watch Here
Here is what my team and I learned from this interview: (These are notes from team members, writers, sometimes AI, and even listeners who submitted what i learned loosely edited and shared here) - If it seems a bit unrefined, you're reading our notes, so. yeah. -Ron
Concept 1: Small Businesses Can Sell
Small businesses are the backbone of the economy. They provide jobs, goods and services, and contribute to the growth of their communities. Unfortunately, many small businesses fail due to a lack of resources, inadequate marketing, and a lack of understanding about the process of buying and selling a business. However, with the right guidance and resources, small businesses can successfully sell their business and reap the rewards of their hard work.
Barbara, an expert in the area of buying, growing, and selling businesses, has seen firsthand the difficulties small businesses face when trying to sell. She and her husband owned an ad agency for fifteen years and when they were ready to sell, they wrote a four-line ad in the Wall Street Journal and their business sold. She realized that many small businesses don’t have the resources to market their business in the same way and that’s why she wrote books like “Small Business Marketing Kit for Dummies” and “Branding for Dummies” to help small business owners learn how to successfully market and sell their business.
When it comes to selling a business, it is important to make sure that the business is in “sell-ready” shape. This means that the business should be well-organized and have up-to-date financial records, a well-written business plan, and a brand that is recognizable and appealing to potential buyers. Additionally, it is important to have a good understanding of the sales process, including how to find the right buyer, how to navigate and negotiate the sales process, and how to manage a successful transition from one owner to the next.
Small business owners should also be aware of the legal and tax implications of selling a business. It is important to understand the legal requirements and the tax implications of selling a business, as well as any potential liabilities that may arise. Additionally, it is important to seek professional advice from an accountant or lawyer to ensure that the business is being sold in the most effective and profitable way possible.
In conclusion, small businesses can successfully sell their business with the right guidance and resources. With the right understanding of the sales process, a well-organized business, and a strong brand, small businesses can reap the rewards of their hard work and contribute to the growth of their communities.
Concept 2: Build A Strong Brand
The key to success for small businesses is to build a strong brand. A strong brand is not just a logo or slogan; it is a story that customers tell about a business when the business is not present. It is the reputation that customers have of the business. Brand equity is the value that investors place on a brand, and brand value is the value that customers place on a brand.
To build a strong brand, businesses need to understand their target audience and create a plan for how to reach that audience. They need to establish a presence online, create a memorable logo and slogan, and create a consistent message across all marketing channels. Businesses should also focus on customer service and make sure that customers have a positive experience with the brand.
Businesses should also focus on building relationships with their customers. This can be done through customer loyalty programs, engaging content, and personalized interactions. Businesses should also focus on creating a unique product or service that stands out from the competition.
Finally, businesses should focus on building a strong financial runway. This means having enough funds to cover expenses and investments for the first few months of operation. This will provide the business with the capital it needs to get started and to ensure its long-term success.
Building a strong brand is essential for the success of any small business. With the right resources and guidance, businesses can create a strong brand that will help them stand out from the competition and attract more customers.
Concept 3: Prepare For Business Sale
However, when it comes to selling a business, having a strong brand is just as important. A good domain name, an online presence, and profits and sales that have been consistently increasing for at least three to five years are all necessary components of a successful business sale.
The pandemic has thrown a wrench into the traditional business selling process, as many businesses have seen their profits and sales dip. However, with the right preparation and understanding of the current market, businesses can still be successful when selling. It is important to have the best three years of profits and sales in the last five years, and to be able to explain any dips in profits due to the pandemic. Additionally, businesses should strive to make themselves as transferable as possible, by having systems and processes in place, as well as two people who can sign checks in the owner’s absence.
Finally, it is important to think of a business as something that can be sold from the start. This means creating a brand that is saleable and can stand on its own without the owner’s direct involvement. By taking the time to prepare for a business sale in advance, businesses can ensure that they are in the best position possible to make a successful sale.
Concept 4: Seller Financing Often Needed
Seller financing is often a necessary part of the sale process. Seller financing is when the seller provides a loan to the buyer, allowing them to purchase the business without having to pay the full amount upfront. This type of financing can be beneficial for both parties, as it allows the buyer to purchase the business without having to take out a large loan, and it allows the seller to receive a portion of the sale price upfront.
When preparing a business for sale, it is important to ensure that all contracts are transferable. This includes contracts with employees, clients, and suppliers. It is also important to ensure that the financials of the business are in order, and that the business has a strong reputation in its industry. Finally, it is important to ensure that the business has competitive products and a growing client base.
Seller financing is often a necessary part of the sale process for businesses. By taking the time to prepare for a sale in advance, businesses can ensure that they are in the best position possible to make a successful sale. By doing so, they can also ensure that they are able to secure the best deal possible for themselves, and that the buyer is able to purchase the business without having to take out a large loan.
Concept 5: Price Business Based On SDE
One of the key elements of preparing for a business sale is to price the business based on its Seller Discretionary Earnings (SDE). SDE is the amount of money that a business owner is able to take out of the business after all expenses have been paid. This includes the owner’s salary, any car allowances, and any other benefits that the owner receives. By pricing the business based on its SDE, the seller is able to maximize their return on the sale.
When pricing a business, it is important to consider both the assets of the business and its potential for future earnings. By setting a ceiling and a floor for the future earnings, the seller is able to protect themselves from potential losses. In addition, the seller should consider the median revenue and sale price of similar businesses in their market. This will help the seller to determine what is a fair price for the business.
It is also important to consider the buyer’s expectations. Many buyers are looking to purchase a business that will generate a good income. The median revenue of businesses sold in late 2021 was between $625 and $690 thousand, with a median sale price of $325,000. Most buyers are looking for businesses that will generate at least $100,000 in income. Therefore, it is important to ensure that the business is priced in line with the buyer’s expectations.
When pricing a business, it is important to consider all of the factors mentioned above. By doing so, the seller can ensure that they are able to secure the best deal possible for themselves and their business. Seller discretionary earnings are a key factor in pricing a business, and it is important to consider this when preparing for a business sale.
Concept 6: Groom Successor, Get Finances Organized
One of the most important steps a business owner can take in preparation for a sale is to groom a successor. This can be an internal employee or an outside hire, but it is important to make sure that the person is capable of taking over the business when the owner is gone. This can be done by providing them with additional training and resources to ensure that they are able to take over the business in the event of a sale. Additionally, it is important to have a buy-sell agreement in place between the owner and the successor so that the terms of the sale are clearly defined.
Another important step in preparing for a sale is to get the finances of the business organized. This includes having a professional accountant or CFO in place to handle the money and ensure that the business is running like a business. Additionally, it is important to have a profit sharing plan in place so that the business can be attractive to potential buyers. It is also important to have systems in place to capture client data and ensure that the business will continue to run even if the owner or a key employee leaves.
By taking the time to groom a successor and get the finances of the business organized, a business owner can ensure that their business is properly prepared for a sale and that they can secure the best deal for their business.
Concept 7: Retain Key Personnel For Sale
The first step to ensuring a successful sale is to find the right person to take over the business. This person should be someone who has the skills and experience to successfully manage the business. The owner should also consider bringing in someone from the outside, either as an employee or through a strategic partnership, to ensure that the business is well run. This person should be well-versed in the business and have a good understanding of the industry.
The owner should also get legal help to make sure that the contracts are clear when it comes to the sale. This is important because the buyer will need to see all the books and other financial information about the business. It is also important to make sure that the team is ready to stay with the business and that the owner isn't holding them back. The buyer will need to know who is staying, who is going, and what skills they have.
Finally, the owner should consider hiring a fractional CFO or CEO coach to come in and help manage the business. This can be a great way to bridge the gap between the owner and the buyer. It is also important to make sure that the buyer has confidence in the product or service that the clients have come to rely on. By taking the time to groom a successor and get the finances of the business organized, a business owner can ensure that their business is properly prepared for a sale and that they can secure the best deal for their business.
Concept 8: Start Planning For Sale Now
When selling a business, planning is key. The earlier a business owner starts to prepare for a sale, the better. By taking the time to get the business in sale-ready shape, a business owner can maximize the value of their business. This includes ensuring that the business is running smoothly and efficiently, that the finances are in order, and that the legal obligations are up to date. Additionally, the business owner should consider strengthening the brand of the business and heightening business morale. This can be done by cleaning up the web presence, making sure that the staff is secure, and ensuring that the finances are invisible to clients.
Finally, it is important to remember that a business owner should not wait until they are ready to sell to start planning for a sale. By taking the time to get the business in sale-ready shape, the business owner can ensure that their business is ready to be sold when the time comes. Additionally, they can ensure that they get the best deal possible for their business. So, if you are a business owner, start planning for sale now.
Concept 9: Maintain And Refresh Equipment
One key element of getting a business ready for sale is maintaining and refreshing equipment. It is important to make sure that the equipment is up to date and in good working order. If you have equipment that is more than 10 years old, it is important to consider replacing it. This is especially true if the equipment is outdated and not able to keep up with current trends. Additionally, if you have equipment that is not operating at its best, it is important to get it fixed or replaced. This will help to ensure that the business is running as efficiently as possible.
It is also important to make sure that any equipment that is owned by the business is properly documented. This is important for tax purposes and also to make sure that the equipment is considered an asset of the business. Additionally, it is important to make sure that any contracts with clients include transferable clauses. This will ensure that the business can be transferred to a new owner with minimal disruption.
Finally, it is important to make sure that any extraneous costs are minimized. This will help to maximize the bottom line and make the business more attractive to potential buyers. By taking the time to maintain and refresh equipment, a business owner can ensure that their business is ready to be sold when the time comes.
Concept 10: Hitch To The Strongest Horse
One strategy for making sure that a business is attractive to potential buyers is to “hitch to the strongest horse”. This means that a business should look for ways to partner with larger, more established businesses in order to increase their credibility and brand recognition. For example, if a business is selling marketing services, they can look for partnerships with well-known companies that offer similar services. This will help to increase their visibility and ensure that potential buyers are aware of the business’s offerings.
In addition, a business should also make sure that their client list is strong and diverse. Having a few large, high-paying clients can be a great selling point for potential buyers. This shows that the business is established and that they have a track record of success. It also shows that they have the ability to attract and retain high-paying clients. Furthermore, having a diverse client list can help to demonstrate that the business is capable of handling different types of projects.
Finally, it is important to make sure that the reputation of the business is strong. Potential buyers will often ask around to see what other people have to say about the business. It is important to make sure that the story that is being told about the business is positive. This can be done by making sure that the business is well-known in the industry, and by taking the time to build relationships with customers and other businesses.
In conclusion, “hitching to the strongest horse” is an important strategy for making sure that a business is attractive to potential buyers. By partnering with larger, more established companies, having a strong and diverse client list, and making sure that the reputation of the business is strong, a business owner can ensure that their business is ready to be sold when the time comes.
Concept 11: Set Goals And Succeed
Setting goals and succeeding is an important part of running a business. Whether it’s setting goals for the year, or setting goals for the long-term, having a plan is essential to success. Barbara Weltman, a business advisor and author, discussed this in a recent podcast. She suggested that business owners should start planning to sell their business 18 months in advance. This will give them time to make sure that their business is attractive to potential buyers.
Weltman also suggested that business owners should be aware of what potential buyers are looking for. She recommended that business owners research what buyers are looking for, and make sure that their business meets those criteria. She also suggested that business owners should be aware of their reputation in the industry, and make sure that they are seen in a positive light.
Finally, Weltman suggested that business owners should take advantage of free resources available to them. She recommended that business owners read her books, and take advantage of the free resources she provides on her website. This can help business owners get an idea of what potential buyers are looking for, and how to make sure their business is attractive to potential buyers.
Overall, setting goals and succeeding is an important part of running a business. By planning ahead, researching potential buyers, and taking advantage of free resources, business owners can make sure that their business is attractive to potential buyers when the time comes.
Concept 12: Take Action, Get Results
One of the most important things to remember when running a business is to take action and get results. This means that instead of simply planning and dreaming, business owners must take the steps necessary to make their dreams a reality. This includes researching potential buyers, setting goals, and taking advantage of free resources such as The Investors and Entrepreneurs Professional Mastermind (TIEPM) to help move the business forward.
The first step to take action and get results is to set goals. This is important because it gives business owners a roadmap to follow. Goals should be realistic and achievable, and should be broken down into smaller, manageable steps. Once goals are set, business owners can begin to research potential buyers. This can be done through market research, networking, or by attending trade shows and conferences.
The next step to take action and get results is to take advantage of free resources. TIEPM is a great resource for business owners who are looking to scale, blow past roadblocks, and achieve success faster. It offers resources such as mentorship, access to capital, and expert advice. Taking advantage of resources like TIEPM can help business owners get the most out of their business.
In conclusion, taking action and getting results is an important part of running a business. By setting goals, researching potential buyers, and taking advantage of free resources, business owners can ensure that their business is attractive to potential buyers when the time comes. Taking advantage of resources like TIEPM can help business owners get the most out of their business.
---- MORE COOL STUFF ---
Are you ready to take your podcast listening to the next level? Subscribe to "DEEPER by How2Exit" newsletter and never miss out on our latest episodes. Join our newsletter HERE
Want to stay in touch with what's happening in the Main Street M&A Space? Subscribe to The Hub - Acquisitions Hub
