Tag Archives: sell a business

We Suck Less

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Currently I am a Business Broker in Florida working with business owners in the process of buying and selling businesses.  Back in 1985 I was working for (a Texas based Technology company ). We were bidding on a very large multi-million dollar computer based project for the Los Angeles Unified School District (LAUSD). Part of the bidding process involved all us potential vendors travelling via buses throughout the Los Angeles area viewing a dozen of the 700+ schools that would potentially buy and use our systems.

The Importance Of Smart Marketing

While driving thru the various areas of LA I had seen white billboards with 3 words on them WE SUCK LESS. I saw this billboard in several different parts of the city. After repeatedly seeing that same sign in the various communities, I asked a local contact regarding the purpose of that billboard, or rather what it meant. I was told that it was a marketing campaign of a local radio station. The premise was – We’re not the best, We’re not number one, We’re not perfect, But We Suck Less than our competitors, and therefore customers/listeners should tend our way. “Were not perfect, we may not be very good, but we suck less than your other options”…

We Suck Less

As we continued the 2 day journey throughout the city, that concept really struck a nerve. It really wasn’t a premise or concept that was even remotely familiar to me. This approach, while just in jest… I think, just hit me as so unusual, that I found myself sharing this story many times over the last 25+ years. Ironically I have also crossed paths with various businesses and business situations over the years that prompted me to recall this ” business concept”.

Is this concept completely hypothetical, or does it truly exist? Has anyone else seen this in action in certain business environments? As a business broker I get to see the inner workings of many companies and mostly I witness hard working well meaning business owners.  But, is it possible that this could be an approach of a business, or just the result of many years of apathy, poor management, or some other larger problem?

Set The Bar High

I really really think we all our wired to “set the bar very high”, we strive to be very good, we want to be the best, some seek perfection even knowing its not possible but keeping it as a goal nonetheless. But to non- chalantly say, “I just have to suck less than the next guy” and as a result of that approach my business will advance to me is somewhat mind numbing.

I recognize faults and imperfections occur in my own business practices. I’ve always felt that it is important that I remain my own toughest critic. As a business broker that helps business owners sell businesses and individuals buy businesses communication is very important. Promptly returning emails and phone calls to me is an essential, and is just mandated.

Treating business relationships with respect, honesty and effort is important to me. Is it easy for someone to fall into the trap that since my colleagues/competitors don’t return emails/phones calls for 4-5 days or never then, if I wait 2-3 days to return a call or email, that makes me better than my competitors. Is this possibly the mindset of some in business? Can one be satisfied with the approach of just not being as bad as the others?- I don’t know. As a business broker and professional, I do know I may see this play out in other businesses, but certainly not mine.

But I do know Striving to “Suck Less”, to me just sucks. I really don’t know if it is a conscious business concept by some, but I do believe I have seen some resemblance of this approach. I also know that I find myself 25 years later sharing this story again.

Can a Goat Herder Teach Banks How to Loan to Small Business

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Small businesses and entrepreneurs need to be able to get loans from banks to grow and or expand their businesses.  Entrepreneurs and small businesses go to banks to get loans to make capital improvements, large  purchases,   buy a business, and generally expand their business.  Basically small business have financing needs that go beyond the immediate cash flow generated by their business.

Imagine driving to the bank in your new Lexus, dressed accordingy, meeting with a bank loan officer and discussing your 5 years old business, your college degree, ok credit score, net worth of $500k and your business generating $50k a year in cash flow and asking to borrow $10,000.  Do you think you will get that loan?

Change Of Perspective For Business Owners

Now-  For a moment pretend that you are a poor goatherder walking to town to get a loan , you don’t have any money to open a savings account with, you don’t have any normal collateral to secure a loan with,  you don’t have a credit record as you have never been formally employed and you’ve never taken out a loan before.  Also consider that  you might even be unable to complete the necessary paperwork as you are illiterate.  You earn about $1/day,  and you want a loan of $250 to buy more goats to grow your business.  Do you think you will get the loan? – Due to Micro financing the  the goatherder may get the loan before the Lexus college graduate.

Many of us Entrepreneurs and Small businessmen/women donate time and or money to various causes or needs.  I have been involved with Kiva since 2007.  Kiva provides microfinance  to Third World Entrepreneurs to help them grow their business.  Kiva was founded by 2 former 20 something year olds that were former employees of TIVO and PAYPAL.

Microfinance is the supply of loans, savings, and other basic financial services to the poor.  As the financial services of microfinance usually involve small amounts of money – small loans, small savings etc. – the term “microfinance” helps to differentiate these services from those which formal banks provide. Why are they small? Someone who doesn’t have a lot of money isn’t likely to want to take out a $5,000 loan, or be able to open a savings account with an opening balance of $1,000. Hence – “micro”.

Microfinance

These are small loans, multiple lenders will “pool” their loans to come up with a lump sum to provide to the Entrepreneur.  Again most of the Entrepreneurs I have loaned money to over the last 4 years earn less than $1/day.  When an entrepreneur pays off a loan, I reloan those moneys to another. So far I have loaned to 18 different entrepreneurs and repayment of loans have been 100%. Sinces 2005 Kiva as a group has loaned almost $150,000,000 to  almost 400,000 Entrepreneurs  and repayment has been 98.27%.

Why can this organization have such success in getting loans repaid from those with so little and banks in our “developed nations” loaning to those with abundant resources have problems so significant that these banks need a “bailout” from their govenment and ultimately taxpayers.  Is it the conventional  bank that is doing something wrong?  Are they loaning to the wrong people on a consistent basis?. How much of the blame falls on those that are requesting the loan?

Getting A Loan For Your Business

Currently how many good entrepreneurs and small business are not able to get loans as a result of mistakes made by conventional banks in the past.   It seems to me that banks tend to over respond to problems.     Obviously if you are a lender and  want to have no loans default and you loan no money- you can achieve your goal.

As a business broker I see the need for lending to allow buyers to finance the acquisition of  buying a business.  I also see income statements and balances sheets of reasonable small businesses that are using credit cards to help finance their businesses. It is hard for me to understand how our economy is benefitting by having small business owners take these “whatever is necessary” financing steps when traditional prudent lending to small businesses could truly be our fastest way to our economic recovery.

The banks reduce/tighten their lending, the need for small business financing continues, higher interest is being paid thru credit card financing, non-conventional means, and when does that higher expense cause employee reductions.    Small business could divert money from high interest payments to investments and  improvements that actually improve their business and create jobs.

Why can the goat herder get a loan and the Print Shop owner not?   Or maybe if I were a banker I could ask why does the goat herder pay off his loans and the Lexus driving College Graduate Default?  I understand there is a lot more that goes on between the comparison of a conventional bank and micro finance- but maybe conventional banks could  learn something from Micro finance groups such as Kiva.

Hands off or Hands On- What Type of Business Owner Are You?

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What kind of business owner do you consider yourself-  Are you a Hands on Business Owner or do you consider yourself more of a big picture operator that consistently effort yourself to avoid the minutia of the business.  I think the majority of us are a hybrid of these 2 approaches.

When running a small business, or involved with a startup business,  on an almost daily basis you are faced with the question ” Do I do it myself or do I hire others to do it for me”.  Most all are aware of the concept Time is Money- but like so many other business concept we all draw the line in the sand at different places.  We are not always consistent with where we draw that line, and find that that line moves as or business moves or the economic climate around our business moves.

This question can be applied from basic business task of running to the post office to mail off some stuff  or calling some prospects to significant larger issues like hiring outside help to handle your marketing functions, doing my own website, or trying to do my own SEO .  I am a business broker and I help business owners and individuals in the process of buying or selling businesses.  Selling ones business is a very significant event and very often like so many other decisions a business owner will decide to try to sell the business themselves or hire someone to help sell their business.

Are You A Hands-On Person Like Me?

This decision is part of the never ending series of question a small business owner needs to answer. In my current profession as a business broker if Florida I am faced with these same similar questions on a daily basis.  Do I do it myself or subcontract out that task or role. ” Maybe someone else can do it better, but I can do it cheaper”, or “Maybe someone else can do it cheaper, but I can do it better…”    Relatively speaking I am a fairly hands-on person.

My previous business I had owned for 20 years I was fairly hands on as well.  I helped install our production equipment on day 1 of the business, I worked on the production line, I worked in the truck delivering product, helped troubleshoot our equipment, performed testing and so on. I also set our policies, accounting procedures, QC procedures and company philosophy.   I enjoy knowing and understanding as much detail about my business as possible. Ultimately I was able to build a team of 25+ employees that both allowed our business to grow and ultimately allowed me to run the business from 1500 miles away for 7 years.

Business Owner

Photo (c) stage2planning.com

While others may say “I don’t want to know the details- I just want it to work”.  People reach business success with both approaches.  I have a good friend that owns a Plumbing business and has very little plumbing knowledge- he doesn’t want to.  He is a very good businessman, with a very successful plumbing business – he  is a big picture, hands-off guy and I think his wife may call me to fix their  leaky faucet before she ask him. But again he is a successful business owner.

The real question that comes in is at what point does the hands on approach limit your business growth.  When does- “I have to do it myself or it wont get done right”  approach become business limiting?  So many businesses do not make a transition to “count on others” and the business remains a certain size.  If the company goal is to stay a certain size then this approach may be both applicable and appropriate.

Hands-On VS Hands-Off Business Owner

But as one desires to grow a business to a certain size- “letting go” a little control is needed.   As working as a business broker in Florida very often I have business owners ask me can I just sell my business myself.  Here is how I summarize my true beliefs on this very important question.

Most business owners I know have a fairly full day- to say the least.  If your day is full already how can you possibly take on the task of trying to sell your business.  And I truly believe this.  Assuming selling your business is a fairly involved process how do you squeeze that continuous task into to your already packed stream of work.  Maybe you say to yourself,  I am going to devote a lot of time and effort towards selling my business, but then what suffers?

Does the business you are trying to sell now have the person steering the ship significantly pre-occupied?  During a recent speaking engagement I compared the process of running a business to running a marathon and addressed the need to finish strong.  Why run the race hard for 23 years or 23 miles and then stumble in for the last year/mile?   It is important when one is selling their business to try to finish strong.

I beleive one of the most important decision a business owner makes its the decision to sell their business.  Like so many decisions a business owner has to “do it myself” or hire others to do it.  Can I do cheaper?  Can I do it better? Do I have the time to do it?  Do I want to do it?Some of the similar questions one faces every day waking up as a business owner, but when selling ones business the stakes are significantly higher.

How Much? – when buying or selling a business

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You buy products or services and one of the first thoughts you have is – How Much?  You sell products or services to customers and one of the first thing a customer wants to know is- How Much? Somebody looks at buying a business and again needs to know – How Much?  And a business owner is ready to sell his business and either move on to other business interest or retire and he needs to determine – How Much.

How does a business owner determine how much his business is worth? The reality of the matter is that the marketplace ,as with most business transactions, determine how much is the worth of the business.  But in order to attempt to sell your business and market you business a value, or a price range needs to be determined to allow potential buyers the opportunity to see if your price goals match with the price range they are willing to pay.

When discussing the concept of valuing a business or setting a range and or target sell price of business with business owners some times the wrong criteria is initially considered by the business owner.  Sometimes the “What I need to make when I sell my business” is different than “what the business is worth.  Consider the example of a business owner invested $50,000 as an initial investment into his business and owes another $100,000 on some equipment he bought and is still paying off.  I might ask the business owner if he has considered what he would want to sell his business for and he may say “I need to at least get $150,000 for the business because of the above reasons.”  Actually the business owner is telling you what he believes he needs to get out of the business, yet this does not necessarily represent potential value to the buyer.

When business owners or entrepreneurs set prices for products and services certainly cost is a significant contributor to determining price point of that product or service.  What like or similar products or services are selling for is also considered.  But the successful and ongoing sales of that product or service is dependent upon how the customer values your product or service.  Does your customer believe that they are getting fair value for the price of your product or service.  The fact that you now lease a new expensive company car- does that enter into the pricing of your product or service.  It may to you but very possibly/probably it does not to the customer.

This is a similar thought process that should go into the question of how much should I sell my business for.  If a person can buy a similar business to yours and buy it for 40% less than yours why would they buy your business.  The price/value needs to make sense.  And if all else is similar it is reasonable to expect the potential buyer of your business to expect your business to be priced similar to other like businesses.   And the fact that you invest more initially into your business or owe $x on  the business, or lease an expensive new car really does not speak to value or pricing (unless liabilities are following the new buyer and may decrease the value to the new buyer)

The best scenario for selling your business is always a scenario which allows for you the business owner to plan that exit strategy.  Part of that planning process is trying to determine what you believe you need to get out of the business for the sale to make sense to you (also allowing for tax consequences of such a sale.) But it is important that what you need to make when selling your business and what your business is worth when selling your business are 2 separate matters.  While these are 2 separate matters that often get convoluted in the thought process of a business owner – it is very pragmatic to target a potential time to sell your business as a time when “what I need to get out of business when I sell my business” is at least equal or less than “the sell price or value of my business.”  Ultimately the somewhat complex process of setting a price of a business for sale (or a product or service for sale) gets reduced to How Much are your selling your business for? and the answer being How Much are you willing to pay.

Need a Job? Buy a Job – Buy a Business

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Consider the various routes successful entrepreneurs business owners take when building a successful operation.  It is important to consider that the path taken is varied, and success need not necessarily follow one specific path.  Bill Gates did not invent the MS-DOS program that became the Windows operating system we know today.  Entrepreneurs can start with an idea, and turn it into a successful business venture.  Entrepreneurs can buy a business, step in and continue that operation and grow it.  Entrepreneurs can “buy a job.”

“You Are Not Buying a Business You Are Buying a Job”

This statement has been attributed to certain business opportunities that potential business buyers or entrepreneurs are evaluating.  Is it wrong to buy a business, when what you are doing is” buying a job”?  Firstly what the statement is intended to denote is that, you will be an integral part of the daily operation, the business may not operate properly without your daily workload, you will not necessarily be in a fixed overhead or supervisory role but rather part of the variable cost of running an operation.  You will be buying a business that you be working at in the day to day operations.

Buy A JobFor example if your spouse and you buy an existing business that is a 2 man Sandwich shop- you may be “buying a job.”  At times the prospects of “buying a job” in lieu of buying a business is viewed as a negative.  Is it wrong to “buy a job.”  Personally I dont think so.  Consider the scenario of the employee that worked for the same company for 15 years, walks in his office one Monday morning to learn that he has been let go, downsized, fired, or  laid-off.  When YOU buy your own business or buy your own job,  WHO is going to walk in your office and fire you? Nobody.  You have control of your destiny not always offered when working for others.  When you own your own business you know how the company is doing.  You don’t spend a minute of your time concerning yourself on how your superiors view your performance.

Do you ever wonder where the largest source of buyers of business comes from.  Most future buyers of business are employees right now, or were employees and have been let go and are ready to sieze more control over their destiny.  Currently I am working with a few people of which are both the combination of currently employed and recently let go. Whether you buy a business or look to start your own business, your should be prepared for some hard work. You will probably work harder and stress more than when working for others but does the trade off of control and working for yourself make it worth it?  Today one is buying a business in a buyers market.  More sellers are offering seller financing when selling their business.  Maybe it is a good time to buy a job