Always Bring Value to the Market

September 28, 2009 by

One of the more common complaints I hear from business owners how the competition getting tougher every day. The fact is that competition won’t disappear and competition is good for you because it makes you better. But you need to build effective strategies into your business that can reduce the competition’s pressure on your business.

Let’s look at the fundamental approaches: First, defining your Unique Value Proposition (UVP) and having a written Guarantee.

Unique Value Proposition is also known as a Unique Selling Proposition (USP). Many use the terms synonymously. Personally, I like the term “value” vs. “selling”, because at the end of the day, the reason your customers buy from you is the overall value you provide, not just what product/service you are selling.

To define what a UVP is, break down the phrase and define each word: Unique – what distinguishes you from your competitors. It’s the “what you do” and “how you do it” that differentiates your product/service.

Value – what your customers get for their money or the intrinsic worth of your offering to your customers. It’s also important to note that value is in the eye of the beholder, and what we think our customers’ value can be very different from what they really value.

Proposition – It’s your proposal to your customer. It must be truthful and you must be able to qualify and quantify your claims and makes your UVP that much stronger! Your UVP is a distinctive message aimed at your target market. Your customers must believe they are getting more than they are giving up (perceived value) in relationship to other alternatives, which includes buying nothing at all.

Does your business have a UVP? It’s amazing how many businesses don’t, or if they do, they clearly don’t communicate it to their target market. If your UVP needs some updating (or if you don’t have one at all), then it’s time to do some market research. Take a look at your competition. You need to know what they are offering. And, you need to know what your customers (and prospective customers) value, why they value it, and what result it achieves for them.

An effective approach is to contact twelve of your top customers. Ask them why they buy from you and what makes you different from your competition. They will give you your UVP (but in their words) and will likely provide reasons and insights you never knew or expected. Additionally, competitive research can also complement and refine some of the information you receive from your top customers and help you better define your UVP.

Talk with Ohio business coach and Certified Exit Planning Advisor, Ralph Berge. Call him 440.838.0991.

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The Succession Plan

September 14, 2009 by

Generally, for a succession plan to work, the main concerns about death, disability, and retirement must be addressed early and often. However, please do not ignore the potential for catastrophic loss of principal family members or key people. Therefore, create a plan that addresses the following questions:

·         Who is going to operate the business, make day-to-day decisions, pay bills, sign checks?

·         Who is going to own the business, and in what format?

·         What steps must be taken to ensure continuity, and which advisors need to be brought on to the transition team to make sure it happens?

·         Has the business buy-sell agreement been updated, and are realistic valuation techniques in place?

·         Is the buy-sell agreement properly funded?

·         Will there be adequate liquidity to continue to operate the business when the founder steps out of the picture and still provide for an equitable distribution of ownership interests?

·         Will non-operating heirs be satisfied with reinvesting the profits back into the business to expand? (If not, managers face a shortsighted process of carving out value for income.) Or will heirs take the first good offer for the business and head to warm and gentle climates?

·         Can the operating heirs buy out the others in a fair exchange of value for control?

·         Can all this planning be done in a tax-efficient manner without disrupting the business?

·         If there is a family heir anointed as successor, does this person have a grasp on the business operation and its employees, suppliers, credit worthiness, and customers?

·         Do the heirs have the capacity and training to make decisions and keep the company moving forward with the full confidence of the other family members? Alternatively, is there a key employee or outside manager available to hold the business together? 

 Most companies fail within a short time of their inception. Family-owned businesses have a tradition of being more durable, but it takes special care and a lot of extra effort to overcome the hurdles and succeed for the next generation. Start the process early and you’ll be able to preserve a lifetime of family work for the future. 

Decide to action today. Talk with Ohio business coach and Certified Exit Planning Advisor, Ralph Berge. Call him 440.838.0991.

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Find Your Deal-Breakers

September 7, 2009 by

The due diligence phase of a transaction is when “the rubber meets the road”. Business owners often unwittingly make short term decisions without considering that they are deal-breakers tomorrow. They make decisions for expedience, based on present circumstances rather than future liabilities. 

So what are some of these deal-breakers? High on the list is any inordinate dependency on factors outside the owner’s control. These include too much revenue from one customer, too much risk from a sole supplier or too much dependence on technology controlled by outsiders. 

Before making that decision ask yourself: Why would a buyer want your company if it is dependent on outside technology? The buyer would likely discount your value or worse, acquire the technology from the outsider and cancel the deal. 

The bottom line to maximizing value — and assuring a successful exit — is to have a formal exit / succession plan and implement it.

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Invest Time in Planning Your Exit

August 31, 2009 by

Take time every day to think about your eventual exit. This time is well spent. It will produce real value and make earnings from anything else you would do with this time pale in comparison.  Real wealth comes from the exit of the business not from the regular earnings of the business. Most owners have 90 percent of their wealth tied up in their business. Doesn’t it make sense to plan for harvesting and preserving your wealth? We call it succession management, which is about creating value for your company and yourself.  

What should you think about? Look from the outside in.  Determine who should eventually own your company and why. Take a buyer’s view of what will make the business more attractive from a strategic standpoint.

·         Should you devote resources to developing proprietary and unique products or methods?

·         Is new equipment necessary now and what is the shape of your physical assets?  

·         Can you develop a brand? Branded companies are sold as a multiple of sales, rather than a multiple of earnings.

·         Document and protect your technology.

·         Can you corner a market or niche and become a price leader.

·         Are you recognized? Do you have a good public relations strategy?

Are your contracts and agreements written so they would provide value to a purchaser of your company?

Often, language in contracts can be problematic for buyers and investors.

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Begin With the End in Mind

August 24, 2009 by

Stephen Covey taught us to begin with the end mind when deciding want steps to take in our decision making process. It is even more important when building your business.

Often the day to day events can consume even the busy business owner. Planning for succession unfortunately takes a back-seat.

 As a result, the end in mind strategy is lost and exit planning strategy is often postponed. Business owners inherently believe there is plenty of time later  to ”think-up” an exit strategy.

 The problem is that without a formal exit plan, wrong decisions can be made that reduce your company’s value or eliminate viable exit strategy options.

 Today, many business owners are building companies to sell. They focus on factors that enhance the exit process. The best advice is to ensure you have a balance between the present and the future. What is your vision for the business, and when will you know you are done? How will you leave the business on your terms? And how will your family and you benefit from your hard work and risk?

 Many options exist. Are you considering leaving the business to family members, going public, selling it to employees, or to a private equity group or strategic corporate acquirer?

In the beginning a natural tendency is to have a very short time horizon – next payroll, next tax payment, next customer, and next month. But to realize a successful (and earlier) exit, the business owner needs to keep his or her eye on the ultimate sale of the company. More important creating and implementing an exit plan builds value in the organization.  

Begin with the end in mind. Talk with Ohio business coach and Certified Exit Planning Advisor, Ralph Berge. Call him 440.838.0991.

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Decide to Exit and Plan Accordingly

August 17, 2009 by

 Start today and take the following steps:

1.       Fix a departure date.

2.       Determine your financial needs.

3.       Decide whom you want to succeed you.

4.       Have your business valued to see if: a) should you sell today; and/or b) it has the value necessary to meet your financial and other exit objectives. 

Based on your objectives and the realities of your business, use a skilled Exit Planning Professional to forge a plan with accountability/decision deadlines. 

Deciding to do something now to create the best possible exit path is not difficult. The failure to act, however, can potentially be fatal to a successful exit. The success of your business exit is simply too important to you (your family and your employees) to leave to chance. Why wait? Why decide not to decide? 

Decide to take action today. Talk with Ohio business coach and Certified Exit Planning Advisor, Ralph Berge. Call him 440.838.0991.

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Let’s Look at a Few Options for Your Business…

August 10, 2009 by

Wait for a buyer…

According to Deloitte’s Entrepreneurship UK: 2008 survey: 35 percent of business owners said they will wait for a third-party offer for their businesses. Owners in this group believe that one day a buyer will contact them, negotiate a sale, and that will be that. Well, this is a decision of sorts—but one that flies in the face of reality. While few businesses are being sold today, there will likely be a significant number of Baby Boomer business owners vying with you to sell their businesses when the M&A market recovers.

In a competitive buyer’s market, only the best-prepared businesses sell for top dollar. And the owners of those well-prepared businesses will be those who made the decision to act to prepare their company years ahead of the actual sale. 

Liquidate…

Liquidation is a common exit path for owners of companies whose cash flow is flat and has little probability of improving—absent the design and execution of a business/exit plan. If you find yourself in this group, we recommend that you meet with your tax and other advisors to do the planning necessary to create the most tax-efficient liquidation possible. 

Succession Management/ Exit Planning…

Planning for succession and your exit from your business is not an event, but a process that should begin years in advance of your anticipated departure. The first step of the process is to develop a vision for you, your family and the team who will manage and perhaps own your company. Then establish goals (aligned with your vision) or a pathway that leads you toward your vision. This is clearly the best and most profitable road to your future.

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Why Decide Today to Leave My Business in Five Years?

August 3, 2009 by

If you are an owner who isn’t sure about what you want, or when you want to leave, why is it so important to decide to act today? Why can’t you wait? 

·         Preparing and transferring a company for top dollar takes time—on average about 5 years. Most of those years will be spent preparing the business for the transfer. If you decide to sell to employees or children (two groups who rarely have any money), they’ll need that time to earn the money to pay you for your interest. You need to be working on family business succession planning.

·         More time often equals greater reductions in risk. Time can be used to design and implement income tax-saving strategies, build value, strengthen your management team, begin a gradual transfer of ownership (not control) to key employees or children. If you wait too long, you probably won’t have time to implement these strategies and you’ll likely end up transferring your business on less-than-ideal terms.

·         The market does not operate on your schedule and may not be paying peak prices when you are ready to sell to an outside party. Witness the state of the M&A market in 2008 and 2009: activity is almost non-existent in many business sectors and down in almost all. 

If leaving a company you’ve worked so hard to build and having little or nothing to show for it, is unacceptable to you, begin planning for succession today.

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Can You Relate to This?

July 27, 2009 by

“I haven’t decided what I ultimately want to do with my business, or when I want to exit, or how much money I’ll need, or whom to sell to, so how can I plan my exit? Besides, I don’t want to exit right now.” 

 If you’ve said this, or thought it, you are not alone. Many business owners are either overwhelmed with the thought of exiting or are so busy fighting daily business fires that they think they cannot plan their exits. 

Know that in your indecision, you are making a decision. As Winston Churchill once observed, “I never worry about action, but only about inaction.” If you take a passive attitude toward the irrefutable fact that you will–one way or another–leave your business, you are deciding to settle for a least profitable exit for yourself and for your family. You must be planning for business succession. 

Take your first step today. Talk with Ohio business coach and Certified Exit Planning Advisor, Ralph Berge. Call him 440.838.0991.

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What Do You Want When You Leave Your Business?

July 1, 2009 by

 Your exit plan should be focused on two main objectives:

 1) Maximizing your company’s value prior to your exit, and

 2) Ensuring that you accomplish all of your business and personal objectives as part of the exit. 

Venture capital firms and private equity groups never invest in a company without having a clearly defined exit plan in place first, why should you? It is never too earlier to create your exit plan – so act now! Ohio business coach and Certified Exit Planning Advisor, Ralph Berge can help. Call him 440.838.0991.

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