THE DANGER OF MARKET TIMING THE SALE OF YOUR BUSINESS

The other day I was speaking with a successful CEO in his fifties who runs a heating and air conditioning company generating eight million dollars in revenue and over one million dollars in profit before tax.

Even though he was tired and nearing burnout, he was planning to wait another five to seven years before selling his business because he “wanted to sell at the peak of the next economic cycle.”

On the surface, his rationale seems to make sense. If you speak with mergers and acquisitions professionals, they’ll tell you that an economic cycle can impact valuations by up to “two turns,” which means that a business selling for five times earnings at the peak of an economic cycle may go for as low as three times earnings at a low point in the economy.

The problem is, when you sell your business, you have to do something with the money you receive, which usually means buying into another asset class that is being affected by the same economy.

Let’s say, for example, you had a business generating $100,000 in pre-tax profit in an industry that trades between three times earnings and five times earnings, depending on the point in the economic cycle.

Furthermore, let’s imagine you sat stealthy on the sideline until the economy reached the absolute peak and sold your business for $500,000 (five times your pre-tax profit) in October 2007. You took your $500,000 and bought into a Dow Jones index fund when it was trading above 14,000.  Eighteen months later  – after the Dow Jones had dropped to 6,547.05– you’d be left with less than half of your money.

Even though you cleverly waited till the economic peak, by March 9, 2009, you would have effectively sold your business for less than 2.5 times earnings.

The inverse is also true. Let’s say you waited “too long” and sold the same business in March 2009. And because you were at the lowest possible point in the economic cycle, you only got three times earnings: $300,000. Notice that’s 20% more than if you’d sold at the peak and bought an index fund at the top of the market.

Just like when you sell your house in a good real estate market, unless you’re downsizing, you usually buy into an equally frothy market. Which is why timing the sale of your business on external economic cycles is usually a waste of energy.

External vs. internal economic cycles

Instead, I’d recommend timing the sale of your business when internal economic factors are all pointing in the right direction: employees are happy, revenue and profits are on an upward trend, and there is still lots of market share for an acquirer to capture.

When internal economic factors are pointing up, you’ll fetch a price at the top end of what the market is paying for businesses like yours right now, which means that – for good or bad – you get to use your newfound cash and buy into the same economic market you’re selling out of.

Tips to Manage a Successful Sales Team

Want to boost your business? It's time to set your salespeople free.
As economic times become more uncertain, companies are increasingly seeking to boost their sales operations to try to capture more market share. But properly running a successful sales department requires a special touch and technique.
Great salespeople also tend to be into solving problems and driving for results. They're positive in their attitude, powerful and authoritative.
The traits that make them so great at sales also can lead to traits that present difficulties for managers. They can be impulsive, demanding and unrealistic in their expectations. They may lack attention to detail and are often disorganized.
If you are more methodical, analytical or process oriented, you may get easily frustrated running a sales department. But those who are good at running a sales department learn how to manage around these issues.
There are certain styles of management that I've often found are a good fit for sales departments. Here are four tips for managing successful sales pros.

• Avoid rulemaking. Great salespeople generally want freedom. They want autonomy. Compliance doesn't work for these people. The better you're able to remove the obstacles and set them up to produce those results, the more successful they will be -- and you will be. Don't ever tell them what they can't do, because they will simply focus their creativity on finding ways to overcome your rules.
   
• Become a coach. That means asking, not telling your high performers what to do. Ask them to put themselves in your shoes over a particular issue, and discuss a variety of possible options. Let them own the solution to whatever obstacle is at hand.
   
• Let them do what they do best. In order to motivate and lead salespeople effectively, you want to think about what's important to them and what drives them. If you have employees who are not great at details and writing proposals but they're great at selling, then let them sell. Find someone else to compensate in some way to support them on the detail.
   
• Give them pats on the back. You need to recognize them. Especially with top-performing salespeople, money isn't often the main driver. It's really about being respected. It's achieving and getting those results.

If you adapt your management style to meet their needs, and understand the behaviors needed to do it, you'll have a lot fewer headaches. And your salespeople will thrive.

2012 Business Sales, Avoiding Risks and Higher Rewards

The new year has begun and resolutions are flying around as if they are going to be kept as usual.  The economy looks like it is coming back, so it is time to consider how that affects you and your decision regarding your exit strategy.

What I have found is that business owners sell only when two decision paths converge.  The first path is the subjective or personal decision to sell: it is time to sell because personal goals can now be met better by selling the business than by staying active in it.  The second is the business decision; both the market conditions and the companies readiness make it the right time to sell.

The personal motives are many but here are just a few to review to  see if you can relate to any of them

·         A desire to take the chips off the table.  Your tolerance for risk just isn't what it use to be.  The recession affected many business owners and took some of the fun out of being in business.

If the joy for going to work each day is fading.  The fire in the belly is gone and for many has been replaced by the desire to do something else.

You realize that now is the time to sell because you can attain financial security.  There are other activities that you want to explore other than just running the business. 

There is a point at which these risks become overly burdensome, especially when the business itself has some value.  The only way to eliminate the risks inherent to owning a closely held business interest to to sell it for cash.  There are few buyers now that are interested in all cash deals so there is still some risk still on the table.  However a personal guarantee for a good qualified buyer will eliminate any concern for collecting what is owed.

14 Easy Ways to Get Motivated

These simple strategies will keep you energized through the holidays and well into the new year.

It's getting toward the end of the year, so with the holidays in sight, I thought it appropriate to give you all a little gift: a column that I guarantee will make you more more successful in the coming year.

Here are 14 quick strategies to get and keep yourself motivated:

1. Condition your mind. Train yourself to think positive thoughts while avoiding negative thoughts.

2. Condition your body. It takes physical energy to take action. Get your food and exercise budget in place and follow it like a business plan.

3. Avoid negative people. They drain your energy and waste your time, so hanging with them is like shooting yourself in the foot.

4. Seek out the similarly motivated. Their positive energy will rub off on you and you can imitate their success strategies.

5. Have goals–but remain flexible. No plan should be cast in concrete, lest it become more important than achieving the goal.

6. Act with a higher purpose. Any activity or action that doesn’t serve your higher goal is wasted effort--and should be avoided.

7. Take responsibility for your own results. If you blame (or credit) luck, fate or divine intervention, you’ll always have an excuse.

8. Stretch past your limits on a daily basis. Walking the old, familiar paths is how you grow old. Stretching makes you grow and evolve.

9. Don't wait for perfection; do it now! Perfectionists are the losers in the game of life. Strive for excellence rather than the unachievable.

10. Celebrate your failures. Your most important lessons in life will come from what you don't achieve. Take time to understand where you fell short.

11. Don’t take success too seriously. Success can breed tomorrow's failure if you use it as an excuse to become complacent.

12. Avoid weak goals. Goals are the soul of achievement, so never begin them with "I'll try ..." Always start with "I will" or "I must."

13. Treat inaction as the only real failure. If you don’t take action, you fail by default and can't even learn from the experience.

14. Think before you speak. Keep silent rather than express something that doesn’t serve your purpose.

Top 6 Management Mistakes Entrepreneurs Make

The business plan is the easy part. Managing and leading a team? That's where the learning curve gets very steep.

Leaders are made, not born... which makes it tough when you start a company and have little to no management experience. (I spent years working my way through a variety of management positions and still made nearly every mistake possible.)

For many entrepreneurs the “business plan” stuff is the easy part; managing employees and leading a team involves a very steep learning curve.

Instead of waiting learning from your mistakes, take the easier route and learn from a few of my biggest leadership mistakes:

Too many positives equal a negative. Say you’re discussing the reasoning behind a new project. There are tons of positives, and your employees should be excited, but for some reason they seem wary. Why? Employees instinctively look for the downside because there is always a downside—and downsides always flow downhill. Share the negatives too. Freely describe the downsides. Show you understand that every project, every initiative, and every new process involves an upside and a downside. Sharing the positives is fun; sharing potential negatives is essential. While it isn’t easy to show doubt, your employees will respect you for it.

Results come and go but feelings are forever. Make decisions based on data, but lead based on feelings and emotions. Criticize an employee in a group setting and eventually he’ll appear to get over it... but inside he never will. When you make a decision, spend more time considering how employees will think and feel than you do evaluating whether the decision makes objective sense. You can easily recover from a mistake made based on faulty data or inaccurate projections. You’ll never recover from damage to an employee’s self esteem.

The flow of ideas is easy to turn off. For example, your best employees will typically generate the best ideas. (That is one of the reason they are great employees.) When an employee has a great idea, it’s natural to give her the responsibility for putting that idea into practice. Unfortunately your best employees are also great because they are extremely productive. The last thing they may need is responsibility for yet another initiative. Pile on too much and if only out of self defense some will stop making suggestions. Give other employees a chance to shine instead; all they may need to become great is an opportunity.

No presentation ever changed the world. Formal education conditions us to assume great information comes from presentations. (Listening to lectures while watching PowerPoint slides must be the best way to learn, right?) In business there’s an inverse relationship between the length of a presentation and its value: The longer the presentation the less valuable the ideas and information. The best ideas can be captured in one or two sentences. Plus, most of the time your employees have those ideas. Listen to your employees and turn their ideas into action. The only presentations you really need are ones used to recognize your employees’ great ideas.

Data is accurate, but sometimes your employees are right. Some decisions should be based on more than analysis, logic, and reasoning. Ideas and decisions are eventually carried out by people, and every employee has a different set of skills, emotions, motivations, and agendas. Leadership decisions should certainly be driven by data, but great leadership decisions can be messy and at times counter-intuitive. If your employees don’t agree with you, ask why. Don’t simply defend your position—find out what they know and why they feel the way they do. No one knows everything, and the only way we learn is when we shut up and listen.

How to Run Your Business Without You - Key to Increasing the Value of Your Business

Making sure your company can operate in your absence should be a basic element of business planning, but many entrepreneurs don't consider the possibility until it's too late. Planning for short-term and long-term replacements is key.

But how do you do that? Here's how to get started.

Get Your Job In Writing. It's easy to become mired in day-to-day tasks and lose track of how you're running your company. Knowing how you spend your time daily is key to ensuring your business can run without you. Ask the question, 'Who can jump in and do my whole job?' Ask yourself: What are the short-term and long-term aspects of the business you take care of? Write them down.

Prioritize. You'll find that certain responsibilities stand out among the many. Identify your priorities and start thinking about what would happen if you weren't around to do those tasks. This ensures that if you're pulled away from your job unexpectedly, the people who step in will know what to tackle first.

Create Processes. Writing out step-by-step instructions for your most important tasks will ensure those responsibilities are taken care of in your absence. Whether it's payroll or tracking sales and expenses--responsibilities that business owners tend to guard closely--making sure someone else knows how to handle those tasks is essential. For example, after Ashton's fall, he switched from manually signing every check himself to using an electronic signature.

Identify People Who Can Step In. Make a list of all your key contacts, starting with employees, vendors, clients, bankers, accountants, and lawyers, and think about who could take over each of your responsibilities

Step Back While You Can. It often takes an emergency for small business owners to realize they don't need their hands in every aspect of the business. Getting away from day-to-day chores has also allows you to spend more time on the company's long-term growth including raising money, expanding marketing efforts, and launching new services, etc.

Stop Procrastinating - NOW!

It seems that no one is immune to the tendency to procrastinate. When someone asked Ernest Hemingway how to write a novel, his response was "First you defrost the refrigerator." But putting off tasks takes a big hit on our productivity, and psyche. Procrastination is not inevitable. Figuring out why you postpone work and then taking concrete steps to prevent it will help you get more done and feel good about yourself.

What the Experts Say
According to Ned Hallowell, a psychiatrist and the author of 12 books, including Driven to Distraction, delaying work is often a symptom of how busy you are. "We procrastinate because we all have too much to do," he says. And of course, we want to dodge things we don't like. "Many people procrastinate because they fear the drudgery or the difficulty of the task they are avoiding," says Teresa Amabile, the Edsel Bryant Ford Professor of Business Administration at Harvard Business School and coauthor of The Progress Principle. But, as you have likely learned, it doesn't pay to dawdle. "Putting it off doesn't make it go away. Getting it done does," says Hallowell. Here are five principles to follow next time you find yourself deferring important work.

1. Figure out what's holding you back
When you find yourself ignoring or delaying a task, ask yourself why. Hallowell points out that there are two types of tasks most often deferred:

• Something you don't like to do. This is the most common one. As Hallowell says, "You don't put off eating your favorite dessert."
• Something you don't know how to do. When you lack the necessary knowledge or are unsure of how to start a job, you are more likely to avoid it.

Once you've identified why you've put something off, you can break the cycle and prevent future bouts of procrastination.

2. Set deadlines for yourself
One of the simplest things you can do is create a schedule with clear due dates for each part of a task. "As soon as you get the project, chunk it down into a few manageable segments that you can complete in sequence," Amabile advises. Then, assign deadlines for each piece. "Put an appointment in your calendar to work on a small piece of the next segment each day to allow yourself to get it done a bit at a time," she says. These "small wins" make the work more manageable and contribute to your sense of progress. And achieving them is much easier than trying to barrel through a complex project.

Setting deadlines also makes sure the project doesn't get buried. For things that you are likely to put off, add reminders in your calendar or put a Post-It on your computer screen. Use whatever visual cues will ensure you don't avoid the project.

3. Increase the rewards
We often dally because the reward for doing a certain assignment is too far off. Regina Conti, an associate professor of psychology at Colgate University and an expert in motivation, provides the example of doing your taxes. "A person may want to complete their taxes to avoid the legal penalties of not doing so, but because those penalties are far in the future and the task is a boring one, they will not have much incentive to get started with the project," she says. To make a task feel more immediate, focus on short-term rewards, such as getting a refund. Or if there aren't any, insert your own. Treat yourself to a coffee break, or a quick chat with a co-worker once you've finished a task. You can also embed the reward into the task itself by making it more fun to do. Work with someone on a particularly difficult project or set up a game for yourself so that doing the task isn't so boring or onerous.

4. Involve others
One of the principles Hallowell often repeats in his work is "Never worry alone." If you don't know how to do something, ask for help. Turn to a trusted colleague or a friend for advice. Or, look for an example of the project you are working on to use as a starting point. "Others are a great source of extrinsic motivation," says Conti. Asking someone to review your work can spur you to get started knowing they will expect it. You can even enter an anti-procrastination pact with a co-worker: share what you are working on and hold each other accountable to set deadlines.

5. Get in the habit
"People throw up a hand and say 'I'm such a procrastinator' as if they have no control," says Hallowell. "You do have control over this and you'll be very proud when you change it." Hallowell says that he used to be a procrastinator but trained himself to stop. "I don't procrastinate at all now. I just do it," he says. There are immediate benefits when you start getting things done right away, and it's a habit you can cultivate. Amabile suggests tracking your improvement. "Spend just five minutes a day to note the progress you made, any setbacks you encountered, and what you might do the next day to enable further progress," she says. She recommends you do this in a work diary. Then see yourself, and talk about yourself with others, as someone who gets things done. "The most powerful event, for maintaining positive inner work life, is making progress in meaningful work," says Amabile.

Principles to Remember

Do:

• Identify which tasks you are most likely to put off
• Use deadlines to motivate you to get things done within a certain timeframe
• Reward yourself for reaching milestones

Don't:

• Call yourself a procrastinator as if it is an intrinsic part of who you are
• Tackle arduous tasks on your own — ask others to help you get over the hump
• Try to finish a project in one sitting — break it down into smaller, achievable chunks