Discover Your Marketing Perspectives

Do you believe that there is a right way and a wrong way to market your business? Is there a set of rules floating around somewhere that we must live by when we step into the role of marketing director for our company?

While some marketing guru’s have discovered that there are steps that are more, or less, effective than others, it’s important to evaluate your own belief system and be certain that your marketing represents YOU. But if your current marketing mindset is fearful and limiting, it's time to step into a new mindset and bring success to your door. There is a wealth of outstanding information out there for all of us, and you can combine this information with your own perspective to create an effective marketing model that resonates with you and represents your brand authentically.


Here are a few questions you can ask yourself to understand the value of what you offer, and to find the words to share your wonderful offerings with a larger audience.

• What is unique about my product or service?
• What is unique about ME and how does that enhance my product or service?
• How does it help others?
• How does it enhance the lives of my clients/customers?
• What are some of the things my clients have said about their experience with me or my company?
• Would my clients feel good about telling others about their experience?
• Is there something I can do to help those happy clients to easily spread the word of this experience?
• What can I do for my clients/customers to thank them for their business?
• Is there anything I can do to make my product of service more affordable for them on occasion?
• What are the most common words I hear others use to describe their experience of my product or service?
• How can I use those words to describe it to my future clients?
• If I don’t tell more people about my offerings what am I depriving them of?

If your marketing mindset is stopping you from growing your company, if you shudder when you hear the word, consider embracing a new mindset. Instead of marketing, use words and phrases like; sharing, spreading the word and helping others.

Enjoy growing your business; let us know how you’ve shaped a new perspective!

Capital Gains Taxes Changing - 0% for 2011

The idea of paying no taxes on your capital gains is an appealing one for most small business owners and investors.

And based on current tax law, it's very possible for many. For taxpayers who are in the 10% or 15% tax brackets for ordinary income, the maximum tax they'd owe on stocks and mutual funds sold for a gain would be 0%.

The zero tax rate is especially appealing now, since many small business owners who might not have expected to qualify just might.

Originally, the 0% maximum capital gains rate was supposed to expire in 2010. However, the 0% rate was extended to last through the tax year 2011.

This is only one of MANY changes to taxes for 2011. I will be facilitating a webinar on May 17^th discussing this and many other “game changers” for business owners. Our guest speaker will be Monty Walker, CPA, CBB, BCB – a renowned tax expert specializing in small businesses.

Reserve your seat: https://cc.readytalk.com/cc/schedule/display.do?udc=gp8lq3q51ukg

Re-Build to Sell

It's sad to say but many small business owners who come to me wanting to sell are in a crisis. They haven't kept up with the times and have outdated equipment and pricing that is below industry standards, and are up to their eyeballs in debt. One thing to keep in mind is that when you do something to enhance your service, it will have an impact on the eventual sale of your business.

Here are a few things to consider when getting your business ready to sell:

1. Equipment: If you were six months away from putting your service on the market than I would not recommend purchasing new equipment or upgrading your software. You will not make back your investment in that period of time. The buyer may also prefer a particular brand of equipment or may buy only your accounts. You would then have to sell your equipment on the used market, which usually brings only pennies on the dollar. If you are two to three years from selling and have old equipment, then by all means buy newer equipment. This enables you to keep up with your competition by offering the same or more enhanced services.

2. Rate increases: Annual rate increases are recommended. One of the most important formulas I use in evaluating a business is determining profitability, which comes down to rate structure. I recently sold a medical service for more than 14 times its monthly billing and the reason it sold for that multiple was the way the services were priced. It was very profitable, averaging $365 per client. The service had only 140 accounts but billed more than $50,000 per month, producing a net profit margin of more than 38 percent. Do not increase your rates just before selling your business to boost your monthly billing. A potential buyer will want to see a reasonable conversion history for the rate increase. I would also recommend switching to a 28-day billing structure. This will give you an additional one month's billing per year, which should increase cash flow along with your annual revenue.

3. Automate: One way to cut down on your biggest expense, labor, is to automate some of the message taking and delivering functions. By delivering messages via email, fax, voice mail, pager, or cell phone, it will free up the time it takes the operator to deliver the messages in person. Some services offer an automated attendant feature, giving the caller a choice of where the call should be directed with instructions that if they have an emergency, the caller should press zero for an agent.

4. Cut the fat: Get your business lean and mean. Cut out all frivolous expenses and cut the dead wood clients. If you have clients who are non-payers or who do not produce a profit for your company, get rid of them.

5. Financial record keeping: Buyers are interested in businesses with a good profit margin of at least 20 percent, advanced equipment with updated software, solid management in place, and a history of growth. One of the first items buyers ask for after reviewing your listing information is a current financial statement, along with at least one previous year's statement. This shows the prospective buyer how your business has grown financially in the past and its likely future growth trend.

6. Clean your financial history: Make sure that you have clear titles to your equipment and other assets, and that all your federal and state taxes are paid, along with being current on your payroll tax deposits. Buyers will do lien searches on you and your business, so if you have any skeletons in your closets, clean them up before placing your business on the market.

Of course location, cleanliness of the operation, and a reliable, well trained staff, all have something to do with how salable your telephone answering service will be, but the above points are critical to getting your business ready to sell.

Protecting your company’s value during a sale

If you have ever promised your child a treat in return for good behavior, you know all about negotiating leverage.

When selling an attractive business, you also have leverage—up to the point that you sign a letter of intent (LOI), which almost always includes a “no shop” clause, forcing you to terminate discussions with other potential buyers while your new found “fiancé” does due diligence before handing over the check.

After you sign the LOI, the balance of power in the negotiation swings heavily in favor of the buyers, who can then take their time investigating your company. At this point, there is little you can do.

Yet, with each passing day, you will likely become more psychologically committed to selling your business. Savvy buyers know this and often drag out diligence for months, ultimately manufacturing things to justify lowering their offer price or demanding better terms.

With your leverage diminished and other suitors sidelined, you’re then left with the unattractive options of either accepting the inferior terms or walking away.

We recommend four things you can do prior to signing an LOI to minimize the chances of your deal dragging on for months and becoming watered down:

1. Make sure your customer contracts have “successor” clauses

Try to have customers sign long-term, standardized contracts that include a clause stating that the obligations of the contracts survive any change in ownership of your company. Have your lawyer wordsmith the details.

2. Nurture and prepare a group of 10–15 “reference-able” customers

Acquirers will want to ask your customers why they do business with you and not your competitors. Cultivate a group of customers to act as references before you sign the LOI.

3. Ensure your management team is all on the same page

During due diligence, acquirers will want to run “isolation” interviews, during which they speak with your managers without you in the room. They are trying to understand if your company is pulling in the same direction and to identify any dissension or incoherence among your ranks.

4. Make sure you have audited financials

An acquirer will have more confidence in your numbers and will perceive less risk if your books are audited by a recognized accounting firm.

Tomorrow we’ll look at the top three things you can do to ensure your deal does not become diluted or fall apart at the altar.

How Do I Get an Accurate Business Valuation?

If you're planning to sell your business, an accurate valuation will ensure that all the hard work you've put into it will be taken into account and included in the price. Business valuations are also important when seeking investment capital, taking on a partner, or selling shares.

While many business owners have an idea of what their business is worth, that idea can quickly wither in the face of challenges from the IRS or other sources. Therefore, getting an accurate business valuation is crucial.

There is more than one type of valuation. For example, there's no point in evaluating a services business based on the value of its physical assets. Other methods to consider include intangibles such as goodwill, which can be difficult to assess. And value may also vary with context and subjectivity — a business may be worth different amounts to different people, depending on their preferences and needs.

This means that if you want a meaningful valuation, you will need to discuss your business circumstances with a business valuation expert. You may find that the valuer needs to use a number of different methods and then come up with a final amount that gives weight to each figure that emerged from each method. Good interpretation and judgment will be needed to come up with a final figure that accurately reflects the value of your business.

Value factors

A number of different factors need to be taken into account to ensure that a valuation is accurate and useful. Some of these factors include:

• The nature and history of the business
• General economic outlook, including industries that affect your business
• Your business's book value, financial condition, and earning capacity
• Your business's dividend history and paying capacity
• Investor risk inherent to your industry
• The maturity of the business and its industry
• The value of the business in the absence of the current owner
• Stock sales
• Stock of comparable public corporations

A valuation expert will also review and analyze recent financial history, financial projections, buy-sell agreements, executive compensation, organizational charts, quality of employees, management depth, major customers and competitors, and the viability of the business without the current ownership.

Methods of Valuation

The crudest valuation method is known as the "multiples" method, which operates by rules of thumb. For example, legal firms are commonly valued at 40 to 100 percent of their annual fees, while landscape businesses are estimated at 1.5 times their discretionary earnings, plus the value of their capital assets. However, multiples only give a rough, industry-wide ballpark figure for business value, not an exact value.

More accurate methods include the "balance sheet" approach, which basically subtracts business liabilities from assets. The "adjusted book value" method is similar, but uses current market value rather than purchase price or depreciated value.

Retail and manufacturing businesses are often assessed according to asset value, assuming those assets are significant. Service companies are often valued using the "capitalization of income" method, which places a heavy emphasis on intangible assets. It's also possible to calculate the value of a private company by making a comparison with an equivalent public company and making appropriate adjustments. Business value can also be estimated by anticipating cash flow over a three- to five-year period, and adjusting that into current dollar amounts.

How Buyers Put a Price on Your Business

If you're looking to sell your business, you probably have a number in mind. Here's why it might differ from what an acquirer is willing to pay.

A funny thing happened when I was first approached by someone who wanted to buy my printing company: I forgot everything I knew about sales.

Instead of listening to the customer and understanding his or her needs, I went into negotiations with potential buyers focused on my needs. I wanted to get a certain multiple for my business but failed to put myself in the shoes of a buyer to figure out what he or she would be willing to pay.

It was a rookie mistake on my part. Any first-year salesperson knows the first step in selling is figuring out what the customer needs. I should have asked about buyers’ goals in wanting to acquire us. In particular, I should have tried to understand what kind of return they were looking for on their investment in an acquisition.

The price buyers are willing to pay for your business depends on a lot of factors, but one of the most important is the return they expect to get and the risk associated with achieving that return.

Assuming your revenue is flat or growing modestly, the higher the return on investment the buyers are looking to achieve, the lower the multiple they will be willing to pay for your business.

At the risk of oversimplifying a complex equation, if the buyers are looking for a 22 percent return on their investment in your company, then they will derive the multiple they are willing to pay as follows:

100 ÷ 22 = 4.5 times EBITDA

Provided you’re not the next Google and you don’t have the cure for cancer, the buyers would be willing to pay around 4.5 times EBITDA to buy your business.

If, however, their expectations for a return are higher, let’s say 30 percent, they will be willing to pay less for your business:

100 ÷ 30 = 3.3 times EBITDA

So what drives up buyers’ expectations for return on investment while at the same time driving down the price they are willing to pay for your business? In a word, risk. The riskier your business looks to buyers, the higher their expectation for a return will be.

Likewise, with your own investments, you are willing to settle for a lower return when you buy relatively safe assets, like a government bond. But when you buy that risky small-cap fund, you expect a higher rate of return in exchange for putting your capital in harm’s way.

So how do you de-risk your business in the eyes of an acquirer?

• Client risk—do you rely on just one or two key clients for most of your business?
• Supplier risk—will you be in trouble if one of your suppliers goes under?
• Depth of management—what happens if a key employee disappears?
• Contracts—do you have legal agreements in place, or do you rely on handshakes?

Ask yourself these questions to judge how risky your revenue stream is. Investors want to know that things won't fall apart if something unexpected happens. Show them safety in your pattern of earnings, and you can expect a higher offer.

When you sit down with people interested in buying your business, try to find out what their expectations for return on investment are. That will tell you a lot about what their offer will look like and how risky they view your business. From there, you can do the math and anticipate their offer price and decide whether or not you want to keep talking.

Why Sellers Stay Involved.

If you think that you might not be carrying a note for a portion of the purchase price...


1. All SBA lenders are requiring a minimum of 10% from sellers with interest-only for five years. Then the seller can get the balloon payment after five years. If a buyer has no experience in the industry but good management experience, they will require more down payment and most likely a larger noter from the seller to reduce the bank's risk.

2. If the buyer uses other financing and does not ask for a note, they will most likely require a hold-back of at least 10% of the purchase price. This hold-back will be for up to 12 to 24 months in order for the buyers to have the reps and warranties guaranteed. If buyers find something that was misrepresented during that time, they have at least the hold-back amount to "offset". The offset is not limited to the hold-back amount but protects the buyer for a period of time.