The Five Things Employees Really Want

I haven't managed to catch all the episodes of Undercover Boss this season, but there was one I did see -- Popeyes Louisiana Kitchen.

I almost didn't want to watch, because if they were going to show me that secretly the restaurants had rats or the food was made from something gross, I didn't want to know. But I had to check it out.
Thankfully, the food seems to be just fine. The problems found by their undercover executive -- chief talent officer Lynne Zappone -- had to do with how employees were treated.
This episode shows exactly what Popeyes's employees really want. Here's a hint, it's not a raise:

1. A pleasant work environment. Zappone worked one store where the manager was yelling at the other workers -- including her -- in front of the customers. That's just not cool.

2. Recognition. The janitor at one store impressed Zappone with his strong loyalty to the company. He even buys his own less-toxic cleaning products to use. "I consider this my store," he tells her. He also sadly informs her that Popeyes has no employee-of-the-month award, like most fast-food chains do.

3. Perks. Zappone was shocked when a coworker asked if he could catch a ride with her for lunch -- to Taco Bell, where the food is cheaper than at Popeyes. He needed to go there because the employee discount on Popeyes food had been discontinued. A company picnic had also faded away over the years.

4. Help when they need it. Many of Popeyes's workers were displaced and saw their families scattered after Hurricane Katrina. One 20-year employee was fired when she couldn't return to work fast enough, despite being an invaluable trainer. The janitor had lost everything in the hurricane and lived at his church for two years while he got back on his feet. Zappone realized Popeyes could have done more to reach out to displaced workers and help them stay with the company after the disaster.

5. Mentoring. One line worker who had formerly been homeless was trying to attend a hospitality college despite lacking a car, while one manager hoped to become a regional trainer. In the show conclusion, Zappone helped both with scholarships and coaching to move their own professional goals forward.
The show highlighted a basic fact so many employers don't get: Your employees are people -- people with problems, yes, but they also have a history and dreams. If you treat them as such, they will be more productive and better representatives of your brand.

What Every Entrepreneur Needs to Know About Public Speaking

What Every Entrepreneur Needs to Know About Public Speaking

Important Thing to Note No. 1: You're not as bad a speaker as you think. "When we have people give talks in shyness groups, they often do much better than they thought they did. There's a tendency to underrate your performance when you're feeling shy," says Dr. Lynne Henderson, director of the Shyness Institute, a nonprofit in Berkeley, Calif., that's dedicated to researching and developing manuals on social anxiety.

Important Thing to Note No. 2: A little anxiety is good.* Because it means you care. You just need to care about the right things. And the right thing in this situation is: the audience. The last thing the audience wants to do is sit there for half an hour and watch someone fidget and have difficulty speaking. They want to listen to someone who is in control. Because someone in control is someone who can help--someone who can help them, specifically.

Audiences are selfish. Which is the key to everything.

The First Part
Look at these people. No, really--look at them. How can you help them? How can you make a difference to them? What do you have that they need?

"Make eye contact. Square up your shoulders with your audience. It takes the spotlight that's shining in your eyes and turns it the other way," says Nancy Ancowitz, business communication coach and author of Self-Promotion for Introverts. "You're saying, I want to look at these people in front of me and really see them and provide something of value to them."

Looking at your audience--assessing them head-on--is the same thing you would do in any conversation. And all speeches should be conversations, even though you're the only one talking. And in order to have a conversation, you have to assess the audience on a personal level. It helps to acknowledge them--not in a vague way, in a specific way. "I'm delighted to be here" isn't as good as "I'm delighted to be here to talk with you."

And then, very clearly, and without much abstraction, tell them what you aim to do.

"State the facts about what you have to offer that will help the lives of the people you're talking to, and put yourself in their shoes," Ancowitz says. "What do you have? What do they need? Where does it overlap?"

"I'm here because …" is not a bad way to start things off. Any situation that's loaded with importance and process and false interaction, such as a speech, is best begun by deflating the whole thing. So tell them what you're going to talk about. Then establish your authority. Let's assume that part of the speech involves the story of your business. That's a great story to tell, because you know it better than anyone else. And everybody likes a well-told story.

The Story
The three best pieces of advice ever doled out in the Esquire offices:

1. The subject can be boring, but the story cannot be boring.
2. You're in charge of the story.
3. People won't miss what isn't there.

All this works for a speech, too.

Your speech might not have a riveting subject, but the speech itself must not be boring. You're in charge of the speech. And you should move things along at a pretty good clip.

Paint a picture--an impressionistic picture. But every now and then, get specific. "Give the audience something to take away. Ideas, tips, rules--something useful," says Dr. Karl Albrecht, an executive management consultant and author of the book Social Intelligence: The New Science of Success. "After all, they're there for selfish purposes." But let those moments be way stations. You're in charge. Move things along.

Things You Should Never Say While Speaking About Your Company On a Stage

Is this thing on?

Can I get a witness? (even ironically)

A great man once said …

Are you picking up what I'm putting down?

Is anyone else warm?

Four score and seven years ago …

And then [pause] boom! It hit me!

In conclusion, I'd like to tell you a story. It all started way back in …

What You Look Like
Be cool. Your energy level during a speech should be somewhere between "excited to be here" and "mildly enthused to be here." Says Ancowitz: "There's no need to push; there's no need to talk loudly; there's no need to be insistent, to pressure people." There's no need to sell, is what she's saying. Selling can be off-putting even when it's happening at an appropriate time. Onstage, it's excruciating. Think of a great historical speech. Every great speech involves selling something, but the selling is the subtext. The main point is information.

And maybe don't move around all that much. "Do you dance onstage?" Ancowitz asks. (We'll go ahead and answer this one on your behalf: No.) "Well, if you're in front of a group, you want to keep your feet grounded, and/or work the space. But you don't want to be moving without any purpose."

Every movement on a stage is magnified. When you cross your legs, people notice. When you scratch your face, people notice. When you play a thumb war with yourself, people notice. So be cool. People see everything. The best part is that controlling these kinds of movements has a way of calming you, too.

How to Wrap Things Up
Asking if anyone has any questions at the end of a talk and then waiting for someone to raise their hand is the equivalent of five people trying to split up the check three ways at the end of a great meal. It's an awkward way to cap off an otherwise wonderful experience.

Allowing people to talk isn't the problem. The problem is that no one feels comfortable until someone volunteers. So the best way to wrap things up is to ask people to raise their hands if they have questions (or to just yell the questions out) and then: Just keep talking. The hope is that you will get interrupted.

If nobody asks a question, you should hone your speech. Because you haven't made them wonder how your story affects their lives. Because you haven't had a conversation. You've been talking to them, not with them. Think of the raising of hands as a score card.

Your goal should be to get to a point where you can say: "We have time for only one more question." Which is a beautiful thing. It means you provoked them. You showed them what you can do for them. It means they understood what you can do for them and they want to know more about how your story can meet their needs. Which suggests that you're doing good work--onstage and off. 

*If you have a severe problem with anxiety, you should stop reading this column and call a professional for help. Read this column in the professional's waiting room. Because it doesn't have to be this way.

Key Technical Matters

Do not poll an audience of 10 or fewer people by a show of hands.

Do not imagine the audience in their underwear.

Do not imagine yourself in your underwear.

Do not look at your watch. If you start wondering how much time you have left, the audience will start wondering when you're getting off the stage.

Thank no more than three people at the beginning.

Keep your hands out of your pockets.

Unless you're a stand-up comedian. From the 1960s.

Do not close your eyes in a dramatic fashion at a key point in the speech.

Do not move your arms in a dramatic fashion at a key point in the speech.

Or your legs.

Or your hips.

Or someone else's arms, legs or hips.

Leave the pounding on the podium to the dictators.

Negotiating for Wimps

How to ask for what you want -- and get it. Eleven tips for the confrontation-shy.

So if you’re like me—a negotiating sissy—here are a few ways to make negotiating a little less stressful, a little more fun, and a lot more successful:

1. Make the first bid. People hate to go first if only because going first might mean missing out on an opportunity: "If I quote a price of $5,000,” the thinking goes, “and he would have happily paid $7,000, I leave money on the table.” In the real world, that rarely happens, because the other person almost always has a reasonable understanding of value.
So set an anchor with your first offer. (The value of an offer is highly influenced by the first relevant number—an anchor—that enters a negotiation. That anchor strongly influences the rest of the negotiation.)
Research shows that when a seller makes the first offer the final price is typically higher than if the buyer made the first offer. Why? The buyer's first offer will always be low. That sets a lower anchor. In negotiations, anchors matter.
If you’re buying, be first and start the bidding low. If you’re selling, start the bidding high.
2. Use silence as a tool. Most of us talk a lot when we’re nervous, but when we talk a lot, we miss a lot.
If you make an offer and the seller says, "That is way too low," don't respond right away. Sit tight. The seller will start talking in order to fill the silence. Maybe he’ll list reasons why your offer is too low. Maybe he’ll share why he needs to make a deal so quickly. Most of the time the seller will fill the silence with useful information—information you would never have learned if you were speaking.
Listen and think more than you speak. When you do speak, ask open-ended questions. You can't meet in the middle, much less on your side of the middle, unless you know what other people really need.
Be quiet. They’ll tell you.
3. Expect the best. High expectations typically lead to high outcomes. Always go into the negotiation assuming you can get what you want. Always assume you can make a deal on your terms.
You can't receive if you don't ask. Always ask.
4. Never set a range. People love to ask for ballpark figures. Don’t provide them; ballpark figures set anchors, too.
For example, don’t say, "My guess is the cost will be somewhere between $500 and $1,0000." The buyer will naturally want the final cost to be as close to $500 as possible—even if what you are eventually asked to provide should cost well over $1,000.
Never provide an estimate when you don’t have enough information. Keep asking questions instead.
5. Concede for a reason. Say a buyer asks you to cut your price. Always get something in return by taking something off the table. Every price reduction or increase in value should involve a trade-off of some kind.
Follow the same logic if you are the buyer. When you make a second offer, always ask for something else in return for that higher price. And if you expect the negotiations to drag on, feel free to ask for things you don't really want so you can concede them later.
6. Never negotiate alone. While you probably do have the final word, being the ultimate decision-maker can leave you feeling cornered.
Always have a reason to step away and get a final okay from another person, even if that other person is just you.
It might feel wimpy to say, “I need to talk this over with a few people first,” but better to feel wimpy than to be pressured into a decision you don’t want to make.
7. Use time to your advantage. Even though you may hate everything about negotiating, never try to wrap a negotiation up as soon as possible just to be done with it. Haste always results in negotiation waste.
Plus there’s another advantage to going slowly. Even though money may never change hands, negotiations are still an investment in time. Most people don’t want to lose on their investments. The more time the other side puts in the more they will want to close the deal… and the more likely they will be to make concessions so they can close the deal.
While some people will walk away, most will hang in for much longer than you might think.
8. Ignore bold statements. Never assume everything you hear is true. The bolder the statement the more likely it is to be a negotiating tactic.
Strong statements are either a bullying tactic or a sign of insecurity. (Or, often, both.) If you feel intimidated, walk away. Otherwise, listen closely for what lies under all the bluster and posturing.
9. Give the other person room. You feel defensive when you feel trapped; so does the other party.
Push too hard and take away every option and the other person may have no choice but to walk away. You don't want that, because...
10. Don’t try to win. Negotiating isn’t a game to be won or lost. The best negotiation leaves both people feeling they received something of value. Don’t try to be a ruthless negotiator; you’re not built that way.
Instead, always try to…
11. Build a relationship. Never take too much from the table, and never leave too much. As you negotiate, always think about how what you say and do can help establish a long-term business relationship. A long-term relationship not only makes negotiating easier the next time, it also makes your business world a better place.

SEVEN POWERFUL RATIOS TO START TRACKING NOW

Doctors in the developing world measure their progress not by the aggregate number of children who die in childbirth but by the infant mortality rate, a ratio of the number of births to deaths.

Similarly, baseball’s leadoff batters measure their “on-base percentage” – the number of times they get on base as a percentage of the number of times they get the chance to try.

Acquirers also like tracking ratios and the more ratios you can provide a potential buyer, the more comfortable they will get with the idea of buying your business.

Better than the blunt measuring stick of an aggregate number, a ratio expresses the relationship between two numbers, which gives them their power.

If you’re planning to sell your company one day, here’s a list of seven ratios to start tracking in your business now:

1. Employees per square foot

By calculating the number of square feet of office space you rent and dividing it by the number of employees you have, you can judge how efficiently you have designed your space. Commercial real estate agents use a general rule of 175–250 square feet of usable office space per employee.

2. Ratio of promoters and detractors

Fred Reichheld and his colleagues at Bain & Company and Satmetrix, developed the Net Promoter Score®  methodology, which is based around asking customers a single question that is predictive of both repurchase and referral. Here’s how it works:  survey your customers and ask them the question “On a scale of 0 to 10, how likely are you to recommend to a friend or colleague?” Figure out what percentage of the people surveyed give you a 9 or 10 and label that your ratio of “promoters.” Calculate your ratio of detractors by figuring out the percentage of people surveyed who gave you a 0–6 score.  Then calculate your Net Promoter Score by subtracting your percentage of detractors from your percentage of promoters.

The average company in the United States has a Net Promoter Score of between 10 and 15 percent. According to Satmetrix’s 2011 study, the U.S. companies with the highest Net Promoter Score are:

USAA Banking 87%
Trader Joe’s 82%
Wegmans 78%
USAA Homeowner’s Insurance 78%
Costco 77%
USAA Auto Insurance 73%
Apple 72%
Publix 72%
Amazon.com  70%
Kohl’s 70%

3. Sales per square foot

By measuring your annual sales per square foot, you can get a sense of how efficiently you are translating your real estate into sales. Most industry associations have a benchmark. For example, annual sales per square foot for a respectable retailer might be $300. With real estate usually ranking just behind payroll as a business’s largest expenses, the more sales you can generate per square foot of real estate, the more profitable you are likely to be.

Specialty food retailer Trader Joe’s ranks among companies with the highest sales per square foot; Business Week estimates it at $1,750 – more than double that of Whole Foods.


4. Revenue per employee

Payroll is the number-one expense of most businesses, which explains why maximizing your revenue per employee can translate quickly to the bottom line. In a 2010 report, Business Insider estimated that Craigslist enjoys one of the highest revenue-per-employee ratios, at $3,300,000 per employee, followed by Google at $1,190,000 per bum in a seat. Amazon was at $1,010,000, Facebook at $920,000, and eBay rounded out the top five at $530,000. More traditional people-dependent companies may struggle to surpass $100,000 per employee.   


5. Customers per account manager

How many customers do you ask your account managers to manage? Finding a balance can be tricky. Some bankers are forced to juggle more than 400 accounts and therefore do not know each of their customers, whereas some high-end wealth managers may have just 50 clients to stay in contact with. It’s hard to say what the right ratio is because it is so highly dependent on your industry. Slowly increase your ratio of customers per account manager until you see the first signs of deterioration (slowing sales, drop in customer satisfaction). That’s when you know you have probably pushed it a little too far.


6. Prospects per visitor

What proportion of your website’s visitors “opt in” by giving you permission to e-mail them in the future? Dr. Karl Blanks and Ben Jesson are the cofounders of Conversion Rate Experts, which advises companies like Google, Apple and Sony how to convert more of their website traffic into customers. Dr. Blanks and Mr. Jesson state that there is no such thing as a typical opt-in rate, because so much depends on the source of traffic. They recommend that rather than benchmarking yourself against a competitor, you benchmark against yourself by carrying out tests to beat your site’s current opt-in rate.

Dr. Blanks and Mr. Jesson suggest the easiest way of increasing opt-in rate is to reward visitors for submitting their e-mail addresses by offering them a gift they’d find valuable. Information products – such as online white papers, videos and calculators – make ideal gifts, because their cost per unit can be almost zero. Using this technique and a few others, Conversion Rate Experts achieved a 66 percent increase in the prospects-per-visitor rate for SOS Worldwide, a broker of office space.

7. Prospects to customers

Similar to prospects per visitor, another metric to keep an eye on is the efficiency with which you convert prospects – people who have opted in or expressed an interest in what you sell – into customers.

Conversion Rate Experts’ Dr. Blanks and Mr. Jesson recommend you monitor the rate at which you are converting qualified prospects into customers, and then carry out tests to identify factors that improve that ratio. Conversion Rate Experts more than doubled the revenues of SEOBook.com, the leading community for search marketers, by converting many of SEOBook’s free subscribers into customers. Techniques that were found to be effective included (perhaps counter intuitively) restricting the number of places available; allowing easier comparison between SEOBook and the alternatives; communicating the company’s value proposition more effectively; and simplifying its sign-up process. The trick is to establish your benchmark and tinker until you can improve it.

Acquirers have a healthy appetite for data. The more data you can give them – in the ratio format they’re used to examining – the more attractive your business will be in their eyes.

Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is. After completing the questionnaire, you will immediately receive a Sellability Score out of 100 along with instructions for interpreting your results. Take the test here:
http://www.sellabilityscore.com/sunbelt-advisors-bay-area/joan-young

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

Alternative Acquisition Funding

As the economy struggles to rebound, unemployment rates remain at historical highs and millions of Americans are still looking for work. As a result, many have considered following their entrepreneurial dreams of "creating" their own job rather than relying on corporate America to see them through. While hard times have kept demand for small businesses high and a wide selection of options are on the market, most business buyers are facing one major challenge: Accessing the capital required to purchase one.

It's rare that a buyer has enough cash to buy a business outright, so traditionally they've relied on a variety of sources to finance the purchase. Unfortunately, the primary source of capital for small business buyers--commercial and bank loans backed by the U.S. Small Business Administration's 7(a) loan program--has dried up significantly over this past year. According to numbers released for the SBA's 2009 fiscal year, the 7(a) program made 36 percent fewer loans than it did in 2008, backing only 44,221 loans from banks for starting, purchasing, or expanding a small business.

These numbers might seem to paint a grim picture for aspiring business buyers, but fortunately there are other ways to secure financing to buy a business. If you're in the market but face a lack of capital and no clear idea of where to start, consider the following financing options:

Peer-to-Peer Lending Networks
If you're unable to access bank capital to finance a small business purchase, one alternative is to turn to peer-to-peer lending networks. These networks remove the traditional lending institutions, instead allowing lending transactions to take place directly between individuals. If you want to use this route, you can do so via online companies such as Prosper.com and LendingClub.com. On these sites, loan seekers request a specific amount (typically up to $25,000) at a specific interest rate, and lenders fund all or portions of the loan. Lenders are then paid back with interest over a set period of time. Buyers' success when using these networks depends largely on their credit ratings.

Friends and Family
Borrowing money from the people you're closest to in life is probably the longest-standing method of funding entrepreneurial endeavors. Many people are hesitant to borrow money from friends and family for fear of straining personal relationships, but--if you make it a point to hold up your end of the deal under all circumstances and borrow only from individuals who are in a position to lend without risking their own financial health--it can serve as one of the most effective ways to fund a business.

If you feel this is an ideal method for your individual situation, you can use sites such as VirginMoney.com to manage the process of borrowing from people you know to ensure all parties involved are comfortable with the deal and confident that all loans will be paid back on time.

Retirement Funds
As with borrowing money from friends or family to buy a business, some might consider using money from a retirement nest-egg risky. That said, it can often be an effective way to invest in your entrepreneurial endeavors and has had successful outcomes for more and more of today's business buyers. As laid out by the government's ERISA law, you can invest your existing IRA or 401(k) funds to the purchase of a business without taking an early distribution and incurring penalties.

It's even possible to combine money from your retirement fund with loans and other funding methods for greater flexibility. Many entrepreneurs choose to invest in a business they control because they believe the growth opportunity is greater and want to diversify a portion of their retirement holdings outside of the stock market. If you find this is a viable option, sites such as GuidantFinancial.com can provide you with more information on this small business investing method.

Seller Financing
Increasingly today more business-for-sale transactions are resting on a seller's willingness to finance at least part of a sale. In a deal that includes seller financing, the seller takes part of the purchase price in cash and the remainder in the form of a promissory note that the buyer will pay back with interest over a period of three-to-five years. This has become essential; buyers are having difficulty accessing funds through traditional methods, therefore there's a natural gravitation toward seller-financed businesses to help offset some of the cost up front.

Conversely, sellers who continue to say no to seller financing are finding it difficult to close a deal, and as more of them have realized this, there has been an increase in seller-financed businesses on the market. To make it easier for buyers to locate these businesses, my company site, BizBuySell.com recently introduced the ability to filter search results based on a seller's willingness to offer financing.

If you're in the market for a small business it's important to be aware of alternate funding options, but know that in some cases it's still possible to borrow from a bank. Government stimulus and bank policy have been trying to promote ongoing small business lending, although many banks are still more conservative than they used to be about when and to whom they'll loan money.

Today's business-for-sale marketplace is full of exciting opportunities that will allow you to take your destiny into your own hands, and with various options available there's no reason to let a shortage of traditional capital sources get in the way of your dreams.

Tips for Negotiating an Earn-out

Less than half of entrepreneurs stick around long enough to reach their earn-out goals. Using these tips, though, might make it worth the wait.

Less than half of entrepreneurs stay for the length of their earn. A lot depends on the entrepreneur. If the earn-out looks at all doubtful, and they have an idea for another business, they’re not going to stay around for three years.

How can you negotiate the earn-out to be beneficial for you, as a seller?

1. Ask for a seat at the table when the goals are being set

Most earn-out agreements are drafted in isolation by the acquiring firm and presented to the seller as a final package. Instead, business owners should ask to be involved in setting realistic post-sale goals for the joint company.

2. Agree to goals that reward integration results

Using an earn-out tied to your company’s profits as a division of the buyer encourages the business owner to prioritize profits of his/her division over the integration of the two entities.

For example, let’s say you use Peachtree for accounting, and the buyer uses SAP. The last thing you want to do is waste time changing accounting platforms when you have an earn-out number to hit, yet having one bookkeeping software program would accelerate integration. The same trade-off is played out in decisions around the sales team, product lineup, real estate, marketing and so on. Integration trade-offs can be the enemy of short-term profit and can create serious tension between the selling entrepreneur and the buying firm.

Instead of signing up for an earnings goal exclusively, ask the buyer to consider also including goals that measure the performance of the integration, such as cross-selling targets, revenue in a new geographic region, number of new customers, etc.

As opposed to profits, earn-outs can be based upon the acquired owner serving their time, client retention or earning a patent, etc.

3. Sprinkle goals throughout the earn-out period

Three years is a long time to wait to get paid, yet most earn-out contracts are heavily weighted to the last year of the agreement. Both buyer and seller would be better served by negotiating smaller payments throughout the earn-out period that reward results along the way.

Try to increase your up-front payment and put less in the earn-out. If the acquirer has their “way” of structuring an earn-out and won’t budge from it, he probably isn’t the right buyer for your business, and you probably won’t see the amount that you had anticipated receiving for your business.

Remember, you have to work with the buyer for years to come. If the buyer gives off a rigidity nature, the track record of earn-outs and the natural tension between integration and maximizing short-term sales, it is unlikely any seller will last six months post-sale.

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.

A Tale of Reported vs. Actual Income – Sellers Beware

Among the genre of small business owners, there is one individual whom I met that stands out from all the rest. He was the epitome of one obsessed with a need to minimize his reported taxable income. I was amazed at the lengths he went to, to distort his sales revenue and expenses on his financial statements. You name it, he did it: pocket cash sales and never enter them on the books, bloat reported expenses by recording personal purchases such as travel, meals, magazine and newspaper subscriptions, personal auto expenses, home repairs and maintenance and so forth as business expenses. He held back credit sales in November and December and didn’t book them until January; he stuffed his postage meter in December with enough postage to last him until August but reported the total purchase as an expense in December, and on and on. Moreover, he was quite proud of this accomplishment. He told me that he met with his CPA several times a year to “brain storm” new ways to minimize his reported income. The energy he put into this practice was enormous. He was truly consumed not with just a desire, but it seemed to me, a compelling need to avoid paying income taxes.

However, the enormous difference between his advertised earnings and what appeared on his financial statements and tax returns didn’t sit well with the buyers.

In addition to the negative affect that distorted financial performance reporting has on a business’s market value, such statements also become less useful—and in many cases useless—as a business planning and control tool. This is dangerous because there comes a point in a growing business where the absence of accurate financial reporting becomes the kiss of death.

There also comes a time in most growing businesses when the need arises to borrow money to finance new operating equipment, leasehold improvements, the purchase of real estate, inventory perhaps and so forth. Without good financial statements (and accompanying tax returns) that demonstrate a history of solid earnings, the ability to borrow the needed money becomes significantly more problematic.

And finally, one always runs the risk of being audited by one or more taxing authorities. If they should discover that you have been deceptive in reporting your company’s earnings, they can make you wish you hadn’t. In fact, I asked the business owner who I have told you about here if he was at all concerned about an audit. He assured me he was not. He said he was confident that he was much too clever to get caught by an auditor. I had my doubts about that. After all, he readily spilled the beans to both prospective buyers. One of those buyers could have been an under-cover I.R.S. agent. They really do stuff like that. Now there’s something else to think about.

Reasons to Sell Your Business Before You're Ready to Retire

You don't have to hold onto your business until your working days are done. Here are some reasons why "retirement" and "exit planning" shouldn't be synonymous.

Have you ever noticed how the terms “retirement” and “exit planning” for business owners are often used interchangeably?

Sometimes it seems as though the only socially acceptable way to exit a privately held business is to hang on until you’re well past your prime, eventually giving the reins to your offspring so you can play golf for a few years before retiring into a home to wait to die. Your children, however much you love them, could be the last people in the world that should run your company. Spending your retirement watching your life's work diminish before your eyes –

I’m sure you have your own reasons for building a business you could sell, and while retirement is a legitimate reason, it’s not the only one. Here are my favorite reasons—inspired by real people in their 30s, 40s, 50s and 60s—for selling a business before you want to retire. You may want to:

• Become an angel investor;
• Capitalize on an unsolicited offer for your business;
• Write a serious check to a charity;
• Get rid of your mortgage;
• Start a bigger, faster and more profitable business;
• Live debt free;
• Take a year off to coach your kid’s baseball team;
• Buy a beach house;
• Get out of a toxic partnership;
• Experience what it is like to work for a big company

When I ask business owners who have sold their company to share the one thing they wish they had known before doing so, many are quick to say they wish they had known to do it sooner.

Don’t wait too long to enjoy the other jobs of life. Allow a good 20 years to do the things you have always wanted to do.

What Can Investor/Entrepreneur Do to Attract and Execute a Successful Acquisition?

Critical Success Factors in Value Definition
Financial Discussion Points

I. Understanding the Financial Statements
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Footnotes to Financial Statements
II. Operating Plan-Financial Projections: 3-5 Year Vision
III. Systems—Accounting and Management Reporting
IV. Tax Compliance Issues
V. Review of Accounting Policies
VI. Stock Valuation Issues for Option, Warrants, Funding Rounds
VII. Tax Carryover Attributes
VIII. Integrations Steps and Processes