Tag Archives: business operations

Selling the Company

Planning Ahead: Steps To Selling The Company

With the new year, entrepreneurs and business owners are looking ahead and putting plans in place for the coming year and beyond. For most the focus is on increasing sales and revenues to grow the business, for some it is looking to take things in a new direction, and for others it may be stepping away from the business entirely and selling the company. Regardless of the objective, planning is essential.

If a business owner is interested in actually selling the company, there are a number of key steps that need to be taken to help ensure success.

Take your time when selling the company

Planning for the sale of a business should begin at least one year in advance. It can take this long to get financial information and documentation pulled together to allow the owner to find the best buyer for the business, that is a match financially and has the right professional experience to step in and take over. When a buyer is found and the deal is finalized, it is also important to allow time for the transition.

Find the right people for the job

To find a buyer, you may want to consider consulting a reputable business broker. A broker can help navigate the steps of preparing and selling the company. Also, tap into your connections to ask around and get advice from trusted sources such as an accountant, banker and attorney. You may be an expert in your industry, but these professionals have handled transactions like this numerous times and often know what to look for. Consider asking people in your business network for referrals and while brokers can be helpful, avoid professional brokers that ask for large upfront deposits.

Succession planning

When selling the company, the business owner may stay on for a period of time as a consultant or contractor. Either way, at some point they will be leaving, and it is crucial to put together a management team that can run the company without the owner. This process can also take time.

Do not assume that relying on longtime employees and managers is enough. In some cases, a manager may have been on staff a long time, but they are still not as involved in the entire business process as the owner and may not know a great deal of the business operations. Planning ahead will eliminate the need for the seller to stay on long after the business is sold and allow time to train and promote someone from within or to hire a qualified person from outside the business.

Document an operations manual

In addition to developing the right management team, developing instructional materials and documenting information on the “how to” for the operation is vital to a successful transition. The creation of a company manual should include everything from detailed major operation information and key vendors to an organizational chart of employees and the small day-to-day tasks. This gives a real value for the company by providing the potential buyer with a base for operating the business.

Make your company desirable to buyers

First impressions are important. Think of how you would react to your business if it was your first time walking in or seeing the behind-the-scenes operations. Making necessary upgrades, documenting procedures and listing business statistics, such as operation costs, yearly sales increases and customer growth, gives a potential buyer the information they need upfront.

Transferring the products

If the company sells a service, most contracts are month-to-month so customers can leave anytime. This means the buyer will devalue the cash flow stream. If you can patent or trademark services and products, this will add value to the company, allowing the seller to command a higher price. If possible, do not take a seller carry-back note. This means the sales price will be paid over a time period and may be based on the future profitability of the company. Less cash upfront is better than more cash over a longer and uncertain period of time.

When selling, it is important to be realistic. According to data from BizBuySell.com, more small businesses were sold in 2010 than 2009, but were sold for less.

Whether it is a business-to-consumer or business-to-business model you are trying to sell, planning ahead is vital. Reviewing the business structure, its operations and securing a reputable broker positions the seller best. In other words, planning to sell the company you have spent countless hours building will ultimately make it more desirable to buyers.

The only question now is, once the business is sold what will you do next?

For more information, visit fswfunding.com.

 

Review Operation Procedures, Expenses

Run Your Business Effectively: Evaluate Operating Procedures, Expenses

Run Your Business Effectively: Evaluate Operating Procedures, Expenses

Managing expenses effectively is a vital part to running any business. With the new year approaching, what better way to celebrate than to make sure your business is operating as smoothly as possible.

Operating procedures are often the first thing a customer or vendor encounters when interacting with a company. As a business owner or manager, reviewing operations can improve customer relations and help contain costs.

As part of the review, operating expenses and lending relationships should also be evaluated because practices are continuously changing, and what may have worked for your company in the past may not be the best option now.

Evaluating operating procedures

Effective communications

Making sure that your staff members are communicating with one another sounds obvious, but it is important to check that the communication between all levels of management and employees is working well and everyone is on the same page.

Breakdowns in communication can lead to quality and customer service issues that can result in increased material and labor costs, not to mention dissatisfied customers.

Improve floor or space plan

Does your facility’s floor plan allow for efficient movement of material and employee safety? Consider utilizing Six Sigma analysis, a business management strategy originally developed by Motorola, but is now widely used in many industries.  An outside consultant specializing in the field can be well worth the fee, frequently paying for themselves through the costs savings they implement.

Update electronics

IT systems must be in place to provide timely, accurate reporting for management to make decisions. Aging equipment can also slow down productivity and efficiency. If your budget allows, consider making new electronic purchases before the end of the year. This can be good for taxes and help get the year off to a good start. Also, moving toward a paperless office can help reduce supply and storage costs and increase productivity.

Review operating expenses

Check insurance coverage and rates

As with any type of insurance, it is important to make sure that the company is getting what it’s paying for. Review insurance policies for acceptable coverage and negotiate better rates without giving up the protection that your company needs.

Negotiate better terms on rent

With the number of vacant buildings around, landlords may be more willing to accept less to keep the building occupied and generate income. You may also find that by shopping around, you can get a larger space for less money.

Look into employee benefits

Benefits can be a significant cash expense, so make sure the benefits are adequate for the location and industry of the business. If necessary, have the employees share some of the cost.

Hire the experts

A good CPA can provide tax advice to save cash. You should consider hiring competent outside professionals because they can save you a significant amount of money in the long run.

Eliminate unnecessary costs

Labor is one of, if not the largest, cash expense item. Review job responsibilities; overtime costs may be avoided by hiring additional staff. During a particularly busy season, temporary staffing can be used to fill a need at lower wages without benefits. Outside consultants can also provide high level, expert skills without incurring salary costs.

Are your marketing dollars being spent wisely?

While it is common to cut marketing dollars to curb costs, this is a short-sighted strategy as marketing is an investment in the company’s long-term growth. Good marketing should generate qualified leads, help to develop business growth and strengthen your brand name. It should also be strategic and consistent.

Re-evaluate lending relationships

Find a lender to suit your needs

Does your lender provide support and flexibility to meet your cash needs? What worked for your business in the past may not work for your company now. You may find it more helpful to shop around with other lenders for better rates and terms — or, in some cases, other loan options, such as factoring or asset-based loans.

Review loan documents

Do you have a contract that requires you to stay in the relationship for a period of time and pay an exit fee if you leave early? If you have more than one loan with a lender, chances are the loan docs have cross default language. Cross default means a lender will tie your loans together, and it is a provision in a loan agreement or other debt obligation stating that the borrower defaults if he/she goes into default on any other obligation.

By reviewing current operating procedures and expenses, you can find ways to save money while increasing efficiency and customer satisfaction. Although you might not think your business has any inconsistencies, there are many moving parts in any organization, and it is important to revisit your current practices.

For more information about how to run your business effectively, evaluate your operating procedures, expenses and more, visit fswfunding.com.