Before you get too excited about selling your business, we’re going to define your job within the business.
When you own and operate any business, there are many different functions that are required to keep the place going. What are you doing? If you’re doing everything, then you’re doing it wrong. Even if you don’t sell your business, this chapter is crucial to having a successful business, and an enjoyable life.
Are you selling a business for an absentee investor, or is it a hands-on type of opportunity?
Ideally, before you sell you can MINIMIZE the active role of the owner. This opens up your opportunity to a lot more people, and makes it more appealing to investors.
An investor must delegate most roles and activities to other people. If it doesn’t, then your business is simply a job.
As we review this chapter, remember, the goal is to help you FOCUS your time and attention on activities that are crucial to creating a sellable business.
When you can clearly demonstrate and document EXACTLY what the potential owner will/ will not have to do if they buy your opportunity.
***Alert: The following paragraph is the most important point in this course.****
YOU, as the current business owner have to make this transition from JOB to business owner BEFORE you can sell the business for real money. And, very often, a crazy thing happens: Once this is complete, the business owner discovers that he LOVES his business, but hated the job.
IDEALLY, as the owner/director of a business, there are two tasks that should dominate your time, energy and attention.
As things get busy, you’ll drift to other duties like electrician, tech support, janitor, therapist, etc. Set a reminder in your calendar to remind you to review how you spend your time, against what actually matters. These two things should be MOST of your time and attention:
• Marketing. Finding new and effective ways to get new customers. Experiment, evaluate, execute, test, iterate and do it again.
• Employees: You have to supervise them closely – FOREVER.
Owners’ number one JOB is marketing. That is, building the scale and profitability of your business.
Marketing is hard work! Marketing is an ongoing search for new ideas. Then putting those ideas to the test. Do more of what is working, and trash those strategies that get poor results.
The ability to show documentation and the results of these efforts has a LOT of value to a buyer. It’s great to show off what is working, but IT’S amazing to have a list of things that didn’t work, and that will save the buyer a lot of time and money. Having a comprehensive list of marketing campaigns that were done, how they were done, and their results? Big value to buyer.
Allow your business and your marketing strategies to grow and to speak to you. Let this morph and evolve. As the owner, you have to do it. If you delegate this or out-source it, it’s not going to get done properly.
You also need to know and understand your numbers (key metrics) and reports. You need to know right away if something, or somebody is (not) working.
This has to be an ongoing activity. I cannot tell you how many times we were preparing the sale package for a business and we uncovered BIG problems.
A shift in the market, organized fraud, or a sloppy employee not following your underwriting guidelines can wreak havoc on your bottom line. You’ll be much, much happier catching this sort of thing EARLY on.
Employees are the way that we scale up and have LIFE outside our stores. However, a sloppy, or lazy employee will cost you money AND aggravation. A dishonest employee can get you into trouble with regulators, they can steal ALL of your money, and even get you sued. Hire slowly. Watch closely. Fire quickly.
In fact, if you have any employees that are so-so, or underperforming? Get rid of them now. A qualified and sophisticated buyer will carefully observe how these crappy employees interact with the customers, and other staff.
And I’m not saying that you’re blind and stupid. It’s always easy to walk into a situation fresh, with no bias and quickly see what’s really going on. From the consulting side, that’s big part of why people hire me.
Bad customer service starts slowly, and it sneaks up on you. That sarcastic and funny employee is great fun to talk to, but do the customers enjoy being talked down to? And people are SNEAKY.
So, how do you measure how you’re doing? How do you benchmark your own results against your competitors?
Find an industry association that can provide you with “normal” financials to be used to compare against the financials of the business you’re buying.
Average financials for most types of business can also be found in the Annual Statistical Report published by the Risk Management Association (RMA), available in the business section of most libraries.
You could look up the financial statements for the Publicly traded companies in the same industry. But, you’re going to have to do some math.
For example: A Title Max has a HUGE online presence and over a 1000 storefronts.
So, let’s look at their numbers. In Q2 2013, TMX Finance (the parent company of TitleMax) had revenues of $183 million. So, if we multiply that by 4. It takes us to $732 Million per year. That’s about $700,000 in revenue per store (including online operations).
You can do the same math for profits, collections, sales per square foot, etc.
Taking this a step further, you should also JOIN trade groups, subscribe to magazines. You should put yourself forward. NETWORK with other operators. If you have 1 store, or 1000 stores, there is always something you can learn.
If there is a major event in your industry, and your buyer is aware of it, and you’re not? You’re going to look really dumb.
Bottom Line: 80% of your time and energy should be spent on marketing your business, and watching your staff. YES, it is a lot of work to build it up. But we’re going to give you the tools to make it easy.