How can you overcome biggest buyer fears when selling your business

May 8, 2011


We have been discussing what preparations the small business seller needs to make before listing the business for sale. There are items seller needs to start taking care of as much as 1 year in advance As the sale process gears up you need to prepare number of documents for the sale to complete fast and without any major hiccups.
The biggest obstacle to the sale of small business stems from buyer’s FUD (Fear, Doubt and Uncertainty). When the buyer is betting hundreds of thousands of dollars on the business and is committing large part of his future life he is bound to have cold feet and second thoughts at some point in the process – just like in marriage!!! Your job as a seller is to address these FUDs and alleviate buyer’s anxiety.
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Filed Under: Management, Sellers Tagged With: , ,

What do you need to Prepare before Selling Your Business

May 1, 2011


Selling a business is a lot like selling your house – only lot more difficult and time consuming. It is not uncommon to take more than year to sell the business – from the time it is put on market to the time the closing papers are signed. Anyone who has been through the selling process knows that there are number of aspects you need to take care of long before the business is put for sale. What makes it more challenging is the fact that you need to do it all while running the day-to-day operations of the business and ensuring that it does not suffer during the selling process.
There are steps you can take to make the process of selling the business easier for you. They can also help make the sale go faster; which is very important for any seller. The longer it takes to sell the business, the more chances of something going wrong and the sale falling through.
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Filed Under: Buyers, Management, Operations Tagged With: , ,

External Market Forces that can Drive you out of Business

April 10, 2011


In case you have not heard Blockbuster; the go to place for video rental just a few years ago; was purchased by Dish Network for peanuts. This is the company that was valued at Billions of dollars before the market and technology changed around them and new competitors such as Netflix and Coinstar came along. They completely missed the boat.
Such is the power of free market economy! Business owners who focus only on internal operations of their business without paying attention to external market forces will get hurt. The market forces will put them in oblivion in a few short years or even months.
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Filed Under: Buyers, Marketing, Sales Tagged With:

Why Embracing KISS Principle Leads to Happiness

April 6, 2011


KISS -Keep It Simple Stupid.
Many small business owners like to take the road less simple. If a task takes 2 steps to finish they will manage to stretch it to 10 steps. They are wired to think complex. We have pondered on the question for some time – when you are running a small business should you opt for a simple operation or a complex one?
You can see the examples of simple and complex operations in franchises as well. On one hand you have a pizza franchise such as Little Caesar’s – home of $5 Pepperoni Pizza with no delivery. On other side there is Pizza Hut with large number menu items and toppings and it not only has carry out; but also delivery and dine-in. Which one is easier operation to run?
There are number of reasons why you should try to keep things as simple as possible.
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Filed Under: Customers, Employees, Management, Operations, Sales Tagged With: , , , , ,

Do You have to be a Cook to Open a Restaurant?

March 23, 2011


Yesterday I came across this interesting article by Susan Reid at AmEx Open Forum about why you should stay within 2 degrees of separation when starting a business. She argues that you may end up feeling overwhelmed with everything you’ll need to learn just to get up-to-speed if you stray from 2 degrees of separation.
For the most part we agree with this. After all, there are number of benefits of staying within your comfort zone when it comes to starting a business – you have less of a learning curve; you can operate the business yourself and save on employee cost and most important you will enjoy what you are doing.
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Filed Under: Buyers, Management, Operations Tagged With: ,

Buy or Build? Buying Existing Business vs Building New one

March 20, 2011


Many buyers of small business are dismayed by the money they have to pay to buy an existing business. They think that they can build the same business from scratch at a much lower cost. And this is true. To understand why this is the case you need to know the concept of book value of a business versus its market value. Book value refers to the money you can get if you sell all of the business assets in the market. The market value is usually higher than book value and is a result of goodwill that is associated with the existing business. It is this goodwill that the buyers of existing business are paying extra for. The goodwill is a result of all the work that existing owner has done to bring the business to its current level.
While it is true that you can build a business from scratch at a lower cost; it comes with its own set of problems. You have to understand both sides of the buy vs. build equation before making a decision. Below we have highlighted pros and cons of buying an existing business as opposed to building a new one. You can make your decision after studying this and looking at your own situation.
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Filed Under: Buyers, Management Tagged With: ,

How to succeed in running absentee business

March 13, 2011


Small business owners run their business absentee for variety of reasons. Some owners are still holding full-time job while starting a business. Others have more locations than they can handle themselves. While still others just don’t want to spend their entire time on the business. Our estimate is that while majority of small businesses are owner operated, there are number of businesses that are run absentee for the reasons mentioned above.
While it is possible to run and succeed in absentee owner business you need to be aware of the problems that arise when you are doing so. Ignoring these problems can lead to deterioration and even disaster for your business. The most common issue in running the business absentee is that you may not be aware of what’s going on with your business or at least not to the same degree as when you are present 24×7. Even if you come to know about the issues it may be too late to act on. The issues can surface in all areas of the business ranging from operations, quality, purchasing and customer service.
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Filed Under: Buyers, Employees, Management, Operations Tagged With: , , ,

Do you have what it takes to be Small Business Owner?

March 2, 2011


Small business owners are a special breed. They don’t like to sit still or take orders from others. They also don’t like to stop even when they have become successful or when they have met with failure. That’s why the term serial entrepreneurs – once an entrepreneur; always an entrepreneur.
Many people who have held job for their life dream of owning a small business – either out of frustration with their current job or because they have lost their job and can’t find one in this difficult economy. They think that just because they have a strong desire to be a small business owner they will succeed. While having a strong desire is a good start; it takes more than that to be a successful business owner. Our experience has shown that the success in small business is dependent on a combination of factors including heredity, upbringing, determination, working style and external support.
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Filed Under: Buyers, Management, Operations Tagged With: ,

Benefits of Buying a Franchise versus Independent Business

January 26, 2011

As we mentioned in the previous post on myths and realities of franchising franchising model helps those who want to get into small business; but do not have prior experience or do not want to start from scratch. These people like the fact that buying a franchise versus independent business will reduce the risk of failure. At the same time, they also question the value provided by franchisor for the amount of money they have to pay to them in terms of initial franchise fee as well as ongoing royalty.
As with any business transaction, it is important that you understand what you are getting in return for the money paid to the franchisor. While franchisor does provide benefits in exchange for the fees they receive; not all of them are equal. In addition, different franchises provide value in different areas depending on their strengths and strategy. You should know why you are buying one franchise over others and set proper expectations before making decision.
In our experience, franchises provide value in 4 categories listed below:
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Filed Under: Buyers, Management, Operations, Purchasing Tagged With: ,

Understand Operating Requirements of Franchise before Joining

January 17, 2011


How franchisees operate their stores is probably the most contentious issue that raises friction between the franchisor and the franchisees. We have come across number of franchises where the franchisee and the franchisor are at odds with regard to how the store should be operated – the franchisor wants franchisees to keep the stores open late to improve sales; while the franchisees only look at it as increasing their labor expense without adding much to the sales.
In our opinion, there needs to be a balance between the needs of the franchisor and the franchisees. However, in real life, the balance is usually tilted in franchisor’s favor. The district supervisors and inspectors hold a lot of sway in dictating how franchisees run their businesses and can even impose penalties and other restrictions in many cases. In one example, the inspector asked the franchisee of a fast-food restaurant to replace the oven because it was not showing proper temperature. It could have been repaired for $1,000; but the franchisee ended up spending $20,000 for new oven simply because the inspector insisted on it.
How can you ensure that you understand whether franchisor runs the operations in a pragmatic or dictatorial fashion and avoid getting into a franchise where you have constant fights?
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Filed Under: Buyers, Operations Tagged With: ,