In this past week I’ve seen 3 situations where business owners did not take the advice of the specialist engaged to deliver it.  Here is what happened.

Situation One: Involved a company in financial distress; where the business owner simply had no idea how to get out of his situation.  He conveyed his situation to several different advisors and each were adamant in the direction he should take.  The trouble was, the advice from each was so diametrically opposed, it only became more confusing.  In the end he simply chose one to follow, angering the others because each felt they were right.  Time will tell, but it’s looking like his own gut feel was correct.

Situation Two: Involved a successful company that was heavily impacted by the Global Financial Crisis.  Sales had declined by half yet costs remained unchanged, and it was clear the company had to restructure urgently or perish.  Retrenchments were necessary, but the method recommended for this did not sit well with the owner who had a strong and caring relationship with his employees.  He agonised over the decision about how to do it in a way that would meet his own moral code, and in the end went against the advice to do it his way.  The outcome was a tremendous success with the exiting staff actually agreeing to the need to be retrenched, and using his own style has those staff leaving on a friendly note.

Situation Three: Involved a business owner negotiating to sell a family asset that was co-owned by a sibling.  Relations had broken down so significantly, it was almost to the demise of all parties.  Advice had been sought and a plan of action had been agreed, but when the deal was required to settle, the family business owner went with his gut feel rather than taking the advice entirely.  He orderd a change in tact, resulting in a successful outcome for all.

What this tells us is that Experts can only provide you with so much guidance, and their advice will only ever be as good as the information you provide about the situation or problem and the experts own experience.  In some of the cases, the experts involved were put out and even became angry at their client, but their clients were correct to follow their own intuition.

So as a business advisor, you’re probably wondering why I would share with you about cases where the clients were clearly in a better position to decide for themselves ultimately, as it seems a bad advertisement for specialist consultants.  However that is my point entirely.

No specialist is going to be right every time, but you are quite right to consider many alternative views before you make your decision about the matter at hand.  By listening to others in the know, you are learning valuable information formulated from their previous experience and knowledge base.  When you blindly follow advice, there is likely to be more trouble ahead than can handled, so listening, thinking through and weighing up the options for an outcome that sits well with you, is the most effective thing you can do.

Here to Your Profitable Exit!

Leigh Riley

I was listening to my iPod when I read the news of Steve Jobs passing earlier today due to pancreatic cancer.  It rocked me, at the sad loss to his family and the company he’d built over 30 years of his 56 years of life.

But Did Steve Really Die?

I’m not trying to be glib about such a sad event in history, but I am serious with my belief that Steve lives on because of the incredible legacy he has left to the world with his creations.  Steve not only placed his very own special mark on the Apple company that is now a world-wide household name, his legend will continue for generations ahead.

At age 21, he started Apple with two colleagues from his parents garage with minimal start up capital.  They dreamed big, then made those dreams a reality. A business rollercoaster unfolded, with mistakes made and disputes unravelling a power struggle that forced Steve out of the company in 1985.  Never being one to be held back, Steve forged forward developing the animation studio Pixar that he acquired, and in 1997 returned to Apple, completely turning around the then struggling company, boosting its value off the charts.

The resurgence of Apple under Steve Job’s vision and management saw it become the USA’s most successful company with more cash than the US government, but it is the innovation that has completely revolutionised the computer world that resonates most.

Steve understood very well the impact of succession, continuity and legacy.  He has exited from Apple twice.  The first time proved to almost be the company’s demise, but the second time around, he’d learned the lessons and this time he built it for continuity. He knew how to boost his business by reaching for the stars, but also how to inspire a team to follow on and implement to make it all a reality.  I say that Steve lives on through his legacy, as he will go down in history as having been an inspiration to all entrepreneurs with a dream and as having had a lasting profound impact on society for decades to come.

My team “The Exit Experts” send our most sincere and heart-felt condolences to Steve’s wife and 4 children whose loss must seem indescribable right now.  Steve’s body may rest in peace, but his legacy continues on.

The Ultimate Succession Plan

For me Steve has become the guidepost for what I would term the ultimate ideal business ’continuity strategy’, because there aren’t too many phenomenal leaders that can leave their post without so much as a hint of financial hitch in sight like Steve has.

What are you doing today that will build your business legacy so it can continue on well after you exit?

Here’s to your successful business exit!

Leigh Riley

How can You Boost Your Business Valuation?

This would have to be the most commonly asked question by business owners preparing to exit.  Buyers are scrutinising more carefully than ever before, so you would want to pay attention to this blog series. The factors impacting your business valuation can seem extensive, which is why I’m running a FREE 45 minute Webinar to explain in simple terms on Thursday, 8th September 2011 at 11.30 am.  You can register your place FREE by clicking here.

FREE Webinar to find out How To BOOST Your Business Valuation!

At the FREE Webinar, I’ll be interviewing Business Valuation Guru, Sean Hutchinson live from San Francisco, USA.  I’ve chosen Sean because he is the best I’ve ever met in my 23 years experience.  Sean breaks down the individual factors without the jargon so you can clearly understand what you can do with your business to BOOST its valuation.

When you attend the FREE Webinar, you’ll discover things like:

• the levers you can easily control to maximise your business valuation
• the 6 risk factors that you’ll want to overcome
• the 3 proven methods to increase your business earnings
• the 5 ways to increase your business acquisition attractiveness
• You’ll have the opportunity to learn exactly how much your business is currently worth; plus learn
• One incredibly simple thing you’ll want to do immediately to dramatically boost your business valuation
  Places are seriously limited to this Webinar and this topic is popular, so don’t delay in registering for your place.

We can’t wait to help you BOOST your business valuation!

Here’s to Your Profitable Exit!

Leigh Riley

Next article in series

When a Wall Street capital markets guru from New York directly quotes what I have to say as a Succession Strategist, it’s time to pay attention, sit up and listen.   I can almost hear you thinking “I have no intentions of exiting my business for some time, so I don’t need to worry about exit planning yet”;  Sound familiar?   But Here’s why:

1. Taking notice to understand what a business buyer wants is the key to understanding how to position your business so that it can be sold any time, at a premium price through just about any circumstances.

2. These days, business buyers are getting smarter and already have the end in mind before they buy. That means they want to know you have an exit strategy in place before they buy, because one day they will want to release their capital quickly and easily too.

3. Financiers just aren’t lending on business acquisitions the way they used to before the Global Financial Crisis (GFC).  These days they also want to see there is a clearly defined exit strategy before they’ll loan to buyers wishing to purchase a business.  So you better get your business in order if you plan to sell it some time in future.

This all adds up to one very important point for you.  If you’re not prepared with an exit strategy for your business, you’re virtually not in the game as a possibility to be sold.  If you hope to profit from the business asset you’ve built, an Exit Strategy is a ‘must have’.

You will never know when, why or how you’ll leave your business.  I only know that you will definitely leave it, even if they end up carrying you out in a box.  If you would like to control the circumstances to your benefit and profit, take action today!  Implement your business exit strategy today.

Here’s to Your Profitable Exit Strategy!

Leigh Riley

(You can see the Wall Street Capital markets guru’s blog at  http://weybenjamin.wordpress.com/)

To reward myself for my hard earnt new qualification at Chicago, I took a quick trip to New York City where I made some amazing new business contacts and book sales too, but I found myself attracting people that were hungry for guidance about succession planning.

On the roof top of the apartment I rented at Hell’s Kitchen, I struck up a conversation an American executive (I’ll call him Ritchie) who seemed a bit troubled and open to discussion about his business problems.  To protect his privacy I can’t reveal too much detail about the compnay details, but I can tell you we ended up having a 2 hour discussion (virtually a consultation) as he poured out his anguish around the succession of his father.

View from my roof top in NYC

Family Succession Suffering

Ritchie had been his father’s succession plan and since his dad’s departure, the company had entered troubled waters.  Ritchie had a Harvard Education so he felt he was well qualified to make business decisions.  As a teenager, Ritchie had worked in the company performing menial tasks and his father had wisely insisted that Ritchie must gain some experience with a competitor before allowing him to work in a management position with his own firm.

The trouble for Ritchie was that his father did not adequately prepare him to fill his shoes of as the CEO. The succession handover was rapid and this did not provide Ritchie with adequate time to win the respect of the staff. Despite his education and work experience in another company, the staff treated Ritchie as if he was a spoiled boy of priviledge and undermined every decision he ever made.

Ritchie was feeling quite down about the situation which was amplified by the fact that he was going to have to downsize and cut staff to maintain a competitive company position. He felt this decision would further decrease his popularity in the company and that he may never gain the respect of his co-workers. When he sought his father’s advice as a mentor, his dad categorically refused to provide any guidance whatsoever.

Lessons for Family Business Succession

The lesson is significant for all of us with Ritchie’s situation:

• Statistics show that only one third of family businesses handed to the next generation will survive.
• The statistics worsen to one in seven survival for 3rd generational family companies.
• Preparation for family successors needs to start early.
• Education alone is not enough to support the next generation, and experience with another similar company may be of help, but nothing substitutes the gradual responsibility and succession handover so necessary to assist the next generation.
• If your family business is important to you, preparation should commence as early as possible.

Family business can be the most difficult succession plans to arrange because of the family dynamics, which are sometimes too soft on successors and other times to hard on successors. It can make or break and be the difference between successful continuity of a business built over a lifetime. Don’t delay,  take action on your business succession plan as early as possible! Family Business needs just as much time to prepare it’s successors as any business.

Here’s to your Profitable Exit Strategy!

Leigh Riley M Bus, Certified Exit Planning Advisor® (CEPA®), DFP, Cert IV A & WT
Consultant Business Succession Strategist, Author, Speaker, Trainer

I think it is bad enough to close your Business doors because you can’t sell, but consider this GPs story.

Dr Francis had served his community in a Practice established over 30 years.  With no business operational skills learned throughout Medical School, Dr Francis was like many of his peers: a very good doctor concerned for his patient’s welfare, with little interest in the business matters of his private Practice.  Honourable as that may seem, it did not serve him well.  Nor did it serve his loyal staff or the patients he’d so diligently cared for over 3 decades.  When he was eventually forced to exit due to ill health, and a new owner could not be found for his Practice, his only option was to close his doors. 

This was a disaster with a threefold effect:

1. His staff were adversely affected being suddenly without jobs

2. His community was impacted heavily due to loss of his valuable services

3.  His personal finances were hit hard, because not only did he not receive any financial consideration for his lifetime of efforts, but he had to meet an obligation owed to staff for long service leave payments and other entitlements.  The insult to injury was that it meant he must pay out money to leave his Practice.

Avoid a similar situation

• Start by educating yourself about the options you have.  In the books ” Your Business Succession”  and “Your Practice Succession” you can find all the practical tips to positioning your business on a course of strength and success through any of the identifiable succession triggers.  
• Sign up for the Live FREE Webinar to learn more about what you can do to successfully exit from your business, despite the circumstances. You can do this by emailing your interest to my office at support@ybsprofits.com  or   call 1300 499 255 or (03) 9584 5099 to book your place. The session will be on 21 June 2011 and it will run in two timeslots , 2pm or 7pm for 45 minutes.

Here’s to Your Profitable Exit!

Leigh Riley

I’m blogging to you from New York City and about to reveal the last 3 important reasons to think like a buyer when you sell your business. These are the points I emphasized to the editor of Inc Magazine (USA) when I was asked to list the things a buyer should look for when buying a business (these follow on from the previous two blogs)

Scenes form New York City: Columbus Circle in Manhattan

8.Systems and Processes

Buyers will want to check out the way your business operates as this will provide an indication of efficiencies. If it is a turnkey operation that anyone can run; and there are established, up to date training manuals, and all staff clear about their role in the business, buyers will pay a premium for that, so it makes sense to ensure you provide this if you are to profit the way you had hoped when you leave your business. If not, be prepared to have a buyer beat you down on price.

9.Leases, Plant, Equipment and; Machinery

Terms and life of leases of your business operation are essential so buyers will scrutinize these carefully. You want to make sure there are reasonable and long term leases in place to protect the continuity of the business operation. Operational equipment must be in good order, or else a buyer will be turned off believing they may be burdened with the need to inject immediate capital to upgrade for future efficiency of the business. Tired equipment, plant and machinery can be a massive drain on profitability, so sort it out before you sell, otherwise you can expect this to be reasoning to beat down your business price.

10.Exit Planning Prospects for the future

I know you’re thinking “why would it be important to a buyer to consider their exit strategy on a business they’re about to buy and probably not planning on leaving for some time?” It’s good question, but definitely don’t discount it because buyers today are thinking to start with the end in mind. That’s because the informed buyers knows one day they will want to also sell for a maximum price. The informed buyer also knows they may not always choose when they leave because unplanned events such as dispute, divorce, disability and death are a lot more common than is thought. You can help by thinking about the exit options for them, and one way to demonstrate this is to have your own exit strategy clearly mapped out. Financiers are now also asking for this information before they lend money on the acquisitions, so it really is in your interests to have this sorted out before you sell. On top of that, it will help you because what if circumstances force you out unexpectedly? Is this a business you are going to be able to off load quickly if you need to, and at a price that is satisfactory to you. If it’s a business that requires special interest or skills, you better start thinking about it now, before you sell, so you don’t get caught out and left strapped for cash.

You can read a lot more about these points I make in the book “Your Business Succession, how to enter, execute and exit your business for maximum cash flow and profit”

Here’s to Your Profitable Business Exit!

Leigh Riley

Previous article in series |

I’m currently in New York City and when Inc Magazine (USA) asked me to comment on what a buyer should look for when buying a business, following on from my previous blog, here’s 4 more things I told them.

View from my rooftop of NYC – Manhattan Skyline

Where is your business positioned in the marketplace?  Does it dominate a particular niche or is it floundering in the fringes?

4. Marketing

Understand the purpose and motivation of why a buyer may want to purchase your business as this will enable you to use it to your advantage. Let’s say you have a business that is uniquely positioned in a manner that could provide a competitor with the competitive advantage they long for. This could be a strategy for you to build upon toward your business exit plan and develop a superior sale price.

On the other hand if your business is just coasting along but you have identified ways to improve the performance quickly, you can offer to demonstrate this to a a potential buyer, so you may retain their interest and prevent them from insisting on a reduction in sale price.

5. Ownership Structure

This is important to you as a seller particularly in relation to taxation and a buyer in terms of future ability to raise funds for expansion plans. A seller may need to go to the expense of restructuring to ensure they’re in the best position to profit after tax. This is something you must consider before you sell with the advice from a CPA.

6. Buying the shares versus the business

Sellers are usually advantaged by selling shares of a company (under Australian Tax Law) rather than the business itself, but if a buyer accepts this, they take on the liability factors of the company that could impact them adversely in the future, so they are generally reluctant to agree to this. One way to mitigate this risk for the buyer and encourage them to buy the shares for your benefit is to provide sale terms with ‘run off’ professional, product and public liability cover (funded by you as the seller) to protect their acquisition with insurance.

7. Management and Organizational Chart

Buyers are looking for a business that’s viability is not dependent on too much of their own physical effort. As a seller your business will be more attractive to a buyer when you can demonstrate the management and responsibility structure with an organisational chart to show who in the company has the rainmaking responsibilities versus the operational tasks. A clearly defined structure indicating little or no owner reliance can provide some comfort. Further to this, show how your key employees are remunerated with attractive employment contracts ensuring staff retention when you leave. You don’t want the buyer to have any fears about the key income generating staff leaving due to a change in ownership. Remember you’re not just selling your business; you’re buying selling everything that make the business work which may or may not include the staff.

So there you have 4 more good reasons to think like a buyer when you sell. In the next blog, I’ll reveal the last 3 which may arguably be the deal makers or deal breakers for the successful sale of your business.

Here’s to your profitable business exit!

Leigh Riley

Previous article in series | Next article in series

I am so excited to report that I successfully passed the Chicago Uni CEPA program which means I am now a fully qualified Certified Exit Planner and indoctrinated into the USA industry body known as CEPA.

Class photo from Chicago Uni – CEPA Program

To reward myself I decided on a quick trip to New York City where i was asked by the editor of Inc Magazine USA to contribute to an article about what buyers should look for when buying a business.  Over the next three blogs, I’m going to tell you everything that I told them, and this is important for you to take notes, because understanding what a buyer looks for when purchasing a business does effect you.  As a seller, you can make sure your business looks exactly like the type of business a buyer would want, and in doing so, your business will become the business that stands out in the crowd, and can command a premium price. That translates to a future set for financial security.

Here’s the first three key points that buyers are looking for:

1. Proven Financial Stability and Profitability

Buyers will want to check the historical performance of your business before they purchase and will verify reports against lodged tax statements.  They want to check out your business debt exposure and understand the debtors (money owed to the business by customers) and creditors (money the business owes to suppliers etc). If buyers are applying for finance to fund the purchase, banks will require this as part of their due diligence before they will approve a loan. If banks won’t lend, buyers may look to you to provide some assistance with Vendor Finance terms or some other financing mechanism, so you’ll need to be prepared for this. Financial data will give buyers a good understanding of how well your business has been managed financially, and enable them to gauge the ability of the business to borrow for expansion and capital improvements. Shrewd Buyers know the past is not always a good measure for the future, so make sure you offer your business plan to indicate a clear direction for the future of your business. 

2. Future Prospects and Forecasts

There are many businesses that have performed well in the past, but the future looks grim for them due to technological advancements or changes in demand and market trends.  You would be wise to provide some evidence of the future market conditions. If you are not sure why this matters, think about what iPods and iTunes have done to CD sales and you may have some idea of how trends can impact heavily on the future financial viability of the business.  Understanding your business future prospects together with a legitimate reason for selling can be a huge bonus in securing a buyer for your business. Take the time to research future prospects for your business so that buyers are secure in avoiding a dead end acquisition.

 3. Client Concentration

Consider where the main income of your business comes from and how much exposure it has to each client.  If your business receives more than 20% of its income from one source or customer, this is risky for the buyer especially if there are no service contract in place to protect the revenue source when you leave.   Everyone knows that when there is a change of management or ownership, there is a possibility of client loss, so take steps to ensure the income your business generates is secured with contracts, and that income sources are sufficiently diversified.  Income sources that are too heavily concentrated in one area, leave you open to the buyer haggling on your business price.

Like I keep saying, you need to think like a buyer when you sell, because it will help you to position yourself for strength and financial reward.

Here’s to your successful exit strategy

Leigh Riley

Next article in series

Family Business Exit Strategies

(Read on for your Three FREE offers with this post)

During the last two posts of this series, I introduced the concept of different business categories and how each of these will be affected differently when establishing Your Business Succession Plan. 

Business Succession Planning is relevant for every business owner because one day, you will either want to or have to, exit your business. How this is to occur will depend on the type of business you have and the type of outcome you are looking for.

Despite the type of business you have, you’ll want to maximise the cash flow and profits you receive when you exit, whether by planned or unplanned circumstances.  This will be very important if you want the sales proceeds to fund the next phase of your life, or to assist you and your family to maintain a decent living standard after you exit your business.

During the previous posts I discussed situations involving the Sole Proprietor and the Medium-sized Business about how to maximise their outcome when they exit their business. In this final part of the series, I will discuss the succession plan of attack for the family business owner who wants to pass the business on to the next generation.

Typically the family business owner can be the most difficult succession plan to devise, because it not only involves the business value, money and mode of operation in succession discussions, but also the family and its dynamics. 

If you are a family business owner, it is especially challenging for you because, not only do you need to build it in a manner that will make it a valuable asset to set you up comfortably for the next phase of your life, but it must also help you to pass on and assist the next generation (your family) to build sufficient capital and skills to buy and run the business.

However, even If you are like some family business cases, where you have sufficient additional assets to consider gifting the business asset to family members when you exit your your business, careful succession planning is still essential. 

There are substantial tax implications for you when you gift your business to family members, so don’t overlook the opportunity to gain specialist succession advice well before exiting. 

Your family business is just as vulnerable when you fail to take the action to formalise an agreement to overcome the six identifiable succession triggers (Dispute, Death, Disability, Divorce, Desire for change, Decision to Retire). There are plenty of failed family businesses because they rested on the thought that as a family they’d be ok and work out any succession planning issues when the time came.  If anything, the emotion within a family can steer a business in an un-business like manner.  Don’t become the next statistic.

Do you want to know how prepared you are to Exit from your Business?

Take the FREE Business Exit Quiz to receive your customised report. It takes about 2-3 minutes to complete.

You can also Download 3 FREE chapters from the popular book, “Your Business Succession”.

If you haven’t engaged a Business Succession Strategy Team working together for your benefit
it’s time to do so. Click here to Book your FREE 15 minute consultation with the Exit Experts Succession Strategist (only for subscribers of this blog, so please log on to subscribe)

Here’s to your profitable Business Succession!

Leigh Riley

Previous article in series |