Business is a Competition

I’ve not revealed this before, but earlier this year I was invited to be on the panel of judges for the “ActionCoach My Business Magazine Awards”.  I felt it was a great honour to be asked so could not refuse the request.  The task was not easy for many reasons.  The number of entrants was significant and thousands of pages of data had to be considered carefully to form an assessment of each candidate.  With most being of such an incredibly high standard, this truly made the task for judges very difficult.  Amazingly though, most of us formed a fairly similar opinion of those candidates that really stood out from the crowd.

It got me thinking about how important it is to stand out from the crowd when you’re in business, and not just to win competitions.  It demonstrated to me yet again, that it’s no accident when a business is successful.  It does become obvious to everyone when you stand out from others in business, and there is a lesson in it for each of us in business.

As a follower and regular reader of this blog, you already know that I bang the drum (rather loudly) about business succession, and I do so because you are operating a business that I know you will one day hope to sell.  You’re working hard building an asset, and often you’re so hard working ‘in’ it, that you can overlook working ‘on’ it.

I want to see my followers succeed and stand out from the crowd, especially the crowd that is gathering around the ‘for sale’ post.  I’m referring to the tsunami I mention in my book “Your Business Succession”, because the average demographic age group of small to medium sized business owners are so near to retirement and are looking for ways to extract their equity to move on to another phase in their life.  With so many about to do this (80% in the next 5 to 10 years) there will be quite a crowd of businesses selling.  It will become a buyer’s market and only those that ’stand out’ from the crowd will gain the most when they exit.

You Business Succession
Leigh Riley

Too Young To Exit?  Think Again

Now before you zone out because you think you’re too young for formal exit strategies and succession plans to matter, think about these two very important points:

• 50% of business owners leave well before retirement because of factors they could not have imagined, such as dispute, divorce, disability and death.  You don’t want to get caught out in a weakened position trying to liquidate your business equity in a crowded market, so take steps to ensure you have an action plan that will keep you in control to capitalise when you exit despite your circumstances.
• Raising Capital to grow your business or release your equity when exiting your business takes time to organise.  In fact it’s damn hard for an SME like yours to get finance for anything related to business if you don’t have a clearly demonstrated and formal exit strategy in place. That means your business growth could be stifled or you could get stuck without any funding when you do leave.  Either scenario is one you definitely want to overcome well beforehand, so get ready now.

Time For Your Business To Stand Out In The Crowd!

The  reason I’ve commenced a series of FREE educational webinars, is so you can see what you can do to ’stand out’ and make the difference for maximised cash flow and profits, with an enhanced  business valuation and a strategy to ensure you get paid what you deserve for your lifetime of effort in business, through most circumstances.

I’m pleased to reveal the finalists have been chosen for the ‘ActionCoach My Business Awards’ .  You may see those that ’stood out’ for yourself by clicking here.

Here’s to your business success and profitable exit!

Leigh Riley

Small to Medium sized business (SME’s) often struggle to raise capital for expansion plans, especially since the Global Financial Crisis.  It’s even harder for SME’s to liquidate part of their business when they need cash to fund other activities, which is one of the reasons having an SME is considered risky.

Financiers are more reluctant to loan on SMEs because of the illiquid nature of them.  If Financiers find themselves having to foreclose on the business they’ve loaned funds to that is struggling financially, the last thing they want to do is run the business.  They prefer to liquidate quickly to regain the capital loaned.  This is typically harder to do for SME’s, and that is why more and more Financiers are demanding SME’s have a clear path of succession and a formal exit strategy to enable them to recoup the funds loaned more quickly if the business folds.

But what if my team could show you a way for SME’s to fund capital raising easily and provide a facility to liquidate the business quickly if needed?

That’s exactly what I intend to do in my next Webinar:  “How Smart Entrepreneurs Raise Capital to Grow or Go From Their Business”.

When you register for the Webinar, you’re going to discover some of the most innovative techniques you’ve ever heard about raising capital for your business, and you’re going to see a live case in action to demonstrate how easy it is to raise capital.

You’re going to uncover things like:

• 8 Funding Solutions for Growing or Going
• 2 Proven Legal Methods to Raise Capital in Australia
• How the valuation process is crucial for raising capital for your company, and how being able to raise capital easily can help BOOST your business valuation
• 5 Essentials for Good Capital Raising
• 7 Risk factors you’ll want to overcome to ensure you attract the capital you require
• There’ll be a live case demonstrated to show you how easy it is
• We’re going to make you an offer to get started raising your business capital right away.

The best bit is that it’s totally FREE to attend!  You can join our 45 minute Webinar/Teleseminar by registering here now.

The Capital Raising Webinar/Teleseminar will be held on:

Wednesday 5th October 2011  at 7.30pm

Or

Thursday 6th October 2011 at 11.30am.

If you’re looking to Grow or Go from your business soon, you can’t afford to miss “How Smart Entrepreneurs Raise Capital to Grow or Go From Their Business”

Here’s to your profitable exit strategy with easy capital raising!

Leigh Riley

How can You Boost Your Business Valuation?

Increase Your Business Acquisition Attractiveness by:

• Developing a market presence that is desired by potential buyers
• Obtain critical mass with demonstrated consistent growth across niches
• Maintain higher margins than your competitors
• Add value with a management team and systems
• Create effective planning that aligns your business motives with your employee’s actions

If you haven’t already done so, make sure you register yourself to attend the FREE Webinar I’m running so you can learn all you need to know about how to BOOST your Business Valuation.  I’ll be interviewing Business Valuation Guru, Sean Hutchinson live from San Francisco. Sean excels in explaining the levers you can control to increase your business valuation and I’m very certain you will learn a lot from listening to him. Register for

Date: Thursday 8th September, 2011
Time: 11.30am
Register Now for the FREE webinar at http://yourbusinesssuccession.com/bizval-webinar1.php

You can’t afford to miss this opportunity to learn all you can about how to BOOST your business profits and valuation.

Here’s to Your Profitable Business Exit!

Leigh Riley

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How can You Boost Your Business Valuation?

During the last post, we discussed how building a robust financial history for your business can help to BOOST your business valuation.  Many business owners mistakenly believe that BOOSTING their business financial position is the only to change the way their business is valued and viewed in the market place.   You may be surprised to learn that risk mitigation strategies can play a much larger part in BOOSTING your business valuation.

Lever Two: Reduce Risk to BOOST your business valuation.

You will learn a lot more about this at the FREE Webinar I’m running on

Date: Thursday 8th September, 2011
Time: 11.30am

where I’ll be interviewing Sean Hutchinson, Business Valuation Guru live from San Francisco.  Click here to register your place now.  Here’s a brief look at the second lever you can control to BOOST your business valuation.

Reduce Risk and BOOST your business valuation by:

• Understanding the sweet spots that contribute most to your business profitability so that you may rule out lesser profitable activities thereby increasing the economic value of activities engaged in your business
• Decrease your business capital base to remove underperforming activities
• Strategise to mitigate specific risks identifiable to your business industry and insure key persons of your company to implement a clearly defined and formal succession strategy, thereby making your business more attractive to financiers and capital raising sources.  Buyers will always value higher a business that has the ability to raise capital due to it’s robust risk managment strategies.
• Operate more efficiently than your competitors and lower the cost of capital by continually testing the market to compare costs of debt and capital raising
• Reduce customer concentration with diversification, so that your business has no more than 10 to 25% of revenue from one source.  Signing customers to long term contracts will secure your business revenue into the future, adding a significant valuation boost.
• Form a management structure so you as the owner, are not central to the business

In the next post, I intend to discuss how to increase the economic value of activities your business engages in to BOOST its valuation.

Until then, make sure you register for your FREE place at the Webinar to be held on Thursday 8th Septemeber 2011 at 11.30am.
You can’t afford to miss this opportunity to learn all you can about how to BOOST your business profits and valuation.

Here’s to Your Profitable Business Exit!

Leigh Riley

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How can You Boost Your Business Valuation?

Here is a taste-test of some of the items to be covered in the FREE Webinar I’m running on:
Date: Thursday 8th September, 2011
Time: 11.30am

You will discover how to BOOST your Business Valuation when I interview Business Guru, Sean Hutchinson, live from San Francisco. Sean is sensational at explaining the levers you can control to increase your business valuation. You can Register Now for your place at the FREE webinar at http://yourbusinesssuccession.com/bizval-webinar.php

In this post, we will discuss How can you Increase Earnings in a way that increases your business market valuation?  Here’s how:

Lever One:

Build a Robust Financial History for your business by:

1. Increasing sales, but not just any sales.  Increase the sales of your products and services that add the most economic value to your business.  It’s worth spending the time to understand which of your products and services are the most profitable to your business.  Making more sales of products and services that are not overly profitable doesn’t make good sense.  If you want to BOOST your business valuation, concentrate on increasing sales where it counts most.
2. Lowering cost of goods sold means taking control of the input costs of production of your products and services, to increase profitability.  You may want to renegotiate with suppliers to lock in lower in-put costs. If your business sells services, consider how you may reduce costs by making more efficient use of lower cost labour and materials. Segmenting the costs of your service offerings will allow you to understand which of your goods and or services provides the least and most economic benefit to your business.
3. Controlling operating expenses Segmenting the costs of your service offerings will allow you to understand which of your services provides the least and most economic benefit to your business.  Once you can clearly define the most profitable products or services sold by your business, you will be in the position to make decisions about how your business will continue forward.

Timely Factors: don’t leave it ’til the 11th hour

Understanding fully the levers that you can control and manoevering them to boost your business valuation, can take time.  For some strange reason, business people too often think they don’t need to worry about it until the moment before they exit. Here are the important reasons why that’s faulty thinking:

More than half of business owners will be forced from their business due to factors they could not have imagined (statistics show 51% leave due to sudden and unplanned events).

• The sudden event means there is no time to prepare; and
• When you’re vulnerable due to unplanned events, it leaves you without power to negotiate

This means you are forced to be a ‘price taker’ and to accept whatever is offered without question.

The time it takes to build a business of value means it is not something you can leave to the last minute or just prior to exiting.

Business Boosters

In the next post of this series, stay tuned for: “How Can You Increase Earnings in a way that increases your business market valuation”, I’m going to reveal the 6 risks you must overcome in your business if you are to increase your business market valuation.  You’re going to be surprised at how large a part mitigating risk in your business will BOOST and contribute to your business valuation.

Until then, make sure you register for your FREE place at the Webinar to be held on Thursday 8th Septemeber 2011 at 11.30am. You can’t afford to miss this opportunity to learn all you can about how to BOOST your business profits and valuation.

Here’s to Your Profitable Business Exit!

Leigh Riley

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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

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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

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Prescription for business succession disaster!

Bill and Ben were equal-share directors of a profitable medical supplies distribution business for ten years. They estimated the business value at around one million dollars. When Ben suddenly died in a car accident, Bill thought he would automatically borrow to buy out Ben’s shares from Ben’s beneficiaries, but he faced a number of unexpected problems.

• Problem 1: Ben’s estate attorney arranged a business valuation to determine the value of Ben’s ownership for distribution to his estate, revealing that the business value had grown to $1.5 million. For Bill to buy Ben’s shares, he would need to borrow $750,000.

• Problem 2: Although the business was going well (with both directors operating it), Bill struggled to find adequate finance (the maximum he could borrow was $350,000) because his personal debt commitments were significant and he had forgotten the business had previously provided personal guarantee security against a mortgage for Ben’s family home.

• Problem 3: Ben’s wife, who didn’t work, needed the money from the business to pay off the mortgage and meet other family expenses, so was applying legal pressure to Bill to do something to release some cash.

• Problem 4: Bill was extremely traumatised by the loss of his long-term working partner and the resulting financial challenges. The situation took months to resolve and affected the business operations in a way that negatively impacted sales fulfillment, which was predominantly Ben’s area of strength in the business. Customers became disgruntled and began purchasing from competitors, which in turn affected sales, cash flow and ultimately the business value.

• Problem 5: Ben’s eldest son Tom had been working in the business as a storeman, and felt he was entitled to move into Ben’s role automatically as a beneficiary to the estate. Although Bill had tolerated Tom working under Ben’s charge while he was alive, Bill could not entertain the idea of working directly with Tom because he was too inexperienced. On top of that, Bill had always found Tom to be spoiled, immature and irresponsible, so considered him to be an undesirable working partner or co¬owner.

• Problem 6: Bill was desperate to find another equity partner, but aside from Tom, no candidates presented. Bill was not able to form an agreeable arrangement with Ben’s widow, who was represented by strong legal counsel. The situation had become quite acrimonious and Bill was forced to sell the business. The business sold 18 months later for $1.1 million, some $400,000 less than its valuation immediately after Ben’s death.

A poor succession outcome for Bill

Bill had lost a large part of his life’s work through his inability to arrange capital funding to take full ownership of the business when Ben died. This was a heartbreaking loss from which he took years to recover.

Although Bill and Ben were excellent business people in so many ways, they made an enormous error of judgement by failing to plan certain aspects of their business that were essential to ongoing good management. During all their previous business planning sessions, they had never discussed a succession plan or taken the simple steps that could have easily prevented the stress and heartache that Bill, Ben’s widow, and Tom all endured.

How to prevent the forced sale of your business

1. Implement thorough succession planning measures, such as forming an agreement that contains funding mechanisms to release owners from debt and guarantee commitments, to ensure that all owners remain in a strong position to negotiate a sale no matter what the circumstances.
2. Educate yourself - read in detail about what Bill and Ben could have done to prevent this situation in the solution suggestions in Part 5 of my book “Your Business Succession: How To Exit Your Business With Maximum Cash Flow & Profits”
3. Conduct a FREE self-assessment of your readiness to exit your business profitably under any circumstances at www.BusinessExitQuiz.com

To Your Profitable Business Exit,
Leigh Riley

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Why you want to properly value your medical practice

Dr Dave, a GP nearing retirement, offered Dr Peta, a talented younger GP, a 20% stake in his Practice, as a retention strategy, and also as part of her remuneration package. They agreed verbally to a loose and informal buyout strategy, whereby Dr Peta would acquire the remaining 80% over four years, as part of the incentive bonus remuneration package on which both doctors had agreed.

The Practice valuation was based on Dr Dave’s own estimations, because both parties believed that it was not worth paying the accounting fee for a formal valuation.

Later, Dr Peta married, and soon afterward tragically died in an accident. Her new husband requested a formal valuation of the Practice and made demands on Dr Dave for payment to the value of his inherited shares.

The formal practice valuation was higher than Dr Dave had estimated, and because the shares had been offered as incentive (rather than being purchased) under a verbal agreement, Dr Dave didn’t believe that he should pay the spouse anything. Unfortunately the legal opinion disagreed, and Dr Dave had to pay up. Without available cash on hand, Dr Dave was forced to borrow the funds in a difficult borrowing environment, which required him to delay his retirement significantly, until the debt was repaid.

What’s more, finding an alternative potential buyer was difficult due to the lack of available candidates at the time. The costs involved in resolving the legal dispute far outweighed any initial succession set-up costs he would have incurred. If only he had sought professional advice from the beginning!

This case could easily have been an example of a viable succession strategy for the GP; instead it demonstrates a series of common succession strategy errors, all of which would have been avoided with appropriate professional guidance.

What Dr Dave could have done to prevent his practice succession nightmare

Dr Dave would have needed to include a number of vital measures:

• Invest in qualified professional advice to ensure the strategy would work for both parties.
• Organise a formal valuation of the Practice to determine the true basis price as part of the terms.
• Formalise the strategy with specified terms, in a legally written Buy-sell agreement, so that there could be no misunderstanding regarding each party’s rights, and so that loved ones would automatically benefit without distress or legal argument.
• Arrange insurance to meet the contingent aspects; this would have provided instant capital to pay out the deceased party’s spouse (thereby requiring no debt funding), and may also have allowed Dr Dave to retire fully funded, without the need to delay his retirement.
• Professional advice from exit experts would have ensured that the strategy would provide the most advantageous structure from a tax perspective.

How prepared are you to exit your practice with maximum cash flow and profits?

Take the FREE Business Exit Quiz and and find out!

To Your Profitable Practice Exit,
Leigh Riley

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Infighting and Disputes Devalue a Thriving Business

When you decide to join forces with colleagues in a business, your natural response is to focus on all the positives of the union.

The last thing you are likely to have on your mind is the possibility of an acrimonious separation that could result in you losing part or all of the capital you contributed to the business, as well as being denied the value that your efforts contributed.

Let’s face it – if you thought that was a possibility, you would never enter a joint venture, but the reality is that some business relationships do sour, and the worst time to attempt to negotiate fair exit terms is during a dispute.

CASE STUDY – Effects of infighting and disputes among business owners

The situational errors made by business partners Andy, Phyllis and Johanna in a professional services firm caused a tragic loss  of value due to infighting and disputes which resulted in one partner being forced out without her rightful financial entitlements.

A thriving professional services firm’s three partners began to argue among themselves about the business operations and workload. Two of the partners, Andy and Phyllis, felt they were working harder than the other, Johanna, although all were earning the same pay.

The arguments escalated into a dispute when Andy and Phyllis, who were romantically involved, ganged up on Johanna, leading to her unplanned, forced exit. With no formal agreement about succession terms in place, an unreasonable exit payment was offered to Johanna.

Johanna engaged legal representation and a costly legal battle ensued regarding equity value. The outcome was less-than-fair terms for the departing partner after costs. With all parties focused on the dispute, attention was diverted from the business operations. The result was a sizable decline in the practice value.

What’s more, during this disruptive period, some staff left, while others took advantage by slackening off. Many clients left the firm to engage alternative options due to the poor service they were receiving, some following departing staff members, effectively destroying the original value of the firm.

Cases like this demonstrate why you want to start your business relationships with the end in view, and why you must negotiate the exit terms while all partners are in a positive frame of mind.

Why Succession Solutions MUST Be Planned At The START of a Business Partnership

This situation could have been resolved easily had they started their partnership with a succession plan agreement. The conditions of the agreement would need to include the full financial terms applicable to any partner of the firm exiting under each of the possible succession triggers identified in Chapter 2 of the book, “Your Business Succession”. This would have allowed Johanna to decide whether or not the terms of exit suited her before she committed to entering the business. She would have had the ability to negotiate more favorable terms from the start, which would have saved her from the stress, legal battle and financial loss that eventuated.

You can read in detail the actual strategy outlined for the agreement in Part 5 of “Your Business Succession”.

How well prepared are you to exit your business with maximum cash flow and profit under any circumstance?

Take the FREE Business Exit Quiz and find out!

To Your Profitable Business Exit,
Leigh Riley

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