Sunday, February 27, 2011
Saturday, February 26, 2011
Thursday, February 24, 2011
[You're getting this note because you subscribed to Seth Godin's blog. www.sethgodin.com]
An atomic theory of business size The magic of the periodic table is that every atom is one thing or another--there isn't a stable element that's sort of oxygen and sort of nitrogen. If there were, there would be millions of elements, not a few hundred.
That's because electrons are (more or less) either here or there. The quantum levels ensure that there are no weird hybrids. A business follows a similar model. A local mom and pop store is just the right size for mom and for pop. The rent is low enough for the two of them to cover it. It's stable. They can't afford a $200,000 a year CFO. It wouldn't be a stable situation.
This is backwards but here you go: businesses that exist exist because the marketplace allows them to function at the right size. There were a lot of bowling alleys in the 1960s because the number of people you needed to run one plus the rent was just covered by the revenue you could expect. There was a right size, one that people were willing to take on and run.
The next level up from Mom and Pop feels different. Different furnishings, different rent, different payroll. It's not a little bigger, it's a whole quantum level different. And then down the street is the chain store, the one with 40 outlets and regional vice presidents and regional newspaper ads. Those things naturally go together, the scale is right.
Rightsizing your business is one of the most important decisions you can make. Just because you're thriving at one scale doesn't mean that a little more effort or a little more investment magically take you to the next. They probably don't.
Want to sell your popular donuts at Whole Foods? That's a quantum leap, not an incremental step.
Want your auction software company to become a public behemoth? It requires a leap of size and commitment, not a gradual creep.
Want to go from freelance work as a programmer to running a business like Fog Creek Software? Totally different list of requirements.
This is actually a good thing. It's good because rightsizing allows you to be profitable and live as a human. Those chasms in between are where people fall down.
One of the side effects of the internet revolution is that several new stable business sizes appeared. Groupon can do a billion dollars in revenue nationwide with far, far fewer employees than it took Target to hit the same level. A solo author can reach more people and generate more impact than she ever could have a dozen years ago.
These new sizes don't mean that the rules of quantum scale have gone away, though. That popular self-published author might be able to successfully employ six people, but there's no way she magically scales to sixty without something else changing. Several times I've run businesses that the market liked but couldn't find the right scale... adding more people didn't add a significant enough amount of revenue, and fewer people would have cost us our customer base. Just because it's a good idea doesn't mean that there's a scale that works.
When in pain, consider your scale. When you're too big or too small for the revenue or the impact you seek, you'll feel it in your bones. Leap.
Julie Gordon White, Principal
BlueKey Business Brokerage M&A
Sent Via BlackBerry!
Saturday, February 19, 2011
Thursday, February 17, 2011
With the planned sale of your business, your reason for selling will be one of the most important “trust factors” created to reach agreement with a potential buyer. Selling your business to an outside buyer begins with a courtship. Don’t ask to get married on the first date, and never, ever lie about why you want to get to know them better! These exit options are the most common reasons for selling a business to a third party, listed in order of highest credibility:
This is THE very best reason for selling! If you are of retirement age, a buyer will more readily accept that you are selling so you can start enjoying the next phase of your life- not just hiding from problems in the business such as the loss of a customer or key employee.
Health issues are another legitimate reason to sell. You don’t have to divulge all of the details of your personal health situation, but the more forthcoming you are, the greater likelihood that the buyer will believe your reason for your selling along with other critical aspects of the sale.
Death of an owner or partner is a very unfortunate but legitimate reason for a sale.
Divorce / Partner Disputes
Divorce and/or partnership disputes are also legitimate reasons for a sale as long as they legitimately affect your ability to operate the business. If you site this as your reason for sale, make sure you have a good story to tell (and don’t mind telling it).
Loss of Market Share
Be honest about declining sales, because in a challenging economy, you can! Be forthcoming with information, share the down and dirty details and be prepared to present the plan to help the new buyer grow again as the economy rebounds. Also, be prepared to participate in the financing (promissory note or an earnout) to reap the upside benefits (more on promissory notes and earnouts later).
So to recap, make sure your reason for selling is legitimate and your “selling story” is practiced. Answering the “reason for selling question” honestly and convincingly will set the stage for an open and friction-free negotiation.
Wednesday, February 16, 2011
Make big plans ...that's the best way to make big things happen.
Write down your plans. Share them with trusted colleagues. Seek out team members and accomplices.
Shun the non-believers. They won't be easily convinced, but they can be ignored.
Is there any doubt that making big plans increases the chances that something great will happen?
Is there any doubt that we need your art and your contribution?
Why then, are you hesitating to make big plans?"
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Tuesday, February 15, 2011
Lastly, with a planned sale, you have time to understand the strengths, weaknesses, opportunities and threats of your company and make changes accordingly with the goal of significantly increasing the final selling price.
The above is an excerpt from the soon to be released book “EXIT! 12 Steps to Sell Your Business for the Price You Deserve” by Julie Gordon White. Julie is a Certified Business Broker, Author, Speaker, Wife, Mom and Marathoner. Julie lives in the San Francisco Bay area and has been quoted in major media outlets such as the New York Times, Wall Street Journal, Inc. Magazine and the San Francisco Chronicle.