Business is hard enough without going it alone: Get outside help to boost your business

Business owners know their company and industry, but still get stuck in the day-to-day business. Often times they hit a plateau and find it difficult to reach the next level of performance. Many of these executives and business owners look inside their organizations for the solution when the answer just simply is not there. They need to be seeking support from someone outside the company.

Professional athletes use coaches to improve their performance because someone from the outside can see things the individual cannot. The coach can observe and communicate what things need to be changed and support that change. Even the best golfers in the world employ coaches to help them improve every part of their game. Business is no different.

Executives and business owners run into new situations every day and have a limited set of reference on how to deal with them. An outside coach can help them put these situations into perspective and support them in adapting to either internal or external situations.

I work with one business owner who is an expert in his field, and wanted to look into his future planning what it would look like. He needed help with developing an exit strategy, ie: sale to an insider, sale to a 3^rd party, or passive ownership; to include increasing sales and adding resources. In our meetings we discuss what is going on in his day-to-day business and progress against our action items. He has found tremendous amount of value by having someone he can talk through the issues and opportunities in his business.

The following are areas to consider if you move forward with a coaching relationship:

Can you take outside advice?

It is not unusual for a business owner or executive to feel inadequate asking for help. The entire organization looks to them for direction and they tend to be very intelligent. If you cannot check your ego at the door however during a coaching relationship, then don’t waste your time looking for help.

One-on-one or Group setting:

There are a number of very good peer advisory group organizations that provide coaching in a group setting. The organizations I know of all are all high quality and the participants tend to do much better than their competitors in areas of business growth, client retention and organizational development. BUT, group settings are not for everyone! If you cannot openly accept input from others in a group setting, and cannot provide balanced support to others you should look to a one-on-one coaching relationship.

Getting Started:

There are a wide range of choices when it comes to business or executive coaching. Prior to meeting with any business coaches perform an inventory of your issues, opportunities, and areas you need help developing. This will give you a starting point when having initial discussions with coaches. Be honest with yourself and assess how you will interact with someone providing feedback. Share this with your coaching prospects during initial meetings.

How to Find a Coach

1.) Ask others that you know about their coaches and solicit recommendations from your network. One of the best ways to find a coach is based on feedback from your network.

2.) An internet search will provide you with a wide range of options. Look for someone local so you can have face-to-face meetings, and not just telephone coaching.

3.) Industry is not important. Don’t get hung up on whether the coach has experience in your industry. They provide the outside look to your industry expertise.

4.) Find out how they operate. Discuss how the meetings work and assess how this matches your style.

5.) Assess the personality of the coach. You will be spending a fair amount of time with your business coach and it is important that you feel comfortable with that person.

6.) Ask for references.

In most cases you will find that coaching for you or your business is very cost effective and can support you and your management team. Understanding if you are the right candidate for coaching is the most important step, followed immediately by your coach’s approach and personality. Most business owners find benefit from most coaching relationships within the first few meetings and measured results within a few months.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of two books “Owner Exit Planning: Leave On Your Own Terms” and “Mapping Your Recovery: Grow sales in difficult times”. For additional information visit www.RoundhouseAdvisors.com

My book “Mapping Your Recovery: Grow sales in difficult times” provides additional information on areas that can be positively impacted by outside coaching or consulting www.roundhouseadvisors.com/growsalesbook

Owner Exit Planning: The 7 things you must do before selling your company: part 5

Editor's note: This is the last of a five-part series on preparing yourself and your company for sale to maximket.

You have prepared your business for sale: increased sales, increased profits, strong management team, improved the value detractors and got your house in order. It is now time to take your business to market and see the results of your efforts.

The process of selling your business is like no other sale you have been involved with in your business career. It is different than buying real estate, different than selling your products and different from selling your home. It can be a complicated process, but not difficult if you have a team pulled together that has been there before.

Many business owners have figured out new business actions in the past, so it is a natural reaction to take this process on by yourself. DON'T...this is the single most important transaction of your career and it pays to have the support of a team that can steer you in the right direction and maximize your results.

Get your team together

Pull together a team of professionals that can help you navigate the process.

Business intermediary - A business intermediary is an individual or organization that can sell your business for you. Manage the process and help you maximize the amount you receive for your business. A business intermediary might be a business broker or investment banking firm. These firms will market your business and manage the process. A general rule of thumb is a business broker works with companies that have a value less than $5 million and an investment banker that will provide an auction like service for companies with values over $5 million (these ranges vary by organization). Find a business intermediary through referral if possible and always check references.

Attorney - You may have a business or personal attorney that has supported your organization for years, but do they have acquisition transaction experience? Some of the more difficult deals that get done are due to an attorney on one side that has not done any/many transactions making issue over items that shouldn't be and miss areas to protect you. Find an attorney that has the transaction experience and in many cases they will partner with you and your trusted attorney.

Accountant/Accounting Firm - Your accounting firm can help you and your attorney structure the deal to help minimize taxes. It is also helpful if your accounting firm has assisted other owners in the sale of their business. They can be very beneficial in assisting during the due diligence process as well as working with you to understand the tax implications of your transaction. In the end it is all about what you take home from the sale of your business.

Financial planner - Hopefully you have worked with a financial planner during the early stages of your planning process to understand how much you need to take home from the sale of your business to fund your lifestyle after selling your business. Now is the time for your financial planner to get involved with managing the proceeds from the sale of your business. They are a key player to help you achieve your lifestyle and legacy goals.

Business consultant - A business consultant can help you in the preparation of your business prior to going to market, but they can also help you through the sales process. Business consultants that have worked transactions can help you manage the due diligence process, answer any questions that arise during the process and can help you work with your other advisors to make the process as enjoyable as possible. Selling your business is very stressful and having someone that you can confide in will help ease the process.

This is the most important transaction of your career, so get the right team together to help manage through the process. Take advantage of their experience in managing the transaction process to increase the chances that you end up with a positive outcome and experience. More in-depth information is available in my book, "Owner Exit Planning: Leave On Your Terms"

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms." For additional information visit www.RoundhouseAdvisors.com

Owner Exit Planning: The 7 Things You Must Do Before Putting Your Company On The Market: Part 3

This is part three of a five part series on preparing yourself and your company for sale to maximize your outcome.

Preparing your company for sale includes more than just improving the value drivers in the business. There are a number of areas a prospective buyer will review during the sales process that are not readily visible when they make the initial offer. These areas will be looked at in depth during due diligence when placing your company on the market for sale.

Due diligence is an opportunity for the buyer to look deep into your company and review all information, processes and structure of the company that was presented during the first part of the sales process. This is where those areas that were neglected over time come back and can negatively impact the price you get for your business. These areas make up the value detractors.

Manage the Value Detractors

The value detractors include areas of your business that are reviewed during due diligence by the buyer and can represent risk to the new owner. Risk comes in many forms and can include too much revenue concentration in only a few customers, aging IT infrastructure, or lack of process in the organization. These are only a few areas that can cost a new buyer additional money after purchasing the business, or can represent risk in the revenue stream.

Most offers are based on a multiple of the free cash flow in the business, and any risk to the revenue can impact the purchase price a prospective buyer is willing to pay for a business. You need to objectively review your operation and identify those areas that a buyer would view as risk to their investment.

Some Examples:

• How secure is the revenue in your business with you gone? Many business owners are the key interface with customers, and when gone represents risk to someone else running the business. In this example it is critical that you have already transitioned many of the key sales activities to others in your company, so you can demonstrate your lack of involvement in the day-to-day sales efforts.

• Do you have a procedure manual that outlines the processes of your organization, or do key employees have the process in their head? The risk to a buyer in this case is from employees leaving or out for extended periods of time. Focus efforts on developing a procedure manual that outlines the key areas in your business and defines the process flow of your organization. It should be written in a way that would allow a new employee or temp to read a section as it relates the job they are doing and perform that task with some guidance. A buyer will look at the procedure manual as a road map to provide direction in the operation.

• Is your IT infrastructure outdated? The buyer will look at this area as an additional investment they will need to make within the first 12 months of purchase. Have your IT infrastructure reviewed approximately 18 months before going to market and update the equipment and software that is outdated. By managing this upgrade far enough in advance of taking your company to market allows you to make smaller monthly investments, as opposed to one large investment. This approach helps you manage your cash flows during the time leading up to your liquidity event.

• Too much revenue in too few clients. You have a problem if only a few customers make up 10% t0 15% of your total revenue. This lack of diversity represents risk to the new buyer in the security of the future revenue and cash flow in the business. This is also a difficult item to fix in a short time frame. The only solution is to increase sales with other customers to lessen the impact of the large customers.

These are only a few areas to review and fix prior to going to taking your company to market. By reviewing those areas in your business that represents risk to an outside buyer, you can be prepared for the due diligence process and maximize the value you receive from the sale of your business.

Coming up: Ready your business for market by getting your house in order and managing through the process.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Owner Exit Planning Part 2: The 7 Things You Must Do Before Putting Your Company On The Market

This is part two of a five part series on preparing yourself and your company for sale to maximize your outcome.

Once you have worked with your financial planner and understand what is needed to sustain a desired lifestyle after the sale of your business, it is time to start working on your business to get it ready for market. The first area to focus on is the value drivers in your business. The primary value drivers for any business include consistently improving cash flow, increasing top line revenue along with a growth story and a strong management team.

A buyer will be looking at the business from a perspective of past performance and current business structure. The buyer will not value your business based on optimistic future business projections, especially if those projections are based on activities and trends that have not been realized in the past. These dynamics will require you to look at the company differently in the few years prior to putting the business up for sale to provide for the maximum return. The operational actions during that period are different than when you are running the business for your personal needs if you want to maximize your financial outcome at the time of selling your company.

Consistently Improving Cash Flow

Free cash flow is the main measurement for company valuation when it comes time to sell your business. A common measure of free cash flow is Earning Before Interest, Taxes, Depreciation and Amortization (EBITDA), and provides a measurement of company performance without accounting for the items not included in EBITDA.

As an owner looking to sell your company you need to increase EBITDA year over year for the 9 to 36 months prior to selling your company in order to realize the highest value for your company. This may mean managing your company differently over that period of time than you have in the past. Most owners of private companies manage their business to minimize taxes, which means many investments in the business are expensed in the current year and extra expenses in the business may exist to depress earnings.

In an environment of maximizing value, you need to review all business expenses and work with your accountant to properly account for those investments that can be depreciated over a period of time. Review all costs and only incur those that are necessary to run your business.

Growth Story

One of the key areas to steadily improving EBITDA is increasing revenues. A growth story provides background to the prospective buyer on the why and how of the revenue growth. The growth story becomes a basis for the prospective buyer to plan growth going forward, which provides a higher valuation for your company.

We see many companies fall into a stagnant growth mode as the owner and business reaches maturity. This results in a lower valuation of the business, because the new owner needs to recharge the company and find growth opportunities. In these situations many owners can stimulate growth through programs that leverage current company capabilities.

These programs include adjacent growth programs, which may include new products developed for current markets, moving into adjacent market segments with current product offerings, or increasing sales channel capability with your current market and products. Whatever the plan to increase sales you will be best served if you can position those efforts into a credible growth story that can be succinctly conveyed to a prospective buyer and provide a basis for increased company valuation.

Capable Management Team

Most owner-run businesses revolve around the owner making many of the decisions. In these organizations, the company cannot continue without the owner on a daily basis, which can create risk for a new owner. Many buyers are looking for a standalone business with management teams that can run the day-to-day activities after the owner is bought out and has moved on. Key management positions need to be filled with strong individuals with the technical ability to run their function – they should be considered “A” players.

The Value Drivers

There may be other items more specific to your business, but in general these three areas are looked at by an outside organization to develop a price for your company. The value drivers represent those areas that are more readily seen in the process. In our next article we will look at the value detractors that represent risk to a buyer and as a result depress the value of your business at the time of sale.

Coming up: Increasing the value of your business by improving the value detractors, and getting your house in order.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Owner Exit Planning: 7 Things You Must Do Before Putting Your Company on the Market

This is part one of a five part series on preparing yourself and your company for sale to maximize your outcome.

You have worked most of your life at a business that has been a key part of your life and now it is time to sell your company and retire. As an owner of a successful business you are probably thinking that managing your exit will come naturally. This cannot be further from reality…running and growing your business is much different than selling your company for a final exit. There is a need to look at your business and your life differently as you begin preparations to exit.

Over the next five articles we will explore the seven areas you need to do before putting your company on the market. These areas will help you prepare yourself and your company to deal with the sales process, maximize the value of your company, make your company more attractive at the time of sale, and help you develop your personal plan after the sale.

1. Are you ready?

Many business owners I meet find themselves waking up one morning with owner’s fatigue – sick of the business and ready to sell, with no planning or preparation. This makes the exit difficult at best with many of these business owners selling for much less than they want (or need) or getting trapped in their business with no exit horizon in sight. Start your planning as soon as possible – 5 years prior to putting your company on the market is not too soon.

What will you do?

Ask yourself “What will I do with my time after selling my company?” If you are like many business owners the response revolves around some leisure activity that you do not get enough time for today. It might be golf, travel or some outdoor activity…if this is your answer you need to be prepared for some boring times. Most independent business owners have too much drive to totally settle down after selling their business.

After 90 to 120 days of leisure they are ready to get back to something more like work, something with purpose. It is important to understand this and develop a personal plan for your next phase of life. This may include starting another business in an area that appeals to you and looks fun, it could be getting on a company board of directors, or it could even include getting involved with a non-profit organization. Whatever turns you on; you need to start the planning development of these areas while you are still involved with your current business. Diversifying your self-image while still in your business helps you during the sales process and also allows you prepare for the next phase of your life.

Financial Needs

Many business owners do not work with financial planner, but instead feel their business is going to fund retirement. The first step in getting yourself ready is to work with a financial planner that can help you assess what your financial needs will be to support whatever lifestyle you desire after selling your business. Your financial plan will provide you with a target of what you will need when selling your company. This is not the value of your business, but it will give you an idea of the work needed to build your company.

The financial plan is an important part of your planning efforts and should not be skipped. A good financial planner can help you develop a plan that can include philanthropic endeavors, gifts to family members or financing your next business venture. Whatever the direction, it gives you a direction and focus. You have been financing a lifestyle with your business and after selling, you will need to fund your lifestyle out of the proceeds from your business.

Your Business’s Value

Your business is not worth what you think it is. Most business owners believe their business is worth two times the real market value. Many times it is because they lack the knowledge of valuation techniques and in almost all cases it includes some level of emotional value attached to the business. You need to be prepared for offers to come in significantly lower than your expectations, if you have done nothing to prepare your company for sale. Start this process early with a professional that can give you an idea of the market value of your company and work on those areas that will have the biggest impact on increasing the value.

Coming up: Increasing the value of your business by managing the value drivers in your company, improving the value detractors, and getting your house in order.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Managing in Uncertain Times

Turnaround… Tough Times… Terrible Economy. Call it what you will. In any case it takes a special focus to manage in a down turn economy and be able to emerge positioned to grow. I have managed organizations that required turnaround skills as well as hyper-growth, and there are challenges associated with both. Turnaround management skills require you to improve or stabilize financial results without putting the company in a death spiral.

The best turnaround management includes not only cost cutting, but more importantly increasing or stabilizing revenues. Too many of the companies I have met with in the last two years have waited too long before looking for help and have focused primarily on trying to ride out the storm, only to find out they do not have the cash reserves to make it to the end.

A focus on the following areas is necessary when managing in uncertain economic times and/or a turnaround situation.

Employees – Employees are your most important asset. Your employees have probably gone through at least one round of layoffs and/or seen reductions in their salary/hours. It is difficult in good times to keep employees motivated and even more difficult when they have gone through the turmoil of the last few years. Unmotivated employees can negatively impact customer service, productivity and ultimately profits.

A key area of managing your employee base during this time is communication. In fact, there is no such thing as over communication during difficult times. In the absence of information, your employees will fill the void with what they think is happening, and most times it is untrue and detrimental to moving the company forward.

Customers – Customers are the lifeblood of your business. You cannot risk your top customer’s hearing about any turnaround effort through the grapevine. They can and most likely will hear about any difficult time you are managing from your employees or others in the industry. Be proactive and discuss your situation with key customers. Visit them in person when possible and reassure them that you are focused on emerging a healthier company prepared to serve them well into the future.

This is also the time to review profitability by customer and make the difficult decision of firing those unprofitable or marginally profitable customers. The client meeting is a good opportunity to discuss a price adjustment that brings them in line with your objectives or terminating the relationship.

Partners – Partners may be dealers or Value Added Resellers, joint venture partners, or banking/finance partners. It is necessary that you communicate openly and honestly about your situation along with the recovery plan in place. Be proactive with your partners and present your plan of recovery along with timelines. It is good with this constituency to be very conservative in your recovery plan, so feel comfortable and confident that the company can achieve the results even with any unforeseen issues that may arise.

Leadership – This is the time your company needs you most. Demonstrate confidence in front of your workforce, even if behind closed doors you and your management team are having violent discussions on the recovery plan. Your employees need to see a common front from the management team to confidently follow your leadership and the direction to improve company results.

Leverage the collective strength of your management to provide the focus and direction of the organization. The diversity of skills on your management team is exactly what is needed to prepare for the recovery. Remember, the collective group is smarter than the individual.

Business as usual will never be the same after the economic turmoil of the past few years. Communication and focus on the right areas of your business is necessary to be in the best position as the economy continues to improve. You may be too close to your business to see all the areas that should be addressed, so take advantage of outside help to provide a 360 degree view of your situation and opportunities. This may be your advisory board, contacts in a networking group, or hire an outside consultant to help with your efforts.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

No Better Time to Prepare Your Company for Sale

You have built your business, planned on selling it and retiring in the next 12 months, but now the economy has forced you to change your plans. Your company is treading water and the last thing you want to do is think about preparing the business for market, when you feel the need to survive the rest of this year. This is a typical story for many company owners over the past few years. Don’t use the economy as an excuse for putting off your plans to sell the business.

Many of the strategies to increasing the value of a business and get it ready for sale can also be used to manage through the difficult economy. Value creation in a business can be done in good and poor economic times, but it does take more discipline when times are difficult. Focus on these four areas to improve your business, make it more attractive when put on the market and emerge a stronger company once the economy improves:

1. Assess and upgrade management. – Take a serious look at your management staff and key employees and identify those positions that need to be upgraded. It is an employer’s market and there is strong talent looking for the right opportunity. The new blood is good for driving improvements in your business today and a key to increasing the attractiveness of your business when it goes on the market.
2. Increasing revenues and cash flows – When it comes time to sell your company, the financial results will be measured compared to your industry’s performance. If your revenue growth/decline is as good or better than the industry, then you have been successful in building the value of your company. - Increasing revenues can be difficult during a tough economy, but you do have the ability to steal away customers from your competitors. Now is the time to get aggressive with programs targeted specifically at this prospect base. Use lower cost marketing programs to make the most of your budget. Some of these programs include PR, telemarketing, pay per click web advertising, search engine optimization and email marketing.
3. Recurring revenue stream – Find opportunities to generate new revenue and more specifically recurring business. A telemarketing firm that I have worked with in the past started a new program that included a database and 50 hours of telemarketing activity from dedicated callers. It turned out that I was thinking of starting a program, but this program was enough incentive to get me to sign up for their services.. Their intent is that the first 50 hours is successful and will generate additional telemarketing. They promoted this to those already in their database through an email blast – very low cost to run the program and successful.
4. Get your books in order – Now is the time to cleanup your legal and financial records. Your legal records will be reviewed by potential buyers and any board meeting minutes that are not up-to-date indicate that there may be other issues in your business that need to be addressed.

The last thing a potential buyer wants to hear when at the negotiation table is something having to do with “normalizing” expenses and cash flows because of what the owner took out of the business. Make those changes now, so you do not need to put yourself in a negative position at the negotiation table. These may include adjusting your salary to industry norm for someone running your business, eliminate cross charges with other companies you have setup to fund some of your interests, cut back on.

At some point, the economy will improve and the acquisition of privately held businesses will heat up again. We are all getting older, and the need to transition a business will not go away. When this happens, you can expect to a large number of businesses come onto the market. Those companies that took the time and effort to get prepared will be the companies that will sell first, and at a better price than those that only survived during the past two years. Don’t let the economy be your excuse to be a slave to your company and delay any retirement hopes you may have.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com