A group of intermediaries within our nationwide network of advisers (The Business House, Inc) has released a strong recommendations list on how to increase small business cash flows. Following these tips can most certainly boost a company’s business valuation. Below is a recap of the key points:
Cash Flow is KING: Cash In - Cash Out = Cash Flow
As a business owner, you obviously want to be cognizant of decisions and factors within your business that will positively or negatively influence its value. Below is a breakdown of some key areas you can focus on today to ensure that your company’s value is protected should you ever need to conduct a business valuation and if you ever plan to sell:
We received the monthly BizQuest newsletter and had to share the articleby Michael Coyle as it’s a very relevant topic and talking point which needs to be discussed between business owners and their advisers: Selling or planning an exit in a down market.
Statistic: “”It is estimated that less than 15% of business owners have developed an exit plan from their business, despite the reality that it is a certain outcome for every business owner.”"
The SBA’s Standard Operating Procedures (SOP) was recently updated and released. It is more streamlined and condensed, allowing for easier reference to and understanding of guidelines.
One specific area we want to highlight is the requirement of an independent, third party business valuation for SBA loans exceeding $350,000. Here is the exert:
(i) Business Valuation
Most Americans continue to read, hear and see troubling news about the U.S. economic outlook. Business owners need some reassurance that the sky is not falling, particularly for business owners considering the future sale of their business. Today is a seller’s market! But, cyclical indicators point that this window will not stay open forever.
CNN Money put out a great Q&A article a couple of weeks ago: How to sell a million dollar business. If you are planning or hoping to sell your 1-2 million dollar small business in the next 2-3 years, save this to your favorites. Highlighted topics include:
The NY Times tackles a very important topic for today’s business owner: what to do when partners want to split. A buy-sell agreement protects all owners in a business for events when a minority, majority or equal owner decides or is forced to leave a business. In most cases, a buy-sell agreement will include a provision for determining “fair market value” via a credible third-party business valuation.
Serial entrepreneur Mike Doernberg used this saying in a business owners workshop and it has always stuck with me. In particular, he used this phrase as it relates to start-up business owners who have reached a point of no return and are about to “cross the chasm”. Either sell your business (run from the lion) at this juncture, or bear down for the next 3-5 years to really refine & develop the business (chase the naked lady).
If you own a business and are thinking about selling, it is important you recognize the value of a defined plan & strategy and the value of professional advisors. An article featured on Financial Post summarizes a recent study of business owners who sold their business within the past 5 years (more than 100 business owners were surveyed about selling and what they would recommend to other business owners following their own personal experiences):
In a NY Times article, “Failure Isn’t Always a Bad Thing”, an interesting formula on determining a start-up’s potential for success is presented which was extracted from venture capitalist David Sliver’s book “Smart Start-ups”:
V = P x S x E
Valuation = Problem solved x Solution’s elegance x Experience of management
