Corporate Social Responsibility and Preparing Your Business to Sell

Corporate Social Responsibility (CSR) is increasingly seen as something that companies of all sizes need to be aware of, so let’s take a closer look at a few of the finer points.

There are 4 basic pillars in CSR: the community, the environment, the marketplace and the workplace.  The community pillar of CSR refers to your company’s contribution to the local community; this contribution can take a variety of forms ranging from financial support to personal involvement. There are 4 basic pillars in CSR: the community, the environment, the marketplace and the workplace.  The community pillar of CSR refers to your company’s contribution to the local community; this contribution can take a variety of forms ranging from financial support to personal involvement. Millenials are especially interested in using their growing purchasing power to support companies that share their values.  According to Forbes, “75% of Millennials consider it fairly or very important that brands give back to society instead of just making a profit.” They  care that brands practice authenticity, local sourcing, ethical production, a great shopping experience, and giving back to society.

The second pillar of CSR is the environment.  The simple fact is that people around the world are becoming much more environmentally aware.  You can be quite certain that a percentage of your customers and/or clients have environmental concerns.

Increasingly, consumers want to know that the companies that they are purchasing from have good environmental practices.  There are many ways that businesses can show that they are environmentally aware.  They range from recycling and using low-emission and high-mileage vehicles whenever possible to adopting packaging and containers that are environmentally friendly.

The third pillar of CSR is the marketplace.  Proper corporate social responsibility includes the responsible utilization of advertising, public relations, and ethical business conduct.  Another key element in the marketplace pillar is adopting fair treatment policies towards suppliers and vendors, contractors and shareholders.  In other words, the marketplace aspect of CSR means rejecting exploitative business practices in favor of fairer and more equitable business practices.

The final pillar of CSR concerns the workplace.  In the workplace pillar, CSR encourages the implementation of fair and equitable treatment of employees, as well as observing workplace safety protocols and embracing equal opportunity employment and labor standards. We’ve written before about fostering a culture of employee engagement. Research shows that employee engagement tends to rise in response to a strong connection to a business’ vision and mission.

Adopting CSR practices in today’s business climate is a prudent decision, as it serves to increase both shareholder and investor interest, while simultaneously encouraging a company’s value.  Likewise, embracing CSR practices can make it easier to attract a buyer and that party may be willing to pay a higher selling price. CSR helps you to create and share a compelling narrative about your business. These stories are powerful vectors of brand awareness and loyalty.  It helps you to focus on what your stand for and reinforcing people’s association between you and those values.

Typically, buyers want a business that has many of the attributes supported by the four pillars of CSR.  Buyers want businesses that enjoy a high level of customer loyalty and have good overall relations with the local community.  Additionally, buyers want businesses that have quality relationships with their suppliers and vendors as well as loyal and dependable employees.

Sellers must realize that buyers want products, goods and services that are in line with the current trends of the marketplace and have an eye towards future trends.  Finally, buyers want as little “baggage” as possible.  You can be certain that buyers don’t want to find any skeletons lurking about in the company closet.  The proper utilization of CSR can address all of these concerns and, in the process, make your business more attractive to a potential buyer.

What Do You Need to Do to Get Your Business Ready to Sell?

In his recent article in Smart Business entitled, “How to get your business, and yourself, ready for sale,” author Adam Burroughs explores the key points of getting your business ready to sell.  Burroughs points to the truism that, at some point, almost every business owner must sell his or her business.  For this reason, it is critical to think about what it takes to get your business ready to sell.  Simply stated, it is best to explore and plan for selling your business long before you actually need to place your business on the market.  Let’s explore some key points for selling your business.

Broadening Your Options

Burroughs interviews Scott McRill at Clark Schaefer Hackett.  McRill notes, “The sooner you think about your exit, the more options you’ll have for yourself and the business when the time comes.”  A savvy business owner will always want to give himself or herself as many options as possible. McRill wisely points out that early planning is key, and a failure to engage in early planning could lead to a lower selling price.  If you want to get the best price for your business, then planning for the eventual sale as far in advance as possible is a good move.

Planning in Advance

According to Burroughs, business owners should start planning to sell their business at least 2 to 3 years before they actually plan to sell.  Part of the reason for this is so that business owners will have enough time to make operational improvements designed to maximize the business’s overall value.

A Financial Review

At the top of every business owners “preparing to sell” list is to have a third-party review the business’s financial situation.  This is excellent advice for, as frequent readers of this blog know, any serious prospective buyer will look long and hard at your business’s financials.  Getting your business’s financial house in order means that you should turn to an accounting firm for help.  You’ll want to review financial statements for at least the previous 2 to 3 years. This will be a crucial step in arriving at your optimal valuation.

Burroughs points out that when it comes to selling a business, there are many variables that business owners often overlook.  At the top of the list is the management team.

Your Management Team

Prospective buyers can get very nervous about the stability of the management team once ownership has changed hands.  Often, the new buyer may only sign on the dotted line if the owner agrees to stay on after the sale during a transition period.  Having a competent and proven team in place, one that is dedicated to staying with the company will help you get your business ready to sell.

There are a lot of variables involved in preparing to sell a business.  The sooner that you get experts involved in the process, the better off you will be.  A business broker can serve as a guide – one that can point you in the right direction.  Find a broker with an abundance of experience, and you’ll have an invaluable ally who can help you navigate the process.  It can take a lot of time and effort to sell a business.  Working with a business broker can keep you from reinventing the wheel at every step of the process.

Encouraging Employee Engagement

Employee engagement is a hot topic in workplace research. According to a recent Gallup survey,

“The percentage of ‘engaged’ workers in the U.S. — those who are involved in, enthusiastic about, and committed to their work and workplace — is now 34%, tying its highest level since Gallup began reporting the national figure in 2000. The percentage who are ‘actively disengaged’ — workers who have miserable work experiences — is now at its lowest level (13%), making the current ratio of engaged to actively disengaged employees 2.6-to-1 — the highest ever in Gallup tracking. The remaining 53% of workers are in the ‘not engaged’ category. They may be generally satisfied but are not cognitively and emotionally connected to their work and workplace; they will usually show up to work and do the minimum required but will quickly leave their company for a slightly better offer.”

While the engagement increase is good news, it’s still quite likely that something like two thirds of your team is not at peak potential.

Does it matter?

Emphatically yes, according to Kevin Kruse, author of Employee Engagement 2.0. In this Forbes article, he presents arguments from 28 studies detailing the positive impacts of employee engagement. Employee engagement correlates positively to improvements in service, sales, quality, safety, retention, and profit and share holder return.

For instance,

A study of 64 organizations revealed that organizations with highly engaged employees achieve twice the annual net income of organizations whose employees lag behind on engagement. (Source: The Impact of Employee Engagement. Kenexa)

Gallup’s research finds that 70% of the variance between engaged and disengaged teams comes down to management and/or leadership. This has some big ramifications if you are a business owner. It’s probably worth your while to seriously consider the culture of your business and how to facilitate a sense of commitment and motivation in your team.

How to go about this?

Purpose emerges in the research as a crucial factor. Employees report far higher levels of engagement when they understand the mission of the company and feel their work advances the cause in a significant way. They also need to feel a pathway exists for them to learn, develop new skills, and advance personal goals. According to Deloitte,

We need to make sure jobs are meaningful, people have the tools and autonomy to succeed, and that we select the right people for the right job. This is anything but a simple undertaking…We each thrive on our ability to contribute to a greater good, and management’s job is to set goals, support people, coach for high performance, and provide feedback to continuously improve.

Training, trust (and the other side of its coin, accountability), team, and work-life balance all contribute to a sense of fulfillment as well.

Leadership strategy expert Brent Gleeson outlines these check point questions that your team should be able to answer positively:

  • I know what is expected of me and my work quality.
  • I have the resources and training to thrive in my role.
  • I have the opportunity to do what I do best – every day.
  • I frequently receive recognition, praise and constructive criticism.
  • I trust my manager and believe they have my best interests in mind.
  • My voice is heard and valued.
  • I clearly understand the mission and purpose and how I contribute to each.
  • I have opportunities to learn and grow both personally and professionally.

Onward and Upward

While valuable, facilitating change in your work culture is not a simple undertaking. Gleeson warns that leaders should be prepared for challenges in trying to cultivate work culture. “Change is hard, takes longer and usually has higher hard and soft costs than managers and leaders generally plan for. Change can be intensely personal for employees, causes fear and can actually reduce productivity when approached improperly,” he says.

But don’t be daunted, especially if you are planning to sell your business at some point. A well-developed team who will support the mission even when ownership conveys is a major selling point.

 

 

Is Your Business Ready to Sell?

“Even if you build a business with zero intention of selling it for a big payday, and even if you never do actually sell, you should still build your business as if you are going to sell it someday. Building a business with this mindset will make the entire operation run more efficiently—you’ll be able to see how your business is trending overall, maintain a cleaner financial picture, and implement better standard operating procedures,” writes Gregory Elfrink in this Foundr article.

It’s never too soon to prepare. There are all kinds of reasons to sell a business – retirement, cashing in on ROI, moving on to the Next Big Thing. Whatever your reason, you’ll want to maximize your profit. This requires preparation and forward thinking, and we can help.

Here are some areas to consider to make sure your business is sellable.

Money Talks

Buyers want to know they’ll be getting a business that will allow them to make money. The best way to prove your business fits that ticket is to have great financials. This means

  • Records over at least 3 years if possible
  • Strong (and, ideally, improving) cash flow, Seller Discretionary Earnings, and gross revenue
  • Well organized, professional documentation

Buyers understandably balk at weird numbers. If you have missing information or sloppy bookkeeping, they wonder what might be wrong or hidden. Consistent, professionally prepared P&Ls and taxes tell the most compelling story.

Value Proposition

Competitive advantage increases the value of your business. “If your competitors can’t match your differentiation without investing time, money and effort, buyers will pay more to have your edge,” writes Kevin Daum for Inc.

Standing out can be easier within a niche. “To maximize the value of your business, you are better off focusing on one or two areas that your business can do really well.  It’s much easier to duplicate your process with others this way, and it also increases the quality of the work you do as you can train and hire specialists as opposed to generalists,” says Shawn Sparks in this ThinkAdviser piece.

Onward and Upward?

Growth potential is another big factor. Do you have ideas to offer a buyer about how he or she might grow the business? Maybe there are untapped markets? Unexplored marketing channels? Tech-paved pathways to scale?

Identity Crisis

The success of the business can’t be wrapped up in your knowledge, relationships, charisma, etc.  A seller may support new ownership for a transition period, but make sure you have clear, accessible documentation on all operating procedures. If you have experienced managers on your team who can take the reins, all the better. A well-trained staff who will stay with the new owner is also helpful.

A (terribly burdensome!) way to vet your business’ ability to function without you is to take a vacation for a while. See where your systems snag in your absence and respond accordingly—rested and tan.

Distribute Your Eggs Over Enough Proverbial Baskets

Diversity in your client base and supply is important.  Customer concentration is a red flag to potential buyers. A company with more than 15 percent of its revenue dependent on one client is vulnerable. That client might leave shortly after you sell your business. A buyer will recognize this attrition risk. Follow these tips to minimize concentration trap for the potential buyer and better position your business to sell at a premium value. 

Likewise, multiple suppliers for all your products are important. According to Elfrink, this adds value in the following ways:

  • Profit Margin Increase: [Foundr has] had ecommerce sellers say flat out that they increased their profit margins by double percentage points simply by finding a different product supplier that gave them a much better deal.
  • Avoid Shutdowns: What happens if you only have one factory making your product and that factory suddenly goes out of business? You’re out of luck. You need backups for emergencies like this. Without a good supplier, you are effectively out of business.
  • Avoid Suppliers Getting Leverage on You: The supplier knows that without a product, you have nothing to sell, and they may try to increase their price over time, thinking that you will just accept the price hike. Having multiple suppliers will greatly increase your ability to negotiate for better terms.

Recurring Revenue

High-volume, reoccurring revenue indicates stable, ongoing success. Customer renewal saves on acquisition, indicates a satisfying product or service, and provide a bankable model, according to “exit guru” John Warrillow. “If you currently eat what you kill, find a way to make your product or service renewable and addictive,” he suggests.

Timing

So many factors are involved in determining if the time is right to sell your business. What are the prevailing market conditions? How are your financials trending? Do you have everything in ready, in ideal order to maximize your profit? A business broker can help identify and answer all the questions you should be asking.

Contact Us to Learn More

If you’d like to learn more or sell a business, contact us! We can help you assess all these criteria and perform a valution to determine the right price to bring your business to market.

Smart Millennial Retirement Planning

Millennial Retirement Plans (Hashtag!)

Last week, the trending hashtag #MillennialRetirementPlans shone a darkly funny light on the despair many millennials feel regarding their financial futures. This generation (born from around 1981 to 1996 depending on the definition) has faced its share of economic challenges. The 2008 crash hit many millennials with the triple whammy of skyrocketed healthcare, student loan debt, and a dearth of paying jobs and wage stagnation. Their average net worth is less than their predecessors’, at less than $8,000, according to a study by Deloitte. They have witnessed wild volatility in the stock market–with swings of a hundred points in a day or thousands in a week—whereas the Baby Boomer generation saw the consistent climbs of the 80’s and 90’s. Research indicates that financial fears are causing this group to defer home ownership and families.

Despite the challenges, millennials are approaching financial planning with their eyes more open than their parents’ and grandparents’ generations. A study by TransAmerica found that found millennials start saving for retirement at age 24, compared to 30 for Gen X and 35 for Baby Boomers.

Business Ownership and Financial Planning

One smart way of preparing for your financial future is business ownership. As we’ve written before, entrepreneurship through acquisition allows you to mitigate the risks involved with starting a business from scratch while maximizing the personal rewards of owning a business.

“[Your] significant ownership interest adds both to rewards and stability. In the long run, we think that being a senior consultant involves much more angst than being the CEO of a small business,” write Harvard Business School professors Richard Ruback and Royce Yudkoff.

An additional benefit of business ownership is in-built, savvy financial planning. You can leverage up to 100% of your 401(k), 403(b)s, IRA, or any other retirement fund to purchase a business. IRS code allows, when structured properly, that such a roll out does not incur penalties for early withdrawal. This frees up funding without creating interest payments on loans, allowing you to launch into your business unencumbered by debt—or at least much less burdened. If you use financing from an Small Business Administration loan, which most purchases do, the terms are almost always better than banks’.

“Instead of investing your money in mutual funds or stocks over which you have no management control, you can invest your savings in your business and grow your equity,” says SGA President Michael Greene. “Your business becomes your retirement fund. With good management and a strong growth record, you can usually sell it for more than you paid for it when you’re ready.”

Opportunities

Click here to see the business listings currently on the market to launch you on the path to a rewarding, independent future.

4 Ways to Eliminate Customer Concentration and Build Confidence with Prospective Buyers

If you are preparing your business for sale, you need to start to think like a buyer. Customer concentration is a red flag to potential buyers. A company with more than 15 percent of its revenue dependent on one client is vulnerable. That client might leave shortly after you sell your business. A buyer will recognize this risk.  Follow these tips to minimize risk for the potential buyer and better position your business to sell at a premium value:

Remove the Client Trap

A lot of business owners fall into this trap. It’s easier to please and upsell existing clients than it is to look for new business. Start looking for “like clients.”  A good client is like a map to new clients. Identify key components—such as size, problems, or needs—and seek out new customers who fit the profile.

Ask for Referrals

Happy clients are happy to refer you to others. If you don’t ask for referrals, you won’t get them.  Stop by or give your best customers a courtesy call. Let them know you are looking to grow your business and ask if they know of any other business that could utilize your services. If not now, ask them to keep you in mind.  In some cases, businesses offer a referral fee. This may or may not work for you, but it’s an option to reward the referring party.

Seal the Deal in Writing

When you have a customer or client who is a significant portion of revenue, get the deal in writing. Spell out the duration of the agreement between the customer and your business. Although contracts can be nullified post-transaction, at least the contract minimizes the risk of them leaving and gives the new owner some peace of mind.

Remove Sole Dependency

With key accounts, the customer often becomes dependent on you.  Start to transition the responsibility of client relations and management to another team member now, even if you aren’t looking to sell right away. The customer needs to transfer their confidence from you to the business. This will add even more assurance to the prospective buyer.

 

Franchise Opportunities and Tips

Franchise businesses rank as one of the leading business opportunities. Many entrepreneurs opt to buy a franchise business. Franchises offer a host of appealing benefits including stability, a proven concept, as well as a network of established resources.

To see current franchise businesses for sale, click here.

If you are considering exiting your franchise, follow these tips for reselling a franchise business.

Your Guide to Reselling a Franchise

According to recent findings from the International Business Brokers Association (IBBA), experts have declared it’s currently a seller’s market and a great time for owners to consider exiting. To help guide you through your transition, utilize the following four tips.

Consult Your Franchise Agreement

Before you make any significant decisions, be sure to review your franchise agreement. Many franchisors layout specific parameters for franchisees looking to sell their business and some franchisors even offer assistance in the selling process.

In addition to reviewing the agreed-upon selling process, you should also make careful note of any transfer fees or mandatory training for the new owner once your business switches hands. While selling any type of business presents a variety of challenges for owners, reselling a franchise often involves a few more obstacles.

Contact Your Franchisor

After reviewing your franchise agreement documents, contact your franchisor as soon as possible to alert them of your exit plans. During this conversation, consider asking the following questions.

  • Will I receive assistance selling my business?
  • What qualifications must a prospective buyer have?
  • How is my franchise location valued?

While these questions are a great start to beginning your exit process, consider enlisting the help of a certified business broker to provide the best guidance.

Prepare the Business for Sale

To receive the best asking price, ensure your business is in tip-top shape from your books to the building condition both inside and out. Consider investing in small maintenance fixes or even a professional service to obtain an accurate business valuation to further help you obtain desirable offers.

Keep in mind the franchise business industry has grown for the eighth year in a row. The industry’s performance paired with your well-prepared business should provide plenty of offers to consider.

Negotiate a Deal & Exit Your Business

After listing your business for sale, consult with your franchisor about any offers you receive. Depending on the franchisor’s level of involvement with the selling process, any prospective buyers may need to be approved before the sale is final. For tips on exit planning, click here.

Why Chutes and Ladders Is an Awful Metaphor for Building Value in Your New Mexico Business

Building value in your New Mexico company can sometimes feel like a maddening game of Chutes and Ladders. The minute you’ve achieved one goal, you realize you’ve slipped on others.

This is why we don’t take a one size fits all approach to helping our clients. Every business has unique assets, strengths and opportunities. There’s lots of good information out there in the business press and no lack of advice, but does it all make sense for you? Selectively choosing what you hope to accomplish, prioritizing, setting your benchmarks, and measuring the results can save you from falling down the chutes and help you climb the ladders.

Chutes and Ladders is a totally random, roll-of-the-dice game. Running a successful business isn’t. If you are looking to build value in your company, here are some of the elements that we will review, work with you to prioritize, and help you develop a strategy to put your business on a solid footing that will help maximize its value.

What Is Your Value Statement?
Not every business can be the dominant force in their market. Take restaurants, for instance. Tourists and locals have abundant options when it comes to choosing where to dine out in Santa Fe and Albuquerque. It is the combination of service, menu offerings, ambiance and location that make for a memorable evening and return guests. Understanding and articulating your value in this competitive market place can help you determine where to spend your valuable advertising dollars, concentrate on what distinguishes you from the competition, and develop the relationships that will promote referrals.

Are You Replaceable?
If this business can’t function without you, look at how you can grow a management team that can take over your many of your functions. Cultivating the right talent, having key employees sign non-compete agreements, and putting clear-cut employee guidelines in place can help you achieve the goal of being (more or less) inconsequential to the everyday operations of your company.

Can You Replicate Your Model?
If you have a good business, consider that you have a good business model. What would it take to open new locations?

How Satisfied Are Your Customers?
Word of mouth advertising is one of the oldest and most valuable ways to grow a business. Maybe you have loyal, longtime customers, but what are you doing to keep them informed of sales, specials and to acknowledge their loyalty? Are you asking them for referrals and testimonials? Are there ways you can automate the “ask”?

Are You Overly Concentrated with One Client?
If one client accounts for 30% or more of your revenue, your company is vulnerable. What should happen if your competition steals them away or they go out of business? Having a good distribution and minimizing your reliance on anyone customer makes your business more reliant and increases its value.

If you would like to learn more, we welcome your call. Whether you are looking to sell your business in the next year or the next five years, take this opportunity for a no-cost, no-obligation first consultation to learn what you can do to strengthen your New Mexico business’ value and position it to achieve the maximum proceeds from a sell. We invite you to contact us.

Popular Nob Hill café-coffee shop has new owners

Limonta-Int-002-small

Reporter- Albuquerque Business First
Bill and Brenda Ennis recently acquired Limonata Italian Street Food Caffe — located at 3222 Silver Ave. SW — from Maxime and Daniela Bouneou. The Bouneous are the co-owners of Italian restaurant Torino’s @ Home in the North I-25 submarket.

Well-known Santa Fe-based business broker Michael Greene, president of Sam Goldenberg & Associates, had the business listed for about three months. The Bouneous said that while selling a business can be “tough and stressful,” they were happy with the marketing and the valuation — that the final sale price was for an expected amount.

“I mean this when I say that this transaction was as easy as listing and selling a house with a real estate agency,” Daniela Bouneou said.

Click to read the complete article.

 

Timing the Sale of Your New Mexico Business

timing-the-sale-of-your-NM-businessConditions are coming together that benefit both business buyers and business sellers. During the first month of January and into the first few weeks of February, we closed two businesses and put three other businesses under contract. While this is an impressive amount of activity for one month, 2015 is simply continuing the trend that began in 2014.

BizBuySell, the largest and most active online small business market place, keeps track of the pulse of small business acquisitions and sales across the U.S. It reported that business transactions reached an all-time high the fourth quarter of 2014 and increased 41% of the same quarter 2013. The service industry was the greatest beneficiary of this increased market activity, but restaurants and retail followed closely behind. Read more