Most small to mid-sized businesses have limited sales potential. These companies are often founded to capitalize on a perceived market opportunity and grow over time until eventually the owner has a healthy, and profitable company.
However, owners often assume that an exit will be as simple as selling the company. Why? Because large exit sales are often in the news. One need look no further than Inc. or Fortune magazines to see the latest Silicon Valley unicorn company selling for 4-6X annual revenues, while being unprofitable. But is it fair to assume that a privately held, profitable company can produce similar results?
Unfortunately this is not the case. What usually happens is: The owner starts the company, the company grows, and within 7-10 years, a few acquisition offers are made. These usually aren’t good deals and the owner gets a tough lesson in small company valuation. Look no further than the “entrepreneur” and “start-ups” categories to see what it takes to build a successful company.
Let’s assume you started a digital marketing agency, a realistic example, given this industry is hot. It’s easy to start out as a solo practitioner and build a company as the skills from one’s career are directly transferrable, and overhead is quite low.
Over seven years the company develops a solid client base, grows to 16 employees serving 40 clients, with revenues of $2 million annually. If acquired, this company would realistically sell for $1.2 – $1.6M, a far cry from the 10X multiples seen in Silicon Valley.
The lesson here: A company is worth what an acquirer is willing to pay; the fact of the matter is that small- to mid-sized companies have limited sales potential.
Additionally, small companies present risks to outside acquirers, who are likely to merge the company into their business, which means culture change, clients will receive notice and may terminate, and some employees will leave. The long and short story adds up to a risky business.
What if there was a way to reduce that risk, preserve the company’s culture, keep employees and clients, increase company morale and improve performance by paying employees more without costing the business more? What would this do to the company’s valuation?
Selling one’s company to an ESOP, an employee stock ownership plan, does just that. Selling to an ESOP preserves company culture and increases productivity, which generally ensures strong future performance. This reduction in risk can take the $2M digital agency that would sell for $1.2-1.6M, and enable it to sell for $3.5-4M+.
While you’re not getting the Silicon Valley exit multiples of 4-6x revenue, it is realistic to exit at 0.5-1X revenue when sold to a third party. As part of that acquisition, expect about half of the proceeds to be tied to an earn out, which is a way for the acquirer to ensure delivery of the goods.
How does an ESOP work?
The short answer is, if you own a profitable company and a culture that is worth maintaining, the company is worth owning, particularly by employees. In an ESOP transaction, owners essentially sell stock, whether some or all, to employees. Employees now participate in company profits, which can be significant financially, and the owner gets partial or full liquidity.
Often these transactions are underwritten by banks, which prefer to lend to ESOPs due to the record-low default rates.
Jack Ogilvie is a founding member of Legacy Press Ventures. After selling his previous company, Techwood Consulting, to an ESOP, Jack started Legacy Press to help others do the same. You can learn more about his company here.
https://www.strategydriven.com/wp-content/uploads/office-1516329_1280.jpg8481280StrategyDrivenhttps://www.strategydriven.com/wp-content/uploads/SDELogo5-300x70-300x70.pngStrategyDriven2019-04-26 08:00:212019-04-29 20:20:21Time to Sell Your Business? An ESOP May Be the Answer
Many businesses start from home, but often the issue with that is at some point, you need to be able to expand and move forward. A business idea can outgrow your small home setup fairly quickly, and while you want to keep the costs as low as possible, you might end up getting to the stage where things change and you need to move on. Many entrepreneurs consider opening up a retail shop. It gives you a business location to work from, but also gives you the chance of dealing with face to face customers and making sales in a different format. So how do you make sure that your new retail shop is a hit? Here are some of the things to consider.
Think about the location
One of the first things to think about would be the location of the shop. You will want a decent location to attract customers into your store and also to be easy to find, but you also need to be aware of the costs involved. A prime location on the high street might be great for business, but it will also hurt your business financially in those early days. So you will need to find a happy medium that you are comfortable with but us yet still worthwhile. It might also be worth thinking of a smaller premises for better location and seeing it as a stepping stone to the next level.
What about the layout?
The layout of the shop is just as important as the location of it. You want people to walk into the store and feel comfortable and able to see things clearly. This is when the shop fittings and things like shelving will be important. Of course you may need to spend a little time looking for a slatwall for sale and finding a decent shopfitter to put it all together, but the hard work will be worth it in the end as you start to see the difference between a good shop layout and ones that put off customers coming back.
Would there be a theme?
The next thing you need to think about would be whether or not your shop would have a theme. This might have a lot to do with the things that you are selling and who you market toards. For example, a woman’s clothing brand might want to make the shop and layout appeal to women. A children’s store might be bright and colourful, or an outdoors shop might have set ups of tents and gear. Think about the theme and make it part of the experience in entering into your store.
Customer service
Finally, customer service is a huge thing for customers and so you will want to ensure that the experience in your store is a positive one. That means that your staff are presented well, that they look the part and make people feel special. The store should be an inviting place and not an awkward environment.
Let’s hope these tips help you when it comes to making your retail shop a hit.
https://www.strategydriven.com/wp-content/uploads/clothing-store-984396_1280.jpg8541280StrategyDrivenhttps://www.strategydriven.com/wp-content/uploads/SDELogo5-300x70-300x70.pngStrategyDriven2019-04-25 16:00:002019-04-25 17:28:13Making Your New Retail Shop A Hit
A well written press release can earn plenty of valuable exposure for a business or other organization. Unfortunately, many press releases feature faults that make them less effective than they could be. Recognizing and avoiding the most common mistakes, however, is easy enough that it should never be a problem.
A Well Established Tool With Plenty of Uses
The first press release was written in 1906 to alert news organizations about a deadly accident on the Pennsylvania Railroad. It quickly became clear to journalists and others that this novel form of communication could be used for many productive purposes.
Today, businesses of all kinds rely on releases originating from Violet PR and similar agencies to get the word out about important news. A properly formulated press release can make work a lot easier for journalists and thereby improve the odds that a story will be published.
Five Press Release Mistakes the Pros Never Make
At the same time, journalism professionals get bombarded with so many releases that they have learned to be choosy. Only fairly high quality press releases have a chance of breaking through and garnering the attention that businesses hope for.
Fortunately, the kinds of mistakes that are most likely to doom a press release are easy enough to avoid. Some of the issues that are most likely to get a press release buried instead of noticed are:
Weak headlines. A journalist tasked with looking through dozens of press releases every day is not likely to spend much time on each, on average. A press release’s headline is its most important asset and should always be treated as such. Concise, informative headlines that make the main point clearly are always the best.
Excessive informality. Some press releases try to get too cute in an effort to stand out from the rest. Journalists are more likely to take notice of releases that stay neutral and impartial. It is generally better to err a bit on the side of stiffness than to indulge in informality when writing a press release.
Too much fluff. Journalism is about conveying information efficiently and effectively. Press releases that are filled with fluff make the work of journalists more difficult. Generally speaking, it will always be best to stick to the most important facts.
Overly promotional tone.Businesses most often issue press releases to spread positive news. That said, whatever positivity a release conveys ought to stem from the facts themselves. Press releases that are overtly promotional tend to put journalists off.
A lack of quotes. The idea behind the press release is to make it easy for a journalist to put a story together. Releases that lack quotes force writers to do more work than necessary. While not every press release needs a quote from a CEO, analyst, or other figure, many benefit from having them.
Almost Anyone Can Write a Press Release
Mistakes like these undermine the effectiveness of many press releases. At the same time, just about anyone who is at all comfortable with writing can put together a release that will be taken seriously.
All that it takes to do so, in the end, is to recognize the intended audience for a press release and to account for it. Since the idea behind a press release is to persuade journalists to write a desired story, keeping that fact in mind should make things fairly simple.
https://www.strategydriven.com/wp-content/uploads/business-2651346_1280.jpg8531280StrategyDrivenhttps://www.strategydriven.com/wp-content/uploads/SDELogo5-300x70-300x70.pngStrategyDriven2019-04-25 12:00:052019-04-25 17:22:00Promoting Your Business like a Pro: 5 Press Release Writing Mistakes to Avoid at All Costs
Most salespeople who need to prospect for a living will tell you that it’s a very proactive, immediate results-driven exercise that can be uncomfortable at times. Hard to disagree with that. This is a topic that we get involved with far too often as it’s a common point of frustration for many business owners and sales leaders regarding their selling culture. As we all know, with uncomfortableness comes excuses. Many salespeople also have what we call ‘headtrash’ about prospecting. Headtrash is the thoughts we have that affect our behavior with zero evidence that those thoughts are true. For example, “I can’t call that owner, they’re to busy for me now,” or “I’m going to bother them,” or “They don’t need what we sell.” I could go on and on about this topic. Unfortunately, it’s the slow death of many salespeople because it stifles their behavior.
The Issue
When salespeople have a behavioral problem, they will always have a technique problem. If they have a technique problem it doesn’t necessarily mean they have a behavioral issue, but behavioral issues always lead to technique issues. If you don’t practice golfing, you’re not going to be a good golfer. It’s that simple. Fortunately, salespeople have the ability to eliminate one of those two issues by doing their daily prospecting behaviors. Yes, you read that right, daily prospecting behaviors. Most salespeople prospect for job preservation. Things aren’t happening in the manner they’d like so they prospect a lot some of the time rather than a little all the time. Big difference. In my experience, the most effective business development people engage in two types of prospecting behaviors: Active and Passive. Active prospecting is what salespeople define as typical prospecting actions such as cold calling, walk ins, meeting people at networking events. The results are usually immediate, yes or no for continuing the discussion. Passive prospecting is like fishing. We cast our lines out and wait to see what bites. The two common activities for this type of business development are prospecting via email and asking for introductions to prospects you’d like to meet that you have common connections with. In LinkedIn speak, this would be a 2nd Connection.
Prospecting Tip: Leverage the Passive
I like to share with our team that a good passive prospecting goal is to send out 10 emails each working morning to prospects they’d like to meet and/or to ask for an introduction from other people they know well to someone they want to meet. If the average person works 250 days per year, that’s 2,500 passive prospecting emails that are sent that otherwise wouldn’t be sent. Trust when I say, as a witness myself, this flat out works!
The Goal
Create for yourself what we like to call a behavioral cookbook. What’s in a cookbook? Recipes. When the instructions for a recipe are followed exactly, it creates a predictable outcome. In the prospecting world, a cookbook is a recipe of prospecting behaviors, both active and passive, that lead to a predictable outcome. How does one know it’s predictable? Because it’s been followed and tweaked until the desired finished product (outcome) is achieved. Quite simply, it’s been battle tested. It’s critical to have a goal for a particular behavior as well as tracking towards the goal. You must do both! Have a goal and track the activity that leads to goal attainment in order to fine tune for success. Activity ALWAYS precedes outcome!
Losing hurts more than winning feels good so get comfortable being uncomfortable and proactively create the business life you want by actively and passively prospecting the smart way!
Without good offices which you can really be happy in, your business is much less likely to be successful. That might sound like a stretch, but if you think about it, it makes perfect sense. Your offices are where all the magic happens, as it were: the space from which you create products, come up with future goals and ideas, and communicate with clients, customers and partners alike. The quality of those offices will determine the quality of all of that, and that will mean that you are much more likely to want to keep the offices as close to perfect as possible. A big part of that will be finding the ideal property to house your offices, which takes a lot of effort in itself. In this post, we will look at some of the major concerns for finding the perfect property for your offices.
To Buy Or To Let?
One of the early decisions you will need to make here is whether you are going to buy some property or rent it. You might well be in a position where this is effectively decided for you; if you are just starting out with a small startup and a tight budget, it might well be unlikely that you are in a position to buy any property. When it comes to leasing a property, you want to go online or speak to a real estate agent and look into office space for lease. You don’t have to go with the first property that you see that fits your requirements on paper, so make sure you don’t settle for less than you want even if you are renting the office space.
But if you have a decent loan or you are running a well-established business, there is a good chance that you will be able to buy property, and there are certainly benefits to that. For one thing, it is going to count towards one of your business’ tangible assets, thereby adding both value to the business and a safety net should you need it. In either case, going through a notable and trustworthy dealer like PropList will ensure that you can find the right place for your offices, whether you buy or rent.
Space, Size & Location
These three characteristics are some of the most vital when you are looking for the kind of property that is likely to serve well as a house for your business offices. You will therefore need to know what kind of amount of size and scale you are going to need, as well as where you actually want the offices to be located. That in itself varies based on whether these are going to be your main offices or whether they are going to be a subset, but in any case it is important to be clear on what it is that you need for them. As long as you are, you will find that it is a much easier thing to be able to find the perfect property for those offices at least in regard to these three things.
Persistence
Remember that it is often going to take a long time before you can actually end up with the right property for your offices, so you will need to have a good ability with persistence in order to make sure you find the right one. It can take a lot to find something that will suit you for good, so make sure that you are happy to approach it in this way.
https://www.strategydriven.com/wp-content/uploads/architectural-design-architecture-ceiling-380768.jpg6741200StrategyDrivenhttps://www.strategydriven.com/wp-content/uploads/SDELogo5-300x70-300x70.pngStrategyDriven2019-04-24 16:00:422022-10-20 04:06:37Finding The Perfect Property For Your Business Offices
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Time to Sell Your Business? An ESOP May Be the Answer
/in Entrepreneurship/by Jack OgilvieHowever, owners often assume that an exit will be as simple as selling the company. Why? Because large exit sales are often in the news. One need look no further than Inc. or Fortune magazines to see the latest Silicon Valley unicorn company selling for 4-6X annual revenues, while being unprofitable. But is it fair to assume that a privately held, profitable company can produce similar results?
Unfortunately this is not the case. What usually happens is: The owner starts the company, the company grows, and within 7-10 years, a few acquisition offers are made. These usually aren’t good deals and the owner gets a tough lesson in small company valuation. Look no further than the “entrepreneur” and “start-ups” categories to see what it takes to build a successful company.
Let’s assume you started a digital marketing agency, a realistic example, given this industry is hot. It’s easy to start out as a solo practitioner and build a company as the skills from one’s career are directly transferrable, and overhead is quite low.
Over seven years the company develops a solid client base, grows to 16 employees serving 40 clients, with revenues of $2 million annually. If acquired, this company would realistically sell for $1.2 – $1.6M, a far cry from the 10X multiples seen in Silicon Valley.
The lesson here: A company is worth what an acquirer is willing to pay; the fact of the matter is that small- to mid-sized companies have limited sales potential.
Additionally, small companies present risks to outside acquirers, who are likely to merge the company into their business, which means culture change, clients will receive notice and may terminate, and some employees will leave. The long and short story adds up to a risky business.
What if there was a way to reduce that risk, preserve the company’s culture, keep employees and clients, increase company morale and improve performance by paying employees more without costing the business more? What would this do to the company’s valuation?
Selling one’s company to an ESOP, an employee stock ownership plan, does just that. Selling to an ESOP preserves company culture and increases productivity, which generally ensures strong future performance. This reduction in risk can take the $2M digital agency that would sell for $1.2-1.6M, and enable it to sell for $3.5-4M+.
While you’re not getting the Silicon Valley exit multiples of 4-6x revenue, it is realistic to exit at 0.5-1X revenue when sold to a third party. As part of that acquisition, expect about half of the proceeds to be tied to an earn out, which is a way for the acquirer to ensure delivery of the goods.
How does an ESOP work?
The short answer is, if you own a profitable company and a culture that is worth maintaining, the company is worth owning, particularly by employees. In an ESOP transaction, owners essentially sell stock, whether some or all, to employees. Employees now participate in company profits, which can be significant financially, and the owner gets partial or full liquidity.
Often these transactions are underwritten by banks, which prefer to lend to ESOPs due to the record-low default rates.
Learning more about how ESOPs work can be explored at Legacy Press Ventures
About the Author
Making Your New Retail Shop A Hit
/in Managing Your Business/by StrategyDrivenThink about the location
One of the first things to think about would be the location of the shop. You will want a decent location to attract customers into your store and also to be easy to find, but you also need to be aware of the costs involved. A prime location on the high street might be great for business, but it will also hurt your business financially in those early days. So you will need to find a happy medium that you are comfortable with but us yet still worthwhile. It might also be worth thinking of a smaller premises for better location and seeing it as a stepping stone to the next level.
What about the layout?
The layout of the shop is just as important as the location of it. You want people to walk into the store and feel comfortable and able to see things clearly. This is when the shop fittings and things like shelving will be important. Of course you may need to spend a little time looking for a slatwall for sale and finding a decent shopfitter to put it all together, but the hard work will be worth it in the end as you start to see the difference between a good shop layout and ones that put off customers coming back.
Would there be a theme?
The next thing you need to think about would be whether or not your shop would have a theme. This might have a lot to do with the things that you are selling and who you market toards. For example, a woman’s clothing brand might want to make the shop and layout appeal to women. A children’s store might be bright and colourful, or an outdoors shop might have set ups of tents and gear. Think about the theme and make it part of the experience in entering into your store.
Customer service
Finally, customer service is a huge thing for customers and so you will want to ensure that the experience in your store is a positive one. That means that your staff are presented well, that they look the part and make people feel special. The store should be an inviting place and not an awkward environment.
Let’s hope these tips help you when it comes to making your retail shop a hit.
Promoting Your Business like a Pro: 5 Press Release Writing Mistakes to Avoid at All Costs
/in Marketing & Sales/by StrategyDrivenA Well Established Tool With Plenty of Uses
The first press release was written in 1906 to alert news organizations about a deadly accident on the Pennsylvania Railroad. It quickly became clear to journalists and others that this novel form of communication could be used for many productive purposes.
Today, businesses of all kinds rely on releases originating from Violet PR and similar agencies to get the word out about important news. A properly formulated press release can make work a lot easier for journalists and thereby improve the odds that a story will be published.
Five Press Release Mistakes the Pros Never Make
At the same time, journalism professionals get bombarded with so many releases that they have learned to be choosy. Only fairly high quality press releases have a chance of breaking through and garnering the attention that businesses hope for.
Fortunately, the kinds of mistakes that are most likely to doom a press release are easy enough to avoid. Some of the issues that are most likely to get a press release buried instead of noticed are:
Almost Anyone Can Write a Press Release
Mistakes like these undermine the effectiveness of many press releases. At the same time, just about anyone who is at all comfortable with writing can put together a release that will be taken seriously.
All that it takes to do so, in the end, is to recognize the intended audience for a press release and to account for it. Since the idea behind a press release is to persuade journalists to write a desired story, keeping that fact in mind should make things fairly simple.
The Prospecting Paradox: Maximizing the Passive
/in Marketing & Sales/by Mike JonesThe Issue
When salespeople have a behavioral problem, they will always have a technique problem. If they have a technique problem it doesn’t necessarily mean they have a behavioral issue, but behavioral issues always lead to technique issues. If you don’t practice golfing, you’re not going to be a good golfer. It’s that simple. Fortunately, salespeople have the ability to eliminate one of those two issues by doing their daily prospecting behaviors. Yes, you read that right, daily prospecting behaviors. Most salespeople prospect for job preservation. Things aren’t happening in the manner they’d like so they prospect a lot some of the time rather than a little all the time. Big difference. In my experience, the most effective business development people engage in two types of prospecting behaviors: Active and Passive. Active prospecting is what salespeople define as typical prospecting actions such as cold calling, walk ins, meeting people at networking events. The results are usually immediate, yes or no for continuing the discussion. Passive prospecting is like fishing. We cast our lines out and wait to see what bites. The two common activities for this type of business development are prospecting via email and asking for introductions to prospects you’d like to meet that you have common connections with. In LinkedIn speak, this would be a 2nd Connection.
Prospecting Tip: Leverage the Passive
I like to share with our team that a good passive prospecting goal is to send out 10 emails each working morning to prospects they’d like to meet and/or to ask for an introduction from other people they know well to someone they want to meet. If the average person works 250 days per year, that’s 2,500 passive prospecting emails that are sent that otherwise wouldn’t be sent. Trust when I say, as a witness myself, this flat out works!
The Goal
Create for yourself what we like to call a behavioral cookbook. What’s in a cookbook? Recipes. When the instructions for a recipe are followed exactly, it creates a predictable outcome. In the prospecting world, a cookbook is a recipe of prospecting behaviors, both active and passive, that lead to a predictable outcome. How does one know it’s predictable? Because it’s been followed and tweaked until the desired finished product (outcome) is achieved. Quite simply, it’s been battle tested. It’s critical to have a goal for a particular behavior as well as tracking towards the goal. You must do both! Have a goal and track the activity that leads to goal attainment in order to fine tune for success. Activity ALWAYS precedes outcome!
Losing hurts more than winning feels good so get comfortable being uncomfortable and proactively create the business life you want by actively and passively prospecting the smart way!
About the Author
For more information, please visit www.sandler.com
Finding The Perfect Property For Your Business Offices
/in Entrepreneurship/by StrategyDrivenTo Buy Or To Let?
One of the early decisions you will need to make here is whether you are going to buy some property or rent it. You might well be in a position where this is effectively decided for you; if you are just starting out with a small startup and a tight budget, it might well be unlikely that you are in a position to buy any property. When it comes to leasing a property, you want to go online or speak to a real estate agent and look into office space for lease. You don’t have to go with the first property that you see that fits your requirements on paper, so make sure you don’t settle for less than you want even if you are renting the office space.
But if you have a decent loan or you are running a well-established business, there is a good chance that you will be able to buy property, and there are certainly benefits to that. For one thing, it is going to count towards one of your business’ tangible assets, thereby adding both value to the business and a safety net should you need it. In either case, going through a notable and trustworthy dealer like PropList will ensure that you can find the right place for your offices, whether you buy or rent.
Space, Size & Location
These three characteristics are some of the most vital when you are looking for the kind of property that is likely to serve well as a house for your business offices. You will therefore need to know what kind of amount of size and scale you are going to need, as well as where you actually want the offices to be located. That in itself varies based on whether these are going to be your main offices or whether they are going to be a subset, but in any case it is important to be clear on what it is that you need for them. As long as you are, you will find that it is a much easier thing to be able to find the perfect property for those offices at least in regard to these three things.
Persistence
Remember that it is often going to take a long time before you can actually end up with the right property for your offices, so you will need to have a good ability with persistence in order to make sure you find the right one. It can take a lot to find something that will suit you for good, so make sure that you are happy to approach it in this way.