How can I start my own business?

StrategyDriven Starting Your Business Article |Building a business|How can I start my own business?Tired of using your ideas to grow someone else’s organization? If this is what doesn’t let you sleep peacefully, you must plan to start your own business. You need three things to grow your business successfully: investment, idea, and of course, manpower. Building a business from zero is quite exciting as well as daunting for those who find it difficult to struggle. The best thing about business is that no magically difficult step is required to solve a brilliance. If you are convinced to start a business today, you must know the steps that can help you walk through all the hurdles and makes the process easy.

The idea: The question you need to ask yourself is why! Why do you choose a specific idea and take all the risks associated with it? Is it worth it? The businesses that succeed today are all meeting the needs of the customers in the market. Look for the needs of the customer which you can solve and grow. It is great if you know what makes you work on your idea. If your why is focused on a need in the market Z, your business will be larger than the business that is designed to meet a personal need. And if you get hold of that idea, start hiring a dedicated team of developers to give your idea a shape. Choose a niche that is attractive and in trend.

A blueprint: Sketch all that comes to your mind and pen down every minute detail that you will work on. A blueprint means you concisely draw your business plan to work it out in a perfect way. Who are you selling to? What are you selling? How much are you investing? What are your goals? Conduct a good study on each of the aspects and create a detailed blueprint so that you know how concrete and fruitful it will turn out to be.

Consider an exit strategy: A business that is built with passion and obsession does not come with an exit strategy. If in the beginning, you think of how to exit the plan, you will see a lot of negativity everywhere. However, to be practical while you invest hugely, you must consider an exit strategy that can help you from a further downfall. Do try to work it out, as success doesn’t come overnight. However, if at all it does not work out and things don’t fall in place, keep an exit strategy ready to let things off and manage what has been lost.

Your finances: Nothing works without investment. An idea is essential, but if you don’t invest, nothing can be fruitful. You need to manage your finances and be aware of all that you will have to invest in shortly. If you are investing, make sure you know where you are investing and how you will earn it back. For a smooth financial journey, consider a good plan in terms of financial management.

Watch out for expenses: A working capital and occasion expenses need to be considered before you hop on a new business plan. A business needs to be fuelled up with investment from time to time. You cannot start a business and in the middle run out of the fund. You must consider all that you will have to bear and how will you manage your expenses. The goal is, minimum investment when you are starting it small. Check on the unnecessary expenses which do not repay.

Manage legal matters: Manage all your legal matters and take all license and permits you will need to start your business. No matter what, you need to abide by the rules and legal acts. Don’t go for anything that is against legal and government standards. Consider a legal check and get your hands on your permits to start your business ethically.

Wrapping up

A big organization starts with a tiny idea. An idea that changes the lives of humankind can grow much bigger than expected. Little patience and these steps can help you start your business and make it a success. If you are having sleepless nights growing someone else’s business, it is time for you to start something new for yourself!

About the Author

Harikrishna Kundariya, a marketer, developer, IoT, ChatBot & Blockchain savvy, designer, co-founder, Director of eSparkBiz Technologies @Software Development Company. His 8+ experience enables him to provide digital solutions to new start-ups based on IoT and ChatBot.

Time to Sell Your Business? An ESOP May Be the Answer

StrategyDriven Entrepreneurship Article |Selling Your Business|Time to Sell Your Business? An ESOP May Be the AnswerMost 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.

Learning more about how ESOPs work can be explored at Legacy Press Ventures

About the Author

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.