Tag Archives: Sellability Score

KEY026 | Creating a Business Owners Dream Financial Plan – The Sellability Score© and The Business Sellability Audit™ (Part 3 of 8)

Creating a Business Owners Dream Financial Plan – The Sellability Score© and The Business Sellability Audit™ (Part 3 of 8)

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IN THIS EPISODE

In this episode, I move on to part 3 of creating a business owners dream financial plan.  I dive into the Sellability Score to help you build a business that can thrive without you.

And if you’d like to get a jump start on finding the answers to your key financial planning questions, using our proven system, you can book your risk free, no-obligation initial meeting. One of our specifically trained Certified Financial Planners will be pleased to walk you through The KAIZEN Financial Planning Process™.

Visit us online, at www.ironshield.ca, to obtain our contact information, then simply call or email to book your free initial meeting.

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KEY025 | Creating a Business Owners Dream Financial Plan – Not Net Worth, Liquid Net Worth! (Part 2 of 8)

Creating a Business Owners Dream Financial Plan – Not Net Worth, Liquid Net Worth! (Part 2 of 8)

Podcast: Play in new window | Download

Subscribe: Apple Podcasts | RSS

WELCOME TO THE KEY TO RETIREMENT™ PODCAST!

To subscribe to the podcast, please use the links below:

If you have a chance, please leave me an honest rating and review on iTunes by clicking here. It will help the show and its ranking in iTunes immensely! I appreciate it! Enjoy the show!

IN THIS EPISODE

In this episode, I move on to part 2 of creating a business owners dream financial plan.  I dive into why most business owners and entrepreneurs can’t retire and what you can do about it today to change this harsh reality.

And if you’d like to get a jump start on finding the answers to your key financial planning questions, using our proven system, you can book your risk free, no-obligation initial meeting. One of our specifically trained Certified Financial Planners will be pleased to walk you through The KAIZEN Financial Planning Process™.

Visit us online, at www.ironshield.ca, to obtain our contact information, then simply call or email to book your free initial meeting.

ITEMS MENTIONED IN THIS EPISODE

   Subscribe via RSS (non-iTunes feed)

Why do you want to sell your business?

Republished with permission from Built to Sell Inc.

Many business owners believe the act of selling their business is similar to passing the baton in a 400 metre relay: once you’re finished running, you get to relax.  In reality, buyers will insist that you stay on for a transition period – anywhere from six months to five years – during which time you continue to work in your business to help the buyer capitalize on the investment they’re making.

THE Question

At some point in the process of selling your business, a prospective buyer will ask you – usually quite casually – “Why do you want to sell your business?” These eight seemingly innocuous words have derailed more deals than any others.

Buyers ask THE question to evaluate how likely and willing you are to stay on or if you already have one foot out the door.

Obviously you don’t want to lie, but there is a right and wrong way to answer THE question. Answers like “I want to slow down a bit” or “I want to travel” or “we’ve got a baby on the way and I want to spend more time at home” communicate to a potential buyer that you plan on winding down when they take over. However, what they want to hear is your intention to help them realise the potential locked inside your business.

Here are some suggested responses based on your age.

If you’re under 40, you clearly aren’t ready to “retire” so you need to communicate that you see an upside in merging your business with theirs:

“In order for us to get to the next level, we need to find a partner with more <insert sales people, distribution, geographic reach, capital or whatever the partner brings to the table>.”

If you’re between 40-55 years old, most people will understand the need to shore up your personal balance sheet:

“I’ve reached a time in my life where I want to create some liquidity from the value I’ve created so far, and at the same time I want to find a partner who can help us get to the next level.”

If you’re over 55, you can start to talk about retirement, but you want to make sure you communicate that you still have lots of energy and passion for your business.

“I’m at a stage where I need to start thinking about retirement. It’s a long way off yet, but I want to be proactive.”

Rehearse your answer to THE question so it becomes a natural response when you are inevitably asked THE question by a potential buyer.

Financial planning for business owners is different.  Following the same traditional financial planning methods appropriate for your employees will lead you down the wrong path. Your business is where your wealth is and planning how to access that wealth when it comes time to retire is key.

Wondering if you have a sellable business? The Sellability Score® is a quantitative tool designed to analyze how sellable your business is. After completing the questionnaire, you will immediately receive a Sellability Score out of 100 along with instructions for interpreting your results.

Take the Quiz here: The Business Sellability Audit

Why not find out now if your business is sellable?

This free online tool is the only no-risk step you can take to determine if your business is ready to get full value. Fast-track your analysis by taking advantage of this free, no-obligation free online tool.

This Sellability Score you instantly receive is a critical component to any business owner’s complete financial plan and is something that, until now, we have only made available to existing clients.

However, we recognized that there is value in knowing in advance of working with a financial planner whether or not your largest asset is ready to be exchanged for your retirement nest egg. Our view is that you are better to learn more about your businesses sellability today and find out how your business scores on the eight key attributes so that you can ensure you obtain full value.

If your business part of your retirement plan, finding out your sellability score will be the best 10 min. you could ever spend working “on” your business.

Sellability ScoreFor more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

What Your Birth Certificate Says About Your Exit Plan

By: Scott Plaskett & John Warrillow

In our experience, your age has a big effect on your attitude towards your business and how you feel about one day getting out.

Here’s what we have found:

 

Business owners between 25 and 46 years old

Twenty- and thirty-something business owners grew up in an age where job security did not exist. They watched as their parents got downsized or packaged off into early retirement, and that caused a somewhat jaded attitude towards the role of a business in society. Business owners in their 20’s and 30’s generally see their companies as means to an end and most expect to sell in the next five to ten years. Similar to their employed classmates who have a new job every three to five years; business owners in this age group often expect to start a few companies in their lifetime.

Business owners between 47 and 65 years old

Baby Boomers came of age in a time where the social contract between company and employee was sacrosanct. An employee agreed to be loyal to the company, and in return, the company agreed to provide a decent living and a pension for a few golden years.

Many of the business owners we speak with in this generation think of their company as more than a profit center. They see their business as part of a community and, by extension, themselves as a community leader. To many boomers, the idea of selling their company feels like selling out their employees and their community, which is why so many CEO’s in their fifties and sixties are torn. They know they need to sell to fund their retirement, but they agonize over where that will leave their loyal employees.

Business owners who are 65+

Older business owners grew up in a time when hobbies were impractical or discouraged. You went to work while your wife tended to the kids (today, more than half of businesses are started by women, but those were different times), you ate dinner, you watched the news and you went to bed.

With few hobbies and nothing other than work to define them, business owners in their late sixties, seventies and eighties feel lost without their business, which is why so many refuse to sell or experience depression after they do.

Of course, there will always be exceptions to general rules of thumb but we have found that – more than your industry, nationality, marital status or educational background – your birth certificate defines your exit plan.

Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is. After completing the questionnaire, you will immediately receive a Sellability Score out of 100 along with instructions for interpreting your results.

Take the Quiz here: The Business Sellability Audit

The Danger Of Market Timing The Sale Of Your Business

By: Scott Plaskett & John Warrillow

The other day I was speaking with a successful CEO in his fifties who runs a heating and air conditioning company generating eight million dollars in revenue and over one million dollars in profit before tax.

Even though he was tired and nearing burnout, he was planning to wait another five to seven years before selling his business because he “wanted to sell at the peak of the next economic cycle.”

On the surface, his rationale seems to make sense. If you speak with mergers and acquisitions professionals, they’ll tell you that an economic cycle can impact valuations by up to “two turns,” which means that a business selling for five times earnings at the peak of an economic cycle may go for as low as three times earnings at a low point in the economy.

The problem is, when you sell your business, you have to do something with the money you receive, which usually means buying into another asset class that is being affected by the same economy.

Let’s say, for example, you had a business generating $100,000 in pre-tax profit in an industry that trades between three times earnings and five times earnings, depending on the point in the economic cycle.

Furthermore, let’s imagine you sat stealthy on the sideline until the economy reached the absolute peak and sold your business for $500,000 (five times your pre-tax profit) in October 2007. You took your $500,000 and bought into a Dow Jones index fund when it was trading above 14,000.  Eighteen months later  – after the Dow Jones had dropped to 6,547.05– you’d be left with less than half of your money.

Even though you cleverly waited till the economic peak, by March 9, 2009, you would have effectively sold your business for less than 2.5 times earnings.

The inverse is also true. Let’s say you waited “too long” and sold the same business in March 2009. And because you were at the lowest possible point in the economic cycle, you only got three times earnings: $300,000. Notice that’s 20% more than if you’d sold at the peak and bought an index fund at the top of the market.

Just like when you sell your house in a good real estate market, unless you’re downsizing, you usually buy into an equally frothy market. Which is why timing the sale of your business on external economic cycles is usually a waste of energy.

External vs. internal economic cycles

Instead, I’d recommend timing the sale of your business when internal economic factors are all pointing in the right direction: employees are happy, revenue and profits are on an upward trend, and there is still lots of market share for an acquirer to capture.

When internal economic factors are pointing up, you’ll fetch a price at the top end of what the market is paying for businesses like yours right now, which means that – for good or bad – you get to use your newfound cash and buy into the same economic market you’re selling out of.

Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is.  After completing the questionnaire, you will immediately receive a Sellability Score out of 100 along with instructions for interpreting your results. Take the test here: The Business Sellability Audit