Kerri, Author at This Way Out Group - Page 11 of 25
If you were to draw a picture that visually represents your role in your business, what would it look like? Are you at the top of a traditional Christmas-tree-like organizational chart, or are you stuck in the middle of your business, like a hub in a bicycle wheel?
As anyone who has tried to fly United when O’Hare has been hit by a snowstorm knows, a hub-and-spoke model is only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid hub-and-spoke managed businesses because they understand the dangers of buying a company too dependent on the owner. Here’s a list of nine warning signs you’re a hub-and-spoke owner and some suggestions for pulling yourself out of the middle of your business:
1. You sign all of the checks
Most business owners sign the checks, but what happens if you’re away for a couple of days and an important supplier needs to be paid? Consider giving an employee signing authority for checks up to an amount you’re comfortable with, and then change the mailing address on your bank statements so they are mailed to your home (not the office). That way, you can review all signed checks and make sure the privilege isn’t being abused.
2. Your mobile phone bill is over $200 a month
If your employees are out of their depth a lot, it will show up in your mobile phone bill because staff will be calling you to coach them through problems. Ask yourself if you’re hiring too many junior employees. Sometimes people with a couple of years of industry experience will be a lot more self-sufficient and only slightly more expensive than the greenhorns. Also consider getting a virtual assistant (VA), who can act as a first line of defense in protecting your time. You can find a VA by filling out the request for proposal at http://www.ivaa.org/ or http://www.supremeoutsourcing.com
3. Your revenue is flat when compared to last year’s
Flat revenue from one year to the next can be a sign you are a hub in a hub-and-spoke model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business dependent on its owner reaches capacity at some point. Consider narrowing your product and service line by eliminating technically complex offers that require your personal involvement, and instead focus on selling fewer things to more people.
4. Your vacations suck
If you spend your vacations dispatching orders from your mobile, it’s time to cut the tether. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without affecting your business.
5. You spend more time negotiating than a union boss
If you find yourself constantly having to get involved in approving discount requests from your customers, you are a hub. Consider giving front-line, customer-facing employees a band within which they have your approval to negotiate. You may also want to tie salespeople’s bonuses to gross margin for sales they generate so you’re rewarding their contribution to profit, not just chasing skinny margin deals.
6. You close up every night
If you’re the only one who knows the close-up routine in your business (count the cash, lock the doors, set the alarm), then you are very much a hub. Write an employee manual of basic procedures (close-up routine, e-mail footer to use, voice mail protocol) for your business and give it to new employees on their first day on the job.
7. You know all of your customers by first name
It’s good to have the pulse of your market, but knowing every single customer by first name can be a sign that you’re relying too heavily on your personal relationships being the glue that holds your business together. Consider replacing yourself as a rain maker by hiring a sales team, and as inefficient as it seems, have a trusted employee shadow you when you meet customers so over time your customers get used to dealing with someone else.
8. You get the tickets
Suppliers’ wooing you by sending you free tickets to sports events can be a sign that they see you as the key decision maker in your business for their offering. If you are the key contact for any of your suppliers, you will find yourself in the hub of your business when it comes time to negotiate terms. Consider appointing one of your trusted employees as the key contact for a major supplier and give that employee spending authority up to a limit you’re comfortable with.
9. You get cc’d on more than five e-mails a day
Employees, customers and suppliers constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval or that you have not made clear when you want to be involved in their work. Start by asking your employees to stop using the cc line in an e-mail; ask them to add you to the “to” line if you really must be made aware of something – and only if they need a specific action from you.
How many of these warning signs apply to you/your business? For the business to grow, it can’t revolve around you. Pick one of these warning signs and move to fix it today.
Here’s another review for HARVEST Your Wealth
“Kerri Salls’ new book, Harvest Your Wealth, is a clarion call for owners of small and medium sized privately held businesses. It might have been titled; “Don’t Leave Your Money on the Table When You Sell Your Business!” The author clearly knows her stuff. The book is chock full of lists: things to do, things to avoid, things to think about. Reading the book, I felt like I could have used a “List of the Lists” to help me navigate through the content, because there are so many useful lists of tips and techniques for the exit planner-I counted more than 75 different lists in the 235-page volume. The book has lots of very useful material, and I can imagine business owners dog-earring pages and writing lots of notes in the margins. I found the organizational design to be a bit vague, but that’s a trifling complaint when balanced against the wealth of valuable information that is made available to the reader.
If you are thinking about exiting your business, this is a book that you’ll want to add to your business library.”
Check it out.
Implement the tools and strategies from Harvest Your Wealth and you will live and sleep with peace.
Because you will control the destiny of your business AND your life. The wisdom and knowledge that Kerri Salls shares in this book is worth its weight in gold, literally. It is a must read for any serious entrepreneur.
David M. Corbin, Best Selling Author, Illuminate: Harnessing The Positive Power of Negative Thinking and Preventing Brand Slaughter, Faculty member CEO Space International.
Managing Director – The Performance Technology Group
President – Aesthetic Audio Systems, Inc.
Get Your Copy Now.
When you started your business, your whole focus was to get customers, generate revenue and try to make a profit from what you love to do and what you are very at.
It’s never too early or too late to plan your exit. Think about your options now, whether you plan to cash out in the next couple years or in a couple decades.
Every business owner has 3 OPTIONS of how they’ll get out.
- The first option is the default that over 95% of all business owners choose. That’s to do nothing, exit feet first and leave your family to muddle along or liquidate the business as best they can to pay your estate taxes.
- The second option is a bit better. That’s the standard option of paying a fee (e.g., $50K+) and a commission (3-10%) upon sale with an outcome that can pay you the owner a modest multiple (x) of your operating profit 6-10 years from now.
Have you thought about this as a viable option?
Do you want to wait that long?
Do you have the drive to continue growing the business another 6-10 years?
Is that the return you were looking for?
Can you finance your reinvention on that?
Is it close to your Number?
Are you aware of how this works? I want to make sure you know about it – but I think it’s an option that favors the buyer. But you need to know what it is to know if it is distasteful for you.
Alternatively, did you know it’s in your better interest to exit early, that when you exit in the first 3-5 years your ROI is greater? And right now, if you exit in the next five years (2013 – 2018), it is optimal timing to hit the seller’s market, instead of the buyer’s market if you wait more than 5 years (beyond 2018).
3. I offer a 3rd option for how to get out. My way is more pro-active and
measurably more expensive up front.
My approach helps owners optimize and leverage results early.
They can exit 2-4 years earlier, potentially realizing 4-6x operating profit,
- Take my 3rd option and get out four years earlier, with a higher multiple of EBITA in cash, with systems, structures and wealth preserving vehicles in place to maintain the lifestyle and benefits your business has provided, or
- Take the standard option of a lower multiple in 6-10 years when it will be a buyers’ market.
Here’s how I make you succeed. I take a comprehensive strategic approach with only one objective, to help you the selling business owner get out on your terms on your timeline. This is all I do.
Most entrepreneurs know they can make a good income running their business day-to-day, but SOME OWNERS INSTINCTIVELY know that their real payday will come only when they exit the business, most likely by selling the business.
That’s when they can access
multiple millions of dollars from their business.
- Is this something you have thought about?
- Do you want your business to produce a multi-million dollar windfall?
- Do you think it’s possible for your business to fund a multi-million dollar reinvention for you?
- Do you know how much your business is worth right now?
95% of all business owners do not have an exit plan – because most owners don’t know what their business is worth. As a result, most owners are walking away with only 50-70% of what their business is worth.
Sadly, most owners and entrepreneurs fail to achieve their dream and get out the way they want to just because of a lack of planning, and forethought. It’s totally preventable.
Those CEOs who invest the time, effort and expertise to plan their exit and make their business appealing to buyers are among the 5% who achieve their dream and the lifestyle it offers.
To discuss how you can be among the 5%, call or email me. Let’s explore strategies to identify what will work best for you.
If you cannot execute a plan now to achieve these objectives, you can’t afford to wait. Call today.
On June 1, 2011, both Floyd’s Coffee Shops in Portland, Oregon were busier than usual. The regulars were elbowed out of the way by new customers visiting the store for the first time to redeem their coupon and get $10 worth of coffee for $3.
This tempting offer was made because Floyd’s had been picked as the first-ever Google Offers “deal.” Google Offers is the company’s first baby step into the world of “social buying” style promotions where a special, limited time offer is made by a business hoping that the deal will spread virally and thereby introduce a new legion of customers to their business.
Google, of course, did not invent the deal-of-the-day category; they were goaded into it after their generous $6 billion dollar offer to buy Groupon was turned down.
Now Groupon is feeling the pinch after thumbing their nose at one of the world’s most valuable companies. According to compete.com, Groupon’s traffic went from 33.7 million unique visitors in June 2011 to just 18.3 million unique visitors in January 2012. That’s a drop of almost half inside less than a year. Not surprisingly, Groupon’s stock is also down around 25% since its IPO.
Over-playing your hand
The moral of the story is to be careful not to over-play your hand when being approached by someone who wants to buy your company. Acquirers usually have deep pockets and, while you may think your business is unique, never underestimate the resolve of a big company with lots of cash.
They do have an alternative to buying you: they can simply compete with you.
Typically when they make the decision to walk away from the negotiation table they do not leave empty-handed. They come away with new-found insight on how you run your business, what works, and what flops; so they have an enormous head start to launch a competitive company.
And it doesn’t just happen in Silicon Valley. Take a hypothetical example of a home security company generating $500,000 per year in profit (before tax) installing and monitoring home alarms. One day a big alarm company comes along and says they want to buy the business and they’re willing to pay four times pre-tax profit. The alarm company owner turns up his nose and demands six times earnings.
Now the suitor has a choice. They can try and negotiate with the owner, but that would undermine the economics of the model they’ve used to buy hundreds of similar alarm companies across the country, or they can simply hire someone to start an office to compete with him.
Let’s say they pick door number two and hire a young, aggressive manager. They guarantee her $200,000 a year in the first 12 months on the job while she is building her business. You have not only lost the opportunity to sell your business; you’re now competing against a young, motivated rival with a parent company who has an extra $1,800,000 ($2,000,000 withdrawn offer minus the $200,000/ year salary for their manager) that they didn’t use to buy you and they’re putting it towards helping your new competitor build her business.
If you’re lucky enough to get approached by a big company who wants to buy yours, remember that they are usually not choosing between buying you or buying your competitor. They are often choosing between buying you or setting up shop to compete with you.
Doctors in the developing world measure their progress not by the aggregate number of children who die in childbirth but by the infant mortality rate, a ratio of the number of births to deaths.
Similarly, baseball’s leadoff batters measure their “on-base percentage” – the number of times they get on base as a percentage of the number of times they get the chance to try.
Acquirers also like tracking ratios and the more ratios you can provide a potential buyer, the more comfortable they will get with the idea of buying your business.
Better than the blunt measuring stick of an aggregate number, a ratio expresses the relationship between two numbers, which gives them their power.
If you’re planning to sell your company one day, here’s a list of seven ratios to start tracking in your business now:
1. Employees per square foot
By calculating the number of square feet of office space you rent and dividing it by the number of employees you have, you can judge how efficiently you have designed your space. Commercial real estate agents use a general rule of 175–250 square feet of usable office space per employee.
2. Ratio of promoters and detractors
Fred Reichheld and his colleagues at Bain & Company and Satmetrix, developed the Net Promoter Score® methodology, which is based around asking customers a single question that is predictive of both repurchase and referral. Here’s how it works: survey your customers and ask them the question “On a scale of 0 to 10, how likely are you to recommend <insert your company name> to a friend or colleague?” Figure out what percentage of the people surveyed give you a 9 or 10 and label that your ratio of “promoters.” Calculate your ratio of detractors by figuring out the percentage of people surveyed who gave you a 0–6 score. Then calculate your Net Promoter Score by subtracting your percentage of detractors from your percentage of promoters.
The average company in the United States has a Net Promoter Score of between 10 and 15 percent. According to Satmetrix’s 2011 study, the U.S. companies with the highest Net Promoter Score are:
USAA Banking 87%
Trader Joe’s 82%
USAA Homeowner’s Insurance 78%
USAA Auto Insurance 73%
3. Sales per square foot
By measuring your annual sales per square foot, you can get a sense of how efficiently you are translating your real estate into sales. Most industry associations have a benchmark. For example, annual sales per square foot for a respectable retailer might be $300. With real estate usually ranking just behind payroll as a business’s largest expenses, the more sales you can generate per square foot of real estate, the more profitable you are likely to be.
Specialty food retailer Trader Joe’s ranks among companies with the highest sales per square foot; Business Week estimates it at $1,750 – more than double that of Whole Foods.
4. Revenue per employee
Payroll is the number-one expense of most businesses, which explains why maximizing your revenue per employee can translate quickly to the bottom line. In a 2010 report, Business Insider estimated that Craigslist enjoys one of the highest revenue-per-employee ratios, at $3,300,000 per employee, followed by Google at $1,190,000 per bum in a seat. Amazon was at $1,010,000, Facebook at $920,000, and eBay rounded out the top five at $530,000. More traditional people-dependent companies may struggle to surpass $100,000 per employee.
5. Customers per account manager
How many customers do you ask your account managers to manage? Finding a balance can be tricky. Some bankers are forced to juggle more than 400 accounts and therefore do not know each of their customers, whereas some high-end wealth managers may have just 50 clients to stay in contact with. It’s hard to say what the right ratio is because it is so highly dependent on your industry. Slowly increase your ratio of customers per account manager until you see the first signs of deterioration (slowing sales, drop in customer satisfaction). That’s when you know you have probably pushed it a little too far.
6. Prospects per visitor
What proportion of your website’s visitors “opt in” by giving you permission to e-mail them in the future? Dr. Karl Blanks and Ben Jesson are the cofounders of Conversion Rate Experts, which advises companies like Google, Apple and Sony how to convert more of their website traffic into customers. Dr. Blanks and Mr. Jesson state that there is no such thing as a typical opt-in rate, because so much depends on the source of traffic. They recommend that rather than benchmarking yourself against a competitor, you benchmark against yourself by carrying out tests to beat your site’s current opt-in rate.
Dr. Blanks and Mr. Jesson suggest the easiest way of increasing opt-in rate is to reward visitors for submitting their e-mail addresses by offering them a gift they’d find valuable. Information products – such as online white papers, videos and calculators – make ideal gifts, because their cost per unit can be almost zero. Using this technique and a few others, Conversion Rate Experts achieved a 66 percent increase in the prospects-per-visitor rate for SOS Worldwide, a broker of office space.
7. Prospects to customers
Similar to prospects per visitor, another metric to keep an eye on is the efficiency with which you convert prospects – people who have opted in or expressed an interest in what you sell – into customers.
Conversion Rate Experts’ Dr. Blanks and Mr. Jesson recommend you monitor the rate at which you are converting qualified prospects into customers, and then carry out tests to identify factors that improve that ratio. Conversion Rate Experts more than doubled the revenues of SEOBook.com, the leading community for search marketers, by converting many of SEOBook’s free subscribers into customers. Techniques that were found to be effective included (perhaps counter intuitively) restricting the number of places available; allowing easier comparison between SEOBook and the alternatives; communicating the company’s value proposition more effectively; and simplifying its sign-up process. The trick is to establish your benchmark and tinker until you can improve it.
Acquirers have a healthy appetite for data. The more data you can give them – in the ratio format they’re used to examining – the more attractive your business will be in their eyes.
To harvest the wealth in your business to fulfill your dreams, your job is to prepare your optimum exit strategy and achieve every goal you set. Through preparation and execution you can engineer how you maximize the wealth you can get out of your business.
“I believe it’s in your DNA to strive for more. It is what drives your passion for business and beyond.
Some years you focus on maximizing the profits you can pull out in order to pay for a house, a new car, and college for the kids.
Some years you focus on reaching new markets, standing out in your market, rolling out a new product line or service, or accomplishing a major business milestone.
Too many years go by without ever focusing on or planning how to monetize the business you’ve built to secure your reinvention.”
Excerpt from Harvest Your Wealth. www.harvest-your-wealth.com
If you’re company is large enough, if you’re open minded enough, if you’re committed to maximizing the value in the business to produce more wealth for you, and if you’re excited about the possibility of making the shift to doing more, solving more, winning more, and succeeding more; there are a number of ways I can be more directly involved in guaranteeing your future dreams come true.
There are many ways I work with clients:
- Personal Advisory Relationships – Mentoring, Not Coaching
- Customized Business Relationships To Fit Your Strategic/Exit Needs
- 1 Day Fee-Based
- 12 Month Fee-Based
- Long Term relationship to see you through the transaction and transition to reinvention
I bring the most value to your business and your ultimate wealth, when we build a long-term relationship. It won’t be worthwhile if I’m bamboozling you, or I drop the ball or you hate my guts. I would have nothing to gain there and everything to lose. I am more long-term oriented rather than a rush at the end.
When you wait until the last 6 months before you want to get out to start thinking about how to get your money out of the business, or to figure out what it’s worth, or more importantly how much money you need out of the business to move on to your next venture, travel, avocation or hobby, here are the trade-offs you signup for:
- You have fewer choices
- Your valuation will be lower
- You have less time/options to make the business buyer attractive
- You leave 30-50% of the value of the business on the table
- The buyer holds all the cards
- It’s much harder to complete a transaction that produces your financial freedom
- You and the business take a bigger tax hit
- The business may not survive the transaction
- The buyer will limit the cash you get out up front
- The buyer will require your participation, expertise for an extended period of time
- You risk walking away with not enough to fund your reinvention dream
- Your reinvention plan has not been tested and you don’t have the next 180 days booked solid.
- Your wealth advisor is ill-prepared to maximize your wealth to ensure your financial future.
So your challenge is to grow the business, add value to the business and make the business buyer ready before you implement your contingency plan, succession plan, or transition plan.
“The difference between greatness and mediocrity, mediocrity and millions, spectacular and pathetic performance is how well you use your time, your opportunities, your efforts, your resources and your assets.”
Think of the most successful business leaders you know. They are never idle. They don’t stand still. They are always moving forward. They don’t look for problems and opportunities just from one angle. They keep moving and view their business from all directions. They see the shadows and explore what’s hidden in those shadows. To accelerate growth and maximize value, they seek out and find new solutions and get meaningful, life-changing results that their competition never will. In every decision they make, they are always asking; “is this decision taking me closer or pulling me away from my long-term plan to sell/scale or find a successor.”
Obviously, there’s much more to learn and much more that can be achieved to make your business a wealth producing machine that allows you to transition to your reinvention, fulfill promises and walk away with the financial freedom to live the life of your dreams.
I can help you get there faster, sooner. I can make the job easier, and far more enriching for you if you’re interested in my personal assistance.