John Denton on Turning A Business In To A Saleable Asset

A business that's 'ready for sale' is well worth keeping!

You Can’t Change History!

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As much as we would like to sometimes, we just cannot change history.

Although, some business owners still try to turn the clock back!

What do I mean by that? Well, every day in business we are creating a history of the business’ performance – reflected in the numbers. Every single thing that happens in the business is there for everyone to see – including potential buyers of the business. And that’s why I keep emphasising to business owners “be aware of the history you are creating. Know your numbers!”

One of my mantras is “Keep your financials clean, up to date and the ‘right’ numbers going up!”

A business, like shares, is much more attractive when there is a history of the numbers going up! The most important numbers are ‘adjusted net profit’ to the owner, turnover, and gross profit. The longer they have been going up the better but at least over the last three years. Steady growth is preferred by most buyers not sudden increases or decreases. Consistency is very important and spread over a good diverse mix of clients. It can take years to get to this state.

One bad number can make a big difference in the value of a business and can put buyers off – big time! Many businesses I get to look at simply do not have a well constructed process for recording and reviewing the numbers. Want to know more? Attend one of my short workshops.

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This is why every business owner who has any ambition at all to sell their business one day, and cash out with a good sale, needs to be planning and preparing their business ready for sale EVERY DAY. Build an asset not just a job for the owner.

A business that is ready for sale will be much easier to manage, run without the owner, be much more successful and will attract buyers. This is the situation you want to be in so that you can have options to sell for the price you want, when you want to. You should be in control of the whole process.

There are many more areas that need to be considered in addition to the numbers. For example how well you structure and record the numbers is also critical. Make it easy for a buyer (and yourself) to see what is happening in the business. Keep your eye on the ball all the time.

In future posts I’ll be covering the other areas but if you want to fast track your learning on the “business ready for sale front” consider attending one of my half day seminars on the topic. To get the details

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Is Your Business ‘Ready For Sale’?

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business ready for sale checklistAt some point every business owner exits their business!

Will YOU exit with equity and have your biggest pay-day ever? 

Do you have a ‘business ready for sale’ checklist for your business?

(O.K. I’ll cut to the chase – I run half day workshops in Perth on getting your business in to a ‘ready for sale’ state. Click the button for details)

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Don’t wait until you are forced to sell by circumstances and only get a low return for all the blood, sweat, tears and time you have invested in the business? Or worse still, close the business down.

The simple truth is that if you haven’t got all your ducks lined up in your business before you put it on the market then you are likely to be very disappointed with the outcome when trying to sell your business. And I say ‘trying’ because in the current business sales market you have to have all your ducks lined up to sell a business.

Buyers are buying businesses but they are doing much greater due diligence than they did years ago. There are a lot more businesses for sale than there are buyers. This means that buyers can be much more selective about the business they buy.

If you want your business to stand out, sell quickly and get the maximum sell price, then make sure that everything is very well prepared and ‘ready for sale’ BEFORE going to the market.

The other benefit of getting your ducks lined up is that (as I keep saying) a sell a businessbusiness that’s ‘ready for sale’ is well worth keeping. Build your business as if you are going to keep it forever, but could sell it tomorrow.

“So” you ask, “what are these damn ducks you keep talking about?”

The ‘ducks’ are basically a checklist of things to have ready! Areas I cover in my “Preparing a Business Ready For Sale” half day workshop, include;

  • Legal entity, ownership, business names versus trading names (often out of date)
  • Financials and accounting (obvious, but often a major headache at appraisal time!)
  • Systems and procedures (often totally absent, out of date or incomplete)
  • Customer records and databases (much of the goodwill is in this area)
  • Sales and marketing – systems and records (absolutely crucial and often non-existent!)
  • Suppliers (done on a handshake – may not be good enough)
  • HR and employment (a mystery area to many business owners)
  • Premises (can be a minefield)
  • Reason for sale (may be obvious to you but a buyer will see it differently)
  • Other – the business needs to be assessed through the eyes of a buyer…..

Obviously I can’t cover all of these in detail here, however I cover ‘getting your ducks lined up’ in my half day workshops. To find out about my next workshop;

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Learning from the many mistakes I see business owners make in my role as a business broker puts me in a great position to help other business owners to prepare their business ‘ready for sale’ and avoid the same mistakes. My 10 years running my training and development business has prepared me to deliver that learning to business owners. Please check out my services on this website and contact me if I can be of help.

Once again, to learn about ‘getting your ducks line up’ – click the button to get details of my next half day workshop!

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“Helping business owners prepare their business ‘ready for sale’ – and selling them!”

Before You Open Your Mouth

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TheThinkerBefore you open your mouth in a meeting, or in a conversation with someone at work or socially, consider applying this triple filter first! This has been attributed to Socrates and goes something like this;

In ancient Greece, Socrates was reputed to hold knowledge in high esteem. One day an acquaintance met the great philosopher and said, “Do you know what I just heard about your friend?”

“Hold on a minute”, Socrates replied. “Before telling me anything I’d like you to pass a little test. It’s called the Triple Filter Test.”

“Triple filter?”

“That’s right”, Socrates continued. “Before you talk to me about my friend, it might be a good idea to take a moment and filter what you’re going to say. That’s why I call it the triple filter test. The first filter is Truth. Have you made absolutely sure that what you are about to tell me is true?”

“No,” the man said, “Actually I just heard about it and….”

“All right”, said Socrates. “So you don’t really know if it’s true or not. Now let’s try the second filter, the filter of Goodness. Is what you are about to tell me about my friend something good?”

“No, on the contrary.”

“So”, Socrates continued, “you want to tell me something bad about him, but you’re not certain it’s true. You may still pass the test though, because there’s one filter left: The filter of Usefulness. Is what you want to tell me about my friend going to be useful to me?”

“No, not really.”

“Well”, concluded Socrates, “if what you want to tell me is neither true nor good nor even useful, why tell it to me at all?”

If everyone in the workplace / family / social group applied this filter before they spoke, what do you think would happen?

Ponder on this story and think about if you should apply it in your business and / or life!

Are you strong enough to do it?

Is it worth doing? What difference would it make to anything?

I’d be interested in your thoughts.

Feel free to add your comments below.

CLICK HERE FOR DETAILS OF GROUP DISCUSSION AND MENTORING SESSIONS

End Of Year – An Opportunity To Plan

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UpGraph

If you fail to plan, you plan to fail!

Are you planning for growth?

When is the best time to plan? NOW!

It’s almost the end of another financial year – well at least it is in Australia. The end of the year is a good opportunity for reviewing your business performance over the last year as well as setting strategies, goals and plans for the coming year.

One of the opportunities which is often overlooked, is the opportunity to restructure your chart of accounts in your accounting package. Why would you want to do that?

Your management accounts are your ‘instrument panel’ for the business. They should be set up to provide you, the business owner, with the information you need to make informed decisions in your business. Correctly set up, your accounts will tell you; what are your most profitable products and services, who are your most profitable clients, the life time value of your clients, where your cash is going and where you can increase your profits – just to mention a few.

When preparing your business “ready for sale” the profit and loss statements are crucial. Make sure you identify different income streams – not just “Sales” or “Income”. Break it down in to logical product or service lines. Track your cost of sales in the same way. Accounting packages these days allow you to assign product codes and associate costs to ‘project codes’. Make good use of the powerful features of the accounting package. Seek help from a good accountant and if you don’t know one, just give me a call.

When it comes to selling the business, it makes it much easier to put a value on the business if you separate out items which can become add-backs. That is, such things as owner’s wages and super, subscriptions and memberships and anything which is discretionary and not part of the day to day operations. It also makes it much more attractive to a buyer and improves the likelihood of getting through due diligence quickly and painlessly.

“You should build your business as if you are going to keep it forever, but could sell it tomorrow!”

I run half day sessions on “preparing businesses ready for sale and increasing their value”.

Just click WORKSHOP for dates and details.

All the best

John Denton
“Helping business owners realise their dreams through buying and selling businesses!”.

Seller Beware on Selling Your Business

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Buyer bewareDon’t Blow Your Money When Trying To Sell A Business!

This will be a short post as I want to get it to you quickly. I have advised clients about this in the past but following a recent marketing campaign by a firm claiming to be business brokers, I thought I should re-post this message.

Basically, there are a few large corporations out there making claims to be business brokers and selling businesses via very expensive glossy advertising in magazines. Sometimes the company involved claiming to sell businesses has interests in the media publication involved.

Their Main Interest Is To Sell You Advertising – Not Sell A Business

Before you engage anyone to sell your business, check out the following;

  1. Are they registered business brokers complying with Australian Government regulations?
  2. Do they know and operate in your local market? That is, do they have an office in the state and people on the ground?
  3. Did you get a written appraisal of your business or did you just ‘agree a price’?
  4. Can they give you names of business owners for whom they have sold businesses?

Just make sure you do your due diligence on anyone before you list with them and find out how they will go about selling your business, not just placing an expensive advertisement in a magazine. For detail about how the ACCC and the NSW Government view these people READ THIS! It includes a sample of a recent marketing campaign and an Australian Institute of Business Brokers press release.

On a slightly different topic – also beware ‘online business evaluations’. Many of these are based in the USA and in any case are very basic and unlikely to reflect true local market values in your area.

To get the low down on valuing a business and preparing it for sale, attend one of my half day workshops. DETAILS HERE

Until next time – keep those numbers going up!

John Denton

Buy A Business – What You Need To Know

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buying a businessWhen I am asked to help a buyer who is looking at buying a business, the meeting is usually me asking a long series of questions. Many of the questions end up being questions which the buyer should be asking the seller in relation to the business and their reason for selling.

At the end of the meeting with the buyer, they  will often say “Thank you, now I know what I need to know and what questions I should ask”. Then I sit and wonder why they hadn’t thought of these seemingly obvious questions before. But of course, if you haven’t been through the process of buying a business before – then you don’t necessarily know what you need to know!

It’s all about asking the right questions to get the right information to be able to make the right decision FOR YOU! The trick is knowing what information you need!

There are some basic areas that you need to explore as a potential buyer and therefore areas as a seller which you need to have covered. These are;

(1) Why is the seller selling? (Especially when they are telling you what an excellent business it is.)
(2) Financial aspects of the business. The seller should be able to provide you with ‘year to date’ figures and finalised accounts to the end of the last financial year. If they can’t why not?
(3) How much should I spend on a business? It’s not just about price but also working capital etc.
(4) Non financial aspects of the business. Just a few of the things are lease arrangements, staffing, systems, barriers to entry, seller hand over period, seller not competing…  and many more,.
(5) Questions to ask yourself. Why do I want to own a business and why this one? Just for starters.

If you are thinking of buying a business then plan and prepare before you even start looking.

Buying a business is a major decision for most people. Unlike buying a home, where if you end up not liking it you can always sell it again and get something for your money. If you buy a business and it all goes pear shaped, you could end up with nothing to sell and lose everything – including your home! Don’t take the chance! Seek good advice before proceeding – CLICK HERE.

Having said all that, if you buy the right business for you and for all the right reasons it could be the best investment you ever made!

All the best in your decision making – John Denton (See Upcoming Events – For More Opportunities to Learn)
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Upcoming Events – This is where I recommend upcoming events which I believe are well worth attending if you are in business or thinking of getting in to business. They may be my events or events by people I know and trust to do an excellent job.

My Monthly Business Owner Mentoring Groups – ongoing – CLICK HERE for details.

June 7th – “Buying and Selling Businesses” at the Small Business Centre – Stirling. Half a day and I am the presenter. 

May 5th – Mal Emery’s “From Frustration To Freedom” workshop – Your Choice between Financial Freedom or Slavery in the Chaotic New Economy”. Hands on 1 day workshop . Mal will make this FREE for you as you are my special guest. That saves you $297 (single) or $594 (double). 

May 23rd – Sue Papadoulis, who is an expert in gaining free publicity for your business, is speaking on “Publicity For Profit” at the Wanneroo Business Association breakfast meeting. Sue has addressed my mentoring groups on two occasions and is terrific value! 

 

It’s Great To Have Standards In Business!

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It’s great when you spot a business which “sets high standards” and pays attention to detail. Here is a small and not serious sign of a business which doesn’t pay attention to detail or train staff to maintain standards.This table was set for three people! We all had a choice of style of glass we wanted to drink from! This quite funny example occurred in a very good cafe in our local shopping centre.


It was funny rather than serious but reminded me of how a lack of attention to detail can detract from an otherwise good business. How well do you set standards in your business AND train staff to maintain them?

When it comes to selling a business it makes the decision for the buyer much easier if there are good systems and standards in place.cIt makes the buyer feel confident that the business can continue to be a success under the new owner.

If you would like help with this or any other aspect of getting a business in to a ‘ready for sale’ state – please contact me via the CONTACT US tab at the top of this web site!

All the best, John Denton – helping prepare business ‘ready for sale’ because a business that is ‘ready for sale’ is well worth keeping!

Trust – The Currency In The New Economy

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So, who do YOU trust?

Ask Mark Harvey, the Australian Rules Football coach of the Fremantle Dockers – he was at a public function representing the club in the morning and sacked at 4.00 pm in the afternoon! Or ask the board of the St Kilda football club who were told by their coach, Ross Lyon, that he was quitting and not seeing his contract through to the end of the 2012 season. Mark Harvey also had 12 months of contract to go.

It seems that in this new economy a contract counts for nothing. It seems that politicians words count for nothing! (“There will be no price on carbon in my term of government!” Thank you Julia!)

So who do we TRUST? Not politicians, not religious leaders and not footy clubs and coaches – it seems!

Apparently, according to reports in various media, we are more and more trusting people we know and love. People who are close to us. More business is done by referral and trusting what our friends say than by traditional advertising in the media.

Power has shifted to the ‘client’. It is a buyers market in almost every category out there. Certainly in retail it is where more and more people are doing their research online before approaching a retail outlet. In some cases people are using their smart phones (iPhones and their equivalent) to scan bar codes in stores and find out the online prices for products and then approaching the checkouts and demanding they match the price. A retailer has told me this happens in his stores!.

So how do you get people to TRUST you? How do you get them to come to you in the first place and try you out?

Well you can try the traditional method by offering large discounts! Hence the sudden rise of discount vouchers like Scoopon, Cudo, Groupon etc. This can be a good way to get people in for the first time (but make sure you do your maths first – or you will go broke!). You then have one chance to impress them enough so that they keep coming back! How many business owners know how to entice a customer back? How many business owners know how to develop a client for life – based upon TRUST? Not many!

One very effective way which businesses and major corporations alike are trying to “get referrals and build trust” is through the massive popularity of social media marketing – and Facebook and Twitter particularly.

On the Gruen Factor program recently they talked about how KLM, the Royal Dutch Airline, were monitoring Twitter in Schiphol (Amsterdam) airport. When they saw someone tweet who was booked on a KLM flight, staff would go and find them and give them a gift to thank them for flying KLM. What do you think this avid “tweeter” did after getting the gift? YES, they tweeted about the gift and how great KLM were! Instantly getting the word out to goodness knows how many of the person’s friends AND everyone else on twitter about how great KLM were. Beautiful, wonderful, FREE word of mouth marketing (apart from the small cost of the gift).

So, how are you using the new (FREE) social media marketing tools to develop trust and seek referrals for your business? There are many small and medium businesses, as well as the major corporates, who are taking advantage of things like Facebook. Go explore the possibilities! It’s largely free marketing apart from your time.

Here’s a small short promo! I have partnered up with Peter Butler of Smarter Websites to run ‘hands on do it with you’ workshops to help business owners actually build their Facebook Business Page in the workshop and optimise it for their business. Enough said – you can get the details by CLICKING HERE

All the best for you in your business. I am a business coach and business broker. I work with business owners to help them build their businesses and prepare them ‘ready for sale’. I do this through business owner mentoring groups, one on one coaching and a variety of workshops and seminars.

John Denton

Boom or Gloom

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What interesting and challenging times we live in.Australian dollar at over $1.10 US – who would have thought!

Australians are saving at record levels and consumer spending is at record lows. Resources are booming but we are now being told that we have a ‘two speed economy – boom and gloom’. And today’s meeting of the Reserve Bank board is shaping up as the most closely watched in months, with the decision on whether to raise interest rates expected to be a close call.

Then of course, we have Queensland flood tax (call it a levy! Is it really going to Qld flood victims? Who’s auditing it?). What will the carbon tax mean to you and your business next year when it starts on July 1st? Whose story do YOU buy on that one? The reality is that nobody knows what the flow on will be! 

What does all of this change & uncertainty mean to your business? What is it doing to your ongoing profitability? What is it doing to the value of your business? Are you relying on selling your business to fund your retirement? If so, when do you sell?

I am running my half day workshop on “7 Keys To Selling or Buying a Business” on Tuesday 9th August, and will be discussing these issues. For all the details and registration CLICK HERE.

Some things which are showing up in business appraisals are;

Retail is struggling big time

Manufacturing is struggling to compete with China and Asia (What will the additional burden of carbon tax do for them?)

Exporters are struggling with the high dollar

Tourism is suffering from the high dollar

Import and distribution are having a great time. Profits are up due to the high dollar!

SOME WIN AND SOME LOSE! WHERE WOULD YOU PUT YOUR MONEY?

All the best

John Denton

“Helping business owners realise their dreams through buying and selling businesses!”.

 

Testimonial On The Sale Of A Business

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From Chris and Eva Godwin – December 2009

I tried a very well known company in Perth to sell my business.  After one interview and a look at some basic figures they said; “it wasn’t worth anything and they weren’t interested”.  After picking myself up I started asking around and was recommended to John Denton of Performance Business Sales.  What a breath of fresh air that was.

John and PBS weren’t interested in the figures in the beginning, they were interested in the business and the owners, then the figures.  The process was professional, honest and respectful and the final sale price of the business was fair and reasonable.  Due to the businesses specialised nature it took 12 months to sell.  John stuck by us (husband and wife directors) to the end and this may sound a little strange, but I actually enjoyed the process as it taught me so much.

My family (me, the misses and 2 kids under 10) our now living in Germany for one year (2010) before returning to Australia and if I decide to buy or sell another business again it will be through John and PBS.  To whoever reads this testimonial; “If you want to sell your business, stop mucking around and use John of PBS.  You want regret it; I didn’t”.

Contact details supplied. Chris and Eva are happy to be contacted.

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