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What is Your Company Worth? What Determines How Much You Get? How Fast It Sells? (#1 in a series)
This month we start a series of in-depth articles exploring the 13 factors that determine the value of your business. We'll also give you tips and advice to maximize what your company when you read the full article online. The first two value drivers we’ll discuss are:
- Discretionary expenses, and
- Customer concentration.
Discretionary Expenses Can Obscure the True Value of a Company
Here are some examples of poor discretionary expenses that will devalue a business:
- The owner hits a Maui trade show each year, not because it’s critical to the business, but because he likes the getaway.
- The owner has family members on the payroll at salaries higher than market rates.
- The business provides an upscale German car to an employee when a less expensive model would suffice.
Preparing for a sale, owners should work to limit their business expenses to those that are truly operationally necessary and will likely continue post-acquisition.
Customer Concentration Hurts the Value of a Company
Too much income from one client is a red flag. For buyers, the risk threshold usually varies between 10 and 20 percent. To fix this problem:
- Add new clients,
- Show that the “large customers” are really several smaller customers with autonomous purchase decision making, or
- Buy a competitor to dilute the revenue source concentration.
- by Business Coach Greg DeSimone - Beacon Equity Advisors, Inc.
Advertising, Copyright Infringement and Common Marketing Practices that Could Land You in Court
Booming online marketing has created many legal problems. Here are some areas where your marketing can break the law:
- Possible copyright infringement,
- Breaking terms of use,
- Using data that does not belong to you,
- Violations of the CAN-SPAM Act (email),
- Making false guarantees, and
- Advertising in a misleading manner.
Copyright Infringement
Simply finding an image online does not mean you can use it! Copyright infringement fines are stiff. Some safe image sources:
Using Data That Does Not Belong to You
If you are collecting data from your followers on a social media site, it is illegal to sell those data to other companies. However, you can use them to sell your own products.
Violations of the CAN-SPAM Act
Many violate the CAN-SPAM Act, which makes it illegal to send automated emails without a working unsubscribe link. Canada and Europe have separate laws in this area.
Making False Guarantees and Misleading Advertising
If you make guarantees or claims that you cannot prove, it is deceptive advertising and a clear violation of the law.
It is simple to copy and publish all kinds of content from the Internet. However, be sure you are fully within the bounds of the law.
While this article is US centric, most other countries have similar protections and laws. It is up to you to know what laws apply. It's for this reason we strongly recommend you consult competent legal counsel to be sure you are in compliance will all laws.
4 Tips to Overcome Controlling Behavior
Controlling behavior takes many forms but, in most cases it will be evidenced by bosses who:
- Make pronouncements as to how employees complete tasks,
- Constantly question employee judgment, and
- Continually check in with staff members for status updates.
A 2014 Accountemps survey revealed that 59 percent of employees had been micromanaged. Of those, 55 percent said micromanagement was barrier to productivity.
If you're ready to overcome your own controlling behavior to help employees be more productive, here are four tips:
1. Focus on Building Trust. Meet with employees one-on-one and face-to-face. In the process, reassure each one that you're working to change your approach to him or her.
2. Request Employee Support. Ask employees to alert you if you return to old patterns of controlling behavior.
3. Assume the Role of Coach – Not That of a Controlling Boss. Start coaching employees, rather than controlling them. To begin, increase your expectations of staff members and overtly encourage their efforts to be successful.
4. Empower Employees. It might take more time to train an employee to prepare a report than to create it yourself, but in the long run this will free up your time.
Change is Tough, You Don't Have to Go It Alone
As professional business coaches, we have many tips, tools and programs proven to help businesses large and small solve personnel problems, sell more, gain control over their time and make more money.
If you are committed to changing your company for the better and would like to know more about how we can help, let's talk. It's always confidential and there is no obligation.
The Challenge of Creating Value in Business is Complex, Here Are 7 Steps You Can Take
The challenge in creating value in business today is more complex than ever. This stems from the contradicting performance requirements companies must meet to create value, such as:
- Quality vs low cost,
- Reliability vs speed,
- Customization vs standardization, and
- Innovation vs efficiency.
This challenge becomes exacerbated by having to satisfy multiple stakeholders with different needs: board members, stockholders, customers, and employees.
Some notable companies are meeting these challenges. Southwest Airlines balances speed and reliability; Netflix and Amazon offer richness of content and reach the maximum audience; and H&M equalizes fashion and affordability.
7 Steps You Can Take
There are seven steps you can take to adapt to the shift required for better management of business complexity:
- De-clutter the organization from multi-level hierarchy, creating an inclusive environment,
- Encourage your teams to learn to prioritize and focus on the most value-driving activities,
- Understand exactly what your people do,
- Distribute the power within teams to give autonomy to foster the ability to use judgement in finding solutions, collaboration, and ownership,
- Reinforce integration,
- Allow learning from every experience and share knowledge, and
- Reward those that engage and reinforce the consequences for those that do not.
By Business Coach Shohreh R Aftahi, MBA, PhD
www.pathtofullpotential.com
To Attract Top Talent, Become One of Canada’s Best Employers - Here’s How
In our tightening employment market, businesses find themselves needing to develop a competitive edge in the workplace or settle for the applicants others turned down.
Here are some ideas to give you that competitive edge:
- Promote career advancement. In a Gallup survey, 51 percent of employees were actively looking for a new position. Internal mobility or lateral movement, with a bit of additional compensation thrown in, can fill the bill.
- Provide good performance feedback. However you review employees, to become a top-tier employer it’s essential that your staff get the feedback they need.
- Put people first. To foster a corporate culture that puts people first – both customers and employees – it’s essential to create equal opportunities for workers from all walks of life.
- Walk the walk, don’t just talk the talk. Invest in training for your employees; create opportunities for them to express themselves and take risks.
- Enable a healthy work-life balance. Insist on employees taking downtime, vacation time, and regular opportunities to enjoy life.
- Identify how you can empower your employees to live your brand by talking to them, finding out what they think of it, and taking note of their input.
What is Your Business’ Value Proposition?
Your value proposition is your competitive advantage and is directly related to what your customers want. Few things, if any, are more important to your success. See if any of these questions reflect your experience:
- Do you feel overwhelmed trying to create your value proposition?
- Have you tried projects that seemed to create great value but didn’t win over your prospects?
- Have you been frustrated by unproductive meetings and disappointed by misaligned teams that produced little of value?
Here are some simple things you can do to define your true Value Proposition:
- Identify and understand your customers and what they want. Organize the information in a simple way, look for patterns, and align your products with your customers’ needs. Target what matters most to your customers.
- Use effective, clear, and inclusive communication to create a common language that your team will be able to buy into and take ownership of your strategy. This leads to more meaningful, productive, and enjoyable meetings and actionable outcomes.
- Avoid projects that waste your time and resources by incessantly testing the premises underlying your ideas and projects. This allows you to pursue big bold ideas that complement your existing projects.
- by Shohreh R Aftahi, MBA, PhD
FocalPoint Business Performance Coaching
pathtofullpotential.com
Negotiate Better: The Walk Away Law
The Walk Away Law says: You never know the final price and terms until you get up and walk away.
You may negotiate back and forth, but you never know the best deal you can get until you make it clear that you are prepared to walk out of the negotiation.
The first corollary of the “walk away” law says: “The power is on the side of the person who can walk away without flinching.”
When you walk out, always be pleasant and polite. Leave the door open so that you can come back with no loss of face.
The second corollary of this law says: “Walking out of a negotiation is just another way of negotiating.”
The very best negotiators are extremely adept at getting up and walking out. They will leave the room, the building, the city, and even the country to increase their perceived negotiating power.
A common tactic is for one or more of the key players to storm out vowing never to return. Another version is “good guy – bad guy.” One will be unreasonable and demanding while the “good guy” will try to make peace by getting you to concede a little to placate the “bad guy.”
- from "THE 100 ABSOLUTELY UNBREAKABLE LAWS OF BUSINESS SUCCESS" – Brian Tracy
What Determines Your Company’s Value? (2nd in the Series)
Last month we started answering important questions such as these:
- What is your company worth?
- What influences how fast it sells?
We will continue to examine the factors that go toward answering these questions.
Customer Relationships
Buyers worry that the relationships your customers have with your business are really relationships between “Frank” in your customer’s purchasing department and “Sarah” in customer support.
Business owners considering a sale should be sure that customers have contact with multiple people in the business – preferably not all family members.
This multi-contact approach also forces employees to be more diligent in recording notes, transactions, order and contact data in the corporate records, which also has value to the buyers.
Family Members
Family members have a natural loyalty and trust for one another. However, a buyer may worry that if family members stay on, their loyalty may not transfer to new ownership. Further, this is especially important for certain positions, such as the heads the finance, operations, sales, product development functions as well as key sales positions.
You must execute the right personnel decisions to properly position your business for sale to a third party.
- by Greg DeSimone - Beacon Equity Advisors, Inc.
4 Keys to Building Better Customer Relationships
The relationship between your small business and its customers must be more than the mere exchange of goods and services for money if you want to succeed.
Poor customer relations can adversely affect your business, costing you in lost customers and sales. Here are four things you can do to build a strong and healthy connection with your customers:
- Ask Them What They Think. Feedback is invaluable. The problem is the opportunity isn't always there. Invite feedback. Send out surveys and hand out comment cards whenever appropriate.
- Show Customers That You Appreciate Their Business. Demonstrate your appreciation with loyalty programs and discounts. Give them free items whenever possible.
- Connect with Them. There is absolutely no reason for you to not connect with your audience, especially since connecting with them is easier than ever before. Technology has given your small business the power to stay in touch with your target market.
- Do More Than They Expect. Disappointment sticks with people. Fortunately, pleasant surprises also stick in the mind. The secret is promising little, then over-delivering. When people get more than they expect, they feel like they got a good deal.
What Are the Best Ways to Validate a Business Startup Idea?
I’ve personally been a part of 14 startups and over 400 business turnarounds. Here are a few of the lessons I’ve learned over the years:
Protect your cash. Don’t spend on researchers or consultants when you can do very relevant research on your own.
Fill a need. I don’t care in people say they like your idea. Is there a real need for it?
Get clarity. Complete clarity is required! Write a business plan for your idea before you start. Some important “clarity” questions:
- Can you clearly describe the “emotional” value of your idea in 20 seconds or less?
- What makes your idea unique?
- Who, specifically would be your perfect customer?
Validate. Research using online search engines, family and friends, printed media, and online forums to establish validity.
Don’t fall in love. Don’t be unwilling to change your idea!
Learn the business. Be sure you know something about the business you’re about to dive in to.
Understand entrepreneurship. It’s about work and effort, and believing in yourself when others may not.
Be fully committed. Many times, investors, bankers, and supporters will base their willingness to help on your level of commitment.
- by Coach Dan Creed