If you think you only need a business plan to go fishing for capital, you are quite mistaken.  A Business Plan, thoughtfully assembled and diligently updated, is the very blueprint for any company.  It sets direction, facilitates communication, amd establishes performance measurements.  Better yet, well-articulated business plans force business owners to constantly weigh the strengths and weaknesses of their operation.

1. Definition of the Problem.  Every plan must start with an explanation of the problem the business aims to solve – not a description of the company or product.  Lay it out in terms your mother could understand.  Avoid any assertions like “every customer needs this” and gobbledgook like “next generation platform” – this means nothing and undermines your credibility.

2.  Solution and Benefits.  This is not the place for a detailed product specification.  Instead, explain how and why the product works.  Again, skip the technical jargon and hyperbole. 

3. Industry and Market Size.  Without compiling a book, capture the evolution of the overall industry, market segmentation, market dynamics, and customer landscape.  Include relevant charts and graphs – they sell a story very efficiently.

4. Explanation of the Business Model.  This section should explain (clearly) how you will make money – who pays you and how much of that you get to keep after expenses.

5. Competition and Advantages.  List and describe all your competition, including substitute products and services.  Then detail your competitive advantages and highlight barriers to entry which will keep your competitors at bay.

6. Marketing and Sales Strategy.  Here is where you sum up how you will go to market, including your pricing and distribution channels.  Map out a timetable of key milestones.

7. Executive Team.  Investors ultimately bet on people, not ideas.  Convince investors that your team has the determination to start a new business and knowledge in the company’s specific area.  Include members of your Advisory Board if possible and key players involved in the company.

8. Funding Requirements.  Explain how you arrived at the amount of capital you are asking for and describe in depth how you plan to use that money.  Show the amount of financial commitment founders and equity owners have in the company.

9.  Financial Forecast.  Include revenue and expenses for the last three years (if relevant) and project them for the next five years.  Clearly show and justify growth assumptions.  Highlight the breakeven point.

10. Exit Strategy.  This section is required when courting outside investors eager to know when and how they will get their money out and what sort of return they may expect.  TRAP !  Plenty of entrepreneurs have built companies only with an eye to sell them.  Focus on building a truly sustainable business.

A final word on great Business Plans.  Longest and fanciesy doesn’t win the race.  The best plans anticipate and answer every question an investor could possibly ask – except maybe – “Where do I sign?”

Your obseervations and comments on this and previous articles published in my blog are solicited.  I will try to reply to any and all salient thoughts.  Email to info@ventureresourcescorp.com.

Mark Zwilling contributed thoughts for this article.

Filed under: General by Daniel Younkins Sunday, February 26th, 2012
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Are you thinking about selling your business ? Consider these points before acting – remember, the early Christians get the best Lions !

1.  Bad timing - judging the best time to sell is important to maximize the price received – eg. when the business is doing well or when there is strong demand.

2.  Being reactive - waiting for the perfect deal is like waiting to win the Lottery – it is highly unlikely. Better to be pro-active when the time comes and have the business marketed professionally.

3.  Not considering all your options - A sale to your staff ?  A sale to a competitor who has synergies ?  Bring in a junior partner so you can ease out ?

4.  Being distracted - do what you do best – run your company.  Let the professionals market your business and negotiate the best deal.

5.  Not knowing your value - what is your business worth now ?  Do you have realistic expectations and will that provide you enough for your next project ?

6.  Where to next - an important part of exit planning is answering that question.  Another business ?  Retirement – and all the issues associated with that ?

7.  Tax implications - your accountant should be part of your team implementing your exit plan and protecting you.

8.  It is not a DIY project - to ensure the best result, be sure you hire an experienced business broker with the expertise, resources, and marketing skills to explore all your options and attract the best buyers.

9.  It takes time - selling a business is much more complex than selling a house – so allow plenty of time.  Full information has to be assembled, multi-pronged marketing strategies need to be implementes, legislative and tax implications need to be understood, and almost certainly there will be unexpected roadblocks and challenges before settlement.

10.  KISS! – do not get overwhelmed with the task ahead.  If you have an experienced team handling the process, they will smooth the way and sort out th problems.

NOTE – We have more potential buyers looking for business than we have businesses for sale – by more than 5 to 1.    If you are thinking about selling, contact us for a brief discussion of our marketing methodology – dyounkins@buckheadbusinessbrokers.com.

Filed under: Business Exit Planning, How To Sell a Business by Daniel Younkins Sunday, October 2nd, 2011
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Everyone has heard of brokers: stock brokers, mortgage brokers and even marriage brokers.  But what is a business broker? It’s a little known and less understood segment of the real estate industry. Simply put, a business broker assists individuals (or companies) buying or selling a business, a concept similar to a residential real estate agent in the housing market. However, that’s about the end of the similarity.

A Few Statistics

There are approximately 25 million businesses in the United States. The vast majority of these businesses have no employees – real estate salespeople, consultants, nannies, etc. Discounting these, there are about 5.6 million businesses with employees, of which 20 percent are for sale at any one time. Ninety percent of the businesses for sale are offered “for sale by owner” – FSBOs. However, according to the U.S. Department of Labor and the SBA, more than 50 percent of the businesses that sell are sold through business brokers.

Build vs. Buy

Every year , thousands of people consider entrepreneurship via one of two routes; either buy an existing business or start one from scratch. Each course has advantages and disadvantages to consider.

Starting your own business can be very rewarding. But you need to have a unique product, technology or service. Let’s face it: there are very few “new ideas” out there. Individuals should complete a thorough evaluation of the marketplace, competition and need (a business plan). Perhaps you can start from home with no employees and greatly reduce the initial capital investment.

However, you may need to support yourself (and your family) with personal savings. It may be months or years before profits are sufficient to provide the level of income needed.

Obtaining financing can be very difficult with no track record and no customers. According to the Bureau of Labor Statistics, the chances of survival for a start-up business is only 25 percent.

Buying an existing business may be a more efficient, but often more costly, way to business ownership. Existing business owners expect a premium for providing a customer base and location.

Existing businesses normally can obtain financing from financial institutions – they have established history, assets and a proven idea. The seller often provides a portion of the financing in the form of a loan.

Established businesses are also less risky because they have relationships with suppliers, an operating process, and employees that are already hired and trained. In addition, there’s an existing cash flow to provide immediate income to the buyer. Experts generally agree, in most cases, that paying the extra cost for an existing business outweighs the risks of starting one from scratch.

Selling Your Business

In residential real estate, sellers want everyone to know their home is for sale to accomplish the greatest exposure. Rarely is this the case for businesses. An owner typically doesn’t want anyone to know his business is for sale. While Realtors deal in the number of bedrooms and baths, square footage and nearby schools, business brokers deal in revenue, cost of goods sold, expenses, inventory and overall business valuations, recasting, income tax returns, profit and loss statements, leases, etc.

Business sales must be conducted in the strictest confidence to protect the ongoing viability of the business. If word got out that a business is for sale, employees flee, competitors pounce, suppliers fret and the entire future of the business is in jeopardy. How many “Business for Sale” signs have you seen? Additionally, businesses are valued on the basis of their cash flow and thus the value of the business may decline as the attention of the owner is focused on the sale.

The Solution

In many cases, the seller pursues a “for sale by owner” route towards the sale of his or her business in an effort to avoid paying a commission to a business broker.

However, the sort-term reality of paying a commission is overshadowed by the benefits of having a seasoned veteran.  In residential sales, the home and land serve as collateral allowing the buyer to obtain traditional financing. In a business sale, much of the value is in the intangible goodwill. Banks are left with very little to foreclose on should the business fail under the new owner.

For that reason, owner financing is a major issue in the business sale transactions. In these cases, the seller has a tremendous stake in knowing the buyer, not just the buyer’s ability to operate the business, but his reputation and personal financial condition as well. Too often, seller will find that he or she has been misled by a buyer who subsequently ruins the business and jeopardizes the ultimate repayment of the loan.

Using a business broker can actually increase the cash that remains in a seller’s pocket after the sale. A good broker works the best interest of both the buyer and the seller throughout the transaction. A broker understands the many pitfalls inherent in business transactions, maintaining confidentiality throughout the process and qualifying the buyer’s reputation and financial options available, enabling the owner to do what he does best – run his or her business.

Considering the pros and cons, the stakes in buying or selling a business are simply too high to proceed without competent representation. While a FSBO can make sense in a residential transaction, it seldom pays dividends in a business sale.

Filed under: How To Buy a Business, How To Sell a Business by Daniel Younkins Saturday, October 1st, 2011
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THINKING ABOUT BUYING A BUSINESS ?

For those of you that are thinking about the possibility of buying a business – in Atlana, Georgia, or elsewhere, here is a list of the hottest selling businesses as of June, 2011 published recently by Business Broker Press.  If you would like my assistance in identifying such a business for you to investigate, please contact me at: dyounkins@buckheadbusinessbrokers.com

Top Ten Main Street Businesses: Top Ten Middle Market Businesses

1.  Convenience Stores                                         1.  Miscellaneous Manufacturing

2.  E-Commerce Businesses                                 2.  Miscellaneous Service

3.  Websites                                                                 3.  Oil and Petroleum Related

4.  Sandwich Shops and Delivery                       4.  Fabrication

5.  American Restaurants                                      5.  Road Haulage and Freight Services

6.  Bars                                                                            6.  Security Related

7.  Fast Food Franchises                                         7.  Storage/Warehouse Real Estate

8.  Liquor Stores                                                         8.  Import and Export

9.  Delis                                                                           9.  Machine Shop Manufacturing

10.  Gas Stations                                                          10.  Medical Supply

Filed under: How To Buy a Business by Daniel Younkins Sunday, August 7th, 2011
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It appears that we may be emerging from our curent recession.  If so, many people will be considering investing some or most of their savings and getting into business for themselves.  Certainly you should use advisers – your CPA, attorney, banker, etc.  However, here are some pointers to consider before making what could be the most important investment decision of your life.

One.  Is buying a business the right decision for you at the present time ?

If you are just bored or looking to do something different, maybe the time is not right for you now   If that is the case, find a hobby !   As many of our politicians say, “You have to have the fire in your belly”.

Two.  Will your spouse support you ?

Owning a business will affect your relationship with your spouse !  Your spouse must be mentally and emotionally ready for this major step.  If not, you may find that your biggest challenge will come from the home rather than the business.

Three.  Who will run the business when you go on vacation ?

If you are buying a business, you might ask the seller “when was the last time you went on vacation”?   What kind of problems did you find after you returned ?  Vacations will recharge your batteries – but who solves the problems when you are away ?

FOUR.  Do the numbers add up ?

This question may seem obvious, but often the buyer does not really think what exactly their return should be.  If you are going to be an absentee owner, can you expect a reasonable return ?  If you are going to be an active owner, will the return compensate you adequately for the time and money you are investing ?  Apply the Stress Test – what may happen to cash flow if sales slow down or there are cost overruns.

FIVE.  Are there any skeletons to worry about ?

Do your homework ! Are there any easements or exclusive rights that may impact the business ?   Has the business ever been a crime scene or vandalized ?  Has the seller ever had problems with the government or IRS ?  What is the zoning and is the area hazardous ?

Six.  What do the customers have to say ?

Talk to current customers – and not necessarily the ones that the seller picks out.  Unless you know who will buy from you and why, you will be flying blind.  This is especially important during the due diligence period.  What you find out will help you after you take over.  Dig deep – understand you potential customer !

Seven.  How does the business make the phone ring ?

You need a growing customer base.  Ask the owner what kinds of things they have done to market their business and generate inquiries from new potential customers.  What kinds of marketing activities have created the most business – and what has not been too effective.  Ask what has proven to generate the most leads.

Eight.  Why is the seller really getting out ?

Take the time to find out why they are selling – honestly.  If the owners are 35 years old, they are probably not retiring unless they just won the lottery.  You may never find out the exact reason – but you must try.  Build a relationship with the seller and be thorough in your due diligence.

Nine.  Will the seller keep some skin in the game ?

Credit is tight these days and virtually every business sold today requires some owner financing – often 50% or more.  If the seller puts up some of his own money, it shows his confidence in the continuation of the business.  Remember, they know more about the business than you do – and if they are not willing to let any money ride on the business, should you ?

Ten.  What is you exit strategy ?

This is an important question to ask yourself before you make the decision to buy the business.  What if you have to sell the business or get out sooner than you thought ?  Consider a buy-sell agreement if you have a partner involved in the business.  Strange things happen.

This article, in part, has elements that were published in INC Magazine.

Filed under: How To Buy a Business by Daniel Younkins Sunday, July 17th, 2011
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Buying a business can be a very emotional decision.  As a result, many people jump in and buy a business before giving their selection careful consideration.  Instead, it makes sense to take some time to analyze why you have made the decision to choose a specific business over another. Remember that there are a great many options out there.  Additionally, it is advisable to choose a business that you like.  Think carefully about your personal preferences and needs.  Otherwise, in the long run, it may be far more difficult to not commit to long hours, but also to exercise your creativity and make yor business a success.  And another thought, just like marriage, it may be easy to get into – but painful and expensive to get out.

Reprinter in part from BizBuySell.

Filed under: How To Buy a Business by Daniel Younkins Sunday, February 20th, 2011
124 Comments »

Are you thinking about selling your business? Here are are a few tips to consider before launching your campaign:

* If you were setting out to an interview for a job, you would make certain that you are appropriately dressed, positive, and prepared.  Same for your business:  clean floors, tidy work areas, mown lawn, accurate records of inventory, FF&E, and most importantly – accurate financial records.  If you have shaved the tax man, your accounting records will not represent the true value.

*Financing is critical.  It is very difficult to get conventional financing in these economic times – particularly for restaurants and service businesses.  SBA financing comes and goes – right now money is available, but may be exhausted by year-end 2010.  Therefore, you must be prepared to offer owner financing.  We have not sold a business for more than $100,000 in the past year where the seller did not offer some financing.  Depending upon how anxious you are to sell, this could range from 20% to 75%.  Of course, you must  conside  the strength and experience of the buyer.

* Pricing your business is not for amateurs.  Virtually all owners believe their business is worth far more than a buyer.  Most Business Brokers will provide you with a valuation of your business for a very small fee, if any.  Their assessment of value, in most all cases, will be more accurate than yours. They are  not likely to value your business too high as it will hurt the chances of selling;  it will not be too low as they want to obtain the best possible  price for you and earn their commission.  Valuing a business is not a science – it is an art.

Filed under: How To Sell a Business by Daniel Younkins Sunday, November 14th, 2010
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