Selling your business

Increasing business profitability with 4 simple steps

As a general rule, I find that people have a tendency to make things more complicated than necessary. This is especially true if the problem they are trying to solve seems to be difficult, or the objective they want to achieve is elusive. Under these circumstances I think we all quite naturally look for complicated answers. Increasing business profitability is a good example of an issue where it is easy to overlook the straightforward and simple answers.

I will go into each in a bit more detail below but my four “no-brainer” tips to increase business profit are:

  1. Never give anything away . . . ever!
  2. Look for ways to reduce costs – and do this routinely!
  3. Upsell or cross-sell at every opportunity!
  4. Send the invoice and collect the cash promptly!

1. No Freebies

Most small businesses would be horrified by the suggestion that they give stuff away – but most do. The discount that wasn’t really necessary, the training course that should really have been paid for, the accessory that should have been sent with the original order but had to be shipped separately, the second visit to the customer when the problem should have been fixed on the first occasion. Every single example quoted above – and dozens more besides – are just different ways of giving stuff away. Stop being so charitable and the profits will improve.

2. Reduce Costs

Reducing costs is absolutely the easiest way to improve profitability.  And yet, most small businesses seldom analyse their direct costs or review their overhead spend. The only way to do this properly is to adopt a “zero-base” mentality and challenge each and every item of cost on a line-by-line basis.

Surprisingly, one of biggest and most common areas where small businesses sustain and tolerate inflated costs is in their payroll or wages bill. This might sound crazy when everyone appears to be “so busy”.  Busy they may be, but are they doing productive work, in an efficient manner? In small businesses there is often a reluctance to address the issue of poor individual performance or staff discipline. The result is low levels of productivity or, in other words, higher costs than necessary.

The other big, and usually hidden culprit, in most small businesses is poor quality. Every time you get stuff wrong – and have to do it again – you drive down profit (and you damage your reputation which makes the next sale harder . . . and therefore more costly. A double whammy!).

3. Upsell and cross sell

A lot of the cost in any typical business is down to all the marketing and selling activity. The simple version of the story is that finding a new customer costs a lot of money and usually so does the effort involved to close each deal.  If you can persuade the customer to buy more of the things they need with each transaction your sales operation becomes more profitable. The classic example that is always given is the tin of shoe polish you are offered each time you buy a new pair of shoes.

4. Send the invoice and collect the cash

The last point requires no explanation – just sound business practice. Even so, it is surprising how often credit control is most commonly the function that nobody considers to be their job.

Do you need help increasing business profitability?

These ideas for increasing business profitability have two important things in common. Firstly, it is usually far easier to identify the problem from outside and secondly fixing the problem will usually require a change of behaviour. Two very good reasons to work with a mentor you can trust.

Client Video Testimonial – Supporting business owners to increase turnover

 

Watch this video to hear the value Rupert Beazley brings to Digital Marketing Agency, 1973 ltd in increasing the turnover and supporting the three directors.

Business: Digital Marketing Agency

Number of employees: 12

 

‘Since we’ve known Rupert our turnover has increased. We were £1m last year and he has facilitated that quietly in the background by making sure we are driving on and mentoring us’. Chris Barnett, Director of 1973 Limited

‘Rupert’s increased our confidence on what we do, where we are going, what markets to address’. Chris Barnett, Director of 1973 Limited

‘With three directors, it can be challenging in making decisions so he helped us to see that and define the roles’. Chris Barnett, Director of 1973 Limited

‘Rupert helped us to recruit and round ourselves out with looking to the future and to see where our time was best placed’. Chris Barnett, Director of 1973 Limited

‘Rupert’s come from a background that is full of skills for us. He knows everything from starting a business, making it successful to looking at selling and helping where we are going long term’. Chris Barnett, Director of 1973 Limited

‘We see him as a big part of our business. we wouldn’t have got to where we are now without using him. He’s very important to us’ Chris Barnett, Director of 1973 Limited

Read the full story here

Book your FREE confidential meeting with Rupert Beazley today

Client Video – Helping the business owner to achieve the vision and goals of her business

Listen to Jonna, CEO of You HR Consultancy talking about the fantastic support Rupert gives to her and her business. Rupert helps Jonna to achieve her goals and vision with helping to set out their strategy and growth plans.

Business: HR and Organisation Development Consultancy

Number of employees: 9 plus external supportive roles

 

‘One word to sum up Rupert’s support and our relationship is….. solid. He really is an invaluable member of our team. He goes beyond that extra mile, he is by far a trusted confidant and I needed that. He really does speak our strapline ‘its all about the people’ . It’s not about what he has to gain but he supports you and your business to help achieve your goals’. Jonna Mundy, Found & CEO of You HR Consultancy

‘There’s a multiply of things I throw his way. I’m smiling as the value he gives me when the going gets tough is his personality and his humor, it will see you through’. Jonna Mundy, Found & CEO of You HR Consultancy

‘He got a good way to hold you to account, to stretch you in a safe environment when he knows you can as your business coach but knows when to support you in the right way when you need him’. Jonna Mundy, Found & CEO of You HR Consultancy

‘He’s seen me through some very difficult times, very professionally, and very supportive but we’ve also had an enjoyable time along the way. That to me is priceless’.  Jonna Mundy, Found & CEO of You HR Consultancy

‘He doesn’t charge the earth, he’s fantastically value for money’. Jonna Mundy, Found & CEO of You HR Consultancy

 

Book your FREE confidential meeting with Rupert Beazley today

Selling your business

When Should You Think About Selling Your Business?

It’s natural to become attached to a business, especially if you have built it from the ground up and even if it is not doing well. Experts advise, however, that business owners should have an exit strategy in place as early as possible.

Here are a few reasons that it might be time to start preparing to sell your business and what to consider:

 

Has the business environment shifted?

Selling your business makes a great exit strategy when looming changes are likely to affect the operations of the company negatively. For example, the IT industry is faced by rapid changes that outdate businesses within short periods.

Business owners should foresee such changes and plan an exit strategy that takes this into consideration.

Retailers and B2C companies are the most affected by the current technological trajectory – apps, online retailing and other trends threaten their existence. The introduction of Uber almost phased out the taxi business while in-person speed-dating services have become extinct with the invention of dating apps.

Sadly, even if your company wanted to adapt their operations to the current trend, you would have to make these changes rapidly in order to try and catch up with the competition. Therefore, a team dedicated to the marketing and PR can make or break your business and its potential future should they not be able to foresee such trends early enough.

 

Is there a good opportunity?

Exit strategies are not just caused by bad experiences but also good ones.

You might want to sell your company if a lucrative opportunity is presented. Buyouts add liquidity to a business especially if you are managing different branches.

Experts say that running an independent business is a risky venture and the longer you hold on to it, the higher the chance of failure. While the business has a substantial value, you can only realise it when you sell part of or the entire venture.

For example, a young social-media website may get an offer from Facebook, Twitter or another established company.

 

Are you sick or ready for retirement?

Running a company is difficult enough to do when you are operating at full capacity so, if you become ill, selling your business might be a way to relieve yourself of a lot of stress.

Similarly, if you no longer enjoy running your firm, selling it makes sense.

Approaching retirement, you should also consider selling your business and try to cash in on your many years of hard work!

 

Selling is a process

No matter what reason you have for selling, before you do you will need to make sure everything is in order. This process can take a while. A potential buyer will want to look back on at least three years of company books that are in order, and so it’s often advisable that you’ve been keeping books with a sale in mind in that time.

If the company has been incorporated, you should decide if it will be sold as a share sale or an asset sale. Businesses that have been performing poorly prefer making a share sale where the owner sells everything, including the incorporated company.

You also need to make yourself dispensable; nobody wants to buy a business whose value depletes when the owner leaves. Potential buyers want a business that runs well without specific input. You should ensure the company has a strong team, effective business procedures, efficient communication and successful marketing strategies that will accommodate the new owner.

Expert help also comes in handy when preparing to sell the company. A professional valuation expert can help you to determine the net worth of the business while a business broker finds potential buyers and navigates the sale process on your behalf. CMC Partners has the experience of both  these aspects plus more. Your local CMC Partner will give you a valuation, help you and your business increase the business worth with a planned exit strategy and prepare your business for sale when the time is right for you. Over the last 25 years CMC has been involved in many successful business sales, reaching a total value of over £156 million to date. Read more about CMC Partners here

No matter what the motivation for selling, if you have everything in order there is no reason why your sale can’t get you a price that you’re happy with so that you can move comfortably into the next phase of your life.

By Anthea Taylor, Assistant Editor at Dynamis and writes for all titles in the Dynamis stable including BusinessesForSale.com, FranchiseSales.com and PropertySales.com as well as other industry publications.

What Owner Managers can learn about Succession Planning from Queen Elizabeth II

This year sees the 93rd birthday of Queen Elizabeth II, who is the longest serving monarch in British history, but her succession planning has been in place for many years and although it is laid down with the ‘line of succession’ clearly laid out and known to all.  It is obvious that other members of the ‘family’ are becoming actively involved in the family business in preparation to take over.

As an owner manager of a business that is owned by you with other family members,   is your succession plan in place, accepted by your stakeholders – not just family members, other directors, employees, customers, etc.?   Research has shown that there is a lack of documentation around the future ownership of a family business with only 24% of business owners having a policy that the business will remain family owned, with 40% having no specific policy at all regarding the future ownership. What is more surprising is that 84% regard succession planning as important but there seems to be apathy towards doing anything to address this. Over 75% of family business owners have not documented management or ownership succession plans and only 44% have actually sought advice about their succession options.

Part of this apathy would appear to be family business owners think that there is no interest from the family to take on the business, or simply that there is no-one within the family suitable.

This may be very true. Many owner managers I work with have deliberately ensured that their children have not been brought into the business, and many children themselves want to develop their careers away from their parents’ business. As time goes by, it becomes less likely that a grown up child will want to return to the business, although they are very happy to share the financial rewards of their parents’ hard work.

Also, it is very frequently heard that the founder does not want to give up what they have created and developed. This frustrates the preparation for succession and can lead to the founder ignoring the need to choose and mentor a successor.

So if as an owner manager of a business, you want to start thinking about successful succession planning, ask yourself some serious questions (and answer honestly). These questions include:

  • Are the current owner managers finding a suitable successor from within their family? (Yes/No)
  • Have alternative exit strategies been discussed openly within the immediate family? (Yes/No)
  • Has everyone involved in the business fully understood the founder’s vision? (Yes/No)
  • Is the founders’ vision important to next generation successors? (Yes/No)
  • How does entrepreneurship succeed from one generation to the next?
  • Do the 2nd & 3rd generations have more entrepreneurial vision than the founding generation? (Yes/No)
  • How can we learn from the experiences of existing family businesses that have gone through the succession process?

For help in getting advice on successful succession planning between generations of the family – fill in the contact form below or call 01844 319286, and Phil can arrange a call with you. Specifically he will be able to discuss with your confidentially and unemotionally

  • Recommendations for succession and inter-generational estate planning
  • Understanding family business challenges and conflict
  • Understanding the dynamics of an entrepreneurial family business

5 reasons why a business owner needs an exit strategy

Building a business is undoubtedly a tough job. Of course, most of the owner’s energies go into the day to day issues, winning customers, driving/directing the team and generally firefighting! So, thinking about an exit strategy is never on the owner’s top list of immediate priorities. However, there are many good reasons why the owner needs to give some thought to this area; it is a hugely important area of wealth generation that can represent an expensive mistake if not treated successfully.  Exit strategies aren’t just about the immediate job of selling a business – they are relevant throughout the life of the business.

1. An exit strategy gives you a plan.

Thinking long term about a business isn’t just for major corporations. Where do you want your business to be in 5 or 10 years? Will the business deliver the cash to fund the owner’s life style? Producing a plan to deliver the business you want is a hugely valuable exercise.

2. What type of exit is right for you?

A business exit can take many forms. A sale is certainly one option, but maybe a family succession is the right way, or even a management buyout could work for the right team. All of these options need long term planning. The common factor to all of these is how the business would work without the current owner at the helm.

3. How will the business function without the owner?

It is often tough for an owner to envisage how the business would work without them. However, whichever exit route is chosen then the role of the owner will be a key consideration. The owner needs to think through how the business will operate without them. This has a major impact on company’s sale value as no buyer wants to buy a company where all of the key knowledge is locked-in with the owner.

4. An exit strategy forces the owner to take the wider view

We all occasionally suffer from being “too close” to an issue and sometimes this means that we don’t take the best long-term decisions. Standing back from the business means that the owner takes a more dispassionate view of the business. Seeing the business from the perspective of a new owner will help the owner to address and fix some of the more strategic issues.

5. Planning to maximise retirement income.

A lot of business owners have only a vague idea of how the sale of their business will fund their retirement. This is one of the major decisions of anyone’s working life, so it needs to be right. There are some simple calculations that relate the business’s future profitability, to it’s possible sale value, and the amount of pension income that will be generated. CMC can help you with this calculation and help focus the owners mind on how successfully building the business can deliver the right level of cash for the owner’s eventual retirement.

Conclusion

Setting a long term plan and formulating an exit strategy will deliver benefits for any business. CMC have over 25 years of working with business owners to produce an exit plan and go on to a successful exit – call us now for a free initial consultation. Meanwhile, you may be interested in requested this FREE checklist on How to improve your chances of a successful exit

Making your will

Have you made your personal will? Probably; after all, it’s the right thing to do, isn’t it?

So why do so few business owners do the same thing for their Company?

You want your children to inherit your wealth without undue hassle. But how much thought have you given to who inherits your business; and who will secure its future success?

When I mention Succession Plans to people, it’s not hard to see folks switching off. There are more important short-term issues to deal with. ‘It can wait – I am fit and healthy right now’.

A scary true story…

So let’s approach this from a different angle – a real-life present-time story.

The owner of a very successful business consultancy sat down in her armchair last August Bank Holiday Sunday, and had a dose. Tragically, she suffered a brain haemorrhage and never woke up. Totally unexpected. She owned all the shares and was the principal contact for the firm’s blue-chip Companies.

Her personal will was clear enough. Her husband inherited all the shares. But he had no interest in the business. The present employees were unprepared for this tragedy, and there was no natural successor with the same level of experience to take it on. So what will happen?

What will the new owner do with a business in which he has little interest or knowledge?

Will current staff remain with all this uncertainty?

How will presently loyal customers react as time moves on?

How will the business set about winning new work in new markets without their principal business-winner?

Right now, no one has the answers, and time is ticking on.

How to avoid this predicament?

Start by having a clear business plan for the next three years.

Include in it the management structure that will deliver the results.

Assess your current team; can/do they fulfill the roles designated in that structure?

Identify any skill gaps and decide whether or not they can be filled from within.

If not, carry out a thorough and disciplined recruitment plan.

And that is the basis for a long-term Succession Plan. Simple, but…

This all takes time

It can take anything from three to five years to put in place the right ‘future-proof’ structure and get the key players performing at the right levels.

And here’s the trick: this same process is essential for selling your business when you retire for best value. So it’s not just a question of securing the business against the unexpected arrival of the Grim Reaper. It’s about ensuring that your legacy will continue once you have retired, allowing you to have a long and happy retirement, leaving behind a happy and motivated team to take things forward.

And that has to be good news for everyone, doesn’t it?

Case Study – 1973 Ltd – Progressing from ‘Doing’ to ‘Managing’ a Business

Growing a creative Digital Marketing Agency

CMC helped the directors of this digital marketing agency increase revenue by 387% in just five years.  Through business planning and process reviews they continue to grow the company to maximise business value.


 The Challenge:

  • Grow the business and increase asset value
  • Create time and space for the directors’ to manage the business
  • Build confidence in directors’ abilities to win bigger contracts
  • Increase existing customers’ spend in line with top client
  • Expand the company’s target market and product offerings
  • To be recognised as a quality email marketing solutions provider

The Benefits:

  • 387% revenue increase within 5 years
  • Won a three-year contract with their main customer, covering the US and EMEA, providing stability whilst focusing on new customers.
  • Expanded into the B2B customer base and leveraged into the B2C market
  • Changed the directors’ reactive approach from being a 100% ‘doing’ to 50% of their time focusing on managing the business and sales and account development
  • The team has grown four fold with a recruitment plan in place for the future

‘CMC’s advice, support and wealth of experience has helped us understand how to successfully build and grow our business. Together we have developed a clearly defined plan with realistic goals to help maximise our business value.’ Chris Barnett, Director, 1973 Limited

Discover how 1973 Ltd achieved business growth which significantly increased their turnover….