The Holy Grail Of Business Success.

5 Critical Points You Must Look Into Before Taking The Plunge

The Holy Grail Of Business Success – 

5 star engine picture

5 Cylinder Airplane Engine with 5 Business Points

The sale price of any business is based on a multiple of trailing net profits, (or losses).
All you need to do to locate a great deal when you go to buy a business is find one with a good product and poor controls.

When you find it, (and there are plenty of them) you found a deal because every single business in the world, no matter how big or small operates the same exact way. They all need FIVE points to operate.

  • Lose One, and the business will be shaky.
  • Lose Two and the business is about to fail.
  • Lose Three, and failure is imminent.

There Are No Exceptions To This Rule … None What-So-Ever.

Let me paint you a picture before we get into it, so you can easily understand it:

Think of a 5 cylinder airplane engine. It is shaped like a star, and when all 5 pistons are firing, the engine runs smooth as silk.

As long as the engine is firing on all 5 cylinders, the engine is balanced, operates smoothly, produces power and pulls the airplane at a speed where it can fly high into the air. (and in some instances, do lots of tricks)

  • If it loses a cylinder, the engine is off balance, it vibrates and begins to lose power. It might continue climbing, but not at the rate and speed it was.
  • If it loses a second cylinder, all hell breaks lose and the plane is going to have a hard time maintaining altitude.
  • If it loses a third, it’s all over – the plane is all of a sudden on a one-way-trip to the ground. The pilot help in determining the force of the landing, but make no mistake. The plane is going to STOP flying.

The same exact thing happens to all businesses, except the pistons are different.
They have a name and a function.

They are:

  1. Vision
  2. Customer Identification
  3. Marketing
  4. Front End / Customer Service
  5. Back End / Product Fulfillment and Delivery.

Like an engine, all cylinders are created equal, and all are of equal importance.

The exact same thing holds true for a business.

  • Lose 1, the going gets tough …
  • Lose 2, It’s difficult to maintain …
  • Lose a third, Game-Over. It’s just a matter of time before the business STOPS operating.

 

Here Are The 5 Critical Points That Every Business Needs to Operate, And What is Critically Important For You To Identify Before You Buy.

1. Vision:
Every business needs someone driving the bus! Vision for a business is key –
Vision comes from the person in charge looking at the business from a 30,000ft view. Looking at the big picture and identifying competition and opportunities.

Further the direction of the company and coming up with a strategy to get there. Many business owners simply lose their vision for one reason or another and the business begins to falter.
When it comes to business Vision, you need to know where the business is now,
What is it and what does it stand for, where do you want the business to be and when, and of course, what are you willing to do to get the business to where you want it to be.

Look at the business greats …. John D Rockefeller, JP Getty, Henry Ford, Steve Jobs, Jack Welch, Michael Dell, Bill Gates and Donald Trump. They all had or have vision.

 

2. Customer Identification:
The amount of business owners who have no clue as to who their customer is, or who they want them to be is stunning. It is so vitally important for you to know who your customers are.

Lets take a quick look at a restaurant for example. If you owned a high-end steak or seafood restaurant, you wouldn’t be advertising in the projects would you? Of course not.

If you owned a fried food restaurant, you wouldn’t be wasting advertising dollars in the high-end neighborhoods either.

If you don’t know who your customer is, how in the world can you go out and reach them?
When you own a business, you also want to identify the exact type of customer you want and then go after them.

Just look at the business Donald Trump built. He knew early on that he wanted to attract the wealthiest people in the world, so he developed some of the highest end and most expensive real estate in the world.

You absolutely need to know who your customer is – so you can market to them appropriately.

Most businesses fail because they lack the understanding of exactly who their customer is and what they want. (Yes, it is really that simple)

 

3. Marketing:
Here is the rub …. If the business doesn’t have vision, and doesn’t know who their customer is, they have no idea and even less of a chance of getting the marketing message out to their prospective customers!
Small business cannot afford to advertise on a blimp like Good-Year tires. Brand marketing is way to expensive for the small business owner.

Unfortunately, most business owners are clueless as to who their target customer is and know even less about marketing.
This gives you, the new owner an enormous opportunity to increase revenue and profit almost overnight because you will have the knowledge to “look” into the already developed customer database and identify almost scientifically the main customer type and begin to craft the appropriate marketing message to them.

Marketing is key to any business, and there are hundred of ways to get the word out …. but you need to know the “Who” before you can market the “What”.

I am constantly bombarded by advertising executives who are completely clueless of what they are selling and are only interested in making sales commissions. I hate those guys!

If your target customer is in their 60’s you wouldn’t want to spend advertising dollars on social media marketing as much as you would on direct mail or other print advertising because it wouldn’t reach them. If, on the other hand your customer were the millennial generation, you would be wise to invest your advertising and marketing dollars on social media and other internet forms of marketing because they rarely if ever read print media.

 

4. Front End / Sales:
Welcome to McDonalds, may I take your order? Would you like to super-size that?
Front-end sales are ever so important.

When a customer calls or visits, your front-end sales better be operating the right way.

Nothing will destroy a sale or a customer relationship faster than crappy front end sales.

Think about it yourself –

  • Do you go back to the restaurant where the hostess was rude?
  • Do you frequent the hardware store that ignores you?
  • How do you remember your last visit to the Post Office or DMV?

McDonalds has a script book all front end people must follow.

My dad had a script book on exactly how the phone was to be answered in the family business, and I have always had a written out script on the exact words a person must use when answering a phone.

If you operate a company’s front end like the Post Office or DMV, you’ll be liquidating the business so fast it will make your head spin!

 

5. Back End / Product Delivery:
Product delivery is key here. Once you’ve identified the customer, gotten to word out and received a phone call or visit and taken the order, the next step in the process is delivering the product.

No matter what that product is, it must be delivered timely, professionally, and in good working order. Miss out on this and you can kiss your ass(ets) goodbye.

Have you ever gone to a restaurant, been greeted properly, seated quickly, ordered quickly, and then waited forever for your food and when it finally came it was uncooked or cold?
That’s because the back end / product deliver part of the business sucks.

Obviously no system, or a really bad one at that. Have that happen more than once to you in a restaurant and I can pretty much guarantee you won’t be going back …. That is, if you even give them a second chance.

One of the main reasons franchise restaurants do so well is because they have systems in place for everyone to follow and the food comes out consistently the same no matter where you are in the state, country or world.

Back end systems and product delivery is of enormous importance.

I remember last year I wanted a MAC monitor. The Friday day before Christmas Eve, I ordered it online figuring with the Christmas rush, it might be delivered sometime before the new year. It was delivered the very next day!

Guess what ….. EVERYTHING I order from Apple comes within 48 hours without any extra delivery charges. Needless to say, I switched my entire office over to Apple products because whenever I need something I can get it within 48 hours.

I am perfectly wiling to pay a premium for a superior product with superior service and delivery – especially when I know I’ll be treated with appreciation and respect when I need to speak with customer service.

How about you?

 

For the business buyer, when looking for an opportunity, it is critical for you to look at the 5 most important points of a business.

Identify what is working and what isn’t and then come up with a strategy to correct the wrongs and get the business firing on all 5.

Do that, and you can pretty much guarantee success in any business you get involved in.

 

FacebookTwitterGoogle+Share

Business Life Cycle

7 Stages of the Business Life Cycle

The Business Life Cycle

Every business goes through a number of changes during the course of its lifetime, and business owners should make sure they understand exactly where they are in the cycle so they can prepare for the next stage.

In this brief report, I’m going to do my best to identify each stage of the business lifecycle from a 30,000ft view so business owners can identify where they arena the cycle and take action, and people interested in buying a business will have a better idea of where to look and why.

The 7 Stages of the business Life Cycle

  1.  Start-Up
  2. Growth
  3. Growth Slowdown
  4. Sustaining
  5. Decline
  6. Decay
  7. Failure

All Business’s have a life cycle commonly referred to as the Business Stage.

1. Start Up
The seed stage of your business life cycle is when your business is just a thought or an idea. This is the very conception or birth of a new business.

There are numerous challenges for a business start-up.

  • Money is tight and resources are thin
  • Marketing is new and not established
  • Customers  have not yet been identified
  • Front end customer service systems are not yet established
  • Back end product delivery systems might be a bit hap-hazard

At this stage of the business the owner is way over-worked and under-paid.

You need to really watch your pennies because this is where most start-ups fail, and the number one reason is they run out of money to operate.

2. Growth Stage
Your business is born and the doors are open. You’re selling your products and services to customers.

The phone is ringing, you are having fun and are very excited about the future.

Money is tight because you are building inventory and hiring employees, but you don’t mind because you are doing what you set out to do and are living the dream!

The Future Looks Bright!

3. Growth Slowdown Stage
Your business has made it through the infancy stage.
Revenues and customers are increasing as well as other opportunities.

You’re making money and find yourself somewhat mired in the mud of day to day operations. Dealing with employees and customers.

The fun and exciting part is beginning to wain because you are busy working “in” the business more and more.

You begin to realize this thing you created is growing bigger than you can effectively handle and you realize you can’t do it all.

This is the optimum time for a business owner to sell – This where the business will sell for the most amount of money because it has a solid growth record. It is also at the point that it isn’t fun anymore foe the owner.

If nothing else, it at this stage of the business cycle that the owner should begin planning an exit strategy.

4. Sustaining Stage
Your business has now matured into a thriving company with a place in the market and loyal customers. Sales growth is not explosive but manageable. Business life has become more routine.

This is where you begin to rest on your laurels and begin to back off a bit. You feel you have worked hard to get where you are and deserve a bit of time to coast. Most business owners at this stage begin to get bored and neglect to pay attention to the competition.

This is where most business should begin thinking of selling – right when the begin to get bored with the business. The owner has reached their peter principal  and stop growing.

This is where the business owner should do one of two things –

SELL: This is the big opportunity for your business to cash in on all the effort and years of hard work. before its too late, or

Begin expanding through acquiring the competition – especially the competitors that have entered stage 6 or 7.

5. Decline Stage
This where the business owner has mentally checked out.
They might be bored to tears with the business and lost interest, turned it over to management, or simply lost focus.

Competition might have taken a bite out of the business, or changes in the economy or market conditions. All of which can decrease sales and profits.

Unfortunately for most companies, this is where the owner has to take immediate and drastic action to get the business back on track, but they do the exact opposite.

Instead of investing in the business and taking back the reigns, they make cuts to marketing and advertising, they stop investing in the business and begin cutting back on everything.
Unfortunately for the owner, they are in denial about just about everything pertaining to the business and they tend to look the other way.

They are unknowingly becoming “Don’t-Wanters” in the business.

(This is where I teach my students and clients to begin looking for business to buy so they can get a good deal and turn things around quickly before its too late.)

6. Decay Stage
Denial has set in completely and it shows – the more revenue drops, the more the cutbacks.

This is about the time when most business owners snap out of it and decide to sell the business and get out.

Unfortunately, it is way late in the game for them to get a good price for the business because previous sales show a negative trend and buyers are quite hesitant to buy a declining business.

This is the last chance for the business owner to get honest with themselves and face reality. It is the last chance for them to either get with it and grow revenue, or get out.
If they don’t, Stage 7 of the business life cycle is imminent.

It is also the best time for a sophisticated business buyer to buy a business at a fire-sale price and get the seller to finance the purchase.

This is where I like to look for business’s because they can be easily turned around because they still have a good book of what I call ** “Off-Balance-Sheet Assets”, which in my mind are perhaps the most overlooked and valuable part of any business, and nobody knows about them!

“In all my years as an entrepreneur, I never knew about them until about 5 years ago, and I have only met one other person who knows what they are. This person happens to be a good friend of mine who bought a company out of Bankruptcy for pennies on the dollar because if the “off-ballance-sheet asset list and sold the company 10 years later for tens of millions of dollars!”

7. Failure Stage
Game over – the business owner puts a lock on the door and liquidates inventory is a going to of business sale. All those years of hard work and sacrifice are down the drain. Dreams shattered, employees lives turned upside down, jobs lost, etc.

According to business broker statistics, only 24% of business sell, leaving about 76% of business listed for sale that end up closing their doors with a going out of business sale with shattered dreams.

Understanding where your business fits on the life cycle will help you foresee upcoming challenges and make the best business decisions. Whether your business is a glowing success or a dismal failure depends on your ability to adapt to its changing life cycles.

There you have it ….. the 7 stages of a business lifecycle.

I hope you found it interesting reading and you can use some or all of it in you entrepreneurial quest.

** Want to learn more about this little secret? Good luck finding it because even Google, Wikipedia or investopedia know the true meaning of them never mind the value!

######

Paul Forsberg is a Business Consultant and provides Intermediary Services in Florida.

He also coaches and teaches people how to buy businesses and become entrepreneurs so they can experience the personal freedoms and satisfactions of being in business for themselves. Even if you have zero experience and no idea how, or where to start.

To learn more about buying a business contact me here.

FacebookTwitterGoogle+Share

Only Morons Start a Business With a Loan

“Only Morons Start a Business with a Loan”

“If you Start a Business With a Loan, You’re a Moron.” says Mark Cuban.

There are too many uncertainties when starting a business from scratch and the bank or your lenders don’t care about your business.

Most small business don’t fail because of lack of capital, they fail because of lack of effort, or the owner fails to work smart.

If you’re starting a business from scratch, you better have intimate knowledge of your industry sector because the competition is not going to sit there and let you come in and compete.

This is one of the main reason you are much better off buying an existing business with existing customers and sales.

Buy it at a fair and reasonable price and make it better.

Here is a Video of Billionaire Mark Cuban in his own words:

FacebookTwitterGoogle+Share