Business Tips
 
12 STEPS TO PREPARE YOUR BUSINESS FOR SALE

  1. Plan your exit strategy when you start your business so that you know where you are going. This is your destination 10 years from now.

  2. Know your best steps to building a business. Get the best minds to help you.

  3. Separate your personal and family vision from your business vision.

  4. Don't confuse your business with you. You are not the business. You are you. The business is a wealth producing, cash flow income machine.

  5. Plan three years before you sell... not the week before. The difference is selling for 5 times cash flow versus 3 times, or nothing if you plan poorly.

  6. Buy the income stream supporting assets such as owner/user building 3-5 years before selling. Pay down debt with tax sheltered income.
  7. Create a ROBUST business model with massive discretionary expenses and cash flow add backs to maximize your sales and profit growth during the last three years, while retaining maximum add backs. Boost sales at least 25% a year or more to make the business as attractive as possible.

  8. Mentally prepare yourself for sale by creating a management team and business structure that is easily transferable. Do not get stuck with the idea that you are indispensable or your business is something special. It is nothing more than a business decision to sell. Don't make it personal. Sell to your employees when possible.

  9. Hire the best business broker you can. Find the best and get their input. You must have great exposure to the largest market. There are huge differences in the effectiveness and power of business brokers. Get the best one and be prepared to pay for it.

  10. Get a fair market appraisal from the business broker. It is costly, but worth it. Appraise your business annually.

  11. Ask five (5) times cash flow for a robust business with growing profits and sales, plus a transferable intact-management team. You want to create a turn-key operation.

  12. Get your business noticed. Create critical mass and exposure by being the best. Expect the unexpected. Be prepared for offers for more than 5 times cash flow from consolidators and roll-up experts.

UNCLE SAM WANTS YOUR MONEY. HE ALSO WANTS YOU TO BE RICH.

Who pays the taxes? Below are Federal taxes paid for the following income brackets:

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PercentilesTotal
Share of AGI*
% of Total Federal Income**
Top 1%
19.5%
36.2%
Top 5%
34.0%
55.5%
Top 10%
44.9%
66.5%
Top 25%
66.5%
83.5%
Top 50%
86.8%
96.0%
Bottom 50%
13.2%
4.0%
*AGI is the taxpayer's take of the entire income reported to the IRS
**The % of total Federal Income Tax is a percentage of total personal income taken.

This means the very rich, top 5%, pay over half of all taxes and yet represent 34% of the entire personal U.S. income. Progressive taxes work that way.

What this also tells you is that the government needs you more than you need them. So they give you ways to increase your wealth and thus pay an ever increasing amount in tax to the Feds. You get wealthier. The government gets more taxes.

The California State Government is set up the same way and with similar statistics. So it does pay to be wealthy, for both you and the government.

WHY BUSINESSES FAIL...

Dun & Bradstreet and S.C.O.R.E. (a volunteer SBA benefit made up of the Service Corporation of Retired Executives) have compiled the most common reasons businesses fail. Even one of these can signal disaster, so be honest in your evaluation and change those things you can control.

· Bad management
· Lack of a business plan
· Inadequate cash flow
· Unforeseen expense
· Failure to adjust to change
· Ego prevents owner from seeking help
· Fear of technology
· Change in laws
· Poor or inadequate marketing
· Owner loses enthusiasm, energy
· Owner unwilling to work as hard and long as necessary
· Management team lacks balance of skills
· Bad location

WITH THAT SAID, LET'S TURN IT AROUND. HERE ARE 12 TIPS TO KEEP YOUR BUSINESS SUCCESSFUL...

· Just because someone is good at a task, doesn't mean they can lead the team. Make sure your managers are good 'people-persons/motivators.' That means you too.

· Write a detailed business plan.

· Obtain adequate working capital.

· Maintain a reserve of funds to prepare for unforeseen expenses.

· Adjust your business strategy to meet the changing market/economy.

· From the SBA to professional associations, there are plenty of experts out there who will work with you to succeed. Ask for help when you need it.

· E-commerce, Web marketing; the Internet is here. Embrace technology - it's another tool to help you succeed.

· Keep on top of the politics that influence your business. If there is the possibility of a change in laws that could impact you, develop a contingency plan.

· Marketing is like exercise - consistency is what counts. One trip to the gym won't get you in shape, and one marketing piece won't bring customers running to your business.

· Surround yourself with people who support your business and want you to succeed. When your energy flags, they'll buoy you.

· Hard work and perseverance are mandatory. If you can't commit to both, then don't even start.

· Hire people with diverse skills who will support the overall business effort.

· Location. Location. Location.

Copyright 2004 Francis Financial: All Rights Reserved