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3 Risks of Buying a Business and Profiting off the Opportunities they Create

3 Risks of Buying a Business and Profiting off the Opportunities they Create

Why start from scratch when you can get a great deal on what someone else started? In today’s sexy startup culture, buying an existing business has lost its vogue. But every year thousands of entrepreneurs become millionaires by buying and growing businesses without the startup headaches of venture capitalists, zero revenue, and no business processes.

If you like the idea of being the sole business owner, improving an okay business and taking things from good to great, buying a business is probably the best opportunity for you. Since every reward comes with risk, I have put together the top 3 risks I see first-time small business buyers face, the profitable opportunities they present, and the diligence to find these opportunities.

Risk 1: The business owner IS the business

The risk:

The owner of the business is a lynchpin. They make all the sales. They manage all the customer relationships. The employees depend on their expertise and training. If you remove the owner, the business struggles and collapses.

The opportunity:

Use this as a negotiating point when bargaining for the deal. If the business IS the business owner, then that person needs to be part of the deal. Structure the buy-out to include an employment contract or consulting agreement, as well as an earn-out. That way the ex-owner is incentivized to hand-off their knowledge and help you succeed.

The diligence:

Interview customers, vendors, and employees. Listen to if they mention the business owner’s name more than the business name itself. Ask employees questions about their job and see if they know the answer, or if they look to their boss for the answer. Review the org chart for an ops manager and sales person who have been in the business a long time.

Risk 2: The employees will flee after change of ownership

The risk:

You buy the business and all the good employees get scared and quit.

The opportunity:

Use the change in leadership to inspire hope and motivate. Or, determine who is holding the organization back and needs to go. Firing bad employees will make the good ones optimistic of a turnaround. For the good ones, challenge them to help grow the company and incentivize them to stay through promotions, profit sharing, or equity.

The diligence:

Work with the current owner to identify key employees. Be your own judge of this, in case the owner is downplaying any key people. Sales, engineering, and operations are typically critical areas. Meet with key employees in advance, if the owner permits, to discuss their ongoing role in the organization and align expectations. You’d be surprised how simply listening to and reflecting the feelings of employees will make them feel more comfortable and taken care of! Ask about the company culture and decide what parts to keep. They may also give you keen insights about the strengths and weaknesses of the company.

Risk 3: Running out of cash

The risk:

You base your purchase price, valuation, loans, and cash forecast off historical financials, only to find out a few months into owning the business that the numbers were all wrong and you are losing cash.

The opportunity:

Negotiate a better price on your deal with findings in a due diligence report. Use the cash forecast in the report to secure better terms on your business loan or lock the owner into seller financing. You can even persuade the seller to pay for the cost of accounting clean-up or bad inventory.

The diligence:

Hire financial professionals to help with your due diligence. This team will research key areas like unpaid payroll taxes, incorrect accruals, bad inventory accounting, and other ways owners can exaggerate their financials, either intentionally or by accident.

Turn these risks into opportunities by performing smart diligence, and you too may become one of the small business millionaires without starting from scratch.

LJ Suzuki is a fractional CFO with CFOshare, an outsourced finance and accounting department for small businesses.

employees

5 EFFECTIVE WAYS TO IMPROVE EMPLOYEE PERFORMANCE

One of the things you will undoubtedly want to do as a leader is to improve the productivity of your employees. While technology has certainly made things a lot easier over time, employees are actually spending more and more time in the office and the typical workweek of 40 hours is getting rather stretched. So how can you improve the productivity of your employees and get them to save more time? Here are a few tips I learned while working at AssignmentMasters and a few other places.

Delegate

It might seem obvious that you should delegate, but a lot of leaders and managers somehow find themselves in the micromanagement trap. It’s actually quite difficult to train yourself to delegate more in practice. You will often feel that your company and business is your baby and that you want to have full control over everything that goes on at the workplace

There is nothing wrong with wanting to see everything going according to plan. It is, after all, what guarantees that no one will hijack your ideas and that your business will be successful. However, you don’t have to check every little detail of what’s going on at your company while you’re at it. You are better off delegating as many things as you can to other qualified people. If you try to do every little thing yourself, you’ll just end up wasting everyone’s time. 

The most important thing you will have to develop is trust in your employees. Start by employing only people who are well qualified at what they do, and then trust them to do it well. You will not only take a huge load off of your back, but you will also give your employees the chance to put their skills to work, to learn problem-solving, to learn how to work independently, and also to learn some important leadership skills. These skills can then later be used to grow your company even more than you could ever have managed to do yourself.

This is actually common in the most successful companies. Zipjob, for example, is very large on delegating and as a result, can even afford to have a lot of employees working remotely. 

Think back to when you first hired your employees. You saw a lot of potential in them and that’s why you brought them on board. Now, give them the opportunity to prove your judgment correct!

Tasks Should Match Skills

While we’re on the topic of delegating, it’s also important to know what to delegate to whom. You should have an intimate knowledge of all of your employees’ skills and their different levels of skill. That way, you will be more efficient in your delegation of tasks to the employees. Some are extroverted and creative, who can think on their feet and are very charming. Allowing these employees to pitch to your clients makes a lot more sense than giving that work to your more introverted and methodical employees. On the other hand, if you have any work that is big on following the rules, then you’re better off delegating that to the more shrewd and methodical employees.

At AustralianWritings, different employees with diverse skills are hired and the work delegated to them according to their skills. As a result, this company has consistently beaten its rivals.

It would be unreasonable to expect your employees to do everything perfectly. Instead, always ask yourself who is best suited to what task before you delegate the tasks. If you can’t find them among your existing employees, then you can either hire someone new or outsource that piece of work to someone else.

Communication is Key

We all know about the importance of communication. It makes the workforce productive overall. With technology, it’s even easier to communicate in the modern office. However, just because more channels of communication are available to us doesn’t mean that communication has become more efficient. Sending emails, for example, takes up more than a quarter of the average employee’s day. That’s a huge portion of the day to dedicate to sending emails!

As a leader, you should look for the most efficient way to communicate with your employees. There are numerous technologies on the market, including collaboration software and scheduling software with direct video conferencing and voice to voice features. You can use these to carry out quick meetings or a speedy paper review and communicate with your employees. That way you will make sure that no more time is used on correspondence than is necessary and your employees have more time to do what you actually pay them to do. 

Have Clear Goals

The whole essence of efficiency is that you are trying to be efficient while trying to achieve some goal. Your employees can therefore not be efficient if they do not have a goal to work toward. You need to give them something to aim for. 

If you don’t define your goals clearly enough, and make them reasonable enough to be achievable, your employees will not be as productive as they actually can. This applies both the goals of the individual tasks you assign to employees and the overall goals of the company as a unit. 

You should always let your employees know, in no unclear terms, what your expectations of them are and what kind of impact the assignments you are giving them will have on the overall goals of the company.

There is a mnemonic for the perfect kind of goal: SMART. 

-Smart

-Measurable

-Attainable

-Realistic

-Timely

Your goals should not only be clever and attainable, but also realistic, easy to measure, and achievable within the given timeline. Always check if your goals meet these criteria before you assign any tasks to employees.

Best Essays and EssayWritingLab are two companies known for this. They pin their weekly goals on the bulletin boards for all employees to see and act accordingly. Each employee is also assigned individual goals so they know what to aim for.

Train Employees

Your employees are one of your greatest assets, if not the greatest assets themselves. You should, therefore, be eager to train and develop them, making sure they get all the skills they need to do their jobs even better. While it might seem like a good idea to cut costs on training and forcing your employees to learn on the job, it has a massive potential to backfire.

Take some extra time and invest some extra money to train your employees in the skills they require to do their jobs. That way, they will be even more independent and competent with the tasks you assign them. 

To prepare training material, you can outsource the work to a writing service like AussieWritings or AssignmentMan to do it for you expediently.  

By making your employees more productive, you maximize the value you get from your business and improve your bottom line. The tips on this list are certainly not exhaustive, but they are a good starting point on the road to making your employees and company more productive. 

This guest post is contributed by Kurt Walker who is a blogger and college paper writer. In the course of his studies he developed an interest in innovative technology and likes to keep business owners informed about the latest technology to use to transform their operations. He writes for companies such as Edu Birdie, XpertWriters and uk.bestessays.com on various academic and business topics.

Bad Data Visualization is Expensive: How to Present Clear and Effective Data

Want to hear a dirty little secret I learned while consulting with Fortune 500s? There were people inside this company that knew the metrics they were responsible for were on a downward trend – so they purposefully avoided showing the data clearly. They kept the data buried in complicated spreadsheets and posted a screenshot of dense data tables on the slides they showed in their weekly operational review meetings. They knew from experience how that meeting would go. Can you picture it?

You probably can, because you’ve been in those meetings looking at confusing, jumbled slides like this:

Your colleague leans over to ask you “what is this even saying?” You put your glasses on to better squint at the tiny font. Now you can see the numbers, but you don’t know what to make of all of them. The colleague sitting on the other side of you has already checked out and moved on to answering emails on her phone. The boss asks the presenter to walk her through the data and it takes the presenter 15 minutes to explain the various metrics on the slide and how the numbers were calculated. And you still haven’t gotten to the purpose of the meeting – which is to use the data to take some action.

You can probably relate to this scenario, even if you and your colleagues are not trying to obfuscate reality in a sea of numbers. The culture in many organizations is to slap a table of numbers on the slide and call it a day. But that method of presenting is incredibly expensive.

First, bad data displays waste time. In the scenario above, simply digesting this slide took a total of about 20 minutes. If we calculated the hourly rate of the executives sitting in that meeting once a week, we are talking about thousands of dollars wasted each year just in trying to decipher spreadsheets on slides.

Secondly, the longer we spend deciphering the slide, the more we put off crucial decision-making that is supposed to be informed by the data. We delay the release of new products, we continue inefficient processes, and we are slower to implement change when we spend our precious time on decoding, rather than deciding.

Finally, perpetuating a company culture that allows employees to just show numbers creates inertia. When we prioritize showing insights, rather than tables, we create a culture that respects one another’s time and attention, putting actionable decisions at the top of the priority list.

As I discuss in detail in my latest book, Effective Data Visualization, it is embarrassingly easy to present data clearly, once you know how to get started. You don’t even have to leave Excel or PowerPoint to do it. The first step is to establish a new expectation that presenters will know their data and (bravely) state their insights at the top of the slide. Then display the visual evidence that supports that insight (and only that data – ditching the numbers that aren’t essential to this particular insight). The answer to “what are we looking at here?” will be evident almost immediately.

Of course, you’ll want the table of numbers as backup, in case anyone asks you for details. But the spreadsheet on a slide is never what people first want to see. When we visualize our data effectively, our conversations are clearer, our decision-making is more efficient, people are happier – and all of that is worth its weight in gold.

ABOUT DR. STEPHANIE EVERGREEN

Dr. Stephanie Evergreen is an internationally-recognized speaker, designer, and researcher. She is best known for bringing a research-based approach for better communication through more effective graphs, slides and reports.

Dr. Evergreen has trained researchers worldwide at major companies including Mastercard, Verizon, Head Start, American Institutes for Research, Rockefeller Foundation, Brookings Institute and the United Nations. She writes a popular blog on data presentation at StephanieEvergreen.com. Her two books on designing high-impact graphs, slideshows, and reports both hit #1 on Amazon bestseller lists weeks before they were even released. This Spring Dr. Evergreen is publishing the second edition of one of those bestsellers and a brand new sketchbook with templates for making infographics and dashboards.