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31 May

Posted at 02:17h in Blog by
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When faced with the need for additional funds to fuel business growth, entrepreneurs often find themselves grappling with tough choices. Selling equity shares provides immediate cash but dilutes ownership, while bank loans come with high costs, growth restrictions, and personal guarantees.

However, there exists a third alternative: customer financing. By persuading customers to prepay for products or services, entrepreneurs can secure working capital without sacrificing ownership or incurring interest expenses. This article explores the concept of customer financing and provides insights into how it can be effectively implemented.

The Success Story of Brad Lorge and Premonition

In 2015, Brad Lorge founded Premonition, a technology company specializing in logistics software for large enterprise companies. While revenue from prominent clients was promising, the decision-making process and implementation timelines were often lengthy and costly.

To avoid risks associated with failed implementations, Lorge adopted a unique approach to financing the growth of his startup: customer financing. By securing prepayments from customers, Premonition leveraged these funds to drive its expansion.

In March 2022, Premonition achieved an annual contract value (ACV) of $3 million, and its subsequent acquisition by Shippit for $20.5 million valued the company at nearly seven times its ACV. Remarkably, due to customer financing, Lorge and his partners still retained 80% equity when they sold the company.

Harnessing the Power of Customer Financing

Customer financing offers business owners a powerful tool to raise capital while
maintaining control over their equity. If you’re considering adopting this strategy, follow
these steps:

1. Understand Customer Needs and Motivations

To convince customers to prepay, it’s crucial to comprehend their needs and motivations. Identify what incentives or guarantees you can offer in return for prepayment.

For example, could you promise expedited delivery times in exchange for a project deposit? Tailor your approach to align with both your business and customer requirements.

2. Productize Your Service

For service-based businesses, another approach to encourage customer prepayments is through productization. Transform your service into a standardized offering with a clear scope, pricing, and deliverables.

This approach simplifies the sales process, enhances efficiency, and delivers a predictable customer experience. By presenting your service as a product, customers are more likely to be comfortable paying upfront for the offering.

3. Offer Incentives and Discounts

Consider providing incentives or discounts that incentivize customers to prepay. These could be exclusive discounts, additional services, or early access to new features. Craft offers that align with your business model and resonate with your target customers, creating a win-win situation.

Benefits of Customer Financing and Productization

Implementing customer financing or productizing services brings several advantages to business owners:

1. Retain Equity

By opting for customer financing, entrepreneurs can secure capital without giving up valuable equity stakes in their businesses. This allows them to maintain control and benefit from future growth and success.

2. Avoid Bank Loan Obligations

Unlike bank loans that involve repayment obligations and personal guarantees, customer financing provides a debt-free way to access working capital. It frees businesses from the burdens associated with traditional financing methods.

3. Predictable Cash Flow

Customer prepayments offer a steady cash flow stream, enabling businesses to fund their growth plans and investment needs. With reliable upfront payments, entrepreneurs can confidently pursue their expansion strategies.

When seeking financial resources to fuel business growth, entrepreneurs have more options than just selling equity or resorting to bank loans. Customer financing and productization provide alternative paths to access capital while safeguarding equity stakes.

By understanding customer needs, offering incentives, and adopting a productized approach, entrepreneurs can effectively leverage customer financing to secure the necessary funds for their business expansion.

25 Apr

Posted at 16:36h in Blog by
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In 2012, Jaclyn Johnson started Create & Cultivate, a media company that educates and inspires women to succeed in business.

By 2018, she had grown Create & Cultivate to eight employees. It was then that she received an offer to purchase her business for an incredible $40 million. Unfortunately, the deal was too good to be true. When the acquirer realized how dependent the business was on Johnson, they withdrew their offer.

A couple of years later, Jaclyn sold Create & Cultivate to Corridor Capital for $22 million. While still a lucrative deal, it was a significant decrease from the original offer.

The moral of the story? If your company is too dependent on you, it may end up costing you down the road. The most valuable companies don’t rely on the owner’s involvement to succeed. Unfortunately, finding extraordinary talent to replace yourself can be challenging, to say the least.

The Biggest Mistake Most Owners Make When Trying to Replace Themselves

Finding a general manager, second-in-command, or Chief Operating Officer to replace themselves is one of the hardest projects business owners may ever tackle.

Whether you rely on a recruiter, paid advertising, or your personal network to find candidates, one of the first steps to shortlisting talent is conducting a comprehensive review of their background. It’s at this point that many business owners make the common error of being impressed by a company name on a resume or LinkedIn profile.

While working for a large company may be impressive, the skills that tend to be held in high regard at a Fortune 500 company often differ from what most small to medium-sized companies need.

Big companies often have well-established processes, systems, and hierarchies that have contributed to their success. People who thrive in big companies tend to excel at winning inside of a predetermined framework.

Unfortunately, many small to medium-sized companies don’t have as significant a framework to follow. This is why many big company veterans often struggle in a more entrepreneurial environment.

If you truly desire to land a worthy replacement, don’t base your hiring decisions on the impressive company names on their resume. Instead, focus on finding someone who is innovative, comfortable with chaos, action-oriented, and creative – someone with an entrepreneurial mindset.

To find them, try using these five strategies when making hiring decisions:

1. Look for Problem-Solvers

Innovation often involves finding creative solutions to problems. Look for candidates who have demonstrated the ability to think strategically and been able to come up with innovative solutions to challenges they have faced in the past.

2. Determine How They Solve Problems

During the interview, ask candidates to describe their approach to problem-solving. How have they produced innovative solutions in the past? This will give you insight into their thought processes. You’ll also get a clearer understanding of their willingness to take risks and ability to think creatively.

3. Evaluate Their Learning Agility

Innovative employees are often those who are open to learning. They also tend to be adaptable. Look for candidates who have a history of taking on new challenges and learning new skills.

4. Assess Their Ability to Work in Teams

Innovation often involves collaboration. Look for candidates who have demonstrated the ability to work effectively with others. Ask about their past experiences working in teams and how they contributed to the team’s success.

5. Consider Their Creativity

Look for candidates who have a creative portfolio or have pursued creative hobbies or projects outside of work. This can be a good indicator of their potential to bring new and innovative ideas to your organization. Right now, your company probably relies on you for a healthy dose of creativity and innovation.

If your goal is to replace yourself, following these five strategies can increase your chances of identifying innovative candidates who will bring fresh thinking and creativity to your organization. They can also lead to a significantly higher payday when you sell your business.

28 Mar

Posted at 18:52h in Blog by
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Wouldn’t it be great to have a magic slot machine? Imagine what it would be like if, each time you pulled the arm, you made more than you bet. How much time would you spend cranking that arm?

You can gamble on a lot of things when it comes to the value of your business, but only one strategy has a virtually guaranteed return. Most companies are valued on a multiple of earnings before interest, taxes, depreciation, and amortization (EBITDA). As a result, every extra dollar of profit you earn in the short term will translate into a winning spin down the road.

When someone is interested in acquiring your business, they will want to look at three years worth of your financial reporting. Every extra dollar of profit you can generate will make a significant impact on the offer you receive if you are considering an ownership transition in the next thirty-six months.

Derek Morin and His P.U.R.E Method

Derek Morin, the founder of Tabarnapp, which creates after-market sales applications for Shopify website owners, was obsessed with finding every dollar of profit available.

When his partner, who handled the finances, left the company, Morin was forced to look closely at his profit & loss (P&L) statement. As Morin saw potential areas for improvement, he made notes in the margin next to each line item he wanted to change.

To save time, he started using a single letter beside each entry to represent the action he
wanted to take:

P stood for “Plus”, something profitable that he wanted to grow.
U stood for “Unnecessary”, an expense he could eliminate.
R stood for “Replaceable”, a cost that could be replaced with a better or cheaper option.
E stood for “Equal” and was used for items that should be left untouched.

Morin realized his shorthand notes could be organized into a memorable acronym he referred
to as “PURE.”

Morin treated the PURE method like a game. Every month he scoured his P&L with the same four-letter system. He then challenged his team to act on each item that needed improvement. He became obsessed with squeezing out a few more dollars of profit every month. His game worked.

In 2020 Morin bought out his business partner in a deal that valued the company at around $400,000. Two years later, after applying the PURE methodology of improving profitability, Morin sold Tabarnapp in an agreement that netted him a roughly tenfold increase in the value of his business.

The Downside of Using Your Company’s Bank Account As a Slush Fund

Treating your company like your piggy bank can have a negative effect when you are ready to sell. Co-mingling personal and business expenses and letting other costs go unchecked may help you reduce taxes in the short term but could end up costing you more in lost value in the long run.

To prevent this from happening, keep your P&L “PURE”. That way, you’ll increase your chances of hitting the jackpot when it’s time to sell your business.

24 Feb

Posted at 04:04h in Blog by
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There are a lot of factors that determine a company’s value. Arguably, the most important is the answer to the question “how would my business perform without me?”.

You need your employees to make an owner-like effort every day for your company to thrive when you’re not around. The best way to do this is to create a vibrant culture of ownership inside your business.

Three ways to get your employees to care as much as you do:

1. Cast Your Employees as the Stars of a “David vs. Goliath” Movie

In 2008 Gavin Hammar started Sendible, a platform that allows companies to manage all their social media accounts from one place. Sendible grew steadily until 2016, when a large competitor entered the space, resulting in a sales plateau. Hammar gathered his employees and explained the challenge they were facing.

Instead of sugarcoating the issue, Hammar encouraged his team to think of themselves as underdogs in an “us-against-the-world” battle. Hammar then went to work positioning his company as a smaller, more personal option. He started a podcast, shared photos of his employees online, and answered customer questions via asynchronous video, and sent personalized LinkedIn messages to every new customer.

With an enemy to battle every day, Hammar’s employees followed his example and gave extra effort to humanize themselves and the company. As a result, Sendible started to grow again. By 2021 the company was flourishing, which is when Hammar accepted a lucrative acquisition offer from ASG.

2. Provide Perks Others Can’t or Won’t

Another way to create a thriving culture is to offer perks your competitors can’t or won’t. Natalie and Chris Nagele are the power team behind the software as a service (SaaS) company Postmark. Unlike most hard-driving software executives, the Nageles were committed to creating a great place to work.

Rather than take on outside investment and the corresponding pressures of demanding investors, the couple decided to self-fund their business. Obsessed with helping her employees do more meaningful work, Natalie began researching ways to inspire her staff. She came across data from the Henley Business School suggesting that implementing a four-day workweek created a healthier workplace culture.

Inspired by Natalie’s findings, the Nageles considered implementing a four-day workweek. They didn’t need the permission of their board or outside investors, because the couple owned the company outright. After a short discussion, the couple decided to try it.

Transitioning to a three-day weekend created a culture in which their employees enjoyed working, resulting in consistent growth for Postmark until 2022, when the Nageles sold the company in a life-changing exit.

3. Gamify Your Business

You can also inspire your employees to give owner-like effort by gamifying your business. Josh Davis founded the freight brokering company Speedee Transport. Brokering freight is all about gross margin – the difference between what you charge the customer and how much it costs to hire a driver to move the stuff.

Rather than simply telling his employees to focus on gross margin, Davis made a game of it. He created quoting software with a virtual gross margin scoreboard for his employees.

The software gave each employee a very public, objective, and transparent scoreboard they could follow to determine whether they won or lost that day. Davis then tied his employees’ compensation to gross margin, which created a healthy competitive culture within the company.

After gamifying his business, the company saw tremendous growth. Within two years, Speedee Transport grew from two to forty-five employees. This rapid expansion caught the attention of an acquirer, who offered to purchase Speedee Transport for a truckload in 2019.

Recap

One of the secrets to building a valuable company is to get your employees to work as hard as you do. Owner-like effort comes from making your people feel like part of a shared mission and giving them a working environment that brings out the best in them.

19 Dec

Posted at 17:37h in Uncategorized by
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This month, we are sharing another blog post from Eric Knam with ActionCOACH Tulsa. Eric is a certified business coach providing business help, advice, and mentoring services to small and medium-sized businesses. We’ve watched many of our business colleagues move from working IN their business to working ON their business, enjoying the perks of being the boss as a result of partnering with Eric.

Keep reading to learn more about how to start working ON your business instead of IN your business!

How to Work ON Your Business vs. IN Your Business | Action COACH

Michael E. Gerber, the author of “The E Myth” series and business expert once said, “If your business depends on you, you don’t own a business – you have a job. And it’s the worst job in the world because you’re working for a lunatic!”

Running your own business can be one of the most rewarding and frustrating experiences there is! The good news is that there are ways to decrease the frustration and increase the reward, you just need to be willing to stop doing everything yourself and take control of your time.

Giving up control can be a scary concept for many business owners. They have been so involved in the growth of their enterprise for so long, that they end up thinking that nobody else has the skills or abilities to do things as well as they can. As a result, they keep ]themselves in the position of the employee instead of taking on the role of owner.

The fatal flaw here is that they spend so much time focusing on the $12 an hour work (employee work), that they don’t have the time to focus on the $500 an hour work (owner work). Put another way, they get caught in the cycle of working IN their business instead of working ON their business.

Don’t think this is a fatal flaw? Consider this, “66% of businesses make it to the 2-year mark and just 30% make it to the 10-year mark. One of the main reasons for this is because very few owners spend the required 20% of time working on their business and this contributes to businesses failing.” (gamechanger, 2019).

So, how can you break the cycle? How can you ensure, as a business owner, that you have the time to develop your business?

Establish Boundaries

Start by establishing boundaries. It’s ok to say “no” to the things that don’t bring you or your business value. Just because it’s a priority to someone else doesn’t mean that you need to be involved. Next, take control of your day instead of letting your day take control of you. You’ll want to do a couple of things here.

First, make a list of all the things you do on a daily, weekly, and monthly basis. Now take a hard look at your list and ask yourself these questions:

  • If I were to prioritize this from levels A-C, what would it be?
  • Is it necessary?
  • Do I enjoy this task?
  • Is there someone else who can do it?
  • Is it possible to automate this process?

 

After you are done, determine the things you will automate, delegate, and eliminate. Then do it. It might be scary to hand things off to your staff. Just remember, they aren’t perfect, and neither are you. With a little training, clear expectations, and some coaching they’ll get better and better at the things you’ve given them to do. Who knows, they may even get better at it than you!

Get Control of Your Time

Now you can focus on getting control of your time. Using a “Default Calendar” is a great way to do this. The purpose here is to identify specific times during the week for key tasks that could not be automated, given to someone else, or scrapped. As an example, some of those tasks might include marketing your business and reviewing your financials.

Instead of hoping that you have the time to work on these very important items, schedule time weekly to ensure they are addressed. You may designate Monday afternoons from 1-4 pm as “Marketing Monday”. During this time, work on all the marketing activities that need to be addressed for the week.

If you get something related to marketing on a Wednesday, it gets added to the list of things to address during your 1-4 pm time block next Monday. Perhaps you need to send out invoices, review your P&L and balance your checkbook. 8-11 am on Friday mornings could be a great time for “Finance Friday”.

Once your priorities are blocked on your calendar, there should be very few things that keep them from taking place. Make sure your staff and family know that you will be unavailable during these times. Close your door or leave the building. Turn off your phone, forward your calls to someone in the office, or put it on “Do Not Disturb”. That way, you can focus on what needs to be done without distractions.

You may need to “tweak” your calendar to maximize your efficiency and it will take some discipline to stick to it. Once you take control of your day, you’ll be amazed at how much time you really have. What a great opportunity to schedule some time to work ON your business!

Working On Your Business vs. In Your Business

If you are wondering what the difference is when it comes to working ON your business vs.
IN your business, here are some examples:

Working IN Your Business

  • Making things
  • Delivering things
  • Administrative stuff
  • Paying invoices
  • Dealing with conflict
  • Phone calls
  • E-mails

Working ON Your Business

  • Personal development & education
  • Strategic planning
  • Goal setting
  • Financial projections & forecasting
  • Creating strategic alliances
  • Establishing & implementing systems and processes
  • Setting your strategic vision

 

Your business should give you the life you desire, not become your life. Taking the time to automate, delegate, and eliminate your non-essential tasks will free up your time so you can work ON your business. Once that happens, you’ll be amazed at how rewarding owning a business really can be.

19 Dec

Posted at 17:35h in Uncategorized by
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This month, we are sharing another blog post from Eric Knam with ActionCOACH Tulsa. Eric is a certified business coach providing business help, advice, and mentoring services to small and medium-sized businesses. We’ve watched many of our business colleagues move from working IN their business to working ON their business, enjoying the perks of being the boss as a result of partnering with Eric.

Keep reading to learn more about how some of the most boring aspects of business ownership are often the most profitable!

Boring is Profitable

Let’s face it, facts and data are not the most exciting things you deal with as a business owner. Very few of us like to crunch the numbers and those who hate it will often find any excuse to avoid doing so. The problem is, that when you ignore the numbers, it impacts your ability to make good decisions.

Having access to accurate and up-to-date data is critical for those who want to grow their business. Without knowing your trends, it’s very difficult to determine marketing strategies, identify and recognize top performers, and make quick adjustments to your action plans. There are so many different numbers you can track that it’s hard to know where to begin.

Knowing your financial metrics and data has got to be your starting point. Just because you had a big sale or your best revenue month ever, it doesn’t mean there will be money in the bank at the end of the month!

Here are some key numbers you should know as a business owner:

  • How much money did the business make? (TOTAL REVENUE)
  • How much money did we spend? (TOTAL EXPENSES)
  • When all was said and done, how much money was left? (PROFIT)
  • What percent of sales is profit? (PROFIT MARGIN)
  • Cash on Hand or Cashflow
  • Equity
  • Debt and Debt Ratio
  • Tax Rate
  • Account Receivables and Payables
  • Total Inventory
  • Net Income

 

Depending on the needs or nature of your business, you may need to look at many of these numbers on a daily or weekly basis. At a minimum, you should review them monthly.

If you struggle with your financial numbers or put off updating them, get help now! There are plenty of qualified accountants and bookkeepers who would be more than happy to help you. A word to the wise here, don’t skimp on this service. The “low-cost option” bookkeeper or accountant usually isn’t the best route to take. I’ve heard multiple stories from business owners who spent a lot of money to get their books fixed because the “good deal” they got on bookkeeping was too good to be true.

Knowing Your Online Metrics

If you have a website, social media, and other digital marketing (in this day and age, you should), you’ll need to know your online metrics as well. Being aware of the following metrics will help you identify opportunities, increase the awareness of your brand, and adjust or maintain the course your marketing takes.

  • Website Unique Visitors
  • Website Bounce Rate
  • Time Spent on Website
  • Number of Sessions for Unique Visitors
  • Pages on your Site with the Most Activity
  • Social Media Engagement/Reach
  • New and Existing Followers
  • Likes, Shares, Comments on Posts (Engagement)
  • Video Views
  • Which Posts had the Most Engagement

 

A business without any customers isn’t much of a business, so it’s really important to track the activities you are using to generate leads. Knowing what strategies are working and which ones don’t allow you to maximize your spending on the activities that are driving people to you. Make sure you are regularly checking the following numbers:

  • Number of Qualified Leads
  • Source of Qualified Leads
  • How Much Each Qualified Lead Cost You
  • The Percent of Qualified Leads That Become Your Customer

 

Once you have a new customer, you must keep them. Happy customers come back, and they tell their friends about your business! Some customer experience indicators you should track are:

  • Customer Retention or Repeat Visits
  • Average Sale
  • Number of Transactions
  • Number of Items Purchased per Visit
  • Lifetime Value of a Customer
  • Customer Count Per Day/Week/Month
  • Number of Five-Star Reviews
  • Net Promoter Score

 

The 5-Ways Formula

Here’s the really cool part. When you know these numbers, you can use them to increase your revenues and your bottom line!
At ActionCOACH, we like to plug them into a formula we call the 5-WAYS. It allows you to use this data to set specific strategies, using your data to make more money…see, boring is profitable!

The 5-WAYS formula is:

Number of LEADs x Conversion Rate = Number of Customers
Number of Customers x Average Dollar Sale x Average Number of Transactions = Revenues
Revenues x Profit Margins = $ Profits

The interesting thing about this formula is that the Number of Customers, Revenues and Profits aren’t the most important focus, they are the results from the other numbers. The areas that really make the difference are your number of leads, average sales, number of transactions, conversion rate, and profit margin. 

If you’d like some specific and effective strategies you can use to significantly improve your business’ profitability and growth, check out this easy-to-use chart: AC-19-5 Ways Handout-US-E

Knowing the important numbers for your business gives you a leg up on your competition. Anytime you hear someone call you boring because you track your data, you can just smile…all the way to the bank!

19 Dec

Posted at 17:31h in Uncategorized by
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This month, we are sharing another blog post from Eric Knam with ActionCOACH Tulsa. Eric is a certified business coach providing business help, advice, and mentoring services to small and medium-sized businesses. We’ve watched many of our business colleagues move from working IN their business to working ON their business, enjoying the perks of being the boss as a result of partnering with Eric.

Keep reading to learn more about who is your biggest critic!

Who is Your Biggest Critic? | Action COACH

There’s a classic Saturday Night Live skit called Daily Affirmation. It stars Al Frankin as Stuart Smalley, a man who is trying to better himself through positive self-talk. In each skit, Stuart gazes at himself in the mirror and tells his reflection “I’m good enough. I’m smart enough. And doggone, people like me.”
The skits were humorous, sometimes even hilarious. What many of us don’t realize is that Stuart was onto something. What we say to ourselves, about ourselves when we are by ourselves has a significant impact on who we are and how we behave.
Don’t just take my word for it, let’s look at a couple of examples from Stuart himself: “I don’t know what I’m doing. They’re gonna cancel the show. I’m gonna die homeless and penniless and twenty pounds overweight and no one will ever love me.” – Stewart Smalley
“I deserve good things. I am entitled to my share of happiness. I refuse to beat myself up. I am an attractive person. I am fun to be with.” – Stewart Smalley
There’s a huge difference in the messages Stewart is sending himself in the examples above. That little voice in our heads can be our worst enemy, or we can train it to become our greatest asset. You see, negative self-talk is a destructive force that tears us down from within and keeps us from achieving our potential.

The Benefits of Positive Self-Talk

Positive self-talk, on the other hand, can have a huge impact on our self-confidence and how we react in different situations. In her article “6 Ways To Practice Positive Self-Talk Without Feeling Like You’re Straight-Up Lying to Yourself” on wellandgood.com, Jessica Estrada outlines several of the benefits that are associated with positive self-talk.
  1. New perspective during difficult or times of crisis
  2. Improved relationships
  3. Increased confidence
  4. Reduction of loneliness

 

Changing what you say to yourself, about yourself when you are by yourself isn’t easy and it takes some work. Let’s face it, you’re dealing with years of listening to the same “recording” playing over and over in your head. Changing the “soundtrack” is going to take some time.

To help with the transition, Estrada recommends the following:

  1. Make sure your self-talk is authentic and true
  2. Change your behavior
  3. Start in one area with positive self-talk
  4. Collect data not judgment
  5. Question your thoughts
  6. Work with a professional

 

To some, this may sound like a bunch of psychobabble gobbledygook. As someone who has dealt with the challenge of negative self-talk, I can assure you it’s not. For the last year and a half, I’ve been working with a thought coach and it has been a game-changer!

My self-confidence has improved. I am now more in touch with the negative thoughts that keep me from becoming the person I want to be. When I hear that old, worn-out record starting to play in my head, I take the time to ask myself if “how I’m thinking, feeling, or acting” supports me becoming the person I desire to be?

If it doesn’t, I have a choice. I can continue to listen, to sing along, or I can change the station.

19 Dec

Posted at 17:30h in Uncategorized by
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This month, we are sharing another blog post from Eric Knam with ActionCOACH Tulsa. Eric is a certified business coach providing business help, advice, and mentoring services to small and medium-sized businesses. We’ve watched many of our business colleagues move from working IN their business to working ON their business, enjoying the perks of being the boss as a result of partnering with Eric.

Keep reading to learn more about the best time to sell your business!

When Is The Best Time to Sell Your Business? | Action COACH

Imagine for a moment that you are a successful CEO. You are in your fifties and run a heating and air company that generates eight million dollars in revenue and more than one million dollars in profit before tax.

Despite the fact that you are obviously tired and headed full speed into burnout, you’ve decided that you want to wait another five to seven years before you sell the business so you can “sell at the peak of the next economic cycle”.

At face value, this thought process seems to make sense. If you ask a professional in mergers and acquisitions, they will tell you that an economic cycle can impact valuations by up to “two turns”. That means a business selling for five times earnings at the top of an economic cycle may go for as low as three times earnings during a low point.

Here’s the problem with that. When you sell your business, you must do something with the money you receive. Usually, that means buying into another asset class that is being similarly impacted by the same economy.

As an example, let’s pretend that in the early 2000’s you had a business generating $100,000 in pre-tax profit. Your industry typically trades between three times earnings and five times earnings, depending on where things are in the economic cycle.

Now, let’s assume, you waited patiently on the sideline until the economy peaked, then sold your business for $500,000 (five times your pre-tax profit) in October 2007. You took your $500,000 and bought into a Dow Jones index fund when it was trading above 14,000.

Eighteen months later – after the Dow Jones had dropped to 6,547.05 – you were left with less than half of your money.

Even though you timed things perfectly, by waiting for the economic peak, by March 9, 2009, you would have effectively sold your business for less than 2.5 times earnings.

The flip side of this scenario is also true. Let’s imagine you “waited too long” and ended up selling the same business in March 2009. Since the sale occurred during the lowest possible point in the economic cycle, you only got three times earnings: $300,000.

That doesn’t seem like a very good deal, does it? Believe it or not, this is actually a better scenario than the one above because you were able to realize 20% more in profits than if you’d sold at the peak and bought an index fund at the top of the market.

It’s no different than selling your house when the real estate market is booming. Unless you are planning to downsize, you’ll be taking your profits and putting them into the same thriving market. This explains why trying to time the sale of your business on external economic cycles is usually a waste of your time and energy.

External vs. Internal Economic Cycles

Here’s another way to look at the timing of selling your business. Consider the internal economic factors of your business: employees are happy, revenue and profits are on an upward trend, there is still a lot of market share for an acquirer to capture.

Are they all pointing in the right direction? If so, this could be the perfect time to look at selling your business. Why? When internal economic factors are pointing up, your business has a better chance of fetching you a price at the top end of what the market is paying for similar businesses.

This means that, for good or bad, you’ll have additional newfound cash that you can use to buy into the same economic market you’re selling out of.

19 Dec

Posted at 17:27h in Uncategorized by
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This month, we are sharing another blog post from Eric Knam with ActionCOACH Tulsa. Eric is a certified business coach providing business help, advice, and mentoring services to small and medium-sized businesses. We’ve watched many of our business colleagues move from working IN their business to working ON their business, enjoying the perks of being the boss as a result of partnering with Eric.

Keep reading to learn more about how to keep your customers using critical non-essentials!

Looking for Ways to Keep Your Customers? Try Using Critical Non-Essentials | Action COACH

As business owners, we tend to put a lot of time, effort, and money into attracting new customers. Unfortunately, we don’t always do the same when it comes to keeping the ones we already have. Every day, your clients are inundated with more and more options when it comes to where they can spend their money. That’s why it’s so important to build meaningful relationships with them. If they don’t feel appreciated and valued, what’s to keep them from taking their business somewhere else?

When a customer leaves your business, the impact isn’t just short-term. “Loyal customers generate more revenue each year they stay with a company. Statistics indicate that a 5% increase in customer retention increases profits by 25% – 95%” (Markinblog.com, 2021).

The reason is simple. Your current customers are way more likely to buy from you again. “The probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is only 5% to 20%” (Markinblog.com, 2021).

The situation gets even uglier when you realize that getting those new prospects isn’t easy, or inexpensive. “It costs up to 7x more to acquire a new customer than to retain an old one” (Markinblog.com, 2021).

So what can you do to build relationships and make your clients feel valued? The answer is Critical Non-Essentials or CNEs.

What Are Critical Non-Essentials?

So, what’s a CNE? It’s a gesture you make that shows your clients that they are more than just a piggybank to you. Critical Non-Essentials help you show appreciation and build long-term relationships and can range from simple to elaborate.

Some examples of CNEs include:

  • Birthday cards
  • Handwritten notes to recognize a milestone in their lives/business or just say “thanks”
  • Bottles of wine
  • Beer or chocolate of the month club memberships
  • Gift baskets
  • Gourmet meals for the client and their spouse
  • Tickets to sporting events, concerts, or the theater
  • Client appreciation events

 

Each time you recognize a customer with a CNE, you make a deposit into their “emotional bank account”. Each deposit shows them that they are important to you and increases the likelihood that you and your business will remain important to them. If you don’t have a large budget for CNEs, that’s ok.

Small, creative gestures can go a long way, especially when they are genuine and well thought out. Remember, it’s all about making your client feel special and appreciated.

If your organization isn’t already doing so, it would be a good idea to capture relevant and important information from your clients. Once you have it, create a system to manage your activity just as you would with any other critical aspect of your business.

Some of the information you might want to capture includes:

  • Their birthday
  • Names of their spouse, children, and everyone’s birthdays
  • Their wedding and business anniversaries
  • Favorite sporting teams and sports
  • Hobbies and leisure activities (i.e., fishing, ballroom dancing)
  • Favorite food, wine, or alcoholic beverage
  • Favorite travel spots
  • Bucket list items

 

Once you get this information, decide when and how you’ll use it to make those meaningful deposits in your client’s emotional bank accounts. Make sure the actions you take are genuine and timely. Personalizing the gesture will go a long way toward making it memorable.

By recognizing the value of your clients, you turn them into raving fans. As a result, they become cheerleaders for you and your brand. When that happens, they tend to become a means for more referrals and more business opportunities.

Client satisfaction is key to the long-term success of any business. While some of the suggested CNEs may seem costly, they may only end up being pennies compared to what your client is worth to your business in the long term.

19 Dec

Posted at 17:23h in Uncategorized by
0 Likes

This month, we are sharing another blog post from Eric Knam with ActionCOACH Tulsa. Eric is a certified business coach providing business help, advice, and mentoring services to small and medium-sized businesses. We’ve watched many of our business colleagues move from working IN their business to working ON their business, enjoying the perks of being the boss as a result of partnering with Eric.

Keep reading to learn more about the personality trait most successful entrepreneurs share!

What Personality Trait Leads to Success?

Ask any group of successful entrepreneurs to define the personality traits that lead to their achievements, and you’ll get several responses. They will quickly throw out words like determination, sacrifice, and hard work. Others may show a little more humility and chalk their success up to personality traits like curiosity. Still others will credit dumb luck.

However, there is one additional personality trait that many of the most successful entrepreneurs share: discipline.

They have the discipline to follow their original vision, even when they are tempted to change course. The discipline to stay true to their original product or service, even when clients start asking for different things.

The discipline to ignore the bright, shiny objects that constantly pop up and tempt them to shift their focus rather than staying true to what they originally set out to do.

Steve Jobs, the legendary co-founder of Apple, said it best: “People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to one thousand things.”

How the Discipline of Saying “No” Led to a 7-Figure Exit

Andy Cabasso graduated with a law degree, but never really practiced law. Instead, he co-founded JurisPage, a company that specialized in helping law firms with their marketing.

Cabasso understood the marketing services lawyers needed, and his partner, Sam Brodie, knew how to build websites that ranked on Google. Their service was extremely popular among lawyers. As a result, they also attracted the attention of other service businesses that wanted to improve their marketing and website presence.

Cabasso and Brodie considered expanding their services beyond their niche but ultimately turned down the opportunity to work with clients outside of the legal profession. They knew they had something unique to offer lawyers.

They also knew the importance of recurring revenue. They insisted that their clients use JurisPage for website hosting, creating a strong base of recurring revenue for the company.

Prospects offered JurisPage thousands of dollars to build them a website that another company could host, but Cabasso turned them down. He knew that the recurring website hosting revenue was a fundamental component of building a valuable business.

In the end, Cabasso and Brodie’s discipline paid off. They ultimately attracted the attention of Uptime Legal, an Inc. 5000 business specializing in technology and practice management software for law firms.

The two companies were a perfect fit, leading to Uptime Legal acquiring JurisPage in a seven-figure deal just three years after it was founded by Cabasso and Brodie.

So remember, while curiosity and grit are important personality traits for any would-be entrepreneur, the ability to remain disciplined in the face of opportunity may be the most important attribute of all.