Today a website is the core element to a successful business strategy and the face of your brand. A business website is a direct link to a business’ customers, providing the small business owner a platform to educate, engage and interact with potential customers, new customers and old customers. Having an online presence has never more important for the small business. Your business website and social media pages create an invaluable opportunity for your to share your business’ story and develop its brand.
Starting a business from scratch can be challenging. Franchising or buying an existing business can simplify the initial planning process.
- Know the difference between franchising and buying a business
- Consider 3 factors before franchising or buying a business
- Get ready to buy your franchise or business
Know the difference between franchising and buying a business
Before you decide if one of these options is right for you, make sure you know the basics of franchising and buying an existing business. The main difference between franchising and buying an existing business is the level of control you’ll have over your business.
Franchising gives you more guidance but less control
A franchise is a business model where one business owner (the “franchisor”) sells the rights to their business logo, name, and model to an independent entrepreneur (the “franchisee”). Restaurants, hotels, and service-oriented businesses are commonly franchised.
Two common forms of franchising are:
- Product/trade name franchising: The franchisor owns the right to the name or trademark of a business, and sells the right to use that name and trademark to a franchisee. This style of franchising normally focuses on supply chain management. Typically, products are manufactured or supplied by the franchisor and delivered to the franchisee to sell.
- Business format franchising: The franchisor and franchisee have an ongoing relationship. This style of franchising normally focuses on full-spectrum business management. Typically, the franchisor offers services like site selection, training, product supply, marketing plans, and even help getting funding
When you buy a franchise, you get the right to use the name, logo, and products of a larger brand. You’ll also get to benefit from brand recognition, promotions, and marketing. But, it also means you have to follow rules from the larger brand about how you run your business.
Buying an existing business gives you more control but less guidance
Buying an existing business is exactly what it sounds like. The buyer typically takes over full ownership of the business. The largest advantage is having an existing blueprint that can include important factors like an established customer base, defined operating expenses, and fully trained employees. Regardless of business type, almost any kind of business could be bought or sold.
When you buy an existing business, you typically get complete control over its direction. However, with no set vision, infrastructure, or external guidance, your business could struggle as you figure out the best way to run things.
Consider 3 factors before franchising or buying a business
Though the business models differ, there are three common steps to take that will help you determine whether you should franchise or buy a business.
- Quantify your investment: Review your financial landscape and decide how much you’re willing to spend to purchase — and ultimately manage — the business. This will help you determine what type of businesses or brands are best for your budget.
- Consider your talents and lifestyle: Be honest about your skills and experience, as they can help you eliminate unrealistic business ventures. For example, if you prefer hands-on assistance, then franchising might be best for you. On the contrary, if you’re an experienced business owner, you may want to consider buying an existing business.
- Review the full landscape: Look at the existing infrastructure and make sure you understand everything that comes along with the purchase. Don’t be afraid to ask questions about contracts, leases, existing cash flow, and inventory. The more you know, the better equipped you’ll be to make a sound decision.
Quantify your investment.
Consider your talent and life.
Review the full landscape.
Pick the right franchise or existing business for you
Once you know whether you want to franchise or buy a business, you’ll need to evaluate each specific opportunity. In short, it boils down to this: do your due diligence.
Your research should help you understand the business from both a financial standpoint and in the overall landscape.
If you’re interested in franchising, you should explore the following:
- Any and all existing reports: Now’s the time to put your detective hat on. To start, get a Uniform Franchise Offering Circular (UFOC). This form contains vital details about the franchise’s legal, financial, and personnel history.
- Associated rules and regulations: Every franchise is different. Confirm that you’ll have the right to use the franchise name, trademark, and do business in an area protected from other franchisees. You can also find out if you’ll get training and management help from the franchisor, and be able to use the franchisor’s expertise in marketing and advertising.
- Contracts: The contract between the two parties usually benefits the franchisor more than the franchisee. The franchisee generally needs to meet sales quotas and buy equipment, supplies, and inventory. Make sure you understand it all before signing.
If you’re interested in buying an existing business, here’s what to look into:
- Licenses and permits: You’ll need to get any needed licenses and permits from the current owner or apply for them yourself. Find out which federal, state, and local permits and licenses you’ll need to run your business.
- Zoning requirements: Zoning requirements may affect your business. Make sure your business follows all the basic zoning laws in your area.
- Environmental concerns: If you’re buying real property along with the business, it is important to check the environmental regulations in the area.
- The value of the business: There are many different methods to determine a fair price for the sale of the business. Here are a few:
- Capitalized earning approach: This method refers to the return on the investment that the investor expects.
- Excess earning method: Like the capitalized earning method, except it separates return on assets from other earnings.
- Cash flow method: This method is typically used to determine how much of a loan the business’ cash flow can support.
- Tangible assets (balance sheet) method: This method values the business by the tangible assets.
- Value of specific intangible assets method: This method compares buying a wanted intangible asset versus creating it.
Get ready to buy your franchise or business
Once you’ve found a franchise or business to buy, it’s important to conduct a thorough, objective investigation.
At this stage, you’ll probably want professional help. Consider hiring an attorney and an accountant. The tax rules surrounding franchises in particular are often complex. A specialist in franchise law can assist you with evaluating the franchise package and tax considerations. An accountant can help you determine the full costs of purchasing and operating the business, and even help estimate potential profit.
An attorney and an accountant together can help you create and evaluate important documents. Typically that includes:
- Letter of intent
- Confidentiality agreement
- Contracts and leases
- Financial statements
- Tax returns
- Sales agreement
- Purchase price adjustment
Be sure to visit the Federal Trade Commission’s Bureau of Consumer Protection for a wide range of resources and guides to help you buy a franchise.
Often we hear that SBIR/STTR funding is “free” money. While the funds are not required to be paid back, SBIR/STTR awards are certainly not a “gift”. When a grant has been awarded the recipient company is making a promise to use the money as proposed, maintain eligibility, follow reporting guidelines and demonstrate progress.
Now your task is to manage the funds awarded, and one of your most “expensive’ costs will be the time and effort needed to do that. Management of an award requires developing and following policies and procedures, establishing an accounting system that adheres to federal requirements, and setting up procurement policies, payroll, employee standards and other internal controls that are necessary for success.
Michael Seibert, SBDC Business Consultant at Yavapai College
Selling your business is similar to selling your house
When you sell your house, you want to get the house ready because you know that potential buyers are going to be coming through and evaluating your house against the other houses on the market. Most of us really want to make our house shine so that it will present favorably, leading to a quick sale at a high price. To this end, we may paint the house. We may do some re-landscaping. We may take care of any deferred maintenance that might distract from the house’s beauty and curb appeal. When you sell your business, you should follow the same approach. Do everything that you can to make your business shine in comparison to the other similar business that may be on the market.
Below are some key factors that can make your business more valuable:
• Business earnings historic track record.
• Ease of operation, which makes transition to new ownership feasible.
• Quality of management and staff.
• Lowing risks associated with market and customer concentration.
• Location and the condition of facilities and equipment.
• Industry and business growth prospects.
• Competitive pressures.
• Business position in the market place.
• Acquisition financing terms.
Below are some actions that will make your business more marketable.
- Get the financial statements ready.
You should have the Balance Sheets, Income Statements and Cash Flow Statements for at least the last three years available for the buyer before putting your business on the market. If possible, you should also have pro forma financial statements for the future three years, especially if there is significant growth expected in the future.
In addition, you should also be able to explain the story of your business that these financial statements tell. For example, if your business has grown by 15% in each of the last three years and you are expecting that to continue in the next three years the financial statements should show that and you should be able to explain the reasons for that growth and why it will continue. A growing company is usually worth more than a company that is declining or just maintaining. Likewise, a company whose sales or profits are declining will be worth less.
Some business owners may run certain discretionary costs (e.g. “business trip” to Hawaii or a business seminar at Disney World) through the business for tax purposes that a future buyer would not need to incur. Now is the time to have your accountant rework your financial statements so that these discretionary costs stand out and can be explained to a buyer. This will present your business’ true earning potential and probably bring you a higher sales price.
If you need help in getting your financial statements ready, you should first discuss this with your accountant. However, the Small Business Development Center at Yavapai College (SBDC) can assist you by reviewing your financial statements and providing feedback, before your put your business on the market.
- Make your business easy to hand off to a new buyer
The more you can document how the business operates, the more appealing your business will be to a buyer. By creating checklists and operating manuals that show how the business operates on a day-to-day basis, it will be easier for a potential buyer to understand and see how he can take it over successfully. Think about it from a potential buyer’s perspective. One business is very organized and has operating manuals and checklists and another business has none of these – which do you think the buyer is going to be more interested in? Of course the one that will be the easiest for the buyer to understand and take over.
The Small Business Development Center can assist you with this by reviewing your current operating documents and making recommendations where improvements are warranted. We have experienced business consultants who will share their perspective and insight.
- Make your business independent
Your business should be independent in the following four areas:
You – Your business should not rely exclusively on you. If your business does not run efficiently when you are not there, then it is too dependent upon you. You should take steps to see that you could go on vacation for several weeks and your business will still run without a hiccup.
Employees – A business should not rely exclusively on any one employee. If any individual employee quit and it would cause a huge problem for your business, then you have a problem now. Although some employees will always be better than others, your business should not be so dependent on any single employee that losing them would affect the financial results of your business. If that is currently the case, you need to take steps to build this independence into the operations of your business.
Customers – Your business should not solely depend on any one customer. If your business is so dependent upon a single customer that your profitability would be significantly hurt if that customer left, then you have a major weakness in your business that needs to be addressed. You should take steps to acquire other customers so that the importance of this major customer is diminished.
Vendors/Suppliers – Relying on a single vendor for essential supplies can increase the business’ risk of a business shutdown due to lack of inventory. In addition, a business generally will incur higher costs related to the need to maintain larger inventory safety stocks and because of a lack of bargaining power with the single supplier. Both of these issues can result in a lower business valuation. It is generally a good business strategy to develop multiple supplier relationships so that a shortage at one vendor can be mitigated with supplies from a second, or third, vendor. These relationships also allows the business owner to negotiate better pricing and better service from its vendors because each vendor understands that they are replaceable.
Dependence in any of these four areas will decrease the value of your business to a potential buyer because these dependencies increase the risk in your business. Buyers pay for the future earning/cash flows of a business. Anything that jeopardizes the certainty of those earnings/cash flows will cause them to discount their value and in turn the value of your business.
The Small Business Development Center can help you develop strategies to mitigate these risks and build a stronger business.
- Appearances do count.
The time to replace that old worn-out piece of equipment, upgrade to new technology or paint the front of the building is before you put the business on the market. Do not assume that a new owner will want to do it or that the price will be only slightly lower because you have not replaced it. The time to “spiff up” the business is before you put it on the market.
It might also be helpful if you took a good look at your business from the perspective of a buyer. Try to put yourself in the place of a prospective buyer. What would you do to make your business more attractive? Then do it now, before you put your business on the market.
Going back to the house analogy, new houses sell faster and at higher prices than “fixer uppers”. The same is true with businesses. So you need to look at your business and decide: is it a fixer upper or is it in pristine condition? If it is the former condition then start making renovations to put it into pristine condition. Your business will sell faster and for a higher price, just like a house.
- Be ready to address buyer questions.
If you are not already, you should get up to speed on your industry and business environment. You should be able to discuss your business’ position in the market place, why your industry and business are growing, and the affect competition might have on that growth potential. Serious buyers are going to be interested in these issues and your ability to explain why your business is positioned to grow in its current environment will lead to greater interest and a higher price.
The Small Business Development Center has experienced business consultants that would be happy to review your current industry with you and suggest some talking points that might address concerns that a buyer might have. We can even role play with you so that you can practice addressing buyers questions.
- Eliminate Surprises!
Before you put your business on the market, do your best to eliminate the surprises. Review every facet of the business and remedy any problems that could appear during the sale process. No one likes surprises – most of all potential buyers. Whether it is a legal problem, an accounting issue, environmental concern, or something else – solve it now. Nothing kills a deal faster than surprises.
- Financing is an important aspect in sale of your business.
Studies have shown that a seller who asks for all cash receives on average only 70 percent of his or her asking price, while sellers who accept financing terms receive on average 86 percent of their asking price. That is a difference of 16 percent. In many cases, businesses that are listed for all cash just do not sell. With reasonable terms, however, the chances of selling increase dramatically and the time from listing to sale greatly decreases. Most sellers are unaware of how much interest they can receive by financing the sale of their business. It also tells the buyer that the seller has confidence in the future of the business.
If a seller cannot afford to finance their business, then helping the buyer find financing will also add value to the sale. Working with the Small Business Development Center, we can assist the buyer in applying for small business loans.
The Small Business Development Center at Yavapai College provides no- cost, one-on-one, confidential consulting to business owners and their teams. We have a wide variety of tools and expertise to assist you!
1. Dominate a niche
2. Focus on content, nothing else
3. It’s a marathon, not a sprint
4. Learn from your community
5. Draw inspiration from everywhere
Here are the seven best strategies to ensure that your small business sales team close the deal.
1. Set the stage for a close
2. Speak boldly
3. Get buy-in
4. Bargain in shorter blocks of time
5. Use “if… then…” for discounting and perks
6. Tell them they’re ready
7. Ask for the business!
Today’s customers have so much information at their fingertips that they are more than half way into their purchase decision before they even engage with your sales person. Because of this they are not looking for a sales pitch. What today’s customers really need is a trustworthy, reliable expert who can calm their fears, clarify inconsistencies in their research, confirm their decisions, and give them the best possible buying experience. They want value, not a sales pitch, so you just need to help them see that is what they are actually getting.
Boost Your Business With No-Cost Consulting From the SBDC
See this panel of experts hosted by the Chicago University Booth School of Business Entrepreneurial Roundtable alumni group.
This panelist group consists of a CEO who has successfully made acquisitions, a business broker who has helped many companies obtain full value for their assets, an organization expert who can tell you what needs to be done to get your company ready for sale, and a community banker who knows what is needed to qualify for government-guaranteed loans to buy a business, and whose bank has funds available to lend.
Pat Grandle has significant experience in sales, marketing, and management. For over 24 years, Pat managed a family business in the manufacturing industry in which she developed an extensive network and experience directing all areas of a business. When her own company was adversely affected by the economic downturn in the automotive industry, she decided to use her experience and growing network to help others plan for their business future. An expert consultant and relationship builder, Pat’s passion is helping individuals and companies reach their goals.
Ellen Huxtable owns ABC Advantage Business Concepts which supports growing businesses through market positioning, process development and management mentoring. She is the author of “Turbocharge & Transform!”, a collection of twenty worksheets for management teams, focusing on mission, strategic positioning and tactical innovation. Ellen serves on the Advisory Board for the College of DuPage Small Business Development Center, the Fermilab Community Advisory Board and the Western Region Board for Junior Achievement.
M. Colleen Ryan has had more than 20 years of involvement with SBA lending at US Bank, Wintrust, and her current bank, Leaders Bank. She began her career as SBDC Director for Moraine Valley Community College. In 1990, she transitioned to banking and established the first SBA Certified Lender Program (CLP) in a DuPage County bank. She has been named the SBA’s Illinois Financial Services Advocate of the Year. She’s also a good contact, having nominated a bank customer who won the National SBA “Small Business of the Year” award in 1993 (Presented by then Vice President, Al Gore). She co-wrote the American Banker’s Association’s manual “SBA Lending Made Easy.” Her current affiliation dates to 2012. She is a member of the Advisory Board for the Small Business Development Center, College of DuPage.
John Swanson is a Chicago Booth MBA graduate and has over 20 years of experience in management consulting with Deloitte and Accenture and in Corporate Development with Hollister. He has extensive experience managing and developing teams through large scale growth and change programs.
Mr. Swanson has completed 19 Merger, Acquisition and Divestiture transactions with valuations of up to $32 Billion in the Banking, Life Science, Health Plan, Consumer Goods and Medical Device markets. In 1998 he co-founded a medical device implant company, raised over $12M in investment funds and sold the company in 2003 for $39M. As the Vice President of Global Business Development for Hollister Incorporated, he led the divestiture of three business units and the acquisition of two target companies while spearheading the firm’s organic growth strategy as the executive in charge of the Global Marketing function that launched 30+ new products annually.
Empowering the American Dream
Small businesses do BIG things. The Small Business Administration (SBA) is here to help the small business. The SBA works to ignite change and spark action so small businesses can confidently start, grow, or expand. They will provide an overview of programs and services available to small business owners for every stage of your business.
Small businesses are the innovators and job creators of our communities – they employ half our nation’s workforce and create two out of every three net new jobs in the private sector. They are also the glue that holds communities together. They give neighborhoods their character, sponsor the Little League teams and place ads in the high school yearbooks. And in times of trouble or tragedy, it’s often the small businesses that step up to meet the needs of their neighbors.
As today’s small businesses succeed, I hope they will inspire the entrepreneurs of tomorrow and continue to reflect the agency’s mission and long legacy of powering the American Dream.
According to the dictionary a rule of thumb is a broadly accurate guide or principle, based on experience or practice rather than theory. According to Wikipedia it is a principle with broad application that is not intended to be strictly accurate or reliable for every situation.
In business valuation, rules of thumb are typically based on a specific part of the operations of a business, such as annual revenues or cash flow or some other easily calculated income-related metric.
Now look at your thumb and compare it to the thumbs of other people. You may see differences in the size, age, shape, color, strength, nail color and dexterity between you thumb and theirs. The are literally thousands of different types of thumbs.
Each industry, or type of business, usually has multiple valuation rules of thumb that could potentially be applied to it. This means there are literally thousands of different rules of thumb that are available to provide indications of value for different types of businesses.
The differences between seller’s “thumb” and a potential buyer’s “thumb” can be quite significant, and generally speaking, no one knows what those differences will be until the two come together. So how can you use a simple rule of thumb to value your business or understand the value that a potential buyer might see in your business? While rules of thumb may be useful for some purposes. They can provide a whole range of potential values to your business. When it gets right down to it, most of the time a more specific, and supportable valuation is needed for the seller and the buyer to feel comfortable with the value of a business.
Follow These Suggestions and Create a Spectacular Online Presence for Your Business
1. Provide a great user experience
2. Think mobile-first
3. Make your website 100% secure
4. Share valuable information on your blog
5. Demonstrate your expertise through guest posting
6. Leverage the most effective social media channels
7. Use email to reach prospects
8. Register in business directories
Get your email program in tip-top shape for 2020 with this updated best practice guide. Email marketing should be a primary component of every businesses customer acquisition programs. This guide offers top tips to empower and inspire you to create the best email marketing campaign for your business.
Email Marketing Getting Started Guide
Email marketing is the go-to marketing channel for effective customer engagement. However, there’s a lot of work that goes into sending valuable, engaging, and high-converting email content. This illuminating guide will explain the hows and whys of email marketing. You will be taken step-by-step through everything you need to know to get your email program up and running efficiently. Learn best practices and tips that will position you to run an efficient and effective email marketing program.
How to Build a Marketing Strategy for Your Startup When You Have No Money
As a startup founder, you may think that you need to have a lot of capital available in order to build and implement an effective marketing strategy for your new venture. However, while having money is certainly helpful, it is entirely possible to craft a marketing strategy that requires minimal spending and yields worthwhile results. The key is to have the right goals in mind and know which tools can be the most effective in helping you achieve those goals.
One cornerstone of running a successful practice is the digital marketing efforts put forth to attract new patients and get them to follow through with an appointment. But considering everything else that falls on a doctor’s plate — not to mention actually caring for patients — a focus on marketing isn’t always a priority.
Some of the main ideas of this article are:
- Establish a solid foundation with your online presence
- Stay consistent across the web
- Zero in on channels patients are frequenting
- Let patients self-serve with online booking
- Invest in modern, consumer-centered experiences
- Harness the power of online patient reviews
- Capture reviews at the point of care
- Listen and respond to patient feedback
- Focus on the customer service side of your business
- Learn from reviews and take action to better your practice
- Keep a finger on the pulse of new digital marketing tools and trends
Entrepreneurs who invest in the renewable energy industry stand to make a significant amount of money. They will also make the world a much cleaner and more affordable place to live.
If you’re thinking about starting a business that helps the environment, and that also gets the backing of the government in terms of taxes and funding, consider the following 5 ideas.
- Solar Panels
- Bio-Fuel Production
- Energy Auditor
- Power Storage
- Repair and Maintenance
Growing your practice is important to the successful massage therapist. These marketing tips will help you to reach your customers and grow your revenue.
How do you attract massage therapy clients to your business through advertising, personal selling, promotions and publicity? In this article you will find help on everything from buying business cards; use of direct mail, newsletters, newspaper advertising and gift certificates; to participation in volunteer events and public speaking engagements.