by Greg Caruso | Jan 18, 2024 | Exit Planning Business Valuation & Growing Business Value
Planning is a process that involves thinking ahead (hence playing chess) and organizing actions to achieve specific goals. Successfully done, it can allow management to see the future and act quickly on opportunities or threats growing the value of the business.
The first step in effective planning is defining clear and measurable goals. Having a precise understanding of what you want to accomplish provides a roadmap for the planning process. Goals should be SMART—Specific, Measurable, Achievable, Relevant, and Time-bound.
Once goals are established, the next step is to assess the current situation or starting point. Namely you must start where you are. This involves conducting a thorough analysis of resources, constraints, and potential challenges. Often a SWOT chart can be used to organize these. Strengths, Weaknesses, Opportunities, and Threats. Google “SWOT” if this is new to you.
By understanding the present circumstances, individuals or organizations can identify the steps required to bridge the gap between the current state and the desired future state. This analysis can encompass various aspects, such as financial resources, time constraints, personnel capabilities, and external factors that may impact the plan’s execution. It is important to think through, even roll play, strategies and alternative plans for both extraordinary success and major difficulties in achieving goals.
The final phase of planning involves developing a detailed action plan. This includes breaking down the overarching goal into smaller, manageable tasks or steps. Each task should have a specified responsible person, deadline, and resources.
Regular monitoring and reassessment are critical during the execution phase to ensure that the plan remains aligned with changing circumstances. Set a non-negotiable schedule to meet either weekly, bi-weekly or at the longest monthly to review progress. Flexibility is key, allowing for adjustments and adaptations as needed.
Successful planning is an iterative process that involves continuous evaluation, learning, and refinement to increase the likelihood of achieving the desired outcomes such as higher profits and higher business value.
by Greg Caruso | May 2, 2022 | Exit Planning Business Valuation & Growing Business Value
A presentation for Jim Hitchner’s Valuation Products and Services Wednesday, May 18th, 2022 1:00 – 3:00 PM EDT
Jeff got up from his hospital bed after missing most of tax season and felt better. So good that three days later he canceled the closing on his 7 employee CPA practice. Unfortunately Jeff spent the next tax season in the hospital too and did not have a practice to return to. While this sounds crazy and far fetched it happens all the time.
How do you keep your exit and succession clients from being Jeff?
Presentation Description: Starting and then following through – taking consistent forward moving action is the biggest issue with succession and exit planning. In this presentation we will review seven major pitfalls that reduce business value and at times stop the process altogether. Several of these are common errors made by professionals and several are traps into which clients commonly fall into. Emphasis will be on maximizing value while continuing to take actions to move the process forward. A simple exit plan template will be provided to aid in initial discussions with the client and to prompt them to take the first steps. Click here for more details from a similar presentation.
You will gain a better understanding of what it takes to get your clients to start – and successfully finish – a business or practice exit and succession plan. If you provide succession planning, would like to add this service, or are just thinking about your own plan, this presentation is for you. This presentation is designed for advisors of smaller businesses with revenues typically under $10 – 20 million.
by Greg Caruso | Apr 12, 2022 | SBA Business Valuation and Appraisal
The United States Small Business Administration—or SBA—loans are primarily for new businesses to get off the ground.
The amounts you can receive vary by loan program but some range up to $5 million! Funds also may be more accessible to some borrowers who struggle to qualify for other business financing methods.
However, most new business owners say that applying for an SBA loan can feel daunting because of the eligibility requirements and application procedures imposed by individual SBA lenders.
Follow these steps to get an SBA startup loan:
Step 1 –Calculate Your Startup Costs
Before you apply for an SBA startup loan, you need to evaluate the needs of your business. First, consider one-time startup costs and then recurring expenses (which may include everything from renting office space to buying equipment and covering payroll for your first employees).
Step 2 – Check Your Eligibility
The Eligibility requirements vary by SBA loan type and individual lender, there are a few general requirements that a business must meet to qualify for an SBA startup loan.
A Business Must:
- Operate for profit in the U.S. or its territories
- Constitute a small business by SBA Standards
- Demonstrate a need for the loan funds
- Have reasonable invested equity
- Have already accessed alternative financial resources, such as personal assets
- Use the loan proceeds for an acceptable business purpose
- Not have any delinquencies on debt to the U.S. government
Step 3 – Write a Business Plan
Most startups do not have extensive financial records like established businesses, so business owners can improve their approval odds by drafting a comprehensive business plan that demonstrates how the business will make money and on what timeline.
Step 4 – Choose a Loan Type
There are several loan programs to meet a range of borrowing needs, however not all of them are good fits for startup companies.
The Options Include:
- SBA Microloans
- SBA Community Advantage Program
- SBA 7(a) Loans
- SBA 504 Loans
Step 5 – Research and Compare Lenders
Borrowers must apply for an SBA loan through an approved financial institution and meet the individual lender’s application and credit requirements. The SBA provides small business owners the Lender Match Platform, which helps business owners choose the best lender to fit their needs.
Step 6 – Prepare and Submit Your Application
Individual lenders impose different requirements, but there are some materials that are requested by most lenders. In addition to a business plan, prepare the following documents as part of your loan application:
- Copies of business licenses and certificates
- Business overview and history
- Personal and business tax returns for the past two years
- Current and projected financials for one to three years
- Profit and loss statement and balance sheet
- Loan application history
Read The Full Article By Forbes That Covers Each Step In-Depth HERE.
Questions, want to know more, contact Gregory R. Caruso, Harvest Business, LLC, t/a The Art of Business Valuation.
by Greg Caruso | Mar 29, 2022 | Exit Planning Business Valuation & Growing Business Value
When these lessons are implemented by management, government contracting company’s business profits, resiliency, and business value all increase.
As a business valuator and business broker who spent much of his career in the Washington, DC area I have frequently worked with government contractors. For a list of industries we have prepared valuations for click here. Technically, government contractors are not a specific category of business. They get lumped into their specific underlying industry. Yet, government contractors are usually quite different from companies serving private industry.
Here are a few things I have learned.
LESSON 1 – Obtain Transferable Long Term Contracts
In order to increase transfer or business sales value long term contracts that can be transferred to a reasonable cross section of buyers should be sought out. Many government contractors have status certifications. These status certifications are important for obtaining work in a competitive market. But, if the focus is on building value also consider the effect if the status used to obtain the contract are difficult to transfer to a larger organization with capital to invest. 8(a) because of it’s limited life can be a great way to grow a firm but check carefully about transferability if you are counting on 8(a) contracts to increase your business value.
LESSON 2 – Obtain Profitable Fixed Fee Contracts
Fixed Fee contracts where you can make a profit are preferable to Time and Material contracts. Typically there are two types of contracts, fixed fee where you take the risk of the cost of performance. But, you also get the benefit of a larger profit if you can do the work for less cost. When properly managed by a government contractor that knows their costs fixed fee can be much more lucrative. Time and material allows a specified mark-up above costs. While these are safe, unless they are very large they cap your profitability at a low rate and frankly, small dollars.
LESSON 3 – Obtain multiple vehicles (contracts) to facilitate growth.
Many small government contractors win one award and think they are fine. But this leaves the company susceptible to contract termination. Contracts can terminate for many reasons often that have little to do with your performance. Government contracts can take years to obtain so set goals and begin working on this now. (Need a free goal setting / planning system, click here) Over time obtain multiple contracts so if one terminates the company has work and is still in business.
LESSON 4 – Take 8(a) contracts anyway
Due to the profitability of the right 8(a) contracts it may be prudent to continue obtaining them even if they are not transferable. Lets face it, earnings / money in your pocket today is always good. Yes, Lesson 1 is important but so are profits today. But, do not take 8(a) contracts if better less restricted contracts are available. If using this strategy both save some of the profits and look for non-8(a) work for when graduation day comes. (SBA statistics indicate that over 60% of government contractors do not survive 8(a) graduation. Don’t join this statistic.)
Obviously leadership, team building, hard work, and a little luck play a HUGE role but the four lessons shown above when properly implemented will increase business value.
Questions, want to know more, contact Gregory R. Caruso, Harvest Business, LLC, t/a The Art of Business Valuation.
by Greg Caruso | Feb 14, 2022 | Exit Planning Business Valuation & Growing Business Value
Improved listening will Improve Your Leadership and Sales Results Improving Business Value
Roberto constantly meets with prospects and in machine gun fashion proceeds to tell them why he is the best tax accountant (you could put contractor, banker, auto shop….) and how he will save them money. Most politely listen and then, after 45 minutes to an hour politely find a way to leave the meeting without a full proposal or commitment to work with him.
Contrast this with Cynthia who briefly explains that she would like to address the prospect’s specific needs therefore it is best for her to start with some questions. She then proceeds to ask questions and listen in order to carefully assess their needs, budget, likely competitors in order to put together a succinct plan of action to address their specific problem. Most of her meetings result in an engagement.
Clearly an effective sales increases business value by improving the resiliency of the company.
Below is Cynthia’s secret to success –
Listening is a lost skill. It is through listening that we can truly understand others. People long to be listened to therefor effective listening will improve all your relationships and increase your value and your business value to your clients and others important to you.
What we think we “know” often gets in the way of true understanding. This happens in our businesses and in all parts of our lives. For instance, every now and then my assistant comes to me with a great idea, yet I “know” she is going to have a complaint, usually about technology. My knowing does not help either of us. Do situations like this happen to you?
A few steps to listen better:
- Recognize that you have a “view.” Sort of like if you put pink glasses on. For a while everything seems pink. Then you get used to it and do not see it but it is there. That is one version of a view. My knowing as explained above is another version of a view. We all have views of everyone we “know” and almost instantly of everyone we meet.
- Consciously let your view go. While doing this take 3 deep breaths and exhale slowly.
- Ask your question or let the other person speak.
- When they speak just listen to them very intently. Do not think about your next question or your response. Just listen.
- While listening note the tone of their voice, their body language, and facial expressions. Pay attention to what is being said and what is not being said.
- One more time – Listen to the answer carefully. Do not be thinking about your next question. Your next question will be better if it comes directly out of the answer just given. You can take a moment or two and think between questions. It will be interpreted as you are really listening and absorbing. Everyone likes being listened to.
- Seek the answer behind the answer. What is really driving the results you see? What could change those results positively and negatively? The child’s question, “why” is remarkably powerful for digging deeper.
Listening attentively means that besides noting the response, summarize, paraphrase, and ask new open ended questions to draw out answers. If an issue is emotional in nature, empathize. Work with the person. Develop a relationship that will foster greater openness with you.
This listening skill takes an incredible amount of effort if it is not your habit. But, if you practice and train and become good at listening you will improve all your relationships including leadership and sales raising your value to all. This will improve both your personal value to your clients and your business value.
This is paraphrased from, “The Art of Business Valuation, Accurately Valuing A Small Business”, Gregory R. Caruso, © 2020 John Wiley & Sons.
