Six Ratios to Start Tracking Now
Doctors in the developing world measure their progress not by the total number of children who die in childbirth, but by the infant mortality rate – a ratio of the number of births to deaths.
Similarly, baseball’s leadoff batters measure their “on-base percentage” – the number of times they get on base – as a percentage of the number of times they get the chance to try.
Acquirers also like tracking ratios, and the more ratios you can provide a potential buyer, the more comfortable they will …
A Counterintuitive Strategy That Led to a $300M+ Payday
When David Perry started his video game company, he filled a dartboard in his office with the names of companies he thought would want to buy his company, Gaikai, one day.
Why would a startup business with no revenue or employees be thinking about potential acquirers so early? For Perry, it comes down to something he refers to as “down-the-track thinking.”
Perry was recently interviewed about Sony’s $380 million acquisition of Gaikai, and he described his philosophy by using a moving trai…
Does the Business Look Good on Paper?
Does the business look good on paper?
With few exceptions, buyers are looking for businesses that make money.
Sure, there are other factors that can make a difference such as equipment, client list, location, key employees, etc., but it is still all about the cash flow of the company.
Business owners have to constantly look at the company financials and make the tough decisions to increase margins, cut expenses, or even head in a different direction.
Showing good, solid cash flow will ulti…
Run Your Business Like You’re Going on Maternity (or Paternity) Leave
How well does your company run when you don’t show up for work?
The answer to this question has a significant impact on the value of your business. Suppose your company could survive your absence for a while. In that case, you will score well on something referred to as “Hub & Spoke,” a driver in increasing your company’s value.
To understand the Hub & Spoke value driver, visualize a big airport like Chicago’s O’Hare or London’s Heathrow. They act as a centralized routing location for the ai…
Selling a Business for a Premium Starts with Planning!
Business owners need to recognize that operating a business on a day-to-day basis is not the same thing as preparing it for sale.
There are many steps necessary in the planning process and it all starts with the AWARENESS of that fact.
It is in the best interests of a business owner to get professional advice early – business broker, mergers & acquisitions advisor, exit planning consultant or business coach – to understand what may need to be done for their business.
And the business owner …
How To Avoid This Valuation Discount
The Swiss value their independence. They don’t use the Euro even though they live between France and Germany. They never chose sides in the World Wars and avoided aligning with one geopolitical regime over the other.
That’s why we use the name the Switzerland Structure to describe a business model that is set up to be free of a reliance on a key customer, employee, or supplier.
A reliance on one customer or employee can hurt the value of your business, but its easy to overlook how one o…
Someone is Going to Throw Money at Your Business? Really?
OK, everyone has heard about a few huge deals for technology companies over the years. But business owners rarely receive a premium for their business.
Buyers will look at all the important factors such as cash flow, key employees in place, profit margins and prospects for future growth, to name just a few.
Then they will try to purchase the business for the best deal possible.
Business owners should consider having a valuation performed by a professional now and then begin preparations to…
The Power of “NO”
Business owners can be confronted with many yes or no decisions every day. Some are small decisions with not much impact, but some are critical decisions that can affect the direction of the company, such as adding a new line of products or a new service.
And many times, it can be much harder to say "no" than to just give in and say "yes" to the pressure of the moment.
A good question to ask yourself to help make that decision might be "will saying YES risk the value of the company by was…