The Australian Small Business Blog

Sunday, March 25, 2007

A Business You Can Sell (or should Buy)


We are told often enough as small business owners, that we must have an Exit Strategy. In fact, it is good practice that you have an exit strategy when you plan your business at start-up stage. But to have an exit strategy, you must have a business that is a Saleable Asset. What does that look like?

These are the key features that a business should have in order for someone to want to buy it. (And conversely, if you are buying a business, this is what you should look for.)

Firstly, does it make a profit? This might seem to be an obvious question, but just because it has a positive cashflow, does not mean that it is making money. Does it give an acceptable return on your investment in time, money and effort, after your wages? If not, don’t expect to receive payment for that from a buyer.

Secondly, would it still make money if you were not there? If the answer is no, what you own is not a business, it is a job with overheads. Unless you can demonstrate to someone else that you can be making money when you are not there, you will be asking a buyer to buy your job. How successful do you think you will be? You need a business model that will enable you to produce an income that does not rely solely on your own efforts

Thirdly, can you give a buyer an Operations Manual that if they follow, that they could expect to achieve the results you achieve, albeit with some training? This is what franchisors are selling. An operations system that dramatically reduces the risks for the franchisee when they follow it.

Fourthly, where are the customers going to come from? You might have a good number of customers today, but what guarantee is there that they will stay when you go? And, even if they do stay, they won’t stay forever. How will they be replaced, and how would the new owner grow the business? If you can’t answer these questions, this will have a very significant impact on the price you will receive. If you can show a marketing plan that the new owner can follow, show examples of past campaigns and their results, and the customer service strategies you use to keep people coming back, the new owner is likely to pay a premium for the potential for this business.

And lastly, how is the business controlled? Could you appoint a manager, and go away, and be sure that the business will continue to be a success in your absence? If you can do this, your business can be replicated, and this will increase its value by many times. This is achieved through a reporting system that lets you know what is happening in all the key areas of your business, even if you are not there.

Successful franchises have each of these elements in place and can charge 3-4 times the annual profit (after the owners’ wages). More sophisticated companies (I am referring to listed companies) regularly charge 15 times earnings and more. But businesses without these elements are often lucky just to get back stock and physical asset value- often highly depreciated, that is a fire sale valuation, with no value from the business at all. But, when you put all these elements in place, you will have a Saleable Asset which will reward you for your invested time, effort and money.

May Your Business Be - As You Plan It.

Over to You. What do You Think? Post Your Comments Below.

Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.

A Business You Can Sell (or should Buy)

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The Australian Small Business Blog

Friday, March 16, 2007

Developing your Brand's Strategy- Lesson 7

The Meaning of Colours and Your Business

The meaning of colours varies depending on one's culture, race, gender, and even age. So, it is not just the selection of colours in general but also which colours to use with your target customers. For instance, white is often associated with weddings in Western Culture and evokes the feeling of innocence, freshness, purity and new life. In Eastern cultures, white signifies death. An exporter of white wedding gowns to China would go broke in no time.

Colours can be combined to signify meaning to a culture. In the western world, green and red are associated with Christmas, while browns and yellows Autumn.

Several large brand name companies are associated with their corporate colours. IBM- Big Blue signifies stability and conservatism. United Parcel Service (UPS) - Brown symbolizes longevity and reliability. A colour can be connected to products like Beer Wine Spirits in the bold orange, evoking the feeling of vibrancy.

Consider the meaning of the following colours for your business marketing, branding, websites and documents. (Western culture):

White: Pure, Clean, Innocence, youthful. It is a neutral colour that can imply purity in fashion and sterilization in the medical profession. (Monash University, White Lady Funerals)

Black: Power, Elegant, Secretive. The colour black can target your high-end market or be used in youth marketing to add mystery to your image. (De WALT power tools)

Red: Passion, Excitement, Danger. Red is the colour of attention, causing the blood pressure and heart rate to rise. Inject excitement into your brand. (Yahoo.com, 3M, St George Bank, Ferrari, Red Nose Day, Virgin Brands)

Orange:Vibrant, Energy, Playful. Add some fun to your organisation if you want to create a playful environment for your customers. (Telstra, Wizard Home loans, Beer Wine Spirits )

Yellow: Happy, Warm, Alert. Yellow can be an attractor for your business with a relaxed feeling. (McDonalds, Dick Smith, Kodak)

Green: Natural, Healthy, Plentiful, Organic, Going Green. To create a calming effect or growth image choose green. Go green go. (Melbourne Water, Blackmores, BP, Woolworths- the Fresh Food People, Caltex)

Purple: Royalty, Wise, Celebration. Maybe add some purple tones to your look for your premium service business. (Aussie Home Loans)

Blue: Loyal, Peaceful, Trustworthy. Blue is the most popular and neutral colour on a global scale. A safe choice for a business building customer loyalty. (IBM, Vic Government, Sensis, GE Money, Intel, Seek)

Consider how these colours are used in your organisation’s marketing materials from logos and brochures to business cards and uniforms. Are your colours projecting the personality and image you want? If not, it may be time for a colour makeover.

Colours have meaning. A white flag means surrender, however, if you have never seen a war the colour is insignificant. It all depends on the experiences of the customer and observer. Consider matching your colours with your customers to best choose the winning colour for your business.

Richard Gill is the director of The Banner Lady

Monday, March 12, 2007

Diary of a New Business- 8. The Technology



When people develop a business they can get tied up in the technology. This is can be very dangerous as it takes the focus from running the business. But the technology was important in this online business, as it was essential to minimise any human intervention which would, of course have increased the costs.

The technology strategy, therefore, was to define in detail, what was needed to make the business work, and then get someone else to design it for me. I did not need to be the expert. I did not want to be the expert! I wanted a technology partner. Someone who was prepared to understand my business, and to give advice on the direction that the technology should evolve.

The technology I am referring to is, of course, web technology. And there were to be two major parts of the technology to consider. The front end was the eMarketing. This included design of an opt-in page, utilisation of autoresponders, email marketing, delivery of audio and video and an eCommerce package.

The other part of the technology was the service delivery in the members area. This required the ability to manage membership, provide individual content, and to deliver media materials according to various levels of privilege.

While what was required was not a first for the internet, putting the two halves together would create some significant technical challenges. And it would not always be possible to achieve the vision without a lot of expensive coding, which would make later change difficult.

This is where finding the right technology partner was important. Someone who shared the vision, and was willing to problem solve to meet the fundamental business needs, whilst delivering a cost effective solution.

My objective in seeking a partner was to establish a long term relationship. So it was essential that the successful technology partner was able to show that not only were they capable of delivering the technology and providing the advice, that they would also be able also to provide business connections to support the business in other areas. In return, for such a technology partner, I knew I would be able to provide them with similar support.

So to find the right partner, I approached a number of web designers with a detailed brief of my needs. One came back and said, they would be happy to build my website, but they were not interested in a technology partnership. So they were dropped from the list straight away. The others were interviewed in some depth before a partner was chosen.

The website was built by www.Snapsite.com.au.

The technology that was developed for this website, was just to be Phase 1. The plan was, once the website was launched, and the membership had reached critical mass, phase 2 for the website would be developed.

There is a risk in trying to make phase one perfect. This results in large delays in launch, huge cost blow-outs, and you may end up spending a lot of time on features that no-one really wants.

It is more important in getting it going than getting it perfect. If perfection was the secret of business success, we would still be waiting for Microsoft to launch Windows 1.0.

Make sure your business strategy drives the technology, and not visa versa.

The next article in Diary of a Business will be: The Implementation Plan

If you would like to post a comment on this article, please click on the Comments link below. Note that the best comment on any article in this blog during March, will receive a Free mp3 Player.


Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is a Business Coach and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems.



Saturday, March 03, 2007

The Seven Deadly Sins of Business



While running a successful business is not easy, there are rules that you can follow that will almost certainly increase your success. And there are also sins that will guarantee your failure. Here are the Seven Deadly Sins of Business.

1. Inexplicitness

If you are not explicit in what you want to achieve for your business, you are highly unlikely to be successful. Setting out clear goals for your business allows you to develop strategies to achieve your goals and to create plans which will ultimately drive your business to success. Without goals, strategies and plans, you are just depending on luck- and how has that worked for you so far?

2. Apathy

Running a business is a major personal commitment- 24/7. And if you are apathetic about your business, it means that you will be unable to make the commitment that you need for success. Commitment requires passion. You are the closest person to your business, and if you are not passionate about it, why would your employees or customers be? If you aren’t passionate about what you are doing, find something that you are passionate about and do that instead.

3. Pride

Pride in your business is a good thing, but being so proud that you don’t ask for advice or help will seriously limit your ability to grow. No-one knows it all. Successful business owners surround themselves with smart people.

4. Inactivity

If you are waiting for others to recognise your brilliance, you may be waiting a long time. Business is generated through taking action. And the best idea in the world just remains an idea until someone takes action on it. There is no return from inactivity.

5. Non-perseverance

Giving up at the first hurdle will never result in success. Businesses seldom get it right the first time. Thomas Edison tried 10,000 different filaments before he invented the light bulb. Perseverance is essential for success.

6. Guessing

If you do not measure the response of each action and tactic of your business, from marketing to service delivery, you are just guessing about what is working and what is not. This means that you will be making bad decisions on what you should stop doing, what you try, and what you should change to improve. And while you are guessing, your competitors are improving through measuring their activities, and leaving you behind.

7. Disorganisation

If you do not organise your business, your costs will rise, your productivity will decline, and you will lose customers as your service will be inconsistent and unreliable. Systems ensure that your services are provided consistently following your best practice, no matter who is providing your service. They eliminate the cost of non-compliance, and ultimately create a saleable asset of your business. Without systems, your business will always depend on you being there and you will forever be reacting to events and fighting fires. Such a business has no long term future.

Of course there are other lesser sins that will effect your business, but if you avoid these seven, your chances of success will be greatly enhanced.

If you would like to post a comment on this article, please click on the Comments link below.


Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is a Business Coach and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems.



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Dr. Greg Chapman is also the author of
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