Growing your Business

Lets examine Organic Growth and Inorganic Growth

Organic Growth:

is growth from within. The infrastructure of the existing

business lends itself to increased sales and net income on a yearly basis. There is a

sales force that brings in new business consistently and the business thrives and

continues to grow.

Inorganic Growth:

has a leapfrog effect on the growth of the business. It is not

dependant on the growth from within.

Typically companies that have annual revenue between $3M to $30M that are

intelligently and aggressively working to grow their company to the $50M+ mark,

often use the Inorganic Growth methods.

Assuming your company is projecting $15M in projected revenue you decide that

Inorganic Growth will give you quicker results. You already have the

infrastructure, good capable people that can take on the responsibility of integrating

the new company into your own.

To illustrate: An insurance agency ( A ) has a dozen salesmen that are good at what

they do. They have consistently grown their business. The aggressive owner of the

agency wants to have more immediate growth. He acquires another existing agency

( B ) that has both salesmen as well as other insurance companies that they

represent. Overnight agency ( A ) has doubled their business when the deal is

closed.

To accomplish this type of Inorganic Growth you will need a skilled Intermediary.

He will help to search for the appropriate business, gather all of the necessary data

that is needed to do your due diligence and assist in the negotiations.

An Intermediary is vital in negotiating a deal that is fair to both the buyer and the

seller. His input takes the emotions out of the deal and helps the buyer and seller

have a clearer perspective of what they are attempting to accomplish.

1. Large purchases (at least $75 million of pre-tax earnings unless the business will fit into one of our existing units)
2. Demonstrated consistent earning power (future projections are of no interest to us, nor are “turnaround” situations)
3. Businesses earning good returns on equity while employing little or no debt
4. Management in place (we can’t supply it)
5. Simple businesses (if there’s lots of technology, we won’t understand it)
6. An offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown)

Since most small to middle income businesses don’t fall into all of these parameters, let’s scale it down to a more practical size:

1. Transaction size – Small business buyers are typically looking for businesses with pre-tax earnings of $75,000-$150,000 per year.   This earnings level is often the range of income that most business buyers are looking for.  Middle market business buyers are often expecting pre-tax earnings of $1M and up.
2. Demonstrated consistent earning power – Business brokers sell history, not future earnings.  A business broker can’t bring a buyer for a business that is breaking even or earning very little, even if the future is bright.  Business brokers sell businesses with strong earnings history – all of which needs to be on the books.
3. Strong returns with little or no debt – The less leverage required to run the business the better! Business sellers should  look to offer seller financing and reasonable terms that offer a buyer a solid return on investment.
4. Management in place – middle market business buyers look to buy businesses with general managers who can run the day-to-day operations.  Most small business buyers look to be the manager of the business themselves. Either way – the business must have a defined history of what the manager does – not a dream of what the manager should do if the business were run properly.
5. Simple businesses – Business buyers only buy businesses they understand.  As business brokers we know how to market business for sale  opportunities to the appropriate markets.  All things being equal, businesses with less moving parts sell quicker!
6. An offering price – Business buyers don’t have the time to play the “make me an offer game”. Put a price on your business or don’t put it up for sale.

In summary, business sellers should price their business right and base that pricing only on historical, recent earnings history.

Cash flow is very critical in establishing value and selling price. 

A buyer will consider Risk verses Reward as essential parts of the desirability of the business that he is investigating as a potential purchase.

If the seller has a proprietary product that the buyers see as a way to get into a new market, that opportunity ( the Reward ) will increase the selling price based on the expectations of a new revenue source.

A machine shop (Job Shop) that serves a niche market ( working with stainless steel)  that has many years of doing business with only a dozen customers and has cash flow of $100,000. will not have the same value as the (Job Shop) that has the same cash flow but has hundreds of customers. Risk vs. Reward determines the value.

Definition of a business man. Simply put, it is a man that makes business happen. Not someone that waits for things to happen. He is instrumental in making it happen.

Historically, over a period of 100 years, all businesses will change hands.

Some will go out of business, some will merge with other entities, some will be bought out completely.

Owners of businesses, large or small, are by nature, empire builders. They recognize that a combination of hard work and intelligence will give them rewards that they can not have as an employee working for someone else. They are willing to take risks that others don’t have the stomach for.

A business owner should review his business at least on an annual basis to determine what he can do to make his business more appealing to a buyer. All of us have a finite time on this earth.

As a business owner we owe it to our family or to our stock holders to make the business highly desirable. Having a good consultant and business advisor is invaluable. Why do large corporations have a Board of Directors? To help with decision about the direction the company is going. Mid sized companies that are in the $10Mill and under range should arrange to have the same resources as the fortune 500 companies.

As a business owner, we should always be looking at how much will someone pay me for this business if I want to or need to retire today.

The health of Ohio’s economy will be on the minds of many residents as they head to the polls on Super Tuesday to pick a Republican nominee for president. The future of American manufacturing is likely to play an even bigger role in November’s general election, since President Obama has been championing the sector as a vital element of the nation’s recovery.
The revival in Ohio is being fueled by the return of the American auto industry, the growth of energy production in the U.S. and the skyrocketing demand for steel and other building materials overseas.
“Ohio’s recovery has been driven by manufacturing,” said Eric Burkland, president of the Ohio Manufacturers Association. “There is enormous investment in new technology and new plants.”
But the news is not all good.

While manufacturers have been adding workers, the sector’s employment is not expected to ever return to pre-recession levels. That’s because new technology and productivity increases have diminished the need for workers on the factory floor.

Factory rebirth
Manufacturing has long been a cornerstone of Ohio, accounting for about a sixth of the state’s economy. And it ranks third in the nation in manufacturing employment and output.
After taking a good hit during the recession, the Ohio manufacturing industry has rebounded strongly in the past year or so, said Kristi Tanner, general manager for manufacturing at Jobs Ohio, the state’s privatized economic development organization.

The sector accounts for about a quarter of the state’s job growth over the past two years, while it has increased output by $8 billion, or 12%.
Companies are rebuilding their inventories, increasing capacity and relocating jobs back to the U.S. from India, Mexico and Asia, she said. Many employers are finding it cheaper and easier to produce products for North America in the U.S.

Ohio has the logistical advantage that it’s within 600 miles of 70% of North America’s manufacturers and 61% of the continent’s population, Tanner said. She is focused on enticing companies that service the automotive, aerospace, shale oil, green technology and biotechnology industries to expand or relocate to the state.

“Ohio is well poised to be a leader in bringing back manufacturing jobs to the U.S.,” she said.

• Sell your business for the highest possible price: Pursue your passions and live your dream lifestyle with the confidence and security that comes with true financial freedom.

• Make your business more profitable and easier to run: Find out how to put growth and profits into high gear, while simultaneously putting many of your most tedious tasks as a business owner on auto pilot.

Not Just a Generic Report: A Customized Analysis of How You Can Make Your Business More Sellable, Based On the Answers You Just Gave In the Quiz
The Sellability Score software has analyzed your answers to the quiz, and pin pointed the problem areas that will prevent you from selling your business. In the report, you’ll find out what these problem areas are and get specific, detailed advice on how to correct them. So you can attract buyers willing to pay a premium price for your life’s work.
Click the sellability box now to see the report on your business.

What’s Inside Your Report ?
In each of the 24 pages of your custom report, you’ll get a step-by-step breakdown of your business’s strengths and weaknesses when it comes to sellability. You’ll see what aspects of your business are solid, areas where you are on the right track and should continue what you’re doing. And what aspects of your businesses are weak, and should be improved upon to make your business more attractive to potential buyers (and worth more money when it comes time to sell).
In addition to giving you a clear picture of where your weak points are, you’ll also get detailed suggestions on how to improve them. The purpose of this report isn’t just to show you the problems, it’s also to give you the solutions. Providing you with a clear path to making sure every key element of your business is as attractive to potential buyers as possible. So you can sell your business fast, and walk away with the biggest check possible.
Your customized Sellability report will cover…
• How your business is performing financially from a buyer’s perspective, and how this will affect the amount of money you’ll be able to walk away with in a sale.

• The current growth potential of your business, and some specific strategies you can use to increase the value of your business by making it more scalable.

• What potential buyers will see when they look at the long term future of your company, and steps you can take to improve your long term outlook.

• How satisfied you think your customers are, and the method you should be using to gauge customer satisfaction that’s much more accurate (the same method used by most business buyers).

• How well your business would run without you (a critical factor looked at by business buyers), and several powerful strategies for automating many of your daily activities to boost the value of your business.

• Plus, how your business ranks in several other critical areas business buyers look at and how you can improve them to maximize the attractiveness and value of your business.

Just click box to get your report.

How Your Report Is Generated (And Our Iron Clad Satisfaction Guarantee)
The Sellability Score software that generated your report was developed by John Warrillow after fifteen years of research in the small business market, his experience starting and exiting four companies, and writing two books on the subject. John’s latest book, Built to Sell: Creating a Business That Can Thrive Without You, was recognized by Inc. Magazine as one of 2010’s “Best Books For Business Owners”.
The Sellability Score algorithm was validated and refined using a quantitative survey of business owners with between $50,000 – $100,000,000 in annual revenue. Using various statistical techniques including a factor, regression and correlation analysis, John and his team were able to pinpoint the factors that predict the likelihood of a company selling at a premium price.
See the findings on your business now by clicking the sellability box.

CNNMoney.com reports, though booms don’t resonate like they used to when it comes to jobs.

“While manufacturers have been adding workers, the sector’s employment is not expected to ever return to pre-recession levels,” according to the website. “That’s because new technology and productivity increases have diminished the need for workers on the factory floor.”
True enough, but that’s the case in many industries. (The story was posted just before today’s news that Ohio’s economy added nearly 33,000 jobs in January as the state unemployment rate fell to 7.7%. Perhaps it underscores CNNMoney.com’s point, though, to note that only 1,600 of the 32,800 jobs added were in the manufacturing sector.)

The story does provide some helpful numbers to put into context manufacturing’s status as a cornerstone of Ohio’s economy.

Manufacturing accounts for about one-sixth of Ohio’s economy, CNNMoney.com says, and the state “ranks third in the nation in manufacturing employment and output.” The sector accounts for about one-quarter of the state’s job growth over the past two years, while it has increased output by $8 billion, or 12%.

Ohio has a logistical advantage in that it’s within 600 miles of 70% of North America’s manufacturers and 61% of the continent’s population, says Kristi Tanner, general manager for manufacturing at Jobs Ohio, the state’s privatized economic development organization.

Still, “Just under 640,000 people are employed in Ohio’s manufacturing industry, about 12% of the state’s work force,” the website reports. “While that’s up from a low of 609,000 in late 2009, it’s still a far cry from the 780,000 jobs that existed at the start of 2007. Over the past decade, the state has lost one-third of its manufacturing positions.”

Going forward, companies likely will boost their payrolls somewhat as they ramp up production, says Zachary Sears, economist for Moody’s Analytics. He predicts Ohio manufacturing employment will peak at 668,500 in 2016.

I want to point out that THERE IS NO OBLIGATION FOR TAKING THIS QUIZ AND ASKING FOR THE DETAILED REPORT. The quiz is ABSOLUTELY FREE, CONFIDENTIAL, AND ONLY TAKES 13-MINUTES.

When you take the quiz you will get a score out of 100 right away. It will then ask if you want the full report. If you click on YES, the report will be sent to us and we will
email you to see if you want to discuss it or if you just want it mailed to you. There is no charge or obligation for either choice. We are not trying to sell you anything.
This is a service that we make available to business owners, because one of our jobs is to educate. The report that you receive will give you valuable information, whether you
plan to sell in the near future, or if you have no thoughts of ever selling.

Peter Vadas, the President of MBA Business Brokerage, and the Ohio Business Brokers Association, has an expertise in evaluating businesses along with 30+ years of experience
in the field. He will be glad to provide you with this information at no cost or obligation to you. We hope you will take advantage of this offer.