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American Business Brokers & Advisors Founder & President PROFESSIONAL INTERMEDIARY & MARKET MAKER FOR PRIVATELY HELD COMPANIES Author of ‘The Art of Buying and Selling a Convenience Store’ & ‘Hidden Wealth’ Involved in the Sale of 800+ Businesses Advisor • Consultant • Speaker
MAY 2021
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What Does Your Succession Plan Look Like? Will Your Business Be Viable to Pass on to the Next Generation?
One of the many things I enjoy about what I do is that I get to meet a lot of successful and interesting people. Recently, I was having lunch with a successful third-generation business owner who had just taken his business into the fourth generation. That’s unheard of! Many business owners hope to pass on the business they started for generations to come. Whether the founder believes the prospect of meaningful employment and easy income or the symbolic importance of keeping a business in the family might keep their heirs interested, 88% of owners of family businesses think their business will stay in the family for another five years at least. The bleak reality, however, is that family businesses fail at alarming rates. It’s very rare for them to last more than one generation. Let me explain to you just how rare it is for this business owner to pass on his business to the fourth generation. If you’re the founder of a successful business and you want to hand it off to your kids, you have about a 30% chance of doing so. While the children of the founder should theoretically be in the best position to run the company, most fail. Second-generation family business owners normally don’t succeed because they’ve usually only ever experienced the business’s success. They never had to feel the pain of being short of cash or invent ways to get business in the door. They showed up when the business was running at a good clip, and all they had to do was not screw it up. Unfortunately, you can’t run a business on autopilot. In a lot of ways, second-generation
business owners have the hardest job of any generation.
Just 12% of businesses last to the third generation (the founder’s grandchildren), and a mere 3% of businesses last until the fourth (the founder’s great-grandchildren). This means that by the time the fourth generation takes over, roughly 97% of the family businesses that existed when the business was founded will have been sold or dissolved. People often have a misplaced faith in their kids when it comes to their ability to take over the family business. It’s so common for family businesses to fail within three generations that we have a phrase to describe the process: “Thunder, blunder, under.” The first generation establishes the business and makes it successful (thunder), the second generation maybe keeps things afloat but definitely doesn’t grow the business (blunder), and then the business sinks when the third generation takes it over (under). Running a family-owned business is incredibly hard, and transferring it successfully to the next generation is next to impossible. While family planners may lament this fact, one thing worth considering is just how viable your business will be a few generations down the road. I talk a lot about having been in the video rental industry, but the concept of a video rental store was born and died within one generation. In the agricultural industry, as the size of the average farm keeps going up, small, multigenerational farms are disappearing. What about the convenience store industry? Well, they began as filling stations, then became gas stations, then became
convenience stores. Now what? A store that sells soft drinks, coffee, food, cannabis, and electricity all at once? Who knows? My conversation with the third-generation business owner consisted primarily of two topics: the valuations of convenience stores and wholesale businesses in the marketplace today, and the future of the industry over the next decade. Convenience stores and wholesale fuel businesses were recently experiencing the highest valuations anyone has ever seen, but the media has been driving valuations down by constantly talking about the proliferation of electric vehicles. Plus, the government has created mandates reducing the consumption of fossil fuels, which could also affect convenience stores’ bottom lines. What do you think the next 10 years of the convenience store and wholesale fuel business will look like? Is the best of the business behind us? –Terry Monroe
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Straighten the Slouch
3 Tools to Help You Perfect Your Posture Slumping our shoulders is a form of poor posture that often results in neck, shoulder, and back pain. It can be a hard habit to break, so sometimes people need a little more than self-correction to improve their posture. Enter posture correctors: tools specifically designed to help correct a person’s posture. Though they should not be used regularly, they can help remind your body of what a correct posture is and how to maintain it without support. Here are three correctors that can help you. Truweo This supporter is for anyone who is on a small budget and looking to improve their posture. The Truweo posture corrector is used by wrapping around the shoulders — both over and under clothing — and can be adjusted for optimum comfort. It is lightweight, breathable, washable, and can be worn for all activities. Whether you are sitting at a desk, working out, or walking, Truweo will be there to offer you the extra support you need. Find it now on Amazon! Forme Wearing both a corrector and a bra can be uncomfortable, which is why Forme is perfect for anyone hoping to avoid that discomfort. The
Forme sports bra offers an under-bust band for posture improvement and also includes eight functional panels to help you stay comfortable, especially during physical activity. You can find this and other health- conscious clothing items at Forme.science. Aspen If you need lower-back support, this posture corrector is a great choice. Easily fitted under or over clothes, this device can ease back pain caused by fatigued muscles, spasms, or flare-ups in addition to offering lumbar support. The Aspen Lumbar Support is completely adjustable, so you are in control of the amount of pressure applied. To learn more about this item, visit the Aspen website at AspenMP.com. Before deciding which corrector you should use, talk to your doctor. They can help you choose the best option for this journey of posture correction and overall health improvement.
When Is the Right Time for You to Retire?
I listened in on an interesting conversation during a real estate closing earlier this year. My clients, who were in their early 50s, were talking with the seller, who was retiring, and asked him: “What is the right age to retire?” The seller paused, then responded that looking back, he wished he had retired five years ago. He was 65, and the pandemic had caused him to put all he was looking forward to in retirement on pause for about 18 months. He was concerned about what his health would look like when he was 67 and if all those bucket-list trips would still be possible. The seller’s words struck a chord with everyone in that room and should strike a chord with every business owner in their 50s reading this article. The craziness that was 2020 has led more and more people to believe that working until 65 isn’t the desired norm anymore. With that in mind, small-business owners should start making an exit plan early, since a substantial amount of their retirement nest egg will undoubtedly come from selling their business. For this reason, it’s critical for small-business owners to maximize the value of their business. But that will not happen overnight.
It’s a process that can sometimes take a couple years. However, if you take the proper steps and work with the right team, you will hopefully put yourself in a position to afford the retirement you’ve dreamed of, with enough time to check everything off that bucket list. The first and sometimes most important step is to get your house in order. This can include making sure all your company documents — such as ownership records, contracts with key customers/vendors, agreements with employees, and financial records — are all properly filled out, written, up to date, and in place. As a part of their due diligence, buyers will look at your contracts with key customers, vendors, and employees. Their condition can cause your business to go up in value in the eyes of potential buyers as well as make buyers’ banks more willing to lend them the money. On a similar note, if you’ve taken steps to minimize your company’s income for tax purposes recently, you’ll want to make sure the maximum profitability is more apparent to potential buyers. While it is okay to not show a profit when you own the business, it can cause issues when you’re trying to sell your business. It can impact how much bankers will feel comfortable lending, which could decrease the
potential purchase price and/or force you to seller-finance part of the purchase.
To prepare a complete plan and set yourself up for a successful retirement, you should meet with a team of advisors and come up with a strategy. This team should, at a minimum, include your attorney, your accountant, your financial planner, and a business broker. The attorney will help you get your documents and contracts in order. The accountant will help you square away your finances. Your financial advisor can help determine your retirement finance needs. And finally, a business broker can offer invaluable insight about how the market looks for your business now, what it could look like in the future, and overall, what you should do to position your business to maximize the sale price. It takes time to properly sell a business. You might not be looking to cash out and retire today, but you don’t want to leave money on the table when you do sell. So, start planning early and strike when the time is right.
Attorney with Hager, Dewick & Zuengler Green Bay, Wisconsin –Mike Demerath
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Take a Break!
Know the ‘Why’ Behind Your Profitability WHY UNDERSTANDING YOUR BUSINESS’S PROFITABILITY IS KEY TO SELLING
WORD SEARCH
Doing your due diligence is an incredibly important part of selling your business. In order to make your business attractive to buyers, you have to compile a good deal of information about your business, including detailed reports of your revenue, cash flow projections, and more. However, in completing your due diligence, don’t forget to do a thorough assessment of your business’s profitability. Now, you might think of profitability as a fairly straightforward concept. So long as the amount of revenue you generate from selling your products and services exceeds the expenses associated with selling them, your business is profitable — right? Well, yes, but digging a little deeper into exactly why your business is profitable can be just as important as the profitability itself.
BLOOM CINCO COMIC DERBY
EMERALD GEMINI GRADUATION LILY
MEMORIAL MOTHER PARANORMAL VETERANS
SUDOKU (SOLUTION ON PG. 4)
Profitability assessments evaluate the costs of your business and the sources of your profits. A few examples of profitability sources include the following:
• Customers: Do you have a loyal customer base that in turn decreases the relative cost of your marketing campaigns? • Geography: Is your business’s location a major factor in reaching both new and loyal customers? • Product or Service Lines: How does each product or service line in your business contribute to overall profitability? • Sales Teams: How often does your sales team discover new leads and follow up with existing ones? Each of these factors can have a profound and unique impact on your profitability. So, to fully understand them, start by getting familiar with the raw data of your business’s profitability. Then, analyze that data to get an idea of what needs to be done to maintain and maximize the profitability of your business. Finally, put it all together in an easy-to-understand report for buyers to ensure the future profitability of the business.
And in all of this, remember to enlist the help of a seasoned expert in the world of brokering business sales! I’ll be able to answer any questions you might have.
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INSIDE 7824 Estero Blvd., 3rd Floor Fort Myers Beach, FL 33931 1 Will Your Business Be Viable to Pass On to the Next Generation?
Sudoku Solution
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The Support Your Posture Needs
When Is the Right Time for You to Retire?
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Know the “Why” Behind Your Profitability
Take a Break
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Connecting Your Employees to Your Mission
Connecting Your Employees to Your Mission
Speak passionately about it. While you want the mission itself to be exciting, even the most intriguing of mission statements will be DOA if your delivery doesn’t convey your excitement. Humans are emotional creatures, so connecting with your employees emotionally in regard to your mission is just as important as the mission itself. Make it personal. While you might think tying your personal story to the company’s mission seems narcissistic, the truth is that your team wants to hear your story. People like stories, and if you can convey yours with honesty and humility, no one will think you’re an egoist. Re-work it. If your mission doesn’t seem to be inspiring passion in your workforce, then maybe it’s time to tweak it a little bit. Whether you’re just starting in business or have had the same mission statement for 10 years, a new mission lived out, made clear, and made personal by you can spark a newfound appreciation for your business among your employees.
Your business might be doing well, but if your workforce doesn’t feel any sort of personal connection to your business’s mission, that could prevent lasting success. You want to boost employee morale and make them happy about their work. To reinvigorate your employees’ passion for your business’s mission, try a few of these tips. Walk the talk. Patagonia CEO Yvon Chouinard decided to make his products out of organic cotton after he saw how industrially grown cotton was hurting the environment. It cost more to do that, but he stuck to Patagonia’s mission of creating environmentally friendly products. If you’re not willing to sacrifice for your mission, then it’s not your mission — and your employees will know it. Make it clear. Make sure everyone at your company knows exactly what your mission is. Only when employees have a clear understanding of the goal can they actually abide by it. If your mission statement can be interpreted in multiple ways, clarify it throughout all levels of your business.
Making Your Passions Their Passions
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