Monthly Archives: December 2016

Time to Spread Some Holiday Cheer

Here’s Wishing you All the Best for 2017!

Goodbye, 2016!

We wish all of you all the best in 2017! May this new year bring lots of success and happiness in your life.

As we say Goodbye to 2016, let us remember the positives and try to not dwell too much on the negatives. In the USA here, we have gone through a nasty election season which saw the country more divided than ever! However, we and those in parts of the world which are conflict free have been fortunate to see peace and prosperity. We hope and pray that 2017 brings peace to more parts of the world and pray for those who have been affected by war and tragedy.

Let us all pull together and do our part for making this world a better place for all of us.

Here’s to all or our friends!

Your friends at TechologyPark.com

Exit Planning

As we Exit 2016, Time to think of Exit Planning

Contrary to common belief, you have to start thinking of planning exiting your business several years in advance. And even if you do not want to exit the business for many years to come, we strongly advise business owners to think about exit planning.

Why?

One of the reasons you do this is to improve the way you run the business so that you can improve the value of your business. Even if you have no intention of selling, the steps that you take in running your business better have other benefits – It helps improve your cash flow, allows you to have more money in your pocket, and most importantly, it will give you more time for you and your family and decrease the stress of running the business.

How?

Value Builder Platform identified eight factors that influence the value of the business. One of the important factors is that you do not run your business using “Hub and Spoke” model. This model is very common in the airline industry where all the flights of an airline converge at one hub before going to their destinations. Whereas there is value for this in the airline industry, many entrepreneurs, and small business owners run their businesses so that they become the “hub”. Everyone comes to them for advice and sign-offs and all decisions, big and small, are made by them. By promoting other people in your organization to take up most of these responsibilities and building a management team. you become less important and you have less stress and more time.

For more on how Value Builder Platform can help you run your business better, please visit this page and take a 13-minute survey to get your Free Value Builder score.

Here is to a less stressful and more productive 2017!

Talk to you soon.

Yatin B. Thakore

Your Company’s Worth

Do You know How Much Your Company is Worth?

We usually keep tab of money in the bank, how much our stocks, bonds, and other investments are worth and how much our home and real estate investments are worth. And we know how much debt we are in – either from a mortgage, student loans, car loans or other loans. We use these numbers to calculate our net worth, and it helps us build a nest egg for retirement. However, strangely, many entrepreneurs have no idea of how much their business might be worth. Your business could be one of the biggest assets that you may have. It is an investment of time, labor, and your financial investments. Shouldn’t you know the value of your business and try to protect and grow its value just like your other assets?

You can hire a valuation expert or an M&A advisor/business broker to get some idea about the value of your business, or you can run some back of the envelope type of calculations to get a rough idea based on your financial performance. Very often, for small businesses with gross revenues under $5 million, you will see that the value is often 2-3 times discretionary earnings (DE, also known as seller’s discretionary cash flow) or 2.5-4 times adjusted EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization). In many industries rules of thumb also calculate valuation based on a multiple of gross revenue (e.g. dentist practice is often said to be worth between 0.5-0.7 times revenue). However, for me, cash flow, either as DE or EBITDA is a better measure because a substantial revenue without profits does not do much.

Couple for valuation

If you are like entrepreneurs shown in this cartoon, who can go on a world cruise for a year, then I would say that you have probably done well – both from profiting from your business and running the business. You have put your business on auto-pilot so that you have a management team who can run the business with minimum involvement from you. As a business owner, you want to take yourself out of a situation where the business cannot run without you. As we teach in our Value Builder advisory practice, this is one of the eight key drivers for driving the value of your business (see here for the other seven).

As 2017 is just around the corner, I hope you too will more attention to your business and see how you can grow your investment in it by taking small steps to build value. Our Value Builder score is a quick way to know in 13 minutes of where you are in terms of improving your valuation.

From all of us at TechnologyPark.com, cheers for the new year!

Yatin Thakore