I have a friend that says he is a “Business Man”
Yes, he is a business man, but NOT a good business man. He has done NONE of the items below.
Good Business Man/Woman Checklist
- Run the business as a BUSINESS, not a hobby.
- Build the business with the intention of selling it someday. Whether you do or not, you will always know the value should you NEED to sell. (see # 6)
- Keep your employees at a bit of a distance, don’t treat them like friends at work, even if they are your friends. Have ALL employees sign non disclosure agreements. (see # 7)
- Keep good records. This would include a daily journal of all your contacts made during the day and all of the major ‘events’ of the day. It is best that you keep this in a hand written format because in a court of law it is very good evidence of the event occurring on that day unlike a computer kept journal that can be modified at any time.
- Keep good financial records. If you do not know where you are you cannot plot a course change to get where you are going.
- Build and maintain a business plan. BUILD THE PLAN AND WORK THE PLAN! Here is a million dollar tip (LITERALLY). In your business plan ALWAYS have an exit strategy. Assume that you will want to sell your business in five years, if you have not kept records properly how are you going to place a value on the business? Also, if you need to sell for any reason before your Exit Plan you can simply change the date in your ongoing business plan and state that you are selling because your Exit Date has arrived. Why? If you cannot state a valid reason to sell, such as the Exit Plan, a buyer will assume there is an emergency and will offer much less hoping to buy your business for pennies on the dollar.
- Keep your mouth SHUT! Do NOT discuss your internal affairs of your business with your friends, employees or your family (spouse excluded unless they are a gadabout). Lets assume you are approaching the Exit time and you are looking around for a buyer. If your key employees know this, they may start looking for another job and go to your competitor and tell them you are selling the business and that they are looking for a job. Your competition can go to your customers and say that you are going out of business and your customers should switch to them. Or worse, you plan on approaching the competition to see if they are interested in buying your business and your employee has already been there and told the things that would allow your competition to offer less money. Think of any other scenarios.
- During the Exit or sale of your business, always shop your business to multiple potential buyers. Let them all know that there are other interested parties and let the bidding begin!
- Have each interested party sign a non disclosure agreement before you even tell them you are there to sell the business. It is easy to do, most business people know and can appreciate a non disclosure and will sign one even if you say something like; ” Bob, I want to share some information with you that is very sensitive and I need you to sign a non disclosure before I give you any information.” Who wouldn’t sign that just to hear what is going to be shared?
- Always know what your industry multiple factor is. Each type of business has its own number. The VALUE of a business is worth X times gross sales. If your business had gross sales of $2 million and the industry multiple factor is 5, then your business is worth $10 Million.
There is a lot more on this subject, I will get a pdf available soon that in an indepth list of common mistakes that will devalue your business.