Sunday, January 28, 2018

Business Management

Important Yardsticks for your Business

Good financial management is essential to allow business owners to make proper decisions through the year as business conditions change. Periodic quarterly or annual reviews are not adequate.
Performance should be reviewed monthly against goals established for the year.

Key indicators to review include:

1. Revenue Growth: 
are sales increasing year over year and meeting targets?

2. Profitability: 
is the business making adequate profit compared to goals. Are profit margins improving?

3. Liquidity: 
are short term obligations covered? What cash and easily converted assets are available for current operations?

4. Cash Flow: 
are you generating sufficient cash to operate? Is bank financing required to help fund growth?

Sometimes businesses can measure their performance against competition within the industry. That may help highlight areas where improvement may be needed.

It is important to not only make money in a business but it should be professional is its management approach and managing financials is an important step to achieving both goals.

These were just a few considerations. Please let me hear your thoughts.

Sunday, January 14, 2018

Exiting the Business

Determining when and how to exit a business can present issues often more challenging than starting the business.  Here are a few thought starters for owners looking for a way to exit their business.

1. Vision
 Is the business operated from strong principles of strategy with a clear vision? Can that vision be expressed and understood by those who manage the business or potential buyers? If you the owner cannot clearly state the purpose or reasons that you exist don’t expect new owners to invent it for you.
2. Return
How will you get the maximum return if you plan to sell? In cases where management/ownership is dominated by a single individual there is a risk that customers will not have confidence in new ownership unless the current owner can provide an effective transition plan that ensures continuity of the business operations. Current owners may need to plan for extensive transitional training.
3. Why Exit?
Factors that may support your decision to leave can grow out of many conditions. The most common are age or health related. A long career leading to a desire for more personal time; reap the rewards of your career. Age may not be the prime driver but longevity at the job could be creating burn out. It may be time to move on.
4. Sell from Strength
Look for opportunities to exit from positions of strength. A well trained and competent management group may provide the opportunity to offer a management buyout.  Managers may be able to pool resources to fund the buyout, you as owner may offer to finance all or part of the buyout or there may be an option to use company assets to finance the loans needed for the buyout. It also provides good opportunities for maintaining stability in the organization.
5. Know the Market
Finally, the marketplace may facilitate determining the right time to exit. Poor economic conditions or competitive activity can have a huge impact on if or when you should exit. Positive conditions too might bring a competitor to the door with a buyout offer.

So the options are many but not always easy to sort through. Timing is critical, business life changes, choose wisely.

I hope these suggestions help with any consideration involving exiting the business. Please let me know your thoughts.