When a Business Makes a Grand Exit

How many times have you heard the words, “do you have a plan?”  Regardless if you are just starting out or have been in business for a while, chances are someone has asked you this question.  Knowing how important a business plan is to success, you probably already have one in place that you revisit periodically.  But, do you have a plan for that day when you leave your business?

You’re first reaction is probably something along the lines of, “that won’t come anytime soon.”  It’s a typical reaction, but not necessarily realistic.  Why, you may ask?  Because we aren’t necessarily talking about retirement here; we’re talking about having to leave because of often uncontrollable factors such as dissolution of a partnership, a divorce, long-term disability or even death.  These events aren’t things that we expect or plan to happen, but often do, and when they do, it often throws not just our personal lives in disorder, but the life of our business as well.

Common sense dictates that if you had a plan when you started your business, having one to end your business in just a wise decision on the part of any business owner wanting to ensure that the legacy of their business.  Having an exit strategy accomplishes several important things.  First, it minimizes any hassles and heartache that a business in transition may occur when it looses its owner.  Secondly, it protects your personal interests.  Finally, it allows you to make difficult decisions and explore a variety of options while still calm and rational and not suffering under the influence of the event that is facilitating your departure.

There are a variety of ways in which you can exit a business; which one you choose depends largely on what fits with your goals.  Ask yourself if you are interested in: 

• Retiring?
• Starting a new business or venture? 
• Building and selling your business for a sizeable profit?
• Passing the business on to a younger family member?

Once you’ve decided on your goals, you’ll be able to select a method of exit.  Possible forms of exit include:

• Selling a portion or all of your business.
• Passing it to a family member in such a way as to minimize estate taxes.
• Selling it to an Employee Stock Ownership Plan (ESOP).
• Going Public.
• Liquidating.

When preparing your exit strategy, you’ll need to figure out how much your business is worth.  A professional business appraiser or attorney may be able to help you come up with a number.  Also determine upfront what each stockholder is to receive and draft a legal document that outlines the split.  Furthermore, be sure that you have a clear line drawn between what constitutes your personal assets and your business assets.  This is sometimes difficult, but extremely important, depending on how you structured the business.  Again, seek professional guidance for what works best for you.

When all is said and done, you’ll find that an exit strategy actually provides you with greater freedom to make decisions about your business and your personal goals.  They are an excellent planning tool for any business.

Pitfalls of Sales Forecasting

Creating a sales forecast can prove challenging, particularly if your focus is on trying to just meet your current sales numbers.  However, accurate sales forecasting is important to the overall health of your business.  Accurate forecasting allows us to avoid unforeseen cash flow problems and to manage our operation, staff and finances more effectively.

Sales forecasting can be time intensive in terms of gathering past sales information and preparing projections based on a set of sales assumptions, but it is necessary.  When preparing your sales forecasts, be sure to avoid these common pitfalls.

Wishful Thinking. A positive and optimistic outlook for business is always good, but you have to remain realistic, particularly when working with your projections.  Ask yourself if you and your sales force can realistic meet those sales figures?  Do you have adequate staff and trainers to handle that level of projected volume?  Also, do not make the mistake of writing in the figure of what it takes to keep your business up and running.  For example, if it takes $25,000 a month to keep your doors open, don’t arbitrarily write in $25,000 as your sales goal.  You aren’t doing yourself any favors.

Ignoring Assumptions.  Sales assumptions are an essential part of your projections.  Each year, your assumptions are probably going to change.  However, they remain a pivotal part of understanding what will impact your business and sales for the upcoming year.  Do not ignore your assumptions.  For example, if you believe that you may loose market share because two new fitness facilities are opening up within a five mile radius, do not disregard and project an increase in sales.  Your assumptions need to tie in and support your sales projections. 

Moving Target.  Once you have reviewed your final numbers, agreed upon them with all relevant parties, and created a timeframe for accomplishing, leave it alone.  Fight the urge to spend time going back and refining and “tweaking” the projections every chance you get.  This only distracts you from meeting the target.

Lack of Consultation.  Most likely, you will not single-handedly be meeting your sales projections.  Chances are you have staff and/or sales associates who will assist you.  One of the biggest mistakes you can make is not consulting your staff and getting their opinions and buy-in.  Talk with and listen to your staff.  If they raise legitimate issues, they need to be addressed.  Unrealistic sales goals only place unnecessary pressure on people and create a stressful working environment.

No Feedback.  When you’ve completed the projections, take them to someone who has the knowledge and know-how to review them and offer feedback.  This may be your accountant, a senior manager or colleague.  Having a fresh set of eyes brings a new perspective and potential insights that could prove useful.

Some argue that sales projections are an act of faith, and to an extent that’s true.  However, your leap of faith may not have to be as far if you avoid these common pitfalls, use solid past sales figures, market research, and industry reports, and keep things in perspective. When you do these things, you may be pleasantly surprised at the results.

Identifying Opportunities

“Success always comes when preparation meets opportunity”
~Henry Hartman

Change happens.  It’s a given, particularly in business.  If its not your market, it’s your customers’ needs and preferences, or the technology and equipment you use, or your sales channels, or the way you deliver your products/services.  It can sometimes prove to be scary when potential threats materialize, but also rewarding when new opportunities present themselves.  Therefore, it is always important to periodically step back and evaluate your business to ensure that you are addressing those threats, but also grabbing those opportunities.

Identifying potential opportunities can sometimes prove difficult.  Occasionally, we are also too late in seizing an opportunity before its time has past.  One way you can ensure that you are spotting opportunities as they arise is to follow trends that will affect your business. Try to identify the trends that are affecting your business now, and over the next 12 months.

Other ways to identify opportunity include:

Evaluating your existing customers to attract new customers.  Do you know why your customers choose to buy your services and/or products?  Have you historically used more than one method for attracting and securing those customers?  If so, take a look at the different ways used and see if one has proven more successful than others and attempt to duplicate it to attract new customers.

Hold on to your existing customers.  Explore opportunities that will generate or increase a higher level of sales among your repeat customers. You might consider offering new products, or versions of products, or upgrades of your existing service.

Expand your current customer base.  Are there customer groups that you do not sell to currently, but who you believe would benefit from your products/services?  Make a lit of the characteristics that made this group distinctive, for example their age, gender, race, occupation, income, hobbies, membership of clubs and associations, etc. Then, identify the benefits that your products or services could provide to these individuals. 

Using your uniqueness.  Its difficult to take advantage of your opportunities if you offer the same products/services at the same prices and in the same way that your competitors do. There must be something about your business, products, or the way that you market your service that sets you apart.  Identify what that is and learn to use that uniqueness to your advantage.

Pursue partnership opportunities.  Often, working with another business that offers complementary services or products to your own can prove both beneficial and profitable.  By partnering with others, you can open the doors to opportunities for your business that you may otherwise be unable to develop due to a lack of resources or money.  These “piggyback” style marketing relationships are becoming increasingly more popular, and can help businesses develop opportunities more quickly.

Discovering Your Target Market

Target market is a phrase that is thrown around frequently.  In simple terms, it is a segment of the market that is the strategic focus of your business.  Being able to effectively identify who is part of your target market is important if you are developing a marketing strategy and campaign and you want it to be successful. 

Prior to creating your marketing plan, you need to be able to answer two essential questions: (1) what is your target market and (2) what does your target market want and/or need that you can provide?  If you are able to answer both these questions in great detail, then you can begin drafting your marketing plan.  If you have doubts or lack the details, you need to back up and do a little homework.

Who Is My Customer?

You need to recognize who your customer is because the objective of your marketing efforts is to concentrate on those customers most likely to buy your products and services.  Therefore, you need to start by describing exactly who your customer is.  Are there certain characteristics that your target market shares?  Do they fall into a particular age category?  Gender?  Socio-economic class?  Occupation?  Do you know which customers spend the most time and money with you?  Why do they do that?

Be Precise

When creating your prospective list of customers, you need to be as precise as possible.  Make sure that you are able to identify them in specific demographic or geographic terms.  If you can’t, you will have a hard time in determining which channels will be the most effective in reaching them, i.e. television, radio, internet, newspaper, etc.

Give Them What They Want

This is often a difficult area.  We think we know what our customers want, but unfortunately we often fail at finding out what they really want and/or need.  You need to be able to give them exactly what they want or need in a convenient and affordable way if you expect them to buy what you are selling.

Quality versus Quantity

More is not always better when it comes to developing prospects.  Buying leads lists is one prime example of this.  If you haven’t taken the time to truly identify who your customer is, buying expensive marketing lists are often a major waste of money.  Most of these lists are outdated to begin with and are typically only as good as the information you put into them when generating.  Having a quality list of leads increases your ability to convert them into sales tenfold.  So, shift your thinking from quantity and focus on the quality angle of building your list.

Use a Sounding Board

Finally, before running with that marketing plan you’ve created, test it out.  One of the most common mistakes made is failing to test out your assumptions on a sampling of your target market.  By taking a little extra time to conduct a survey or questionnaire of a small portion of your target market, you can avoid wasting your time and money.  It may take a little longer to kick off your campaign, but it will be well worth it in the long run.