2005 | ISSUE 7
   
Get Your Business Ready for Sale
Road Test Your Website
A Strategy for Managing Business Bills
Get Better Label Printing Results
Memorable Quotation

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Get Your Business Ready for Sale

Selling a business can be a complex and time consuming process. When the time comes to sell your business there’s a lot you can do that will increase its perceived value to prospective purchasers.  You will also be much better prepared to discuss the sale with prospective purchasers and their advisers.

Be sure that you have a clearly defined reason for wanting to sell your business that you can articulate to others. Have you considered the options to selling your business? If you’re selling because of a shortage of capital you could investigate bringing in an investor or partner. You might even want to hire somebody to manage the business instead of running it yourself.

How Salable is Your Business?

Is there currently a demand for businesses like yours? You should know the true value of your business as well as how much the market will think your business is worth.  Businesses bring higher prices if their metrics are trending upwards and they’re in a period of favorable business conditions. You’ll also have to decide if you’re prepared to wait until you get your price, or whether you can you offer vendor finance to the purchaser.

Premises should be attractively presented and in good repair; it’s best to remove all furnishings and equipment on the premises that aren’t part of the sale to avoid confusing prospective purchasers.

Business Structure

If the business is a partnership you need to have copies of signed partnership agreements. If the business is incorporated you should have copies of all the incorporation documentation, and if there are multiple owners of the business you should be able to document the holding of each owner.

Get the Facts Together

You’ll need proof of the business’ real income that will satisfy a prospective purchaser, as well as proof of ownership for all furnishings and equipment.                                 

Are you willing to stay in the business for a handover period after the sale and if so, for how long? Will key personnel remain after the sale?  You should also know if you can transfer your relationships with key customers and suppliers to the new owner.

You should know what a realistic market rental for the premises would be. If you continue in ownership of the premises, what rent do you expect to charge the purchaser of the business?  It’s essential to understand the basis of what your prospective buyers and advisers are using to calculate their particular valuation of the organization; these need to be clarified so they can be given accurate information and not make unfavorable estimates.

The period of the handover is a variable that can often be used to clinch the sale. Stock valuation will have to be done by an independent source if records aren’t accurate or if the inventory doesn’t balance with those records. As noted above, old stock should be cleared before the sale process begins.  All assets on the register should be covered by documentation about their origins and proof of ownership.

Restraint of trade is often a sticking point. For how long will the outgoing owner be ‘locked out’ of the industry? This is something that you must anticipate and understand that some restraint of trade conditions will be likely to be demanded by the purchaser.

Prepare for Due Diligence

Due diligence is a part of every sale. It enables the purchaser to confirm what the vendor has told them about the business. It also will discover anything the owner was unaware of that might affect the future performance of the business.  You’ll need to have tax returns for your business covering at least the past three years, and full documentation for all financing agreements, equipment leases and loans relating to furnishings and equipment.

You also need proof of ownership for all furnishings and equipment owned by the business, copies of any agreements with suppliers, customers and employees, and documentation for all intellectual property that the business owns. It’s essential that all the business’ tax returns, books of account, ledgers and supporting information are in agreement and that you can provide records of all stock in the inventory.

Marketing the Business

Identify the people or firms most likely to be interested in purchasing the business and the best ways of communicating with them. Prepare an attractively presented company profile that can be given to prospective purchasers and give them a complete and positive picture of the business.

You have a big part to play during the sale and need to understand that buyers have their own ideas about how a business can be improved.  When a buyer suggests something that the business isn’t presently doing this shouldn’t be seen as an ‘invasion’ of your territory; owners should always respond positively and be receptive to such ideas.                                 

Do everything you can to keep the sale confidential. This means having a means of handling inquiries about the business that won’t give away it’s identify and getting signed confidentiality agreements from all prospective purchasers and their advisers.

Road Test Your Web Site

Most websites work in the way they were intended to work by their programmers, but does that mean your visitors will have the experience you want them to have? You can’t be sure unless you give it a thorough road test in real life conditions.  Road testing a website doesn’t have to be expensive, nor does it need to be conducted by highly specialized researchers. You can do it yourself and find out quickly where any problems exist. Here’s a seven step process that you can use.

  1. Identify the functions that visitors want. Ask yourself this question: “Why would someone visit my website?”  There are many possible reasons why people might visit your website and you need to prepare a list of every one of them. 

  2. How will people get what they want? When you know what people want from your website you then have to work out how they’ll get it. Prepare an outline for each kind of function that your site now offers that shows step-by-step how it can be done. Later you’ll compare this with test results and see if this is really the best way to do it.

  3. Select your road testers. You will need between five and ten people for your road testing. Although anybody can road test your site for functionality the best results will be obtained if you recruit a group from your current customers who are likely to be representative of those who will visit your website in terms of characteristics like age, product preferences and economic circumstances.

  4. Set up your road testing facility. The testing facility doesn’t have to be anything fancy.  Most people visiting your site will just have a desk with a PC and Internet access so set these up in a quiet location where the road testers won’t be interrupted.  You’ll need enough room for your road tester and yourself. Each test should take no more than an hour or so.

  5. Write the scripts for your testing. Prepare a simple script for every activity you want to test, both for those functions your site now offers and those you think visitors might want it to offer.  If you want to see how someone makes a purchase from your site ask them to “...select a product you might want to purchase and buy it from the website.”  Have a script for each activity that is based on functionality only – don’t give them any how-to instructions.

  6. Conduct the road tests. Tell the road testers in brief what the test is all about and what you hope to accomplish. Encourage them to say whatever they want to say about your website, both good and bad.  You want to see what works and what doesn’t. Go through all the scripts relating to existing functions first and see how each participant handles each function. Don’t help them do anything; if something isn’t easy to do you need to know about it. Note in detail every step in their actions, even if you know what they’re doing won’t give them the desired result.  When the existing functions are completed take them through the functions that you think might be wanted. First find out if they want that function to be available, and then ask them how they think it would be delivered. Get them to take you through a process of using that functionality – how they ‘see’ it being done.

  7. Analyze your road test outcomes. Review your notes and analyze the test results function by function. Identify which existing functions worked as intended and which need attention. Evaluate the answers you received on functions you think might be wanted and for those that are in demand which is the best procedure to use for delivering them.

You need to do this road testing because the real test of a website is just how usable it is. If your website isn’t easy to use it will be quickly abandoned and your prospective customers will go somewhere else where they feel more comfortable.

 A Strategy for Managing Business Bills

A business depends on its cash flow to pay its bills. Cash flow can fluctuate greatly in smaller enterprises and there are often times when payments have to be made selectively. This is a strategy to serve as a general guide for paying bills at any time; it is especially useful for times when extra consideration has to be given to which bills are paid and which are delayed.

Prioritize every bill that comes in when it comes in. Maintain a register of all bills that shows their priority ranking, when they have to be paid, and of course whom to pay and how much is owed. Note how they’re to be paid – cash, check or electronic transfer.  Set up a system that will enable you to see at a glance the bills due to be paid that day and the priority attached to each one.

Pay the Most Important Bills First

Some creditors are more important than others. Those that are essential to carrying on the business have to be at the top of the pile; this is a list of those that are usually deserving of top priority status:

  • Business insurance

  • Business vehicle leases

  • Governmental authorities - licensing and permits

  • Income taxes

  • Key suppliers

  • Payroll and sales taxes

  • Rental or mortgage payments on business premises

  • Utilities – electricity, water, gas, telephones

  • Wages

Silence Isn’t Golden

Simply not paying the less essential bills is not the right way to deal with them.  It leaves your financial position in doubt and could trigger anything from hostile phone calls to collection action.  Contact the creditor and explain that you’ll be late making payment but that payment will be made by a specific date. Raise the priority level of that payment accordingly and be sure you do make it on time.

Ask each creditor if you can make partial payments for a period of time until your projected cash flow returns to normal levels. See if there might be some way of reducing or eliminating the debt by providing them with goods or services.  If your business experiences seasonal cash flow fluctuations  - for example, you generally experience a shortfall during the summer - you can negotiate with suppliers that bills will be paid within thirty days most of the year but within ninety days during the summer.

Meeting a Temporary Cash Flow Shortage

To meet a temporary cash flow shortage you may want to use one or more of the following strategies:

  • Obtain a loan

  • Arrange for a line of credit from a bank

  • Accelerate the receipt of receivables due to you

  • Bring forward a sale or other cash raising activity

  • Acquire new items of equipment by leasing or other finance means

  • Liquidate investments to raise cash

Get Better Label Printing Results

Most small businesses do their own label printing and have experienced the usual problems of jammed printers or printing labels with text that goes beyond the borders.   There are some things you can do for your next label printing job that will reduce costs and help increase your chances for success.

 Be sure the labels are intended for the type of printer you’re using. Laser printers get very hot and using the wrong type of labels means the adhesive can become liquid and the labels will peel off inside the printer.  Inkjet printers are less demanding but cheaper labels can still separate from their backing sheets and cause printer jams. Test a sample sheet and bend it to be sure the labels don’t pop off their carrier. 

Older labels – even good quality ones, can lose some of their adhesive characteristics after a year or more. When you purchase labels note the date on the container and either dispose of them after twelve months or check them carefully before running them through a printer.

Glossy or coated labels won’t work with most inkjet printers. The ink sits on the coating and smears because it doesn’t have enough time to dry. Other kinds of glossy or coated stocks can warp when they’re used in laser printers. Check the details on the label package carefully to make sure the stock is suitable for your type of printer.

Use Large Labels and Printer Fonts Where Possible

Most postal services use optical character recognition (OCR) to sort mail. This isn’t always able to ‘read’ labels if the font is too small or too ornate. Use labels large enough to carry your information in a font that’s clear and no smaller than 8-point (9- or 10-point is even better).

Make Use of Leftover Labels

Rarely if ever will your database equal the exact number of labels you’ve bought for the job. There are usually leftover labels that shouldn’t be run through the printer again as this greatly increases the risk of jamming. Instead, put your own address details in the ‘blanks’ at the end of your database. You can use these for return address labels on large envelopes or as labels for self addressed return envelopes if you need them.

Use a Photocopier for Printing Labels

Most labels will work in photocopiers as well as they do in a printer, and the cost of producing a photocopy can be significantly less than printing a sheet in an inkjet or laser printer.  If you are printing a large number of labels that all contain the same information you can print out one page and then use it as the original in your office photocopier to produce the labels you need.

Consider a Dedicated Label Printer

If your business regularly prints a large number of labels you should consider investing in a label printer that’s designed for that purpose.  They print labels from a roll rather than a sheet and can be linked to an office PC like any other printer. If you decide to purchase a label printer be sure to consider the cost of the blank labels you’ll need to buy. Label costs vary greatly and a printer might be a bit cheaper to purchase than a competing make might require you to use labels that are more expensive and quickly eat up the initial savings.

Memorable Quotation

“Business is not financial science; it's about trading, buying and selling. It's about creating a product or service so good that people will pay for it.” – Anita Roddick

How to Make the Most of Your Newsletter

Be sure to read each article with the mindset "How could this apply to our business." Thinking of it that way will guarantee that you get value. Better yet, take notes as you read and commit to having the ideas implemented by the time the next edition arrives. Also, make copies for each team member. To really make sure something positive happens, work with your business development specialist to talk your team through the ideas and how to set a schedule for getting them implemented. We're here to help you get started.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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© 2005 ROC Systems Pty Ltd