Case Study: How Three Moves Quadrupled the Value of this Business

Are you stuck trying to figure out how to create some recurring revenue for your business? 

You know those automatic sales will make your business more valuable and predictable, but the secret to transforming your company is to think less about what’s in it for you and more about coming up with a reason for customers to agree to a monthly bill.

Take a look at the transformation of Laura Steward’s company, Guardian Angel. Steward had gotten her IT consulting firm up to $400,000 in revenue when she called in a valuation consultant to help her put a price on her business. Steward was disappointed to learn her company was worth less than fifty percent of one year’s sales because she had no recurring revenue and what sales she did have were dependent on her personally.

Steward set about to transform her business into a more valuable company and made three big moves:

1. Angel Watch

The first thing Steward did was to design a monthly program called Angel Watch, which offered her business clients ongoing protection from technology problems. Steward offered her Angel Watch customers ongoing remote monitoring of their networks, pre-emptive virus protection and staff on call if there was ever a problem.  

Steward approached her clients with a calculation of what they had spent with her firm over the most recent 12-month period, including the cost of her customer’s downtime. She made the case that by signing up for Angel Watch, they would save money when taking into consideration both the hard costs of her firm’s time and the soft costs associated with downtime.

90% of her customers switched from hourly billing to the Angel Watch program.

2.      Doubling Rates

Next Steward doubled her personal consulting rates. That way, when one of the customers who decided not to opt into Angel Watch called her firm, they were quoted one rate for a technician’s time or twice the price to have Steward herself. Not surprisingly, most customers opted for the cheaper option and others chose to re-consider their decision not to sign up for Angel Watch.

3.      Survivor Clause

Steward also credits a small legal maneuver for further driving up the value of her business. She included a “survivor clause” in her Angel Watch contracts, which stipulated that the obligations of the agreement would “survive” a change of ownership of her company.

Steward went on to successfully sell her business at a price that was more than four times the original valuation she had received just two years prior to launching Angel Watch.

Steve Goranson has owned and operated the Northeast Florida of ActionCOACH since 2014. ActionCOACH is the World's #1 Coaching franchise with of 1000 offices in 50 different countries. They coach over 15,000 business each week.

Steve's commitment is to assist small business owners, to spend less time working "in" their business and more time working "on" their business so they can build a more valuable and sellable business. In the end, you’ll be spending less total time working, will be making more money and will have truly created the company and team you always dreamed of. In addition we will help you put the FUN back in your business and your life.


If you would like to learn more about how you too can get an "actionable" business education to improve your business's operations, sales,& bottom line contact ActionCOACH Steve Goranson to schedule a free 1/2 hour Phone Strategy Session  at 904-739-0200. www.actioncoachjax.com

5 keys to get your business working harder so you don't have to

Business ownership is one of the American Dreams; being able to be in control of your own destiny and have the freedom to choose want you want to do and when.

But for many entrepreneurs, that dream has escaped them. They have fallen into the business trap. The dream of freedom has fallen into the daily challenges and frustrations that struggling entrepreneurs face every day.

1. No Cash – You may be selling, but there’s never enough cash to pay the bills at the end of the month. There no cash left over to invest in new technologies or to upgrade equipment or put into your pocket.
2. No Time – You’re not running your business, it is running you. You are spending most of your day solving problems and putting out fires. Instead you should be planning your company’s next big venture, or just have time to do things you want and spend it with the people you love.
3. No Team – Instead of having a team of professionals that are working together toward a common goal, you have a group of employees that are looking out on how to better themselves. It’s more about “I” than “We”.
4. Feeling Stuck – Your Company has hit the glass ceiling. You can see as clear as day where you want to go, but something or someone in your organization is holding you back from crashing through that barrier. Nothing you have tried has worked.

If you find yourself struggling in any or all of these areas you are not alone. These are very common challenges for most businesses. Though very common, successful businesses have learned to overcome them by focusing on these 5 areas to get there businesses working hard and they can enjoy more life

1. Planning & Vision – Having a common focus & goal that everyone can buy-in to.
2. Leadership Development – The business is not working because you are. You need to develop leaders within your organization that are aligned to the company’s focus and goals that will run organization.
3. Test & Measuring – What gets measured gets improved! Each leader and team member in the organization needs to have an activity based score card to help them stay on track towards reaching the company’s goals.
4. Systems –Leverage is about doing more with less. To get your business working as hard as you do, you need to create written systems for your team to follow to drive consistency throughout your organization.
5. Implementation – Without Action nothing happens. This is where accountability and discipline come together. This is where most businesses get struck and spin their wheels.  Your organization must agree on 3-7 priorities that they will focus on. Each team member must know and be responsible and accountable to how their role leads the company towards achieving your top priorities.

Want to learn more about how you too can get your business working harder so you can enjoy more life? Contact ActionCOACH Steve Goranson at 904-739-0200. www.actioncoachjax.com schedule your free 1/2 phone coaching session.

Steve Goranson has owned and operated the Northeast Florida of ActionCOACH since 2014. ActionCOACH is the World's #1 Coaching franchise with of 1000 offices in 50 different countries. They coach over 15,000 business each week.

Steve's commitment is to assist small business owners, to spend less time working "in" their business and more time working "on" their business so they can build a more valuable and sellable business. In the end, you’ll be spending less total time working, will be making more money and will have truly created the company and team you always dreamed of. In addition we will help you put the FUN back in your business and your life.

Call his office to schedule a free 1/2 hour Phone Strategy Session 904-739-0200

Confessions of a Business Owner: The business was driving me instead of me driving the business

Are you driving your business or is your business driving you?  You can continue to be stuck in the owner’s trap and stay on the treadmill or choose to get your business back on track.

That was the 2^nd confession from Jeff Clarkson, a former client of mine of where he was at before we met.  He wanted more than a job; he wanted a business that would work without him but wasn’t sure how to get there.

It was while having a cold beer during a gripe session with a friend of his (a current ActionCOACH client) that his friend recommended that he speak to me about how the ActionCOACH system could help him through his struggles.  .

Jeff had been the owner and President of Florida Bonded Pools here in Jacksonville for over 10 years.  It was the oldest pool company in Jacksonville started by his father over 50 years ago.  He had success in turning their struggling family owned business with 1 million in sales to a profitable company with sales ranging from 4.5 million to 6.5 million in annual sales.  Even with this success he was frustrated &wanted more.

As John Warrillow wrote in his book Built to Sell,  Jeff was caught in the owner’s trap. He was doing a lot of the selling and business always got slow when he was away.   Customers only came directly to him when there was a problem and his employees couldn’t make a decision without asking him first. 

He definitely felt trapped.  He was afraid that he was going to fall into the same trap that his dad had fallen into when he was spending more time at the business than at home.  Jeff wanted more than a job he wanted a business that could work without him.

It all starts with ActionCOACH’s definition of a business … with the simple idea that as a business owner you started or bought yourself something that’s more than just a job …

I see a business as … A Commercial, Profitable, Enterprise, that Works, without You … Let’s look at this more closely;

Commercial means that you sell something that people value, they want to buy;

Profitable means that you understand enough about business finance that you can possibly increase your profits without even increasing your revenue or lowering your expenses.

That Works and can work without you means that you have a system and a team that you can trust.”

You can’t have a business that works without you as the owner until you first have a business that works. Prior to that, it’s got to be both commercial and profitable … 

So, let’s take a look at the 6 Steps that Jeff learned to create a business that could work without him.

Step 1 - Mastery: 
This is about going from Chaos to Control … it’s about going from breaking even or losing money, to truly making a bankable cash profit.  It’s about making sure delivery happens so you don’t get customer complaints and, it’s about taking back control of your time

Steps 2 – Niche
Now this is where you start to make the real money … working your Niche is about getting a bunch of new leads, quickly reworking your sales conversion rates, getting your repeat business numbers up and then, boosting your average dollar sale.  This is truly about building a marketing machine that drives profit straight to your company’s bottom line. 

Steps 3 – Leverage
The next step is all about Systems … it’s about working ‘ON’ your business and not just ‘IN’ it.  Here you’ll start to see your business going from being people reliant, to being systems reliant …truly starting to free up your time and give you control over the growth of your business.

Step 4 – Team
They say team stands for ‘Together Everyone Achieves More’. When you’ve already got your Mastery, Niche and Systems in play, it’s time to lead a team that will ultimately run the company without you.  At the team stage you start to get a true business by getting it to begin to work without you.

Step 5 – Synergy
Here you’ll start to step back from the day to day, start handing over control. You really begin to ‘turn up the volume’ as they say … now that everything works, it’s time to do it bigger, better and more often … all the while keeping an eye on your team, your systems and your company making sure it can handle the growth.

Step 6 – Freedom / Results
This is about you – First, it’s about you enjoying the fruits of your labor and then it’s about diversification and investment.  Now that it’s all working, you can start to invest more time with your family, at your hobbies (or, even to find a hobby), or even work on investing your income or buying other companies where you can use everything you’ve learned all over again.

Confession # 2:  The business was driving me instead of me driving the business

Solution:  Jeff stopped and asked for help.  He was able to develop a more valuable company that was system based and not dependent on him by learning ActionCOACH’s 6 Steps Business Success System.

Over the next few blogs we will look a bit closer at each of these 6 Steps to create a more valuable and sellable business.

If you would like to learn more about you too can get an "actionable" business education to improve your business's operations, sales,& bottom line contact ActionCOACH Steve Goranson at 904-739-0200. www.actioncoachjax.com

Steve Goranson has owned and operated the Northeast Florida of ActionCOACH since 2014. ActionCOACH is the World's #1 Coaching franchise with of 1000 offices in 50 different countries. They coach over 15,000 business each week.

Steve's commitment is to assist small business owners, to spend less time working "in" their business and more time working "on" their business so they can build a more valuable and sellable business. In the end, you’ll be spending less total time working, will be making more money and will have truly created the company and team you always dreamed of. In addition we will help you put the FUN back in your business and your life.

Call his office to schedule a free 1/2 hour Phone Strategy Session 904-739-0200

How to Get Rich in 3 (Really Difficult) Steps

Becoming wealthy may not be your primary goal, but if it is, there is a reasonably predictable way to get rich in America.

Step 1: Ignore Your Parents

Parents around the world typically encourage their kids to get educated so they can get a ‘good job.’ This may mean becoming a doctor or lawyer, although neither tends to be a path to significant wealth. High-paying professions provide an excellent income stream, but two insidious forces undermine the professional's ability to create significant wealth: tax and spending.

Tax

It is difficult to become wealthy on the basis of a salary alone. Since income is taxed at the highest possible rate, you're left with not much more than 50 cents on the dollar.

Spending

The other problem with having a high income is that it creates a ‘wealth effect’ that triggers spending. Thomas J. Stanley, the famous author of the research-driven classic The Millionaire Next Door, points out that some professionals—in particular, lawyers—spend a large portion of their income to give the impression that they are successful, in part because they do not enjoy much social status from their job. In other words, when you earn $500,000 a year, you buy a Range Rover or send your kids to an elite private school at least in part because you want people to think you are wealthy.

Step 2: Start Something

Most wealth in America is created through owning a business. Recently, Mass Mutual looked at the proportion of business owners that make up a number of wealth cohorts. They found that 17 percent of people with between $100,000 and $500,000 to invest were business owners.

Keep in mind that there are about 8 million employer-based companies in the United States, meaning that the incidence rate of business ownership (the natural rate at which you find business owners in the general population) is about three percent. Said another way, if you grabbed 100 people walking down the street, on average three of them would be business owners. On the other hand, if you took a random sample of 100 people with investable assets of between $100,000 and $500,000, 17 of them would be business owners, meaning you're over five times more likely to find a business owner in the $100,000 to $500,000 wealth segment than you are to find an employee in the same segment.

The trend becomes more pronounced the higher up the wealth ladder you go. If you look at wealthy investors with between $500,000 and $1,000,000 in investable assets, you'll see that the proportion of business owners in this segment goes up dramatically—to27 percent.

The Very Rich

Among investors with between $1 million and $10 million in investable assets, the proportion of business owners jumps to 52 percent. As for those investors with $10 million to $50 million sloshing around in their bank account, 67 percent are business owners; and for investors with $50 million dollars or more in investable assets, 86 percent are business owners.

Simply put, if you meet someone who is very rich, it's highly likely they are (or were) a business owner.

Step 3: Get Liquid

The next step for you as a business owner is to focus on improving the value of your business so that you can sell it for a premium. Just being a successful entrepreneur is typically not enough to become rich. You have to find a way to take the equity you have locked up in your business and turn it into liquid assets. When it comes to selling your business, the three most common options are:

·         Acquisition: This is the headline-popping way some entrepreneurs choose to trade their shares for cash. When Facebook acquired WhatsApp for $19 billion, founders Brian Action and Jan Koum got very rich.

·         Re-capitalization: A minority or majority "re-cap" occurs when you sell a stake in your company (often to a private equity firm) yet continue to run your business as both a manager and part owner, with a chunk of your wealth in liquid assets outside of your business.

·         Management Buyout: In an MBO, you invite your management team (or a family member) to buy you out over time, usually with a mixture of some cash from the profits of your business as well as debt that the managers take on. There are other, less common ways to turn your equity into cash (e.g., an IPO), but the key is turning the illiquid wealth in your business into diversified liquid wealth. The best part about selling a business is that the wealth created is taxed at a very low rate compared to employment income, so you get to keep most of what you make.

You might argue it is better to keep all of your wealth tied up in your business as it grows, but that can be a risky proposition—just ask Lululemon's Chip Wilson or BlackBerry's cofounder Mike Lazaridis. If you keep your money locked up in your business, it also means you may not be able to enjoy the benefits of wealth. You can't use illiquid stock in a private company to buy an around-the-world plane ticket or a ski chalet in Aspen. You actually have to get liquid first.

There are many good reasons to build a business; and for you, wealth creation may not be as important as making an amazing product or leading a great team. But if money is what you're after, there is no better way to get rich than to start and sell a successful business.

In creating a more valuable business, it is always the little things that get the big results. Our Business Health Check will give you invaluable insights into the many areas of your business that if tweaked will increase the value of your business.  By completing the Business Health Check, you will receive a Free Report based on your answers, prepared by our team of highly skilled Business Coaches.  CLICK HERE to take your Business Health Check Now

Steve Goranson has owned and operated the Northeast Florida of ActionCOACH since 2014. ActionCOACH is the World's #1 Coaching franchise with of 1000 offices in 50 different countries.  They coach over 15,000 business each week.

ActionCOACH Steve Goranson's commitment is to assist small business owners, to spend less time working "in" their business and more time working "on" their business so they can build a more valuable and sellable business. In the end, you’ll be spending less total time working, will be making more money and will have truly created the company and team you always dreamed of. In addition we will help you put the FUN back in your business and your life.

Steve's clients are feeling happy because they are focused on their goals, they're feeling more successful because they are reaching their goals, and they are feeling more free because their businesses are starting to work harder than do. 

Business Advice: 1 Hidden Thing That Drives Your Company’s Value

At ActionCOACH our definition of a successful business is a commercial, profitable enterprise, that works without the business owner.  If the business can't work without the business owner, it's broke. You don't own a business, you own a job.  And... no one wants to buy a job or at least not pay a lot for it.

The main advantage of having the business being able to work without you doing the "technical" work in the business, is that you are now increasing the value of the business and at the same time making it more attractive to a potential buyer in the future.

In our previous post we discussed how the importance of the business owner not selling as a way to increase the value of the business.  In this post well focus on another area to increase the value of your business.

You already know that your company’s revenue and profits play a big role in how much your business is worth.  Do you also know the role cash flow plays in your valuation?

Cash vs. Profits

Cash flow is different than profits in that it measures the cash coming in and out of your business rather than an accounting interpretation of your profit and loss. For example, if you charge $10,000 upfront for a service that takes you three months to deliver, you recognize $3,333 of revenue per month on your profit and loss statement for each of the three months it takes you to deliver the work.

But since you charged upfront, you get all $10,000 of cash on the day your customer decides to buy. This positive cash flow cycle improves your company’s valuation because when it comes time to sell your business, the buyer will have to write two checks: one to you, the owner, and a second to your company to fund its working capital – the cash your company needs to fund its immediate obligations like payroll, rent, etc.

The trick is that both checks are drawn from the same bank account. Therefore, the less the acquirer has to inject into your business to fund its working capital, the more money it has to pay you for your company.

The inverse is also true.

If your company is a cash suck, an acquirer is going to calculate that she needs to inject a lot of working capital into your business on closing day, which will deplete her resources and lessen the check she writes to you.

How To Improve Your Cash Flow

There are many ways to improve your cash flow – and therefore, the value of your business. One often overlooked tactic is to spend less on the machines your company needs to operate.

In the restaurant business, for example, there is an often repeated truism that it takes three bankruptcies at a single location before any restaurant can make money. The first owner of the restaurant walks in and – with all of the typical optimism of a new entrepreneur – pays cash for a brand new commercial kitchen complete with fancy stove, commercial grade walk-in coolers, etc., as well as all new dishware, pots and pans, thus depleting his cash reserves before opening night. Within a year, the restaurant owner runs out of cash and declares bankruptcy.

Then along comes a second entrepreneur who decides to set up her restaurant at the same location and buys all of the shiny new equipment from owner number one’s creditors for 70 cents on the dollar, figuring she has made a wonderful deal. But the outlay of cash is still too great and she too is out of business within a year.

It’s not until the third owner comes along that the location actually survives. He saves his cash by buying all of the equipment off the second owner for 10 cents on the dollar.  

The moral of the story is: find a way to reduce the cash you spend on equipment, however you can. Can you buy your gear used on sites like eBay? Can you share a very expensive piece of machinery with another non-competitive business? Can you rent instead of buying?  In Jacksonville a great place to find used and new restaurant is www.a1restsupply.com.

Profits are an important factor in your company’s value but so too is the cash your company generates.  We call this phenomenon The Valuation Teeter Totter and it is one of the eight key drivers of the value of your company. Curious to see how you’re performing on all eight drivers? Get your Sellability Score here: www.actioncoachsellabilityscore.com