With the potential for renewed prosperity on the horizon, now is the time for business owners to get ready to burst through the window of opportunity.  The following four initiatives can help you make 2010 a breakout year for your business. (more)

Talk with business owners and most will tell you how they dream of selling out some day and enjoying the fruits of their labor, yet statistics show the majority of them never realize this dream.  Research on businesses for sale indicates that most businesses are put on the market due to poor performance or as a result of a personal tragedy.  And nothing is more difficult than helping a business owner, or their family, close the doors or sell a business under tragic circumstances.  Unfortunately this happens all too frequently.  The question is why? (more)

Type: Business-to-business, manufacturing and distribution preferred.

Type: Manufacturing or Distribution in the Powersports industry (no retail).

Capitalize on Human Resources

Study after study provides irrefutable evidence that investing in human capital pays great dividends.  This illustrated in a recent University of Southern California study that reports businesses with formal human capital management programs had a 66% higher return on sales, a 20% higher return on assets, and a 13% higher return on equity.  While these numbers may be eye-opening, the potential returns from training and development in 2010 may prove to be even greater.

Given today’s economic environment, talent is available and employees are now more loyal and dedicated than at any time in the recent past.  Not only does this mean there is longer window for return on investment in hiring and training, having well qualified employees will help businesses capitalize on opportunities presented by a changing economy.  

Investment in human capital has always been a good idea as it has been proven over and over to provide great returns.  The New Year represents a great opportunity to develop human resources, so business owners may want to consider this as a key priority for 2010.

Strengthen Your Competitive Position

During the last few years many businesses have disappeared or pulled back leaving market niches open to new competitors.  As a result, there are incredible opportunities to gain market share and strengthen the competitive position of your business.  Therefore, 2010 is an excellent time for business owners to look closely at how they deliver value to their customers, what they can do to improve their value equation, and what new market niches they may be able to serve.

Towards this effort, it is a good time to get customer feedback through surveys, informal meetings, or focus groups in order to better understand how relationships with existing customers can be improved and how new customers can be captured.  It is also a good time to find experts that can help by providing specialized industry knowledge, support for strategy formation and implementation, and outside resources necessary for product or service development and delivery.  Finally, it is a good time to evaluate potential acquisitions or strategic partners.

Improve Banking Relationships

Though by most accounts the economy is improving and many experts forecast a strong second half of the year, money is tight and newly enacted bank regulations are not likely to make money easily available any time soon.  As a result, businesses poised for growth but short on cash may find it difficult to capitalize on the opportunities presented by an improving economy.  This means it is imperative for business owners to evaluate their current banking relationships and to look for new banking avenues if necessary.

Protect Your Assets and Future Interests

While this year may be a year of recovery and opportunity, it is wise to make sure your assets and future interests are protected from common tragic events.  In addition to risks specific to your business, for which contingency plans should be in place, the future of any business can be jeopardized by what the insurance industry calls the four Ds.  They are death, disability, divorce and departure.

Planning for these contingencies can be fairly straight forward, particularly for sole owners.  However, according to a recent study conducted by Harris Interactive the majority of business owners neglect to prepare for these inevitable events.  Unfortunately, it may cost them and their families dearly. 

For example, I testified in a recent divorce case where the court was charged with distributing a couple’s assets, which included ownership in a closely held company.  The business had approximately $150,000 in cash flow after reasonable owner’s salaries and physical assets worth about $600,000, suggesting an asset only value somewhere between $700,000 and $800,000.  However, the company also had around $1,100,000 of debt, which means it had a negative overall value.  It is obvious the business is “upside down,” but the court appointed appraiser valued the business at $800,000 and, despite expert testimony to refute the valuation, the judge accepted it because it had been done by a “qualified” third party.  The end result is that the judgment caused a financial burden beyond the means of the owner, which eventually caused the business to fail. 

Sadly, with a little planning, the result of the above example could have been very different.  Take the time in 2010 to protect your assets and future interest.  Not only is it wise, you will likely sleep better too.

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Obviously tragedies are inevitable, but over the years I have noticed something different about those that make a successful transition out of business ownership and it is vision and passion.  For example, I have two clients currently planning their exit strategy.  One has a dream of becoming a professional fisherman and the other wants to get more involved with the work he is doing with kids.  Their enthusiasm for the next phase of life is evident every time I talk with them as both view the sale of their business as a passage to something else, not as an ending.

On the other hand, my father effectively died at his desk.  Though he often mentioned how nice it would be to retire, it was always a few years off.  And he never talked much about what he was going to do, but instead talked about what he would no longer have to do.  He had no specific purpose or passion compelling enough to leave the business.  Therefore, selling out was always a little ways down the road until cancer forced him to sell.  Not only was it sad that he never got to enjoy retirement, he was devastated by the fact that the proceeds he received from the sale of his business were far less than the business would have commanded had he been healthy.

For many business owners, the power and prestige associated with being a business owner are as important, if not more important, as making money.  The sale of their business means they will lose their identity, making this a difficult psychological transition.

Studies related to retirement indicate that loss of identity is one of the hardest struggles for people after retirement.  Further, those that do find a new identity and purpose tend to be happier and to live longer.  Business owners that are able to “try on” a new identity and to find one with which they are comfortable are far better equipped to make the transition out of business ownership.  Therefore, exploring new interests and getting involved in outside activities during business ownership appears to be a fundamental activity for making a successful transition out of business ownership.

Early in my career I spent a lot of time working on start-ups and discovered that successful entrepreneurs always had passion and vision.  It seemed to fuel the energy needed to persevere.  Ironically, as I do more work with business owners transitioning out of business, I have discovered that passion and vision provide the energy for making a successful exit as well.

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