Many are just starting their business, but you should keep in mind a plan for an exit strategy. The expression, “Begin with the end in mind” is an excellent of thinking about it in case your business is sold or you retire or change careers. From Market Watch, I found this article that outline how to create a small business exit strategy.
John Brown, president and founder of Business Enterprise Institute, says there are five steps business owners must take to formulate their exit plan:
- Determine your objective. “One is timing — how much longer do you want to work in your business before you sell it, give it away or transfer it to your employees? Two is figuring out how much money you’ll need for your financial security.” [Read Tim Ferriss’ book, The 4 hour Work Week, to figure exactly how you need to live on.]
- Designate a coordinator. “You need to put an advisory team in place that can help you with the transition. The team could be made up of your lawyer, your CPA, your financial adviser. But you really need to have at least one adviser who knows the planning process, who can bring in other advisers as needed, and who can coordinate everything,” says Brown. [Find someone like a SCORE volunteer who may have also sold their business and learn from them]
- Get your business appraised. Work with a professional business appraiser, or, if your business is very small, a CPA. “Owners usually do not have an idea of what their business is worth,” says Brown. [Customer base, goodwill, and market share should be considered]
- Focus on increasing cash flow. “Most business owners will focus on increasing revenues or opening additional offices, but cash flow is used to determine the value of a business,” says Brown. “If the owner can increase the cash flow by a couple hundred thousand dollars, he can increase the business value by $750,000 to $1 million.” [Begin to pay debt down if you are planning to sell your business. This makes your company more attractive if you have less “debt baggage”]
- Put a management team in place. After you’ve determined who is going to take over your business when you retire, you should have a management team — or, in a small company, just one person — to transition the business to the new owner. “This is critical. Third-party buyers will want someone to carry on the business. The management team should have a relationship with vendors, customers, etc.” [Consider who your successor may be–an trusted employee, family member, or consultant]
“The more time you give yourself to implement a plan and figure out value, the better off you’ll be.”
Yesterday, I attended the Silicon Alley 2.0 breakfast sponsored by NY:MIEG (New York Media Information Exchange Group). The panel included some heavy hitters in the online media world like Sean Morgan and Scott Mayer, CEO of About.com
Later I stopped by a cocktail party celebrating the release of Mark Hurst’s book, Bit Literacy. I met some very cool people that I may work with on a future project.
You never know who you may meet, so it is good to tell people about your many interests and projects, and you may find a connection.
One of my clients, Kim Ima of Treats Truck, is in Time Out New York this week. Her dessert truck will be rolling around the city very soon!
Lindsay Mure, of Adfemme.com was featured in Crain’s New York in an article about entrepreneurs under 30. Here’s the pdf of the issue.
My physics teacher in high school always said, “Use the KISS method, Keep It Simple, Stupid”.
Cash Vs Accrual Accounting is a topic that I will continue to discuss because there is no quick and simple answer. Accrual accounting may be G.A.A.P. (Generally Accepted Accounting Principle) but it is not always best for cash management for a small business. For small businesses especially for a services like web design or a law firm, you really can not recognize income until you get the cash. Some of my clients have clients that have yet to pay them for services so they cannot recognize a sale. A retail client who has cash sales is most definitely on a cash basis. There is no accounts receivable. For accounts payable, that is pretty synonymous with the Unpaid Bills Report in Quickbooks, but only if a business enters bills as they come in and does a weekly or periodic check run. Otherwise, you pay bills as they come in, and that is good practice so that you don’t miss payment deadlines. What I have found to be a problem with Quickbooks is that you have to commit to one method or another, or when you switch, transactions can sit in a queue waiting to be cleared.
The bottom line is that small business accounting is a mix of cash vs accrual accounting. Apply the right method to manage your cash conservatively while keeping your taxable income minimized is a challenge but it can be done.
Here are a few more applications you may want to check out.
Tictocit: A timesheet and invoicing web application with a name that actually says what it does.
Chronopipe: I am so excited that there may be an application that help my clients easily import their Basecamp project management data into Quickbooks. I plan to try this out and write a comprehensive review.
Is it crazy that I promote applications that would reduce my hours at some of clients? No! I think that my time can be better spent with analysis and business consulting and less with data entry. Analyzing what the numbers mean can help a business find what it profitable and what it not. Providing direction, tools and ideas for entrepreneurs is what I aim to do. 🙂
Marci Alboher interviewed me last week for her new small business column in the New York Times, and I am featured in her latest piece, “When The Entrepreneur Has 2 Faces“.
Here’s a snippet of the article:
“Anyone who is an entrepreneur in the city has to be open-minded,” she said. Clients find her multifaceted life interesting and often refer to her as a Renaissance woman, she said. Plus, there is some spillover. One client, a lawyer, comes to her comedy shows. And many of them frequent her cupcake blog for the lowdown on cupcake happenings and shops. She has also found a way to bring her passion for blogging to her accounting practice through Keeping Nickels, a blog that offers small business advice and financial tips.
They say that you often find love “right under your nose”. The same can be said for business partners, clients and affiliates. Networking events can be effective, but sometimes it feels forced and hard to make a connection.
However, when you chat up a person at a social event, a yoga class or a clothing swap, you may gain an opportunity for selling your product or services, or just promote yourself. Forbes asks several professional how do they network, and the article is very interesting.
Ladies Who Launch founder Beth Schoenfeldt says, “I think creativity and real breakthrough ideas come from unusual places, and not just from hanging out with people just like you,”.
I personally hang out with different groups of people and it is nice to expand my network in creative ways. Networking may sound impersonal, so think of it as connecting instead. You will connect the dots and have fun doing it!