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Selling A Business Benefits From Proactive Owner

Monday, August 09, 2010

Selling A Business Benefits From Proactive Owner

This is no ordinary recession. It is trudging into its third year with no end in sight despite the government's futile attempts at "stimulation." As a result, many New Mexico business owners have exhausted their "rainy day" funds and are now surviving on credit cards and borrowed money (if they can find a willing lender).

The survivors are sure to gain market share and customer loyalty when the economic sun finally shines again, but not all businesses are able to ride out this storm, especially those that need to sell due to ill health, death, divorce, disability or the myriad of other circumstances that limit a business owner's choices.

If you are one of these business owners, don't lose heart — there are buyers out there!

Today's prospective buyers are coming out of corporate America (often the victims of downsizing), between the ages of 40 and 55 and willing to relocate. They are intelligent, have the financial resources (they can tap their 401(k) or IRA without penalty or tax), are eager to buy a job, but are scared to death by the specter of investing in a business that might not survive this downturn. These quasi-entrepreneurs are looking for businesses with a history of profits, proven products or services and reasonable price tags.

A banker friend recently quipped that "Flat is the new growth." Prospective buyers will consider businesses that have shown little or no growth during the past two years as long as the business is still producing sustainable cash flow. Unfortunately, "flat" also means a lower-than-expected appraisal, which in turn leads to more owners deciding to retain their businesses and await a better economic climate.

For those who don't have the luxury of waiting, here are three steps to take to improve your odds of success:

1. Reduce operating costs. Smart entrepreneurs are reviving the concept of "zero-based budgeting," whereby each expense category is carefully analyzed for possible cuts and there are no automatic annual budget increases. Many are having heart-to-heart talks with their landlords and signing new, longer-term leases designed to ease current rental costs in favor of higher rent once the economy improves. Others are using that same logic with their employees in lieu of downsizing.

2. Revitalize marketing efforts. During a recession, business owners typically pull back on their marketing/advertising budget. Smart owners look for creative, low-cost ways to improve their visibility in the marketplace. Social networking is the current "buzz" and requires little cash outlay (ask your teenager to explain). Personal letters, phone calls and visits to existing and potential customers cost little money but can result in both new sales and increased good will.

3. Package the business competitively. In shaky times buyers want sellers to have some skin in the game! That's why seller financing is vital to attract today's skittish buyers. A strong commitment on the part of the seller to provide an orderly transition and customer retention also helps to alleviate the jitters.

Tough times demand even tougher solutions. Fortunately, you're not in it alone. Contact the local SBA (Small Business Administration) office to arrange a meeting with a SCORE (Service Corps of Retired Executives) volunteer. Check with the Albuquerque Chamber of Commerce and Central New Mexico Community College for upcoming seminars or classes dealing with survival tools such as marketing, networking, budgeting, cost controls, etc. In short, be proactive – don't wait for the recession's grim reaper to visit your business.

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