Small business owners’ biggest fear? Not having the money to retire, says a new study.

Nearly two-thirds of small business owners fear outliving the money they need to retire, according to a poll from the Guardian Life Small Business Research Institute.

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We find many business owners who do not sell their company because they fear not having enough money to live without their primary income source.

Exit planning alleviates fears by establishing the business value, a planned exit path, and a comprehensive retirement plan.

Fear is often based on a lack of knowledge. Exit planning brings in multiple advisors to give an owner the knowledge and confidence they need.

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For direct links to the two newsletter articles, you can click below.

• How to Hire a Great Salesperson
• Planning Business Ownership Succession (outside link to Bank of America)

Click here to download the PDF report now.

The report includes:

• Valuations of recent Medical Billing transactions
• An overview of the industry
• Key due diligence issues
• Factor such as technology and regulation

To discuss the report or industry market conditions, please contact:

Bryce DeGroot, CBI, CMEA, CSBA | 406-282-6000 x801 | bryce (at) compass-advisors.com

The first edition was published in 2010 and was named by INC Magazine as a 2010 “Best Books for Business Owners”. The second edition with expanded resources will be released tomorrow, April 28, 2011.

I recommend the book for every business owner. He takes readers through a process of building sell-able value into an advertising agency as seen through the eyes of the fictional owner. This engaging narrative is punctuated with “Ted’s Tips”, a series of take-away points from Ted who is the fictional business advisor in the book. Although the book focuses on a business in the service industry, it offers valuable insights for all industries.

Even if you do not plan to sell, building a business to sell is the exercise as adding intrinsic value to the company. Click here to visit the book website and to place an order.  If you order by April 30 John is offering a valuable promotion. Click here to get the promotion.

Happy business building!

Bryce DeGroot

Compass Advisors advised in the sale of two Montana businesses in Q1 2011.  We initiated these transactions, assisted in the negotiations leading to their conclusion, and acted as advisor to the sellers.

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In a recent dialogue with the founder of a manufacturing company I wrote the following note:

We recommend starting to plan for a sale at least 2-3 years prior to the time you want to exit. Two of the most critical value drivers to develop are (1) stable and growing earnings, and (2) a qualified management team and operating systems that allow the company to operate without the owner to the greatest extent possible…

In response to my note the owner said the following:

The management team is the first hurdle which has been the hardest for me to apply. We had a consulting group come in and after a few days it became apparent to me how miserable I was trying to do everything myself, the entrepreneur’s juggernaut that many never get past. So, I stepped aside and put a very capable man in charge as President. That was the best thing I ever did because I truly hate running the business. I like the sales/marketing and in particular, technology development.

This astute business owner realizes that growing to a multi-million dollar revenue level means that he needs to delegate and form a second layer of senior management. His experience stands in contrast to some business owners who get burnt out while trying to do it all. Lets read again what he said above:

…it became apparent to me how miserable I was trying to do everything myself, the entrepreneur’s juggernaut that many never get past.

Let that be a lesson to each of us. It could change your company’s direction and your life.

Not only does a qualified management team release the owner who is trying to juggle everything. It also drives a significant value premium when the owner eventually sells or transfers ownership.

Bryce DeGroot, President

The report continues to project the 2011 business sale climate.

Topics include seller financing & succession options.

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Excerpt:

This type of financing differs from a traditional commercial loan because the seller essentially extends credit to the buyer against the purchase price of the business. However, seller financing is misunderstood by many, even though it may be the best way to sell a business in a challenging financing environment.

Then I mention some benefits of seller financing:

• Faster sale and higher price– Seller financing provide an attractive option for buyers which means that sellers can sell their business more quickly and at a higher price.
• Flexibility – Seller financing enables the seller to create a payment schedule, interest rates and loan period that fit their personal goals.
• Tax breaks – Taking a note for part of the business purchase price may provide a tax break for the seller. The seller can defer some of the tax due on the sale of the business until full payment is received, which could be several years down the road.
• Protections – Requiring the new owner to keep the seller up to date with information like monthly profit and loss statements, cash flow, order backlog, inventory levels or other items can be a loan covenant or stated in the sale contract. The additional information allows the seller to keep track of the business and to step in and offer advice or help if any problems are detected.

Continue reading the full article.

One place to start measuring your company’s potential value in a sale is determining your EBITDA, or earnings before interest, taxes, depreciation, and amortization.

“It’s a quick and dirty way to assess the firm’s ability to pay back interest or debts,” says Gil Sadka, assistant professor of accounting at Columbia Business School in New York.