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Top 10 Things a Business Owner Should Not Do
Kirkland , WA
Thursday, September 16, 2010
 
 10 things a business owner/seller should not do
Business owners do a lot of things right. This is especially true of the owners of profitable companies. However, many of the habits, traits and actions that got the business from startup to where it is now are exactly the things holding it back from the next level. Here are the top 10 things a business owner and/or seller should not do:

Emphasize potential—too many owners look at what their business could be not what it is. Of course, they expect to be paid for that potential (before its realized) because "it's such a great business."

Hang on too long—know when it's time to get out. Too many owners coast and then wonder why buyers ask skeptical questions. Keep in mind that a decline to you is a little less profit. To a buyer, with acquisition debt payments, it can be a disaster.

Cheat the IRS—don't skim cash. After all, what's worse, a seller who says he skims cash or one who says he skims but really doesn't. Also, don't deduct your personal expenses that could be from Costco, the grocery store, vacations, your kids cars and insurance, etc.

Have to tell a story—if you have to explain why your business is better than the financial statements and tax returns show it is then you have problems you should have fixed a few years ago. It doesn't matter who you have to explain it to, banks, buyers or prospective (key) employees.

Be a lone wolf—nobody wants a business that dies if the owner leaves, gets hit by a bread truck or sells. Build a management team and prove they know their stuff by taking a month long vacation. Better yet, for three months don't do anything day-to-day. Don't make sales calls, go on the shop floor, do any accounting, etc. Spend all your time on vision, strategy and recreation.

Be small—you may think it's a sign of good management to keep the business small. Buyers think it's a sign of stagnation. Continually grow the business, show what you did to grow it and don't let up.

Not show profits—banks and buyers love profits. All the excuses in the world only go so far. The bottom line is, show profits and pay taxes.

Be unprepared—not having your people, process, systems or financials in order is a deadly sin. If it doesn't lower the price you'll get it's because your lack of preparation already scared off the buyer.

Wear down your assets—when a buyer sees future capital expenditures they naturally assume there will be other expenses upcoming. Operate the business like you plan to maximize profits for the next decade.

Have no written plan— The lack of a business plan is the number one business mistake and companies with a plan have sales and profit growth twice that of companies without a plan. Owners without an exit strategy have no strategy.

Bonus reason, #11 – Waiting for the perfect offer—While it happens all the time, from 2008-2010 there are a lot of owner who wish they had taken that "too low" offer from a few years ago. That's because that same offer is now considered outrageously high.

About John Martinka

Over the last 15 years Mr. Martinka has written over 200 articles, authored a workbook, assisted on over 100 buy-sell transactions and spoken to thousands of people on the subjects of buying, selling or growing small to mid-sized businesses. Some of his related articles and speeches include:

• The Seven Deadly Sins of Business Buying

• Non-Financial Factors Influence a Company's Value

• How to Sell Your Business for What you Thought When Other People Can't

• Growth by Acquisition is the Fastest, Least Painful Way to Grow

• An ACTION? Plan to Sell Your Business

Mr. Martinka can be reached at 425-576-1814 or at john@johnmartinka.com. Please follow him on his website at www.partneroncall.com/johnmartinka, his blog www.johnmartinka.com, and via Twitter at http://twitter.com/johnmartinka He is available to speak to and write for associations and media.
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John Martinka
Partner On-Call Network
Kirkland, WA
425-576-1814