"Get ahead by preparing documentation in a data room. A data room is a web-based repository of critical documents such as financial statements, legal and employee agreements and your business plan. Rooms range at the high end from Merrill, at mid-market from ShareVault, but you can get started with Box or Google Drive."
"Work with an attorney who is familiar with the process of purchasing and selling businesses to make sure that all of your legal ducks are in a row before wooing potential purchasers. It is much better to make sure all of your legal check boxes are marked before engaging with a potential purchaser than to have to scramble to get everything in order once you have found an ideal purchaser."
"You should clearly define your goals after selling the company. If you want to start a new company, make sure to do the ground work before selling your current venture. If you're going to retire, make sure you have enough money. Don't get in a situation where you would not have much after exit. Don't have a "will-figure-it-out-later" attitude. Planning ahead is always good."
"One of the most costly aspects of selling a business is the due-diligence process. Make sure all of your client contracts and paperwork is buttoned up. The buyers will decrease the value of your business if there are holes in the operation or potential liability due to an incomplete filing system."
"If you want to sell your company for a high valuation, you must be able to remove yourself. You don't want to sell and then have to stay onboard for three to five years. Start hiring people to take over your position or delegate down to your current employees."
"Having sold one of my previous companies to eBay Enterprise, I can tell you that one of the best things you can do prior to selling is cut the fat. The valuation of your business will depend largely on how profitable it is during the negotiation that takes place prior to earning a term sheet and entering due diligence. Cut needless expenses, poor performing employees, and get your books in shape."
"Before you attempt to seek out acquisitions, you should have an understanding of your valuation. This would include potential value, expenses, sales per year and even physical assets help determine what it should be sold for. Collectively, once you add up everything, you can analyze what your company is worth to you. This is important to know so you can shoot for your target sale price."
"Chances are you already have processes for the way you and your team work on everything from advertising to payroll. Get these systems written down in a format that can be transferred in a sale (like a company wiki or operations manual). There's inherent value in buying a company with replicable success, especially if key team members transition during the sale."
"You need someone in-house and fully committed to your company to really take a deep dive into your financials. Having these organized in a manner that’s advantageous to the business is key to getting the deal you want. "
Bitcoin is a currency. It can be sent digitally. It can also be stored securely, either digitally or on paper. Unlike traditional money, it can’t be easily forged. Unlike traditional currency, bitcoin transactions are both public and largely anonymous.
Bitcoin does a number of things that traditional money, gold, credit cards and checks do, but it does it without a central bank. Bitcoin also does it digitally and in a way that is very difficult and arguably impossible to forge. These characteristics are so desirable that many people are trading traditional currencies for bitcoin. In fact, so much of this is happening that it’s causing the price of bitcoin relative to traditional currencies to skyrocket, creating an investment opportunity for many people coming into the currency.
Like other currencies, bitcoin’s value is driven by supply and demand. Bitcoin has a limited supply (today there are only 16 million bitcoins and the currency will only ever have 21 million coins). This is a limited global supply but an in increasing global demand. Bitcoin is becoming more widely accepted and easily transferable. It’s now possible to send money from person to person and country to country, without it going through a bank.
While this may seem basic (that’s the point), it’s transformative. It’s was previously impractical for people to be their own bank. You could store money in a vault or under your mattress but it was difficult and impractical to do so because ease of transfer and portability are important. This is why centralized digital payment companies like credit cards, PayPal and Venmo took off. They made payment easy and portable. But these methods are centralized. Anyone who has had their credit card stolen or had their PayPal account locked up knows how crippling this can be. The differentiator of bitcoin is that it’s decentralized.
Technological disruption often eliminates middlemen. It allows people to deal directly rather than indirectly. Bitcoin is eliminating the arbitrage of a bank. It allows people to control their own funds directly.
For all the things that are positive about bitcoin, there are a number of problems worth discussing. These problems are being worked on by teams around the world, and given the decentralized nature of bitcoin, will require consensus to solve.
Global wealth is measured in the $100 trillion range and up. Cryptocurrencies, including bitcoin, are in the $200 billion range. I believe that the future will have more cryptocurrencies rather than fewer. My predictions:
I believe that many aspects of cryptocurrencies will become inevitable. Not everyone wants to trust banks with their money, but to date, it’s been impractical to do otherwise. The collapse of Lehman Brothers, the fraud at Wells Fargo and others have created new opportunities for bitcoin and beyond. I believe the future is bright for digital currencies.
Warning: Never invest in something you don’t understand and don’t risk money you’re not willing to lose.
]]>"One critical component in your business is how you collect money from your customers. A large piece of that for, many companies, is credit card processing. As someone in the industry, I know how costly it can be to make a knee-jerk decision to set up what is quick and has a simple pricing model, rather than finding a reputable rep to save you on fees."
"Business coaching is a huge business and it's easy to get swept up into making a five-figure investment without considering what your business needs most. Be willing to take your time, really research a coach's reputation and get the right fit."
"Getting a cool office at the beginning might seem like a great idea. You can afford it this month, but can you really afford it for the next year or two? I have seen people who have glamorized the "startup lifestyle" and believe cool offices are a necessary part of it. That couldn't be further from the truth. You can change the world straight from your garage."
"What may seem like a simple legal question can result in a twenty page memo and a $3,000 invoice. Some attorneys are willing to offer project rates or a cost cap on a project to help you budget your legal expenses. It is worth asking your attorney if they would consider a project rate or cost cap fee arrangement. After all, if you don't ask, you don't get."
"All too often early-stage entrepreneurs are enticed by the glamour and recognition of articles, awards and credentials, and hire a pricey PR firm in excitement. However, it is critical to resist that urge and let your work be your calling card. If the energy and passion you put into your work shows then the awards and recognition will follow organically."
"A SaaS CRM is 40 dollars a month, hosting is 50 dollars a month, social media management might be 20. Keep track of these in a spreadsheet so you know when your recurring outlay is getting too high and what you can consolidate. If you don't, you'll quickly find yourself spending several hundred a month for a package of services, half of which you might not even really be using any longer."
"When you're first starting out, avoid unnecessarily inflating your employee head count. While it may be nice to have an office manager, an administrative assistant and a dedicated HR person, most of those tasks can either be outsourced or handled as shared responsibilities. Limit your overhead and operate lean because profitable businesses are ones with true staying power."
"Cellphones are expensive, but your employees need them to interact with customers. Make sure you get a corporate wireless plan. If you don’t qualify for one, then go with a less expensive prepaid plan."
Last year, I came into a crunch time. I was developing a training pilot, wrapping up the manuscript for my second book, coaching clients and managing personal strains, including my boyfriend’s father being in the hospital for months. I felt like I had no spare time. When I did have room to breathe, I wanted to spend it with the people I loved or asleep — not at the grocery store shopping.
That convergence of pressures brought me to finally not only hire people to help with my business activities but also to get help with day-to-day life. This included grocery shopping, cleaning and errands. The benefits to myself and my business have been remarkable. I wrote my second book on “How to Invest Your Time Like Money,” but in that process, I also learned that you need to invest your money to get more personal time.
Here are three principles that can allow you to have more time and money for what’s most important.
If you want to see your business grow in this coming year, consider how you could invest money in creating more time to work and to live.
]]>If you have already mentally moved into your home before closing, you will lose your ability to objectively determine whether that particular property is the best fit for you and your family. You may also lose leverage in negotiating fair terms since the seller can tell if you have taken the bait, hook, line and sinker.
If you proclaim, “I absolutely have to have THIS house,” is the seller likely to drop the price or make any repairs that might be found during the home inspection?
Instead, when you think you may have found your ideal home, do your best to blanket your excitement when negotiating with the seller and stay objective on whether it is indeed the best home for you and your family.
Your potential new home may seem to be operating just fine, but damages may surface just a few weeks down the line. Make sure you set enough aside to cover big ticket expenses.
For example, my friend recently purchased a home with a driveway that needed repairs which reached $12,000, and Alex’s home will need a new roof. When buying a home, it is wise to err on the side of being conservative as to how much home repairs are likely to run.
If the seller has either disclosed flaws in the home or a home inspector identifies problem items, be prepared to spend money to fix those right away. If the seller has disclosed a troublesome hot water heater, washer and drawer, roof, etc., odds are it will need to be repaired sooner rather than later.
In addition to home repairs, you will likely want to make some design changes, including purchasing furniture and other items for your home. I personally am budgeting for patio furniture, since I know I’ll be itching for it once I move in.
Some first-time home buyers are surprised that it costs several thousand dollars to close on a mortgage for their home. It is smart to plan ahead and ask your mortgage broker for an estimate of how much the closing costs will run when you get pre-approved for a loan and not wait to find out how high closing costs will run a few days before closing.
A 30-year fixed mortgage is not a one-size-fits-all solution for financing your home. I’m working with a savvy mortgage broker to see whether a seven- or 15-year mortgage would best fit my circumstances as I may sell my home in the next few years.
Getting approved for a home loan can be a tedious, stressful process. Just when you think you have provided every single last possible bit of your financial details, the mortgage broker is likely to ask you for one more piece of information.
To keep from going crazy from the paperwork, plan for the time it will take to complete it. Alex and I had to remind ourselves to ask our broker how much documentation we would need before loaning a large amount of money to a complete stranger.
There are only so many hours in a day, and finding your ideal home, purchasing the home, getting approved for a mortgage and planning a move can be extremely time consuming. It’s ideal to focus on buying a home when you do not already have other big time commitments going on in your life. For example, try not to purchase a home when you are having a child, planning a wedding or changing jobs.
The idea of paying a real estate agent 2.5 to 3 percent of the purchase price of your home might seem absurd at first, but you should involve an expert when you are making one of the biggest investments of your life. Get the help you need and don’t be overconfident that you can figure out all of the home-buying wrinkles on your own. The right real estate agent is likely to earn every penny of his or her commission by not only being a knowledgeable resource but by also being emotionally supportive and trustworthy. You will be glad you had one during the home buying process.
Buying a home is an exciting but also a stressful time. Hopefully these tips will help make the process one more of celebration than of regret.
Alex King is a co-author and an attorney at Bend Law Group, PC, a law firm focused on small businesses and startups.
]]>But these tips are also valuable to all the business owners out there, whether you invest or not, as these are also good ways that you can attract investors to your business.
As odd as it may sound, it is sometimes difficult for those who wish to invest in new businesses to find an opportunity to do so. If you are a well-known investor in the business community, you may be approached about investment opportunities. But for the most part, entrepreneurs don’t advertise their need for startup capital. Most of the time, investors learn of the possibility of a startup investment from family, friends, or their network of colleagues.
Most times, startups are trying to raise money from investors because they are unable to get financing through traditional sources, such as a bank loan. It is important to learn why the entrepreneur is not seeking traditional financing. However, it is also important to remember that just because a startup isn’t using traditional financing does not mean that the company cannot succeed. Financing for startups is extremely difficult to obtain and even businesses who have been operating well for several years report difficulty with bank financing. In addition, some business owners try to avoid starting the company with too much debt, believing that investors may provide them with more reasonable financial backing than a loan with high interest.
In order to protect your liability, it’s important to understand the different IRS and legal structures of a new company. If a small business fails, an investor could be liable for unpaid bills or liabilities. Because small businesses do fail with some frequency, it is important to protect yourself from liability for these expenses. However, you can consider creating a limited liability corporation (LLC) in order to protect personal assets should the business fail. Never invest in a business based on a handshake, no matter how close you are to the person you are going into business with. Always draft official documents and put things in writing to protect yourself and the other party.
Keep in mind that when you invest in a company, you may not see returns on that investment for many years. When a business starts, they need as much cash on hand as possible, which means that earnings are reinvested or returned back to the company for the first few years. If you need to see a return on your investment quickly, consider lending the company the money rather than doing it as an investment. Because the loan is between individuals, you can set fairly reasonable terms so that it does not cause a hardship on the startup. Be sure to put all loan terms in writing to provide you with legal recourse should the loan not be repaid.
One of the most important things to keep in mind when investing in a startup is to have an exit strategy. A startup company could use all of your capital investment even before the doors open and it could take years before they begin turning a profit. Even when the company is successful and you begin receiving dividends, you may have difficulty withdrawing the original investment. Therefore, when preparing to invest in a startup, discuss what your exit strategy may be. An exit strategy not only protects your investment but also protects the company owner from damages should you decide you no longer want to be part of the business. An exit strategy may stipulate who you may sell your stake of the company to — approval by the company owner of any future investor — or it may state how long you must wait before you can request a refund of your initial capital.
You can find good startup investments and protect yourself from liability or financial difficulty should the company fail. By entering into the agreement in a businesslike, legal manner, both you and the business owner will benefit greatly.
]]>Every year, new trends take hold and the financial markets change. With these shifts come opportunities for investors to earn money; if their forecasts are correct and investments are timely. But, as with most things, investing does not always go according to plan.
Even ruling out all of the investments mentioned above, there are thousands of opportunities to invest wisely and build a diversified, high-yielding portfolio. Whether its in the stock market, investing in real estate through investment crowdfunding, bonds, or another strategy, due diligence and diversification are key across the board.
]]>"I read "Rich Dad, Poor Dad" in high school, and it started me on a personal journey to learn about personal finance and entrepreneurship. Whether or not you agree with all of the principles, it's a great jumping-off point."
""Accounting Made Simple: Accounting Explained in 100 Pages or Less" is a solid introduction to accounting principles, including GAAP compliance, cash versus accrual methods, and financial ratios. It’s a good foundation for young entrepreneurs and a good resource for the early stages when you want to set up a clean accounting system but don’t have the resources to hire a professional."
"I recommend "Solving the Money Puzzle: Personal Finance Made Simple" because it's crucial for young entrepreneurs to properly manage their personal finances before being endowed with startup capital. If you can straighten out your own house, the pressures of being responsible for vast capital will diminish, and your positive habits will carry over."
""Get a Financial Life: Personal Finance In Your Twenties and Thirties" is a great primer on the basics of personal finance and money management. A lot of the tips and advice in the book are invaluable."
""The Richest Man in Babylon" is 100 pages, was written in the 1920s and has stood the test of time with simple personal finance lessons such as “Pay yourself first.” Head into a bookstore one afternoon for some nuggets of financial wisdom."
""I Will Teach You To Be Rich" is a great book on how to automate your savings by creating a sound system. The author has personally gone to businesses like Google to speak about his systems that are simple and effective."
""The Lean Startup" is a phenomenal piece of work that inspired me in how I operate my own business. Managing finances is an important aspect of the book, and it will definitely help readers lay some necessary cornerstones for their company."
""Predictable Revenue" is a fantastic book for startups with a B2B sales process that want a more modern perspective on consistent quality lead generation and more predictable revenue."
"A Roth IRA is essentially free money, and everyone who is eligible should fund his immediately. The longer the money is in there, the more it'll be worth once you retire."
"Whether you use an external firm or have an internal bookkeeper, it's one thing that you can hand off to someone else to free up your time while still staying on top of these incredibly important metrics. As a business owner, you need to know you numbers, but you don't need to be the one in charge of putting the data together."
"When I first started, my only financials were the tax returns of the company. As we added people to the team, I realized that the budget projections for the business tell a story. People can align themselves and their activities behind them even if the budget is wrong. And guess what? Most projections are wrong. What's important is how the team creates and updates them as things change. "
"Find a tax professional who understands startups and who can help you minimize your taxes and hold on to as much profit as possible. You should look for someone with extensive experience with early-stage companies and guaranteed audit support. A tax professional who can find all potential tax credits for your company and whom you can trust to manage the tax process is invaluable. "
"Like it or not, healthcare reform is here, and if an entrepreneur hasn't already addressed the implications to his business, he needs to ASAP. For a lot of small businesses, costs are increasing dramatically. You need to be prepared for it and understand the financial costs associated."
"A good financial adviser can really help young entrepreneur safe guard their own future. Often as business owners we see our personal wealth and the success of our businesses as one an the same. A financial adviser can help you really start to plan for your own personal financial stability even if your company takes a down turn."
"It's not always how much money you make, but rather how much you save. Make sure you have extra cash on hand for your business because the unexpected will happen, and you need to be prepared for it. Cash flow is the lifeline of a business, and your business could very well fail if you run out of cash."
"Make sure you communicate right at the start of the new year what your team's sales goals are for the year, each quarter and even each month. It's valuable to communicate these key milestones to your whole startup team so everyone is on the same page about the benchmarks for success, and everyone is driving toward achieving this key financial goal in their work throughout the year."
"Most entrepreneurs don't have strategies for their bookkeeping efforts. As a result, their accounting department, bookkeeper or CPA simply produces a set of financials that are inaccurate and worthless in terms of business. To change that for the new year, set five metrics you believe will help you better understand your business, and hold your team accountable for delivering them to you on a schedule."
"Yes, I know that it is a hallmark of entrepreneurship to go all in and pile loads of debt on a personal credit card. However, this can only be very short term. There are plenty of installment loans to pay off high-interest debt. Especially in the U.S., credit card companies are "fleecing" the consumer rates up to 29.99 percent. Switch to a consolidation loan if you can't pay it off in six months."