Sam worked his entire life to build his manufacturing company. His long hours away from his wife and kids paved the way for the success of his company and rewarded him financially as well. And when he finally reached the time to sell his company, Sam’s world changed forever.

Sam, Linda, his wife, and I had been meeting for several months leading up to the final meeting with the buyers group. We had prepared every last detail to insure that the business would transition smoothly and the employees would not miss a single day. Accounts were opened and closed, the inventory matched up, the company records were examined and delivered. In the final days, Sam had been at the office from 5 am until late in the evening. Linda told me it was just like he was starting all over again. She never saw him when they first opened and it brought back some painful memories of the toll and sacrifices made by the families of entrepreneurs and small business owners everywhere. We all were excited for the settlement day at the office of Sam’s attorney. And in a matter of 30 minutes, it was done. Sam and Linda had their dream of retirement fulfilled.

Our discussions concerning the ultimate sale of the company also included talks about post sale life for Sam and Linda. They were going to take some time to see friends on the west coast, and then stop off at the Grand Canyon. Sam had been promising to take Linda for over 15 years, and he was so happy to be able to make good on that promise. I told Sam that after things settled down, the new normal, he might have a little difficulty in finding himself. For 28 years, he was Sam M, President of STM. He poked fun at me for insinuating that he wouldn’t have enough to keep him occupied. After all, he had been at the office for all those years and couldn’t wait to have free time. I know from personal experience what happens after you sell your company. I was hopeful that Sam would not feel the same way I did after selling my company.

Although I continued to help Sam and Linda with their personal financial plans, we didin’t talk much about the business any more. That was until Linda called me concerned about the way Sam was acting, particularly when they were out socially. Sam was always outgoing and very social at gatherings. He would stick his hand out and state proudly who he was and his company’s name. Now, he was just Sam. After that, he really didn’t know what to tell people he did, or who he was. He tried to joke about being a future PGA player, soon to be world yachtsman, or ex-CEO looking for a new office, but in reality, Sam was struggling with who he was once his company transferred. He now was facing the reality that for all those years, he WAS the company through and through. Sam became depressed, and began to question why he sold his business in the first place.

It took several months before Sam came to grips with his post-sale life. We spent several lunches talking about what he could do to put his experience and skills to good use. Linda realized that Sam needed to have more purpose in his life and while she could get him to travel and spend time with her whenever she wanted, he was happier when he was in business mode. I helped Sam get into some public speaking at small business luncheons and seminars. He wasn’t making money, but he felt he was making a difference. He regained his identity by stating that he was a businessman who had realized his dream of selling one day, and was now giving back by donating his time and telling his stories. His pride and confidence helped many scared entrepreneurs get off the ground, and helped Sam regain his identity.

Thinking about growing your business to sell one day. It is never to early to plan the flight path of your company. It takes careful though and planning, and most imprtantly, time.

If you have thoughts or feedback, I would love to hear from you. You can reach me at ron@ronhamons.com.

My wife and I started my automotive service company at dinner one night. It wasn’t my first business, but it was my largest to date. For the first few years, I attempted to compete based on price and spent most of my advertising dollars producing ads that had the same “specials” that everone else ran. You see them all the time. Oil changes, coolant system flush, tire rotations, safety inspections, the list is endless. One afternoon, I was in a discussion with a potential new “customer”.  The dialogue got a little tense as he told me that in order for him to use our services, he wanted me to honor everyone else’s prices and accept cupons from competitors in the area including national franchise and chain companies. That’s when I realized, I was getting exactly what I asked for. I had been advertising for customers like him. I ran the same ads, acted the same way, competed based on price. For months I had been trying to figure a way to increase our busines volume and profit. Runnig ads making myself”competitive” seemed logical. Too bad, I got what I asked for.

That evening, I didn’t go home at 8. ( We closed at 6, but this is for another posting) I stayed and wrote down exactly what made our services different than all of my competitors. I wrote down what made my shop completely different from the others in the county. I also quit advertising in all the local papers, including the cheap ones called Bargaineer and PennySaver. I never ran any “teaser” advertisements after that day.

Two weeks later, I had developed a customer retention program and customer referral program. It was simple, but proved very effective. By asking my customers for feedback, I had all the answers to why they used our services. Price was the next to last reason for having their vehicles repaired at my business. This knowledge allowed me to market based on our value proposition and forever changed the way I run any enterprise.

There is nothing more valuable than the feedback from your clients. It takes everything you think you know about your business and turns it upside down. If you cannot write down exactly what makes your business unique, or lack the understanding of what your client’s want, I encourage you to take an afternoon and make some calls. Keep it short, be polite, ask real questions, and write down the answers. In front of you is a roadmap to increase the value of your business and client relationships.

Got an opinion or want to know more?  Please drop me a line at ron@ronhammons.com and I will get in touch with you. I always appreciate your feedback.

Ron

I meet with business owners every day who fail maximize the value of their business and take advantage of tested and proven strategies to virtually eliminate the confiscation of wealth from taxation. After my discussions, here is a list of questions that are most frequently asked.

1. My attorney says I need estate planning. Should I do that first before I make my business planning decisions?
2. Is there a way I can treat all of my children, even those who are not participating in my business fairly?
3. The estate tax is going to kill my ability to leave anything to my kids. Is there a way to effectively beat the estate tax?
4. Can I transfer my business to my business involved children tax free?
5. Is there a way I can guarantee my assets are protected form creditors? (ex-spouses, in-laws, and lawsuits)
6. What is the best way to plan for my retirement and how do I fund it?
7. Can I reduce the value of my business legally for tax purposes?
8. If I do retire, will I have enough to support my lifestyle (and my spouse’s) for the rest of my life?
9. Can you show me a way to fund education for my children and grandchildren without risk?
10. My current estate plan around my business is complicated. Is there a simpler way for me to understand what I have?

The answers to all the questions except 1, 6, and 8 are yes in almost every situation. Number 1 is definitely No. Questions 6 and 8 require more investigation and conversation. I have argued for years that traditional estate and business planning lacks creativity because, quite simply, “we always do it this way.” Remember, if a business can have a simplified process, it maximizes production (billable hours).

If you want answers to your own personal business planning questions, drop me a not to ron@ronhammons.com. I will take the time to get back to you and give you the staright answers you deserve. It’s your money, Keep it!

Ron

I meet many owners who seem to have more in common than would meet the eye. The conversation begins with “we aren’t making enough money.” When I ask the usual basic business questions, nothing unusual is uncovered. Then, out of nowhere, I hear of the latest expansion or product.

It was such a great idea. How could it fail? Along with our primary widget or service, we’ll expand and go after another area in our market. Others are making money. We will too! That seems all too often the means to the end for so many companies. Roofers doing windows, lawn moving service companies begin to do hardscape layouts, home builders venture out to pretend to be commercial contractors, and the list goes on.

While the original thought was to expand to gain market exposure or increase sales by cross-selling products and services, owners make expansion mistakes along the same lines as Starbucks and KrispyKreme. Often, there is a failure to identify the risks of the new venture and also the financial and time considerations that they addressed initially when starting their current business. Many times, the new enterprise takes the owner’s eye off the ball, and takes money from the primary business to seed and feed the new “baby”, and that is the point where they begin the downward spiral.

If you are considering expanding your current operation, or start a complimentary line or service, you should only proceed once you have completed an indepth investigation into the proposed enterprise. The business plan should be funded independent of financing via the existing company. In other words, it should stand on it’s own. Don’t make the fatal mistake of believing all of the competitors in the new area are profitable. I find it interesting that many times I do a market investigation only to find that all of the players are losing money. Imagine wanting to open a new buisiness in an arena where all of your competitors are going broke. I see an opportunity here, but you can’t jump in without a well thought out strategy. Focus on your primary business purpose first. You may find that there is room to increase profits without taking on a new load of time and financial responsibility.

Email me your thoughts on expansion and associated businesses to ron@ronhammons.com. I am always interested.

An owner of a successful business, let’s call him Bill, reached me
in my office one day to let me know he wanted to retire. He told me that for
thirty three years he had managed every last detail of his business. He knew
every vendor, every manufacturer of materials, the names of every salesman that
was in and out of his shop. Bill had created an empire that he was very proud
of. The company was highly profitable and even had managed to buy the building
where the company was located. By now, Bill had forty seven employees. Some had
been with Bill since the company started in the rented space. The decision to
leave was very personal and emotional for Bill. These people were his family.

Bill and I met at his office. I was impressed with how each person
I met in the company was so cheerful and obviously happy to be there. Each one
teased Bill about retirement. They obviously cared for Bill and believed that
his departure was well deserved. I spent my first day listening and observing.
At dinner that night, Bill and his wife, Nancy, told me what they wanted to do
once Bill wasn’t leaving before 6 am and getting home at 8. They wanted to have
time to plant a garden, visit the grandkids, and have some time for the two of
them to do nothing if they wanted. After all, the last thirty three years, they
both had sacrificed a great deal.

I asked Bill what he wanted to do with his company. His two grown
sons had careers of their own, and were not interested in Bill’s line of work. For
his employees, he did not know of any of them who could run the show on their
own, much less have the money to buy the business and property. Bill decided he
wanted to sell the company. Ideally, he wanted to sell to a much younger
version of himself, someone who would work hard, appreciate his employees and
his reputation built on quality and service and continue the operation as if he
had never left. After dinner, the conversation continued at Bill and Nancy’s
home.

Nancy and Bill had a number in mind when it came to selling. They
told me that Carl, their accountant, had given them a “ballpark” figure for
what he thought the company would be worth. Bill had a slightly higher figure
that he thought was in order. We talked for another hour about the employees,
if Bill wanted to stay on, what terms he would consider, and what would be left
over after the sale. As I drove back to my hotel, I knew that for Bill and
Nancy, the immediate desire for retirement was still a ways away. I heard their
story many times before.

That night, I examined the business accounting and production
reports. I did a bit of research into companies similar to Bill’s in size and
revenue. Ironically, a company very close to Bill’s had sold about 200 miles
from him four months ago. The numbers were not in Bill’s favor. While printing
some information to discuss in the morning, I felt bad for Bill and Nancy.

Bill managed to build an enterprise around him. Along the way, his
advisors never spoke of building a company that could stand without him. His
company’s value was entirely based on Bill being there and continuing to
operate. Should Bill have decided to sell, the estimated value would have been
cut by more than 50%. It was unlikely that an individual would purchase from
him, but very likely a large international player would be interested. Many of
his loyal employees would be let go during the takeover. In the end, Bill could
not retire as he had planned.

Bill and I began working on reorganization of his company the
following week. We developed a plan to establish value based on the company
operating without Bill at the helm. Over the next two months, great progress
was made. It looked like within a year or two, Bill and Nancy could be much
closer to the retirement they wanted. Then Bill suffered a heart attack. With
Bill no longer able to work every day, the orders began to fall off. Seven
months after Bill’s illness, Nancy made the decision to close up shop. The
equipment and building was sold. Thirty three years of work and selfless
dedication was wiped out of the community and every employee gone.

Don’t wait to make plans for your successful departure from your
business. Creating an exit takes time. In my workshops, I tell owners to build
the exit from the beginning. What’s your plan for success?