the end game » business owner

Is there a difference between entrepreneurs and business owners?

Michael Oleksak — Mon, 07 Nov 2011 21:07:26 +0000

The terms entrepreneur and business owner are often used interchangeably. At a recent XPX-D.C. Metro breakfast, the two panelists were introduced as serial entrepreneurs and, it is true, each had founded four unique businesses. And although this was an Exit Planning Exchange event, these entrepreneurs did not talk much at all about how they transferred their ownership shares when they sold. Instead, they jumped right into the description of the next business they started or bought.

At one point, one of the entrepreneur panelists said, “I bought or started each of my businesses with the end in mind, with an eye toward selling.” This is also why you hear the term entrepreneur associated with venture capitalists. When a v.c. invests in a company, they want to know the exit for the liquidity event – usually a sale to a strategic investor or to another financial investor, or an I.P.O, within three to seven years of the investment.

But that doesn’t describe a lot of business owners I know. Most business owners, I believe, think longer-term. The business becomes part of his or her identity. The focus is on building the business, employing an ever-increasing number of workers, developing a paternalistic image and possibly passing the business along to family, but generally not thinking of a specific deadline to sell.

I think that this distinction is important for advisors who are advising owners – are they business owners or entrepreneurs?

What do you think? Is there a difference? What does that mean for them and for their advisors? Please share your thoughts.

XPX – Washington D.C. Metro event – June 15

Michael Oleksak — Tue, 10 May 2011 20:02:41 +0000

XPX – DC Metro – June 15 evening event at Snyder Cohn, CPA, N. Bethesda, MD – XPX friend Mario Ricciardelli will speak on “From dorm room to public company buyout: Lessons learned along the way to a successful exit”. Mario will enlighten the audience with his first-hand experiences around building his successful business, his ownership transfer through a sale, and the role of advisors throughout. He will also speak about the owners whose companies he acquired for the UK company that acquired his own firm six years ago. This is the inaugural event for the Washington D.C. Metro chapter of XPX!

XPX – Boston events – May 18, May 25

Michael Oleksak — Tue, 10 May 2011 19:56:55 +0000

Wednesday, May 18 at Babson College, Wellesley, MA

XPX – Boston will hold a breakfast meeting where former business owners Jeff Garr and Ken Bettenhauser answer the question, “When is an Exit not an Exit?”

Wednesday, May 25 XPX- Boston will hold a roundtable in Boston around the topic of helping selling business owners understand their new-found wealth and how to apply some of it to a philanthropic program

Every Family’s Business by Tom Deans

Michael Oleksak — Tue, 10 May 2011 19:52:42 +0000

Every Family’s Business by Tom Deans

This book is the relating of a colorful conversation between two fictional owners who recently sold their respective businesses who meet on a flight to Barbados to invest their proceeds. One sold his family’s insurance business twelve years after taking it over from his father. The other sold his furniture manufacturing business after years of fighting with his son, daughter and wife.

The book’s best passage: “(Lay out) a process…that keeps the family members in the business focused on the goal of selling the business at some point–selling the business at the highest price to the highest bidder, giving preference to cash and without prejudice to whether the buyer is family or an unrelated third party. The stock of the business must always be understood to be for sale. Sale of the stock takes primacy over any consideration of family employment. And family employment will not alter or distort the value assigned to the stock.”

Putting the business first. Brilliant.

What if you knew?

Michael Oleksak — Tue, 10 May 2011 19:50:34 +0000

On Wednesday night, May 11, I’ll be speaking on a panel for an event titled, “Managing Mergers and Acquisitions”. I’ll be describing steps around intangibles and preparing the business for exit. Other panelists will describe psychological and emotional preparation in selling as well as legal issues and the process of the deal itself.

The great aspect of this event is that the moderator will kick off by asking, “What would you do if you, as the business owner, had six months’ notice that you had to sell immediately (maybe because you were going to die?)?” What a great perspective! (aside from the dying part…)

Here’s what I think:

Human Capital:

· Are there successors to take over for you in your company?

· Do these successors have employment contracts that will make them want to stay with the company?

Structural Capital:

· Do you have a will?

· Are all the key processes in your operation written down?

Relationship Capital:

· Are your customer relationships secured with long-term contracts?

Strategic Capital:

· Do you have life insurance?

· Is your family cared for financially?

· Do you know the value of your company?

· Are you prepared from a tax angle?

· Is your company prepared and attractive for potential acquirers?

· Could your company survive a rigorous due diligence process?

I’m sure there will be many great ideas and recommendations from the other panelists and in questions from the audience. I’ll be taking notes along with everyone else attending.

Wednesday, February 16 at Babson College in Wellesley, MA, What Every Business Owner should know about Private Equity

Michael Oleksak — Mon, 24 Jan 2011 00:46:03 +0000

Wednesday, February 16 at Babson College in Wellesley, MA, What Every Business Owner should know about Private Equity – Mark Jrolf is the Managing Partner of Heritage Partners, a Boston-based private equity firm that has a different approach to investing in family-owned businesses than most equity groups. Heritage provides capital for companies to diversify shareholder net worth, cash out partners, open up ownership to management, or to grow using outside capital. Heritage uniquely allows original ownership to retain control. At this breakfast meeting, Mark will speak about the process of preparing a company for ownership transfer, when a business owner should consider private equity options, and key attributes that private equity firms look for in an investment.

If not the IC-IQ quiz, here’s another quiz

Michael Oleksak — Mon, 24 Jan 2011 00:39:15 +0000

The Intangible Capital quiz IC.IQ can be powerful and a great way to quickly get at what’s going on in a business. It tells you what the financials and all the “hard” data have ignored.

The power instantly increases if you give the same quiz to a sampling of your employees, your customers, your partners and your investors. Who knows you better than these stakeholders? We have always used this approach for strategic projects and recently started using it to help lenders and investors get a deeper understanding of our clients’ businesses. We’d be happy to send you a sample if it would be of interest to you.

Of course, if you want to ignore your intangible capital, you can always take the Accent Quiz. In 13 questions, it will accurately determine where you’re from in the U.S. and where you learned to speak. Of course, you won’t learn anything about what you need to be successful in business these days, but this is an amusing way to kill 10 minutes.

family business – a different approach

Michael Oleksak — Wed, 17 Nov 2010 15:12:11 +0000

Part of what makes a family businesses unique could be that they simply have a different set of priorities. While many companies place ahigh value on growth and current profits, family businesses consider other values of high importance. For example, many family businesses consider the value of the family business to the fiber of the family. This business can serve as a source of employment for family members andit can serve as a means of keeping the family connected.

This unique set of priorities can be very productive- allowing a company to really focus on building value for the long term. But it can also cause problems, especially if a skill set is missing within a family and they refuse to go outside for help. Family businesses also have unique challenges compared to traditional business – family tensions anddynamics have a way of spilling over into the business causing fissuresand counterproductive behaviors.

I’ve seen both the positive and negative sides of family businesses. In my opinion, the secret is to not pre-judge a family business based on “traditional” business practices. Rather, start with an open mind andtake the time to understand the business, the family and then their relationship together. It is also vital that you are ready to confront the family when their behavior becomes a problem for the business.

This thinking requires specific training in issues facing family businesses -which is why we have included this in the curriculum at XPX. If it’s done right, a family business has a lot to teach American business people who have lost the ability to think long term.

family business and a joke

Michael Oleksak — Wed, 17 Nov 2010 15:09:02 +0000

An owner walks up to his son and says, “Son, I’ve been thinking, I’d like to give you half of this company. I’d like you to learn the business starting on the plant floor with production.” Son says,” Dad, that’s not really interesting to me.” Father says, “OK, son, work in the office with me and learn finance, sales and marketing.” Son replies, “That doesn’t sound very appealing.” The father, frustrated, then said, “Well, what do you suggest, son?” The son replies, “Why don’t you just buy out my half?”

Former owner and now family business advisor Scott Wakeman, told this joke at our first Owners Academy session at last month’s Exit Planning Exchange (XPX). At this event, owners were invited by XPX members to hear other business owners talk about their various experiences in owning, operating and exiting their own businesses.

Another former family business owner, and now investment banker Andy Crain, explained how his family was somewhat insular and less inclined than other companies to get good outside advice from a board of advisors. This is actually common with family businesses – to keep it ‘inside’ and figure it out without help from the ‘outside’. Luckily, Andy isa smart guy and was able to lead the family business out of trouble, but some family businesses aren’t so lucky.

Maybe not everyone would find Scott’s joke to be that funny. But I think it proves the point that family business is such a unique and special entity. You can understand business, but that doesn’t mean you understand the first thing about a family business – so maybe it’s safer to consider this an inside joke.

A Different Approach

Michael Oleksak — Wed, 13 Oct 2010 20:45:06 +0000

The last three years have been tough on businesses – that’s no secret. In order to survive, businesses were forced to lay off many workers and cut back all discretionary spending. Most businesses delayed investment in expansion and new equipment in order to preserve cash in the face of banks cutting credit lines and other creditors tightening standards. Indications, however, are that the bottleneck will soon loosen and business conditions will turn around.

In anticipation of the turnaround, and corresponding increases in confidence and risk-taking (and it is starting to happen), baby boomer owners should know their exit options and be ready. They need to ask themselves these questions:

Is my company salable?
If so, what are the ownership transfer options?
Is my family OK with the decision to sell?
What will I do after I sell?
Have I built the value in my company so the sale proceeds will finance my lifestyle? If not, what can I do to improve its value?
Do I have the right advisors for the process?
Is my company ready for a thorough (and exhaustive) due diligence process?

As proponents of intangible capital, we urge owners to document systems and processes and take other important steps so potential buyers know more of what they’re buying – especially with that premium over book value of a company.