Four New Videos Posted

Well, for those who are interested, I have just posted four videos on my website at http://www.quickconsultant.com/. These videos, part of a series I have produced under the "Checklist for Survival" banner, are not for owners with short attention spans, since they average 11-19 minute in length.

The subjects covered in these new videos include:

• Sales Per Employee



• Critical Financial Ratios



• Your Chart of Accounts



• And one titled simply, "Money"

Since they are FREE, I can't give you a discount , but I would appreciate any and all feedback, good or bad. Just be gentle on me. It is a lot easier speaking in front of a live audience than it is looking into the lens of a camera that never seems to nod, laugh, or raise its hand with a question!

Anyway, I hope you enjoy them.

Sitting in the Buyer's Chair

Many of the business valuations that I prepare for owners come in much lower than what they were expecting.

I am always curious as to why so many of them think their business is worth so much more? Many appear to have pulled numbers out of the air. Others end-up mis-applying what otherwise are sound valuation formulas. Still others simply forget that all of the liabilities on the balance sheet need to be cleaned up or eliminated in order for the business to be sold "free and clear."

If you are expecting the buyer to assume all of those notes and other liabilities you are mistaken. Too many owners think selling their business at their price should be simple. They expect that someone else will take over all of their headaches and that in the end they will be able to walk away with a fistful of cash. That's just not going to happen.

Imagine sitting across the desk from a seller and trying to decide whether this purchase is a wise one or not. The buyer is ready to commit what $250,000, $400,000 or some other amount. In the simplest of terms, he expects that this investment should produce some type of return on his investment, just as he would if he invested in the equity market.

By the way, if the buyer is buying the business as an on-going entity, then the equipment you are selling has to be sold free and clear. Remember, you can't sell what you don't own.

If the buyer is going to takeover the functions of a working owner, he (or she) also expects that the business should be able to pay themselves a fair market salary for managing the business on a daily basis, as well as generate enough excess money to pay the seller each month.

Can you explain to a potential buyer how this can be done? Can you justify your asking price based upon the above scenarios?

P.S. I have only known of two businesses that have sold for more than one year's worth of gross sales. Most businesses end up selling for somewhere between 25-60% of gross sales. Some valuations are higher and many more tend to be at the lower end of the spectrum.

New Chart on Ratios 1983 vs. 2009

The chart below is one of a number of informative charts and tables used in an upcoming video dealing with the industry's Chart of Accounts as well as a video dealing with key financial ratios.

In a sense, the chart is self-explanatory. What I want readers to note more than anything else is that, contrary to popular opinion, only one single major expense category has increased in the past 27 years in this industry!

New Chart of Accounts Video

I am excited about my new, second video titled, "Chart of Accounts." I just viewed a rough cut and with only minor changes it is ready to post. I am hoping that it will be available before the end of this week.

If you haven't had a chance to view my first video on "Sales Per Employee" I encourage you to visit my website at: www.quickconsultant.com.

I have another video in the works that deals with "Key Financial Ratios," and a fourth video titled simply "Cash." This video takes a somewhat light-hearted, humorous approach at how a stack of $1,000 dollar bills is distributed to pay all the bills in a "profit leader" firm versus how these bills are paid by a "profit laggard" firm.

Regulations Are Not Job Killer Says Report

My October 2011 Quick Consultant column challenged the notion that government regulations are the cause of many of our problems.

Now, a new CNNMoney report affirms that statement. The article disputes the claim made by many Republicans, especially those in the Tea Party, that government regulations are not the major reasons for the problems being faced by small business.

The claim that the Obama administration and a wave of new government regulations are strangling the economy are not true, according to the report. Citing both private and government sources, the article notes that "Only a small percentage of employers report regulation as a reason for laying off workers."

Of the 55,000+ new unemployment claims filed in the first eight months of this year, only 2,085 were attributed to government regulations, according to the Bureau of Labor Statistics.

Even the National Federation of Independent Business (NFIB) noted that less than 20% of small business owners cite government regulations as their most important problem.

"Poor sales, for example, were a much bigger worry," notes the CNN article.

"And a CNNMoney survey ofr economists conducted in the second quarter delivered similar results. Only a couple of the 16 economists questioned said government regulation was the biggest drag on the labor market."

According to the article, Economist Gary Burless, a labor economist at the Brookings Institution, said "there is little evidence to suggest that government regulations are killing jobs."

Owner's Business Under Water

In too many situations, owner's still owe far more than they will receive from the sale of their business. This is not an unusual situation, yet it nonetheless shocks many potential sellers.

I recently analyzed a firm from the west coast with annual sales of about $550,000. Unfortunately, he was making only slightly more than what our formula specifies for a working owner. Thus, there wasn't much left over. What is left over, if any, is called excess earnings. These earnings are typically subjected to a multiplier between 3-5 and the result of that is then added to the total value of all net assets being transferred or sold.

The problem is, however, that you can't sell assets you don't own. You need to pay off all notes and loans to transfer the equipment free and clear.

In this specific situation, even giving the owner the benefit of the doubt in many areas, his business came in with a very modest valuation of $150,000. BUT wait! After the owner takes out all the cash in the business, collects the receivables AND pays off all the short and long-term obligations of the business there is a negative amount of -$(354,000) to be settled up on the balance sheet.

That means even if someone is willing to pay the seller $150-$175,000 for the business he is still going to be "under water" in the sense that he will owe more than he will receive from the sale. Meaning in many cases he will have to loan the company more personal funds as he has done in the past.

How did this ever happen? Well, there are lots of reasons but this owner over invested in equipment and never generated the sales he expected. He wanted his shop to be an all-digital operation and it is, just a very expensive one!

His current equipment could easily produce $1.5 million in sales, but at present and for the past few years it has been doing about 60% less than it should.

Ipad helps with shooting three more videos

Well, it rained cats and dogs on Saturday, but that was Ok because I was planning on spending all Saturday morning shooting three new videos. Previously I went out and bought the light stands, the tripod, wireless mike set-up and the camera, but I ended up hiring a local videographer to do all the filming, editing, etc. It has been both fun and nerve-wracking at the same time. Trying to get it all in one take, keeping them short, and yet interesting through the use of key charts and graphs has been a challenge.

I have fallen in love with my ipad II and while I first got it because of a great flight planning software program (which has revolutionized the paperwork part of flying), I now find myself using it extensively for reading, checking my email and as a very useful tool in helping me make these videos.

I use the Ipad and a program called Notetaker. The program was developed by Dan Bricklin... if you are 50 years or older you should recognize that name because he developed the very first spreadsheet program called Visicalc. He is often referred to as the father of personal computing because he actually came up with a spreadsheet program that could be used on personal computers to do real work, rather than just play games.

We then connect the Ipad to a video capture card and capture all of the penstrokes and drawing that I use while demonstrating the various slides. It has worked out great.

Anyway, I should have these three new videos uploaded within the next 7-10 day. The subjects cover:

• "Chart of Accounts"


• "Critical Financial Ratios,"


• and one I simply call the "Money Video."

Lots of editing required to put these videos into final form but I hope they help those who choose to view them.