If we follow the advice from the book The 7 Habits of Highly Effective People by Stephen Covey, we want to implement Habit 2: Begin with the End in Mind! We can follow that recommendation due to another meaningful quote from Steven Covey “your most important work is always ahead of you, never behind you!”

Even if you are 40 years old and plan to work another 15 to 20 years, build your business with the end in mind! Plan for healthy and profitable growth, but also plan for the unplanned. Address the future of your business in good times but also address what will happen in case you are critically injured or die tomorrow. This is referred to as business continuity planning. Plan to do both. Let us begin to address the potential business exit timeline with the possible time frames that come with each milestone below:

Your Exit Timeline

If forced by circumstances beyond your control, you could likely exit your business within a year. Some business owners are here today and – literally – gone tomorrow, but usually not by their own choice. But leaving in style – with adequate cash and having achieved whatever other goals you have set— that takes time, far more than most owners expect.

So, you can leave whenever you choose if you are willing to settle for a less-than-ideal payday, or you can leave in style. The questions is: “do you want to control your own exit, or will it just be something that ‘happens’ to you?”  Most owners prefer to control their own destiny but may not have an idea when to get started. Let us look at some tasks common to all exits, and how long they take to complete.

Design and Create Your Exit Plan:

Timeframe: 90 days to one year

While it is possible to create an exit plan in as few as 90 days, most plans require almost a year to create. Most owners need time to ponder and weigh alternative paths, and to think through the many issues that arise when they move through a comprehensive exit planning process for the first time.

Close the Gap:

Timeframe: depends on amount of growth in value needed, but often five to ten years

There is likely a gap between the value you want to receive for your ownership interest and the value you are likely to receive if you transfer the business today. Many owners are in denial when it comes to objectively quantifying the size of the value gap, and exactly how they are going to close it within their planned departure timeframe. The surest way to create sustainable growth is to create a written growth plan for your business with deadlines and accountability as part of your overall exit plan. There are a variety of ways to integrate growth plan development and implementation into your daily/monthly/yearly business management activities.

Tax Planning and Implementation:

Timeframe:  three to ten years

Part of reaping full value for your company involves minimizing taxes. Keep in mind that one of the headwinds you may face is increased tax on income and capital gains. Fortunately, planning can not only manage taxation upon the transfer of ownership interest, it may help save taxes on an ongoing, annual basis.

The Ownership Transfer Transaction:

Timeframe: one to ten years 

It is possible to transfer your entire ownership by simply transferring all your ownership in exchange for a promissory note right now in one grand transaction, with a big celebration that follows. This is a form of financial suicide. What will you do if the note payments stop coming and you have been absent from the business for a couple of years already? A methodical, possibly incremental approach to preparing the business, preparing yourself and preparing the next owner (especially if he/she is a child or employee) for a successful future tends to create a better outcome for all involved. Take the preparation and execution of the ownership transfer in whatever size bites you can manage, whether that is attaching one area per month or per year – you know your business well enough to know how quickly the recommended action items in your exit plan can be completed.

Conclusion:

Think about your exit as a process, not an event. Everything you have done in your life that was significant took time and multiple steps or stages. Your exit plan is no different. Your exit planning timeline is your bridge to the future that you envision for yourself, your business, and your family. Take control of your future and begin creating your timeline today.

For a free PDF on The Five Critical Elements of a Successful Exit Plan, contact me at david@remodelforce.com.  I will forward that PDF report to you.

The post Creating the Perfect Business Exit Timeline! appeared first on Remodel Force™.

Now, successful owners are usually optimistic people, somewhat averse to dwelling on the more unpleasant aspects of business. Contemplating one’s demise certainly qualifies as an unpleasant aspect.

Sorry for the somber tone here, but you as a business owner must address the future of your business in case you are critically injured or die tomorrow. This is referred to as business continuity planning. Business continuity planning is the roadmap to address a variety of transfer events and consequences that can impact the business for the remaining (or new) owner when the original owner leaves.

Problem I: Loss of Continuity of Business Ownership

Sole-Owner Company:

Continuity of business ownership is the critical issue in solely owned companies. In fact, there is no continuity unless sole owners take steps now to create a future ownership group or groom a successor.

Multi-Owner Company:

Continuity of ownership is not an issue when a buy-sell (or business-continuity) agreement, funded by life insurance or disability buyout insurance, has been implemented. The problem is that most owners and their advisors fail to keep their buy-sell agreements up to date and, as a result, those agreements often can create more problems than they resolve.

Solutions to Problem I

Sole-Owner Company:

You can implement a plan to allow the business to continue after you are gone. If there is no co-owner, you must provide for the business’ continuity by securing the continued services of your most important employees. Do everything you can to prevent your employees from leaving, because they are indispensable to the business’s continued existence. Secure their continuation by compensating them at a substantially increased level (usually 50–100% more than they ordinarily receive). This is accomplished using a documented Stay Bonus.

A Stay Bonus is a written, funded plan that provides monthly or quarterly bonuses, usually over a 12- to 18-month time frame, for employees who remain with the company during its transition from your ownership to new ownership. (This applies whether the business is transferred to a third party, employees, or family members.) The Stay Bonus provides a cash incentive for your important employees (perhaps 20–50% of the total workforce) to stay.

Typically, the Stay Bonus is funded with life insurance in an amount sufficient to pay the bonuses over the specified time-period. The plan is communicated to the important employees when it is created so that they know a plan exists and, consequently, that thought and planning (and money to pay salaries) will ensure the continuation of the business. At the very minimum, you must communicate, in writing, your wishes as to what should be done with the business upon your death or permanent incapacity:

• Designate key employees or others who can be given responsibility to continue and supervise business operations, make financial decisions, and oversee internal administration.
• Name these individuals today through a business-continuity form (I have examples of this form so if you would like a copy, please contact me).
• Name advisors and others, who should be consulted in the ownership transfer process. (Again, the idea is to put these names on a business-continuity form).
• If it is your wish that the business be sold, state that intention. List the names and contacts of businesses that have expressed an interest in acquiring your company or who you think would make an appropriate successor/owner. Do so, in writing, on a business-continuity form. You may wish to indicate your desire that the business be sold to key employees, continued in the family, or liquidated. The choice is yours, but you must make it while you are alive. There is no better time than the present to do so.
• Finally, give the completed business continuity form to the person you trust the most (e.g., spouse, child) and copies to your advisors.

Multi-Owner Company:

From a continuity standpoint, the nicest thing about having multiple owners is that the business will continue if one of the owners dies, provided measures are taken—usually in the form of an up-to-date, adequately funded buy-sell agreement—to allow the remaining owners to acquire the deceased’s interest in the business. However, chances are that your buy-sell agreement has not recently been reviewed, does not reflect current business value, and does not completely address the following possible transfer events:

• Death
• Disability
• Retirement
• Transfer to a third party
• Termination of employment
• Business dispute among owners
• Involuntary transfer due to bankruptcy or divorce

As may be apparent, the biggest risk to the continuation of co-owned businesses is not the death or disability of one of the owners. The biggest risk is that the abovementioned events are considered once and then memorialized in an agreement. All further thought and action on the subject are then shelved, along with the agreement. Do not allow that agreement to be shelved! Make sure that your buy-sell agreement is current and up to date.

Problem II: Loss of Key Talent (i.e., You)

Sole-Owner Company:

Your death likely has the same impact on your business as does the loss of any key person. Your talents; experience; and relationships with customers, employees, and vendors may be quite difficult to replace. Without planning, few businesses have the financial resources or successive management to weather this storm.

Multi-Owner Company:

Multi-owner companies seemingly avoid many of the problems endemic to single-owner companies. However, as it relates to the loss of key talent, this is only true if surviving owners can readily compensate for your loss. To the company, your death is the same as the loss of a key employee. If the remaining owners do not have your experience or specific talents, the business suffers as sorely as if it had been solely owned. Unless there is a key employee (co-owner or not) to fill the void, the business is wounded—perhaps mortally—upon the death of a co-owner who fulfilled the following roles:

• Marketing guru on whom the other owners were dependent to provide new clients
• Hub of most of the industry, customer, or other key relationships
• Overseer of the company’s operations

Solutions to Problem II

Sole-Owner and Multi-Owner Companies:

In a solely owned business, the key employee is almost always the owner. Usually, it is the owner’s entrepreneurial drive, experience, and dedication that stimulate the business. Losing its key employee, you, is a blow from which many businesses do not recover. If your business is a mirror image of you, it is unlikely that any amount of key employee life insurance or other source of cash will suffice. You must create value (within the company and distinct from you) in the form of successive management capable of filling the void left by your unexpected departure.

In a co-owned business, the loss of an owner is not as drastic, provided your co-owner can carry on without you. If your co-owner cannot replace you, you must train employees to perform the same or parts of the same role as you. You must take the same step if you desire to sell the business for top dollar during your lifetime. In either scenario, the underlying need is the same: capable employees must be able to assume the responsibility of running the business. In a lifetime transfer, if the owner is ready to leave the business but the business cannot thrive or at least survive without him or her, the owner is forced to continue operating the business until successive management is located and trained.

However, when an owner dies, the absence of successive management is more devastating because the owner is not available to do anything. The best hope is to provide the company with adequate cash, in the form of life insurance proceeds, so that the business can survive until replacement management is located and trained. That cash is also used to produce a cash-based incentive plan designed to motivate and retain the new management.

In a co-owned business, the loss of an owner can severely strain the business, but the remaining owner can, especially with sufficient life insurance proceeds find and train replacement management and provide that replacement management with a significant cash-incentive plan.

As you well know, finding and training your replacement can take years. Thus, you must prepare your company for an ownership transition starting today. Remember, at some point, you will not be in your business. I hope your absence will be due to a sale to an outsider or perhaps to the key employees you have brought into the company. However, your exit may be due to death or disability. No matter the cause, your business will survive and thrive only if you have found, trained, and motivated your replacement before you leave the business.

Realistically, the continuity of a business is reliant on a transition of ownership from you to equally capable individuals of an operationally and financially sound company. In the situations we have discussed, primarily the death of an owner, life insurance can instantly provide significant financial strength. However, the business also requires talented and motivated key-successor management, and for that, there are no quick fixes. The benefit of starting to search for that key-successor management today is that you will be building value within the company that will be converted to cash when you leave it.

Problem III: Loss of Employees and Customers

The death of an unprepared owner ignites a cascading series of events for the business. Chief among these are the departures of employees and customers. The loss of employees is followed immediately by defaults under contracts. Because of the inability to perform promised work, customers inevitably leave.

Usually, employees leave because they fear that the business will not survive, thus jeopardizing their salaries and future employment. Additionally, when the owner’s leadership role is hastily transferred to anyone other than a recognized successor, employees and customers grow uneasy. With uneasiness comes migration to new employment and other vendors. These financial and personal concerns must be quickly quelled by implementing a preconceived, funded continuity plan.

Sole-Owner Company:

A common and natural consequence of an owner’s death is the speedy departure of employees and customers unless an existing continuation plan is immediately implemented. Employees must know that a plan that guarantees their compensation and clearly names your successor exists. With these assurances, most employees and customers will stay with the company. Without such a plan, the key and non-key employees will wonder where their next paychecks will come from. Typically, they leave for greener and more secure pastures.

When the workforce leaves, contracts cannot be completed, and work is unperformed. Resulting losses can require payment by the deceased-owner’s estate.

Multi-Owner Company:

Companies with multiple owners must cope with the normal lifetime retirement of their owners. In most cases, retirement imposes a significant cash drain on a company. In a death scenario, the surviving owners must be capable of keeping both the employees and the customers. Simply having a successive owner is not sufficient. These successors must be able to maintain cash flow and the confidence of the business’ employees and customers. Confidence is best gained by having a written, well-capitalized continuity plan.

Solutions to Problem III

Sole-Owner Company In a solely owned business, financial and personal concerns about succession are handled through the following:

• A written Stay Bonus Plan (described earlier), funded by life insurance and communicated to employees when it is prepared
• A succession-of-management plan, which you prepare now, that names the person to take charge
• Your decisions—made today or as soon as possible—regarding the sale, continuation, or liquidation of the business in the event of your demise.

Multi-Owner Company

In a multi-owner company, loss of employees and customers does not usually present a problem because of the presence of other owners.

Conclusion:

Business-continuity issues can be divided into two camps: those that occur while the owner is alive and those that arise upon the owner’s death or disability. This article reviews the latter. In the case of transfers during an owner’s lifetime, you have the luxury of time to find and train your replacement. This is not so in the case of death. Your company must have ongoing management and adequate cash (almost always subsidized by insurance on your life) to survive the following:

• Loss of key talent (i.e., you)
• Loss of employees and customers
• Company’s loss of financial resources
• Loss of continuity of business ownership

In the short run, money is required to do the following:

• Trigger a buyout
• Provide capitalization
• Provide cash incentives to entice your employees to stay
• Replace the loss of business value that you brought to the company. The management team must be capable and motivated to grow the company and incentivized to stay long after your demise

In the end, a successful business is one that you can either sell for top dollar and exit in style or one that can survive your exit in style. A failure to plan for business continuity can irreparably damage your business’ sale value and prevent you from exiting in style.

if you have any questions or would like to receive a sample business-continuity form, please contact me at david@remodelforce.com.

The post Business Continuity Planning – Your Business Can Survive Even if You Do Not appeared first on Remodel Force™.

Let us compare the 2 experiences:

• In elective surgery:
  • There is a big emotional investment
  • Prior to surgery, the outcome is uncertain
  • Patients desperately hope that they pick the right surgeon
  • If a child or family member, expertise, not cost is what is most highly valued

• In custom remodeling:

• • There is a big emotional investment (project imaging – wish list)
  • Prior to remodeling, the outcome is uncertain (potential clients have all heard stories of projects that did not go well)
  • Homeowner desperately hope that they pick the right contractor for their project
  • A contractor’s expertise and experience, over price are what homeowners are paying for to meet their remodeling dreams

Let us review the physical as well as emotional homeowner experience.   In this new Covid-19 working environment, what can we do to manage the homeowner experience to meet and exceed expectations:

Digital differentiation – there is a digital transformation taking place in construction

Contractors will set themselves apart by how they adopt and use technology:

• Website: dynamic, engaging, interactive
• Cloud Based Construction Project Management Systems:
  • Co-Constuct
  • BuilderTrend
  • ProCore
  • UDA Construction Online

Video Conferencing, Messaging, Screen Share and Chat:

• Zoom/GoToMeeting
• Loom/Glide (video e-mail and text software)

Remote Viewing and Design Tools:

• 3D Model virtual walk-throughs
• 360 Cameras
• Matterport

Onsite worksite considerations (following CDC recommendations):

• High-efficiency particulate air (HEPA) filters
• Dust walls to seal the work areas
• Hand wash stations
• Hygienic wipes
• Face masks

Following the worksite recommendations above protect by homeowner and employees.   This is what good contractors do.   Homeowners will pay more for this kind of expertise!

Now, let us address the emotional side of the homeowner experience:</

Homeowners, before any major remodeling project, are scared.   They are filled with fears-usually unwarranted, frequently emotional, and sometimes irrational.   There are many reasons that they feel the way they do, but 5 major reasons are reviewed below:

1. Crooks: Homeowners are afraid they will hire an unreputable company:

Almost every homeowner begins the remodeling process with some baggage.   If you watch television, read the newspaper, or listen to the radio, you will inevitably read or hear stories about unscrupulous building contractors.   In these stories, some unsuspecting homeowner was taken advantage of that cost them thousands of dollars.   Many homeowners do not trust building contractors.   They are afraid that they will hire someone that could “rip them off”.

2. Money: Homeowners do not understand the real cost of remodeling.   They are afraid of the “hidden” costs:

Most homeowners do not understand how difficult it is, and how expensive it is to remodel an older home.   Most homeowners underestimate the true cost of remodeling.   It is a difficult and expensive process to integrate the “new” with the old.   This process is made even more difficult because of the uncertainties that arise during the remodeling process.   Dry rot, termite damage, bad electrical wiring, and insufficient load bearing capacity are problems that are frequently exposed once a project has begun.   Whether planned for or not, these problems must all be fixed.

3. Disappointment: After extended design time, and a lot of money, homeowners can fear that “It’s not what I wanted!”:

In working with hundreds of homeowners over the years, I’ve made a very important discovery – homeowners can work with a set of plans for months, but with 90% of the homeowners I worked with, they did not fully understand what their project would look like until the walls started going up.   The two-dimensional reality presented on building plans is not-enough for most homeowners to truly visualize what their project will look like when it is done.   Most homeowners fear, that after spending all that time and money in the planning process that they may not get what they wanted.

4. Disruption: Homeowners are afraid of the disruption that remodeling brings:

Remodeling is a tremendously disruptive process.   A homeowner can be without a kitchen for weeks, or longer.   They can be without a bathroom for weeks, or longer.   A major remodeling project can disrupt just about every routine a family may follow.   It is also a very invasive process.   A psychiatrist I know, who himself went through a major renovation on his own home, said it was one of the most difficult times in his marriage.

5. Control: Homeowners fear losing control of both their home and finances during the remodeling process.

Due to all the factors I have reviewed above, many homeowners express the fear that once their home remodeling project begins, that all of the unknowns involved leave them with a feeling of “being out of control.”  This is a very fearful time for many people.   Their home is usually one of their biggest investments, and they are spending a lot of money.   They want guarantees.   Home remodeling involves unknowns.   Remodeling contractors cannot always provide the kinds of guarantees that homeowners want.   They must trust their contractor.

There are some things a good remodeling contractor can do to help a homeowner through this process:

1. It is a process, not a product: A good remodeler understands they are not just selling a product-they are also selling an experience.   The best ones understand they must manage the process, as well as manage the project.   Homeowners need to be guided through their remodeling experience every step of the way.   They need to trust that their contractor will always be there for them, no matter what.
2. The 4 elements of trust:  Homeowners desperately want to trust their remodeling contractor.   If a contractor understands the 4 elements of trust, and practices them honestly, most major problems will be avoided.   The 4 elements of trust are:

• Consistency: Remodeling contractors need to set, and follow, consistent routines.
• Honesty: Tell homeowners what is going to happen each week and acknowledge mistakes.
• Promise Keeping: Contractors must keep their word.   They must fulfill on the promises they make.
• Reassurance: Good remodeling contractors reassure homeowners on a regular basis.   Homeowners want to know their contractor will be there for them every step of the way.

3. Homeowners are emotional: Experienced contractors realize a major remodeling project is an emotional time for homeowners.   Good remodelers expect this.   They gear their efforts towards reducing homeowner fears and dealing with the inevitable upsets.   Emotional homeowners are not the exception-they are the rule.   It comes with the territory.

David Lupberger is the author of the book Managing the Emotional Homeowner.   For a free digital copy of his book, contact him at David@RemodelForce.com.   He will forward a copy of the book along with the Homeowner Emotional Roller Coaster.

The post Dealing with Homeowner Fears – Creating an Exceptional Homeowner Experience appeared first on Remodel Force™.

For every business owner, determining how to increase transferable value is the business owner’s job. However, once owners and their advisors determine which of the appropriate value drivers must be strengthened, everyone in the company should be involved. By definition, business owners cannot do it alone. If they could, they would not be creating transferable value, because once they departed, the value drivers would disappear.

If you wonder whether installing systems in these (and all) areas of your company is worth your time or effort, let us look at systems from the perspective of a potential buyer. If a buyer compares your company to another, which company will he or she pay more for?

Your Company which is run by an owner who:

• Has creatively and effectively built the business with intuition and intelligence; and
• Will be gone once the buyer takes the reins.

Or:

Another company which relies on systems that:

• Are written and communicated clearly
• Are adhered to by all employees
• Produce consistent results
• Will be in place long after the owner leaves

As you can see, systemizing internal operations are a critical Value Driver. In the context of transferable value, operating systems are the established and documented standard business procedures that demonstrate to potential buyers that a business can maintain its profitability after an owner leaves it in the buyer’s hands.

The Value of Documented Operating Systems

The theme of Michael Gerber’s best-selling business book for entrepreneurs, The E-Myth Revisited, is, “Let systems run the business and people run the systems. People come and go but the systems remain constant.” This advice is as true for smaller businesses as it is for larger enterprises.

Having great processes means customers, vendors, and employees enjoy the same experience each time they interact with a company. It also means that the data surrounding each interaction can be measured, interpreted, and mined. Using that information, next-level management teams continually modify and improve those experiences.

If your objective is to sell your company at some point, you would be well-served by building reliable systems that can sustain the growth of your business. Before we get started on discussing this important value driver, here are a few quick definitions:

• Systems refer to a group of related processes
• Processes have purposes and functions of their own and are components of a system. Taken independently, a process alone cannot do the work of a system
• Procedures are the approved way we do things and often include a sequence of steps
• Steps are the actions we take to get something done

That was a mouthful! A solid management team is one of the first important value drivers to focus on when you are preparing for a potential business exit. In addition to building a strong management team, it is important to build reliable operating systems that can sustain the growth of the business. The second value driver then is the development and documentation of business systems that either generate recurring revenue from an established and growing customer base or create financial efficiencies.

Look at your business from a buyer’s perspective. Would you buy your business? If you leave shortly after a sale, what remains? If the answer is top management and highly efficient business systems, you can be more confident that you will have a strong legacy and be able to get full value for your business.

The documentation of company systems and their related processes and procedures is important to ensuring that quality and consistency can be maintained after the sale. They also signal to a potential buyer that elements critical to the successful transition of a business are in place. Some examples of items worthy of documentation are:

• Financial control systems and accounting policies.
• Policies to ensure compliance with legal and regulatory matters, especially those related to employer/employee relationships and safety.
• Data management and information systems that tie the company together.

Again, put yourself in the shoes of a would-be buyer. Buyers want assurance that the business can continue to move forward under new ownership and that operations will not break down when the former management leaves. This assurance can be obtained when there are documented systems in place that enable the potential buyer to repeat the actions of the former owner to generate income and grow the business.

There are several business systems, which, once in place, enhance business value whether you plan to sell your business now or decide to keep it. These systems include:

• Effective marketing practices with metrics that can be measured
• Effective customer qualifying processes – only working with qualified clients
• A documented sales process that guides potential clients through their sales experience
• A documented sale to production handoff
• Daily production management systems so that clients enjoy the same experience every time
• A documented close-out and warranty process
• Processes on converting every past client into a client for life

There is a lot of content here. If you would like assistance with generating documented company operating systems, please contact me. I have a business manual with 21 construction-specific job descriptions that will facilitate this process for you: David@RemodelForce.com.

The post Building Company Value – Documented Operating Systems appeared first on Remodel Force™.

Owners can remove themselves from daily operations with some foresight and planning with their eventual exit in mind. This does not happen by chance – it happens when a strategic plan is implemented in a thoughtful and deliberate fashion.

What does this look like?  I have included a short outline of this process below:

• The Exit Planning Roadmap:
  • Set goals/timeline
  • Quantify resources
  • Grow transferable value/minimize risk/taxes
  • Reviewing a potential sale to:
    • Children
    • To a 3^rd party
    • To co-owners/key employees
  • Business continuity/estate planning
• Three universal goals:
  • How much money do you want when you leave your business?
  • To whom do you want to transfer the business?
  • When do you want to exit?

You must begin planning and executing a strategy to accomplish your exit goals well before you are ready to leave. Otherwise, it is highly unlikely that the business will be ready for transfer when you are ready to transfer it.

Here are the outcomes that every business owner strives for exiting their business:

• Having the financial security
• Ensuring that their chosen successor(s) are in place when they leave
• Beginning their purposeful new life

Design and Create Your Exit Plan:

Most Plans require almost a year to create. Most owners need time to ponder and weigh alternative paths and to think through the many issues that arise when they move through this exit planning process.

Close the Value Gap

There is likely a gap between the value (money) you need to receive for your ownership interest and the value you are likely to receive if you transfer the business today. The time it takes to close that value gap depends on the following:

• By how much does the business need to grow?
• What is a realistic growth rate for your business in today’s economy?
• What is the estimated growth rate of your non-business investment assets?

The time required to close the value gap is the wildcard in estimating when you will be able to leave your business. The surest way to create sustainable growth is to create a written growth plan that includes deadlines and accountability as part of your overall Exit Plan.

I find that most owners are in denial when it comes to objectively quantifying the size of their value gaps and determining exactly how they are going to close them within their planned departure time frames. The reason behind the denial of what is generally a large gap is that most owners have no plan to close it other than “work harder.” Owners frequently do not know how to build value consistently at the pace necessary to achieve financial independence.

Tax planning and implementation

Part of reaping full value for your company involves minimizing taxes. Fortunately, planning can legally minimize (or even eliminate) taxation upon the transfer of ownership interest and save on taxes annually. Of course, the IRS does not make this easy. Regardless, if you leave tax planning until you are ready to exit, the IRS wins.

Transferring Your Business to Children or Employees

It is possible to transfer your entire ownership to a child or employee by simply transferring ownership in exchange for a promissory note. However, this can be a form of financial suicide. If you wish to transfer ownership to children or management while achieving your financial and other objectives, you need time to do the following:

• Grow business value and cash flow. As growth occurs, you benefit from increasing distributions of excess business income and can invest the net proceeds in non-business investments.
• Develop the incoming owner’s management and ownership skills.
• Begin a methodical transfer of small amounts of non-voting ownership to children or key employees based on their achievement of pre-set performance standards. During this time, you retain full control of the business until your children or management can pay cash—enough to ensure your financial security—for your ownership interest.
• Ultimately transfer the balance of your ownership interest for cash after your children or key employees have acquired sufficient equity to borrow money to pay for your remaining ownership interest.

Or Selling Your Business to an Outside Third Party

Assuming your transaction advisor determines that you are likely to receive the money you want from the sale of your business, your last step before beginning the sale process is to engage in pre-sale planning. This involves having your advisors review the structure and operations of your company to discover and properly bury any “skeletons” that might stall or halt the sale process.

A few examples of skeletons are potential lawsuits, disgruntled minority owners, and any accounting discrepancies. These skeletons can derail the sale process in its tracks.

An adage of deal attorneys is that “time kills deals.” You do not want correctable problems to cause delays and the pre-sale planning process helps prevent this. Pre-sale planning takes but a few months, but correcting problems that are discovered can take several more months. Once remediation is completed, the sale process begins and is usually complete within a year. Obviously, if your transaction advisor has good reason to believe that your business cannot be sold for the price you need, you will need more time to accomplish all of the actions necessary to close the value gap.

Conclusion

I am confident in saying that almost all owners today are ready to exit their businesses long before their businesses are ready to be exited. If the time before the business can be successfully transferred drags out for years after owners feel ready to exit, those owners face burnout and frustration, and lose interest in the business, making it even hard to build its value.

The pie-chart below reviews the key considerations in any business transfer. If you would like to review  a free exit planning assessment to identify your company exit priorities, e-mail me at David@RemodelForce.com.  The evaluation takes less than 30 minutes to complete!

The post Planning a Strategic Business Exit – What Is Involved? appeared first on Remodel Force™.

If you find you spend too much time chasing prospects that don’t pan out, you may want to consider tactics that help you qualify leads.

Even in a slow market, small business owners are faced with the challenge of having too much to do and not enough time to do it all. The Harvard Business School refers to this phenomenon as “resource poverty”. Simply speaking, the small business owner wears dozens of hats and as a result, has limited time and resources.

For people in this position, time is the most valuable and limited resource you have. With time being such a valuable commodity, effective business owners limit their focus to “high impact activities”. These high impact activities are specific actions that will have a positive impact on many different areas of your business. How you Qualify Leads to make sure you a seeing the right customers before going on an unproductive sales call is a high impact activity.

Part of the process you use to Qualify Leads in a pre-qualifying phone conversation. You want spend 15 to 20 minutes interviewing your prospective customer. You can qualify leads during your initial conversation with the simple idea that you can’t/won’t take the time to go out on appointments with an unqualified prospect. Your time is too valuable to go on sales calls without a reasonable chance to make the sale. Here are 7 steps on qualifying a potential customer by phone.

Step 1: How did the potential customer come to call you? (Evaluate your marketing efforts)

It’s important to understand where the potential customer came from. If you can track where the lead is coming from, you can allocate additional time and resources to those activities that generate the highest number of calls.

Step 2: Review the Scope of Work (Do they really need your services)

When you reach a homeowner on the phone, let them know who you are, and ask them if they have time to talk about the work they want done. If the answer is “yes”, ask them to explain in more detail what work they need completed. When they have provided you with a short description of their project, you have two ways to go:

1. If they want services that you don’t provide, ask whether you can refer them to another contractor who can provide those services.
2. If you can assist them with the project they want, let them know you can help them. Then make sure you ask the following “do you mind if I ask you a few questions to find out more about what you want to do?”
   • When they respond with a “yes”, ask them to tell you more about their project. What is the full scope of work?” “What do they have in mind?”
   • You are the expert now. You ask the questions:

By asking these questions, you are now conducting the interview and controlling the flow of conversation. You can direct where the conversation goes.

Step 3: Review the Homeowner’s Sense of Urgency (Eliminate the tire kickers)

There are times when you will receive a call where the homeowner has little or no sense of urgency, but does need some assistance in planning their project. Even if this homeowner is not ready to start something right away, there may still be value.

They may not be ready for an actual sales call, but you may be able to assist them by providing needed direction, or giving them a timetable that you both can start working toward.

Many homeowners are not educated in the project development process, so you can provide value by giving helpful tips. Any help you provide at this stage may develop a relationship with these future clients so that when they are ready to buy, you are the person they call to move forward. As you’ll find by going through the process to qualify leads like this you’ll see they still have value. They just need to be developed.

Step 4: Determine a Homeowner’s Budget (Is their budget realistic?)

You need to ask this question of every homeowner. There is a cost for your services, and if they can’t afford these services, do you want to waste your time going to their house to determine that they can’t afford you? At this point in the interview, you will want to ask “do you have a budget for this project?”

This is a reasonable question to ask any homeowner. Do not feel shy about asking, and don’t be deterred if they will not share this with you. If a homeowner responds by saying they don’t have a budget, or they won’t share it with you, try this: if they want a new bathroom and won’t share their budget, respond by saying something like “I understand. Let me ask this another way. I’ve renovated bathrooms for $20,000, and I’ve done another for over $50,000. Are you closer to $20,000 or to $50,000?”

This broad pricing strategy will let you know if they have a realistic budget. If they tell you that they were thinking about spending $4,000, you may want to reconsider going out to their house

Because many homeowners have little or no experience with home remodeling, many are unprepared for the real cost of your services. This doesn’t necessarily mean that they are not a good customer. It may mean that you will have to do some home improvement education with them. Spending time with homeowners helping them understand this can turn them into a customer.

Step 5: Determine the Homeowner’s Schedule (Does their schedule match your availability?)

A key question to ask in this initial call is when the homeowner wants the work completed. For a project like a new kitchen or bathroom, design work may need to be done. There must be time set aside for planning, and selecting the appropriate cabinets and fixtures.

Construction can’t begin until all of this is done. Because most homeowners have little experience with larger projects, you may need to guide them through an appropriate timeline when you review all the choices that must be made. These projects require planning and a time to review all the potential selections. When speaking with homeowners about their schedule, ask them:

• “When do you want to get started?”, or
• “When do you want your project completed?”

If their schedule is realistic, and allows for this planning period, you have a good starting point. If not, take this opportunity to educate them on a realistic timeline to develop good plans and specifications. They are only going to do this once, so make sure that they do this the right way.

There are 2 primary benefits.

First, it demonstrates that you are a professional in reviewing how successful projects are created.

Secondly, with good advice and direction, you will probably make their project better. Doing numerous kitchen or bath projects provide you with the experience and perspective to improve upon what they are doing. This is what most homeowners want from their contactor. Waiting a few more months is not a deal killer. Establishing clear expectations before a project starts is a required starting point.

Step 6: Who Will Be Involved in the Decision Making Process (Don’t go out on “one-legger” appointments)

Who is making the final decision on a project? You need to know this prior to going out on a sales call. You will have wasted you time if you go out on a call to meet only one spouse and are told that they need to review this with their missing partner before they can move forward.

With one partner missing, the person you speak with can always tell you that they can’t make a decision until consulting their partner. To counter this, ask the person you speak with on the phone who will be involved in making the buying decision. If it involves both partners, make sure both are there for your sales call.

Step 7: Review the Scope of Work with the Homeowner (Let them know you understand)

In this last step, summarize the scope of work that was reviewed in step 2. In conducting this phone interview correctly, you are not making a sales call on the phone. You are completing a review and evaluation of the “problems” that the homeowner has reviewed with you.

You are determining if you can help. You are identifying the homeowner’s budget and schedule, and asking any additional questions you might have about what they want done. You are doing your “due diligence” to determine if this is a job you want. You are also determining if this is someone you want to work with.

In asking these questions, you find out a great deal about a prospective customer:

• Real prospects want to talk about their projects. In the course of a 15 to 20 minute conversation, you will get a good sense if they are a real customer. You will know when people are responding honestly, and you will know when people are withholding information. Since you are giving up several hours of your time to meet with someone, make sure the homeowner is a serious buyer.
• You may find you make a good connection with the homeowner. In a case like this, you have already pre-sold yourself. When you have a good connection with someone, your follow-up sales call is more of a formality if you have reviewed budget and schedule and both are satisfactory.

In the course of these “auditioning” calls to prospective customers, don’t try to sell anything! Just listen. Follow the 80/20 rule. Let the homeowner speak 80% of the time. Try not to speak more than 20% of the time.

With these questions, you can guide the homeowner through a description of their project, and help them understand scheduling and project costs. This is the basis to a good working relationship. In the world of home remodeling, you are the expert. Guide the homeowner through this process, and they might become a good customer, and provide a steady source of future referrals. Take your time with this.

Summary:

Remember your time is valuable and you want to make the most of it. One easy way to do that is to follow the seven steps to qualify your leads:

1) How did they come to call you?

2) Review the scope of work

3) Review the homeowner’s sense of urgency

4) Determine a homeowner’s budget

5) Determine the homeowner’s schedule

6) Don’t go out on “one-legger” appointments

7) Complete a final scope of work review

By asking focused questions, you “control” the interview process, and you can move through the project evaluation quickly and efficiently. The answers to these questions will allow you to determine if they are a “real” customer or not.

Don’t go on appointments with unqualified prospects. Time is your most valuable resource. Only schedule appointments with qualified prospects!

The post Construction Job Leads: How to Qualify Construction Leads appeared first on Remodel Force™.

If you find you spend too much time chasing prospects that don’t pan out, you may want to consider tactics that help you qualify leads.

Even in a slow market, small business owners are faced with the challenge of having too much to do and not enough time to do it all. The Harvard Business School refers to this phenomenon as “resource poverty”. Simply speaking, the small business owner wears dozens of hats and as a result, has limited time and resources.

For people in this position, time is the most valuable and limited resource you have. With time being such a valuable commodity, effective business owners limit their focus to “high impact activities”. These high impact activities are specific actions that will have a positive impact on many different areas of your business. How you Qualify Leads to make sure you a seeing the right customers before going on an unproductive sales call is a high impact activity.

Part of the process you use to Qualify Leads in a pre-qualifying phone conversation. You want spend 15 to 20 minutes interviewing your prospective customer. You can qualify leads during your initial conversation with the simple idea that you can’t/won’t take the time to go out on appointments with an unqualified prospect. Your time is too valuable to go on sales calls without a reasonable chance to make the sale. Here are 7 steps on qualifying a potential customer by phone.

Step 1: How did the potential customer come to call you? (Evaluate your marketing efforts)

It’s important to understand where the potential customer came from. If you can track where the lead is coming from, you can allocate additional time and resources to those activities that generate the highest number of calls.

Step 2: Review the Scope of Work (Do they really need your services)

When you reach a homeowner on the phone, let them know who you are, and ask them if they have time to talk about the work they want done. If the answer is “yes”, ask them to explain in more detail what work they need completed. When they have provided you with a short description of their project, you have two ways to go:

1. If they want services that you don’t provide, ask whether you can refer them to another contractor who can provide those services.
2. If you can assist them with the project they want, let them know you can help them. Then make sure you ask the following “do you mind if I ask you a few questions to find out more about what you want to do?”
   • When they respond with a “yes”, ask them to tell you more about their project. What is the full scope of work?” “What do they have in mind?”
   • You are the expert now. You ask the questions:

By asking these questions, you are now conducting the interview and controlling the flow of conversation. You can direct where the conversation goes.

Step 3: Review the Homeowner’s Sense of Urgency (Eliminate the tire kickers)

There are times when you will receive a call where the homeowner has little or no sense of urgency, but does need some assistance in planning their project. Even if this homeowner is not ready to start something right away, there may still be value.

They may not be ready for an actual sales call, but you may be able to assist them by providing needed direction, or giving them a timetable that you both can start working toward.

Many homeowners are not educated in the project development process, so you can provide value by giving helpful tips. Any help you provide at this stage may develop a relationship with these future clients so that when they are ready to buy, you are the person they call to move forward. As you’ll find by going through the process to qualify leads like this you’ll see they still have value. They just need to be developed.

Step 4: Determine a Homeowner’s Budget (Is their budget realistic?)

You need to ask this question of every homeowner. There is a cost for your services, and if they can’t afford these services, do you want to waste your time going to their house to determine that they can’t afford you? At this point in the interview, you will want to ask “do you have a budget for this project?”

This is a reasonable question to ask any homeowner. Do not feel shy about asking, and don’t be deterred if they will not share this with you. If a homeowner responds by saying they don’t have a budget, or they won’t share it with you, try this: if they want a new bathroom and won’t share their budget, respond by saying something like “I understand. Let me ask this another way. I’ve renovated bathrooms for $20,000, and I’ve done another for over $50,000. Are you closer to $20,000 or to $50,000?”

This broad pricing strategy will let you know if they have a realistic budget. If they tell you that they were thinking about spending $4,000, you may want to reconsider going out to their house

Because many homeowners have little or no experience with home remodeling, many are unprepared for the real cost of your services. This doesn’t necessarily mean that they are not a good customer. It may mean that you will have to do some home improvement education with them. Spending time with homeowners helping them understand this can turn them into a customer.

Step 5: Determine the Homeowner’s Schedule (Does their schedule match your availability?)

A key question to ask in this initial call is when the homeowner wants the work completed. For a project like a new kitchen or bathroom, design work may need to be done. There must be time set aside for planning, and selecting the appropriate cabinets and fixtures.

Construction can’t begin until all of this is done. Because most homeowners have little experience with larger projects, you may need to guide them through an appropriate timeline when you review all the choices that must be made. These projects require planning and a time to review all the potential selections. When speaking with homeowners about their schedule, ask them:

• “When do you want to get started?”, or
• “When do you want your project completed?”

If their schedule is realistic, and allows for this planning period, you have a good starting point. If not, take this opportunity to educate them on a realistic timeline to develop good plans and specifications. They are only going to do this once, so make sure that they do this the right way.

There are 2 primary benefits.

First, it demonstrates that you are a professional in reviewing how successful projects are created.

Secondly, with good advice and direction, you will probably make their project better. Doing numerous kitchen or bath projects provide you with the experience and perspective to improve upon what they are doing. This is what most homeowners want from their contactor. Waiting a few more months is not a deal killer. Establishing clear expectations before a project starts is a required starting point.

Step 6: Who Will Be Involved in the Decision Making Process (Don’t go out on “one-legger” appointments)

Who is making the final decision on a project? You need to know this prior to going out on a sales call. You will have wasted you time if you go out on a call to meet only one spouse and are told that they need to review this with their missing partner before they can move forward.

With one partner missing, the person you speak with can always tell you that they can’t make a decision until consulting their partner. To counter this, ask the person you speak with on the phone who will be involved in making the buying decision. If it involves both partners, make sure both are there for your sales call.

Step 7: Review the Scope of Work with the Homeowner (Let them know you understand)

In this last step, summarize the scope of work that was reviewed in step 2. In conducting this phone interview correctly, you are not making a sales call on the phone. You are completing a review and evaluation of the “problems” that the homeowner has reviewed with you.

You are determining if you can help. You are identifying the homeowner’s budget and schedule, and asking any additional questions you might have about what they want done. You are doing your “due diligence” to determine if this is a job you want. You are also determining if this is someone you want to work with.

In asking these questions, you find out a great deal about a prospective customer:

• Real prospects want to talk about their projects. In the course of a 15 to 20 minute conversation, you will get a good sense if they are a real customer. You will know when people are responding honestly, and you will know when people are withholding information. Since you are giving up several hours of your time to meet with someone, make sure the homeowner is a serious buyer.
• You may find you make a good connection with the homeowner. In a case like this, you have already pre-sold yourself. When you have a good connection with someone, your follow-up sales call is more of a formality if you have reviewed budget and schedule and both are satisfactory.

In the course of these “auditioning” calls to prospective customers, don’t try to sell anything! Just listen. Follow the 80/20 rule. Let the homeowner speak 80% of the time. Try not to speak more than 20% of the time.

With these questions, you can guide the homeowner through a description of their project, and help them understand scheduling and project costs. This is the basis to a good working relationship. In the world of home remodeling, you are the expert. Guide the homeowner through this process, and they might become a good customer, and provide a steady source of future referrals. Take your time with this.

Summary:

Remember your time is valuable and you want to make the most of it. One easy way to do that is to follow the seven steps to qualify your leads:

1) How did they come to call you?

2) Review the scope of work

3) Review the homeowner’s sense of urgency

4) Determine a homeowner’s budget

5) Determine the homeowner’s schedule

6) Don’t go out on “one-legger” appointments

7) Complete a final scope of work review

By asking focused questions, you “control” the interview process, and you can move through the project evaluation quickly and efficiently. The answers to these questions will allow you to determine if they are a “real” customer or not.

Don’t go on appointments with unqualified prospects. Time is your most valuable resource. Only schedule appointments with qualified prospects!

The post Construction Job Leads: How to Qualify Construction Leads appeared first on Remodel Force™.