This is a followup to last weeks post 5 Lessons Learned From Starting My Own Business, so if you haven’t read it, read it first.
Build It To Sell
Just because a business is new, doesn’t mean it’s too early to think about selling it; it’s never too early, and by thinking about how to sell it, you’re going to build a stronger business. One of the key factors in building a business that can be sold it making sure the owner isn’t integral to the business. People who buy companies don’t want to buy a company that they’re going to have to work in 40 hours a week. They like to buy a companies whose employees do the majority of the work. That doesn’t mean the new owner can’t work ON the business. It just means that he or she shouldn’t have to work IN the business.
Get Organized Early
Besides being a lot harder to manage, no one wants to buy an unorganized business. Meet with an accountant to figure out the best business structure for your business and get you started with some accounting software to keep track of your revenue and expenses early. It can be much more expensive to tackle these problems later.
Pay the Right People For The Right Advice
One of the quickest ways to fail is to try to do everything on your own. For newer companies, owners will find themselves taking on the tasks that multiple people would handle at a larger company. This can lead them to try to handle the legal and accounting work for their company as well – and this can be a bad choice. If it’s a legal or accounting problem, it’s best to seek out a professional. Problems in these fields require a significant amount of time to understand, so you’re usually better off just paying the right accountant or lawyer for advice. For example, I have businesses that are LLC’s, S-Corp’s, and C-Corp’s – all for different reasons. Choosing which depends on what your business will do, how many partners and investors you will have, who those investors will be, and how susceptible to lawsuits your business is. I helped someone last year reorganize their business, and by simply switching it from a sole proprietorship to an S-Corp, they saved almost $8000 in taxes they didn’t have to pay. This year they’ll double it and save $16000!
For the advice that will save them $24,000 over two years, they only had to pay an accountant $160 for one hour of their time. That’s a 15000% return on their investment, and that’s before considering they’ll continue saving at least $16,000 every year after.
This advice doesn’t only apply to legal and financial matters either. In many industries, there are mentors who have been very successful in their industry offering classes and mentorship program to help others to become more successful. These can be quite expensive, but the right ones can pay off 100 fold.
If you’ve noticed, I keep mentioning paying “the right people.” Do your homework before paying anyone to ensure they have the proper background and understand your industry well enough to provide sound advice.
If you’re going to be doing something more than once, it’s often a good idea to create a system for it. It doesn’t have to be an amazing system. The magic is that by creating one, you’ve given yourself a benchmark to improve upon. When you do things the same way multiple times, you continue to learn how to do it quicker and better and can continue to adjust the system. By bringing this mindset into your business, you can not only make it run more efficiently, but it will make it much more attractive to potential buyers down the road.
Don’t Treat You’re Business Like Your Baby
Many new business owners treat their business like they would a child. Don’t fall into this trap. Business is meant to be non-emotional, and by keeping it that way, you’re opening your mind to make better choices when difficult situations come up.
Yes, exercise. It makes you a better person mentally as well as physically. Exercise helps keep your mind clear and your energy levels up. When Richard Branson was asked “How do you become more productive?” he responded with “work out,” and claims it gives him at least four additional hours of productive time every day.
I hope these lessons can help you avoid many of the mistakes I’ve made. Any great advice I missed?