Have you heard these myths about small business exit strategies? Myth 1: The value of your business is solely based on net profits. Myth 2: Customer service is the ultimate differentiator. Myth 3: Emotion and identity play no role in business value. Want to know the truth behind these myths?
Building a Valuable Business: Lessons from An Expert Business Coach
In this episode of Napkin Numbers, Scott Lundt and Rahsaan Freeman speak with Denver Business Coach Steve Kohnke to dispel these myths.
Throughout the episode, key factors impacting a business’s value are uncovered, shedding light on the risks associated with owner dependency, emotional attachment, and lack of differentiation. By addressing these factors through intentional strategies, small business owners can mitigate risks, increase operational efficiency, and ultimately boost their companies’ attractiveness to potential buyers.
Understanding the key factors impacting the business value is crucial for owners looking to optimize their exit strategies and achieve maximum value upon selling their businesses.
Napkin Numbers Talking Points
[0:37] Exiting on Your Terms
- Steve emphasizes the importance of business owners exiting on their own terms and schedule.
- He highlights the risks of dependency on the owner, key employees, customers, and suppliers and the need to separate the owner from the business.
[1:20] Business Risks and Emotions
- The conversation delves into the emotional attachment of business owners to their businesses and the impact on value growth.
- The discussion also touches on the significance of brand value and its influence on the selling process.
[8:15] Valuing the Business
- Steve discusses the misconception of using a simple multiple to determine a business’s value and highlights the need for a more comprehensive analysis that considers industry benchmarks, intangibles, and risks.
[11:50] Differentiating the Business
- The conversation explores the importance of identifying real differentiators for a business beyond competing on price or customer service.
- Steve shares how training employees to think like entrepreneurs can create value and set a business apart.
[14:25] The Power of a Strong Team Culture
- Steve discusses the importance of having a fully committed team and bought into the company’s vision and values. A strong team culture results in better service and increased business value.
[14:38] The Intangible Factor of Culture
- Scott and Steve emphasize the significance of a solid company culture when looking to sell a business.
- They highlight that a strong culture can make a business more attractive to potential buyers and increase its valuation.
[15:08] Attractiveness to Financial Buyers
- Emphasis is given to the importance of building a business that is attractive to financial buyers.
- They stress that having the right people and culture can raise a business’s valuation and make it more appealing to potential buyers.
The importance of business owners exiting on their own terms and schedule is paramount. Emotional attachment, accurate assessments of brand value, misconceptions about valuation, real differentiators, and the power of a strong team culture are all factors one must consider when attempting to attract financial buyers and ultimately increase their business’s value.
If you want to sell a business, please use our complimentary business evaluation calculator to determine its value.
Discover more about Steve Kohnke:
Uncovering Overlooked Risks in Growing Your Business’s Value
Ever feel like you’re playing a risky game with your business’s value? An advisor may have told you to focus solely on growing your revenue, but have you ever considered the overlooked risks that could instantly wipe out all your hard-earned value? It’s frustrating to pour your heart and soul into your business only to realize that it might not be as secure as you thought.
In this episode of Napkin Numbers, Scott Lundt & Rahsaan Freeman uncover those hidden risks and show proactive steps you can take to safeguard your business’s value.
You will discover how to shield your business from unexpected events by effectively mitigating risks, learn the essential strategies for preparing your business for a successful sale, explore the importance of diversification in maximizing your business’s potential, leverage insurance for robust protection of your business, and navigate the complexities of business planning and consulting.
You won’t want to miss these invaluable lessons you need to know to protect your business!
Napkin Numbers Talking Points
[0:31] The Reality of Selling a Business
- Rahsaan explains the sobering statistics that three out of four businesses fail to sell when put on the market, highlighting the need for strategic planning and protecting business value.
[1:01] Risks and Business Value
- Scott Lundt discusses the principle of higher risk leading to less value in a business, emphasizing the importance of mitigating risks to safeguard business value.
[3:32] Turning Challenges into Opportunities
- Understanding and mitigating risks are crucial for safeguarding business value. The upcoming episode will explore how a business consultant like Steve Kohnke can help turn these challenges into opportunities.
- Listeners are encouraged to reach out for further discussion.
If you want to sell a business, please use our complimentary business evaluation calculator to determine its value.
Real Estate Mastery for Business Owners: Exclusive Buy/Sell Case Studies
If you’re feeling overwhelmed by the complexities of commercial real estate transactions, struggling to optimize your financial outcomes and need guidance on the best decisions, you are not alone!
In this episode of Napkin Numbers, Scott Lundt & Rahsaan Freeman review case studies they have seen through their work at Freeman Lundt, where business owners have bought or sold real estate in connection with their business.
You may have heard myths about commercial real estate transactions, such as you don’t need a commercial real estate broker and can use legal counsel to draw up an agreement for a transaction without any input from a broker. Scott and Rahsaan share the benefits and importance of having real estate brokers involved in commercial property deals for the best return on your investment.
You’ll hear insightful examples of buyers and sellers who made expensive mistakes by not having an agent’s expertise during negotiations. They explain how agents add value on both sides of a deal, from guiding due diligence and inspections to advising on tax implications and financing options. Working with an agent meant better loan terms and higher cash flow for buyers.
You won’t want to miss these first-hand accounts of how commercial real estate brokers maximize financial outcomes.
Napkin Numbers Talking Points
[1:11] Importance of Real Estate Professionals
- Scott highlights the value of hiring a commercial real estate broker to guide buyers through the real estate process, including market value, due diligence, financing, and potential tax savings.
[2:47] Emotional Attachment and Payment Risks
- The conversation delves into sellers’ emotional attachment to their buildings and the potential payment risks they face after selling.
- Scott also explains the implications of switching from owner-occupied to non-owner-occupied buildings.
[4:11] Role of Real Estate Agents
- The importance of real estate agents is emphasized, particularly in setting market rent rates.
- A real-life example is given where an attorney’s lease agreement lacked context for the rent amount, resulting in a significant discrepancy.
[5:31] Financing and SBA Options
- Rahsaan discusses financing options for buying real estate, highlighting the SBA’s 504 loans as a potential avenue for 100% financing.
- Listeners are encouraged to reach out for further discussion.
If you want to sell a business, please use our complimentary business evaluation calculator to discover what your business is worth.
Uncovering the Risks: Do Business Owners Need a Commercial Real Estate Broker?
In this episode of Napkin Numbers, Scott Lundt & Rahsaan Freeman are joined by Bob Fredrickson, the president of Coldwell Banker Commercial Danforth, to discuss the pivotal role of commercial real estate brokers in business property transactions.
Bob’s expertise shines as he discusses the vital factors that buyers need to consider, including property valuation, compliance, and market insights. He emphasizes the necessity of local market knowledge and the ability of commercial brokers to assess property value and potential risks accurately. On the seller side, Bob highlights the importance of balancing business and property value, stressing the need for realistic pricing and thorough property preparation.
For any business owner or investor in the real estate market – this episode is an essential listen to hear Bob’s valuable insights and practical advice to guide them through real estate transactions with confidence.
Napkin Numbers Talking Points
[2:28] Why Can’t I Just Use a Transaction Attorney
- The transaction attorney can write up the transaction, but they will not do a feasibility study.
- Commercial real estate brokers will look into the property to see if there are other tenants.
- The broker will analyze the leases for all of the tenants to tee up the building and prepare to sell it.
- Bob Fredrickson shares that his brokers put together an analysis of how a property will perform over the next 5 to 10 years, ensuring the buyer knows it is a good investment.
[5:52] Commercial Real Estate Broker Brings Value
- Bob Fredrickson says it is crucial to balance the business’s value versus the property’s value.
- A discussion must happen between the M&A side, commercial broker and the real estate owner and the business to determine that balance.
[7:00] Risks for Sellers
- Bob Fredrickson says it is crucial to balance the business’s value versus the property’s value.
- A discussion must happen between the M&A side, commercial broker and the real estate owner and the business to determine that balance.
[9:02] Including All the Experts
- Rahsaan mentions that a CPA is also a vital component of finding the balance in evaluating the business and the property.
- The CPA will provide guidance from a tax perspective on valuing the business or the property more.
[9:55] The Standoff Between Buyers and Sellers
- Meanwhile, he says, buyers are waiting for the bottom to drop out of the market.
- Neither party is getting their way – buyers are not getting bargain basement prices on real estate, nor are sellers getting top dollar for their property.
- Both sides need to be realistic with their numbers, so if everybody gives a little bit, then brokers know they did a good job because everyone is hurting a little bit.
- Rahsaan shares that the definition of a successful transaction is 90% happy on each side.
A sincere thank you to Bob Fredrickson for being our first guest on Napkin Numbers. For more about Bob and his team at Coldwell Banker Commercial Danforth, click the links below.
If you want to sell a business, please use our complimentary business evaluation calculator to discover what your business is worth.
Acquiring A Business With Real Estate: Top 3 Reasons Why Investors & Entrepreneurs Should Consider This Move
Discover the three compelling reasons for acquiring a business with real estate to achieve a strategic advantage. In this episode, Scott and Rahsaan shed light on the financial, strategic and legal aspects of purchasing a business with real estate and provide valuable insights for entrepreneurs and investors to navigate this journey.
Through two case studies, Rahsaan illustrates the need for expert guidance to positively impact the acquisition of a business with real estate and the potential return on investment that it brings. To gain a competitive edge in the market, listen now for the essential information on valuation, buying or selling a business with real estate.
Napkin Numbers Talking Points
[0:51] Acquiring a Business with Real Estate
- Top three reasons why investors and entrepreneurs consider acquiring a business with real estate: property valuation, due diligence, and financial considerations.
[3:30] Selling a Business with Real Estate
- Explores the strategic decision of selling a business with real estate
- Emphasizes the importance of finding the right buyer
- Navigate legal and regulatory issues
- Valuing and pricing the business for sale.
[5:38] Tax-Efficient Vehicles for Selling Real Estate
- Highlights tax-efficient strategies for selling real estate, such as a DST, 1031 exchange, and monetized installment sale
- Emphasizes the importance of reducing tax liabilities and increasing ROI.
[7:56] Introduction to Industry Expert Bob Fredrickson
- Previews industry expert Bob Fredrickson, president of Caldwell Banker Commercial Danforth
- Bob will join the next episode to provide insights on commercial real estate and its impact on buying and selling a business.
If you are ready to discover more about what goes into buying a business, please visit our website: freemanlundt.com/buying-a-business/.
If you are interested in selling a business, please our complimentary business evaluation calculator to discover what your business is worth.
Buying A Business? 3 Essential Requirements To Find Your Perfect Fit
Are you tired of the same old routine? Ready for a change? Have you considered buying a business?
In this episode of Napkin Numbers, Scott and Rahsaan explore how self-reflection can uncover hidden passions and open doors to unexpected opportunities.
Don’t fall for these common myths: 1) You need to be an expert in the industry to succeed, 2) Passion is the only thing that matters, and 3) Your preferences can’t change over time. Listen in as we debunk these myths and reveal the truth behind identifying the right skills, passions, and preferences when buying a business. Scott and Rahsaan share their proven strategy to help you make the right choices for your entrepreneurial journey.
Napkin Numbers Talking Points
[1:10] Understanding Your Ideal Opportunity
- To find your ideal business to purchase – Answer 2 questions: What do you like to do? What are you good at?
- Identify skills that you have
- Find what you’re passionate about
- This exercise helps buyers expand their options and consider industries they may not have initially thought of.
[4:10] Turning Dreams into Realities
- An engineer completed the 2 questions, showing that the liked to cook, but wasn’t a chef. And he’s good at managing people and tasks and was open to running a restaurant.
- Need to have vision, because owning a business means your employees come first
- Discipline is essential to get you to your vision
- When you’re passionate about what you do, your discipline kicks in so you can fulfill your vision
[6:50] Keeping an Open Mind
- You never know what might be next so be open to the possibilities
- If you’re not into managing people, steer clear of businesses that do not align with that value.
- Scott & Rahsaan never thought they would own the portfolio they have now, but each of them turned out to be the perfect fit.
If you are ready to discover more about what goes into buying a business, please visit our website: freemanlundt.com/buying-a-business/.
If you are interested in selling a business, please our complimentary business evaluation calculator to discover what your business is worth.
