Archive | July, 2014

Why 2014 May Be The Perfect Year To Sell Your Business

In the entrepreneurial ecosystem, business owners looking for an exit strategy are likely to find 2014 an optimal year for selling.- Peter Lehrman, Entrepreneur Magazine

Timing any market is always a tricky proposition, especially in this era of diminishing returns and lowered expectations. The market for selling a small to mid-sized business is no exception.

Anyone considering selling a business, especially boomer business owners thinking about retirement, should have a list of compelling reasons why they want to sell and a plan to help them do so.

For most business owners, the timing will never be perfect, so waiting until the ideal moment to sell could be an impractical course of action. However, certain indicators are pointing to a better than average success rate for selling a business in 2014.

That’s why it’s a good idea to employ strategies right now that will help you get the maximum money for your business.

2014: The “Year of The Seller?”

Three or four years of turmoil in a struggling economy makes some business owners understandably cautious when it comes to optimistic projections for 2014. However, there are some very good indicators pointing to the possibility of a perfect selling environment for at least the next 18 months or so.

For example:

• The majority of businesses have experienced increased profitability for the past 2-3 years.

For numerous business owners, 2008-2010 were flat as far as profits were concerned. Those who survived this period felt lucky to break even, much less put profits on the books. With demand down across the country for services and solutions, business owners were unhappily treading water.

However, the recession is slowly retreating, allowing businesses to recover. Many are now in a position to show the three or four years of solid growth that qualified buyers want to see when they build projection models.

The ability for a company to demonstrate upward trends in their financials shows prospective buyers that it is right to make positive projections for future growth. This in turn gives owners better valuations and does wonders to make the deal viable. Buyers want to know that a business they purchase is poised to survive even a serious economic downturn.

• Low interest rates (for a little while longer, anyway)

You don’t have to have an advanced degree in economics to understand that the artificially maintained low interest rates we now experience will soon be a thing of the past. Forecasters have been fretting that the Federal Reserve will be forced to curtail its’ bond-buying program soon.

A growing number of experts now say that 2014 could be the year when that finally occurs. This means, naturally, that waiting too long to sell might mean an owner will see higher interest rates and a lower price for his or her business.

The reason for this is that interest rates always have a direct impact on the price of capital used to purchase a company. Buyers who rely on loans to acquire a business will feel the sting of these rising rates since earnings are used to pay the interest on loans. An increase in the price of capital will almost certainly lead to lower valuations for businesses.

It makes sense that the more expensive it is for buyers to get capital, the less willing they are to pay top price for a business. As soon as rates begin to rise in 2014, there will be a negative impact on business valuations.

• Low levels of debt and lots of positive cash flow

Credit Suisse reported in February, 2014 that 73 percent of U.S. companies and 56 percent of European companies have incredibly low levels of debt on their balance sheets compared to their total market capitalization.

Private equity companies are awash in cash, with nearly $1.1 TRILLION in cash on hand. At the same time, levels of corporate debt are falling to new lows. So, what does this mean for you as a business owner who is seriously considering selling?

Well, for one thing, since all this cash needs to go someplace other than under the CEO’s mattress, private buying groups will be out en masse looking for successful businesses they can buy and from which they can see immediate cash flow.

For another thing, there is a natural mood elevation that goes on when so many dollars are in play.The old saying “a rising tide lifts all boats” is applicable here. Every billion dollar mega-deal that goes down makes every smaller business deal more attractive. Small businesses are sure to benefit from the optimism that comes with any boom.

• Changing demographics are pushing boomers to sell.

The first half of the “Baby Boomer bubble” (2005-2010) has passed. During that period, older Boomers were able to sell to younger boomers, although the success rate was still a mere 3%.

However recent research indicates that the number of boomer owners indicating they wanted to retire increased from 50,000 in 2001 to over 750,000 in 2009.

It is possible we could see over one million businesses go on the market in the next 10-15 years in a transition tsunami. If this holds true, then it makes sense to sell ahead of the herd and reap the benefits of the current buying frenzy fueled by low debt levels and loads of cash.

Even if you think you aren’t ready to leave your business yet, you should plan as if you are. Positioning your business to sell is never a bad idea or waste of time.

By crafting a well-thought-out exit plan, you will be prepared if circumstances (either good or bad) push you to sell, or if you get an offer from a qualified buyer that you just can’t afford to pass up.

You never know, maybe 2014 will be the year you make a profitable transition from your business and start enjoying everything for which you’ve worked so hard.

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Agile Versus Traditional Project Management

Tipped to be the hottest trend in project management for 2014, Agile has seen its heyday come at last. Not a new concept, agile project management has been used to some degree in the software industry for several decades, but is only now coming to the fore as a workable project management method for other industries too.

Using agile project management techniques is not a million miles away from traditional methods. You still do the same work and arrive at the same end goal, but with the agile method work tends to be faster, more productive and risks tend to be diminished. Here’s why.

Traditional project management
This method, also known as the waterfall method, is the most widely used form of PM worldwide. It typically involves six key steps from start to finish:

1. Requirements
2. Design
3. Development
4. Integration
5. Testing
6. Deployment

Each one stage is completed before the whole team moves onto the next stage, making this sequential method seem like something of a waterfall cascade, hence the name. Not all projects include all stages, and some may include a few more, but in essence this is the formation of waterfall PM.

Traditional PM is widely accepted as being valuable for smaller, well designed projects, but can sometimes struggle when dealing with larger and less well defined situations. It is designed for use in construction and manufacturing industries, where later changes are impossible or not cost effective, meaning everything needs to be done in a certain order.

Agile PM
The agile method differs in that everything can take place in any order, and is not necessarily sequentially completed. The method relies on human interaction management, and works on the project as a set of small tasks which are defined and completed as the demand arises. Large projects can be simply broken down into smaller components, known as ‘sprints’, and tackled for a short space of time until complete.

In agile, the design, testing, integration and development are all undertaken during each sprint, which makes the likelihood of errors being built into the final project much less. This means there may be major changes made throughout the lifespan of the project, and the final product might not be exactly what was envisaged at the start. It will, if done right, be relevant, useful and flawless.

Which is best?
The most suitable method for managing your project is something you will need to decide for yourself. It will largely depend on the type of project you are delivering, as well as the scale. Projects involving creative industries or software development benefit much more naturally from agile than those involved in creating physical products, as they allow for changes to be made even at very late stages in the project delivery.

Consider how stable the requirements of the project are. Projects that are likely to undergo changes to the brief or the requirements will respond much better to an agile project management framework, whereas those with well-defined business requirements and where certain stages need to be completed before moving on are more suited to traditional PM.

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Used Car and Bad Credit – Why is it the Best Combination?

Want to buy a car with bad credit history? Well, you are not alone. Many Americans are struggling with credit score and they still want to buy a luxurious new car. And, that is where they go wrong. There is no problem in buying a car straight out of any of the 2014 Auto Shows; but it is not the best decision for a bad credit buyer. Why buy an expensive car when used cars are perfectly capable of taking you places?

Used cars are no longer what they used to be. With the Cash for Clunkers Program of 2009, really old and decrepit cars were taken off the road. If you opt for a used one, you will probably get a car that is just six or seven years older. This means that you are buying nearly new car only.

Benefits of using a Used Car

Lower Loan Amount

Today, new cars are costlier than ever. Your dream car may cost you more than $30,000. But, you don’t need to spend such a fortune on a used car. You can get a decent car for just $12,000. You can even buy a cheaper car from a private seller by eliminating dealer’s commission.

Because of the lower loan amount, you will be able to make affordable payments easily. This will result in improvement of credit score as well. Sounds like a good deal, isn’t it?

Easy Financing Options

Most lenders do not approve new car loan requests of bad credit buyers. They worry about the safety of their money. But, lenders don’t have any problem in providing loans of smaller amounts. So, getting a loan for a used vehicle is relatively easy for a person with poor credit.

Dealing with Down Payment

A down payment or trade-in equity is required to lower the loan amount of a new car. You may even have to take a personal loan or break your savings to put money down. But, this is not suitable for a bad credit buyer. It is because he can use the same money in paying off debts and improving his credit score. You can avoid this situation by opting for comparatively cheaper used cars.

Dealing with Depreciation

Most new cars depreciate between 20%-30% of their cost as soon as you take them out of the dealer’s lot. There is no point in wasting your hard-earned money on depreciation. Instead, you can buy an old car with lower depreciation rate and almost the same reliability.

Dealing with Warranty

While buying a used car, you can easily transfer the original factory warranty to your name. Also, many manufacturers provide additional warranty on certified pre-owned cars. This way you can get a reliable car with lower cost. That’s sounds like hitting two birds with one stone!

A used car is an obvious option for a person dealing with bad credit issues. It provides the much-needed respite from crowded public transportation. And, because of affordable loan program, you actually have the opportunity of improving your credit score.

So, bad credit buyers! Stop looking for new car and make a logical decision by choosing a used vehicle.

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