I read quite a few business books each year and have developed an ability to tell an academic writer from an entrepreneur in just a couple of pages, even without the help of the author biography.   Built to Sell is the former and a book I feel comfortable recommending as an accurate and realistic guide from a successful entrepreneur who has “been there, done that”.
If you own a business and want to successfully sell your company one day, realize that exit planning is a multi-year process that is financially worth the effort you invest.  If you are not a book reader, the cliff notes are contained in this article and you can keep current with John Warrillow’s blog.

Do you every think about selling your company?  Have you done any exit planning?  Here is a good first step…

Built to Sell – Exit Planning From the Begining is a post from: Business Cash Advance provider Instant Capital Solutions.

I was having breakfast with a CFO of a government contracting firm last week who shared a story that is instructive and insightful if you hope to successfully exit your business one day.

Two years ago, he was finalizing weeks of deal making on a small ($4.5 million) acquisition.  About a week before the deal was to close, the recruiting manager left the company they wanted to purchase, making the acquiring owner just a bit nervous.  After further consideration the acquiring owner decided to proceed, but knocked a half a million dollars from his offer.  Although pricing is under constant negotiation during the closing process, was a bit unusual and it destroyed the deal.  The sale never happened and the seller is still trying to recover from the personal disappointment and get his company back on track.

Important lesson:  There are critical employees in your business who have the ability to impact your sale and the value of your company.  Here are some guidelines to keep in mind while managing your company sale process:

1 – Keep the process confidential.  In fact, you should not market your company for sale, but rather “considering strategic opportunities.”  Use an outside party to help with your company sale.  Remember, it is much less expensive to surprise your employees with news of a sale then having them surprise you.

2 – Design a retention package for key people that is consistent with your earn-out provisions.  You are likely to have some of your sale proceeds paid out months after the closing based on performance metrics.  These should be coordinated with a retention package with key employees that allows them to share in the upside by increasing the back-end payout to you.

3 – If certain employees are key to maximizing the value of your company at sale time. they are key even if you do not sell the company.  Make sure you have golden handcuffs to keep them motivated to continue to build value in your company.  A well designed plan should always benefit ownership.

There are many moving parts to manage during a business sale, and retaining key employees is one of those parts. Since employees a emotional human beings, they can be one of the most challenging and surprising parts.  Remember, surprises are seldom good news when selling your company.

These issues should be addressed well in advance of a company sale, in fact, they are all part of a well designed exit planning process.  This is a growing field of business advisors and a good exit plan would have saved this particular owners retirement life.

Do You Have a Key Employee Worth $500,000 is a post from: Business Cash Advance provider Instant Capital Solutions.

It happens every single day and often kills small business owners without a great credit score.

This morning’s Wall Street Journal’s did a great story on free credit score reporting.  I know you have multiple issues you manage on a daily basis, but hey, this is about bottom line profits.  There is nothing more important.

Your credit score will ultimately have an impact on profits and sales, so focus.  The impact of your credit score is not noticeable to most owners until it becomes expensive.  As a business owner there are other levels of complexity which I’ll develop in a future post.  Today I’ll just illustrate the financial importance of your credit score.

Your FICO score not only impacts the availability of capital for a small business,(which could save your business one day)  it has direct impact on your profits as well.  Because this is an abstract concept for most, let me give you a specific look at the financial rewards of strong personal and business credit.

Last week I helped a business owner secure an equipment lease for a new machine he wanted so he could expand into a more profitable business segment.  His credit score of 620 (below average) provided a bit of a challenge, but we were successful with his equipment financing.  He elected a 5 year lease with a monthly payment of $1,025.  He was thrilled because his return on investment was significant.

Here’s where I hope to get your attention:

The exact same business owner with a 720 FICO score would have been offered a lease with a monthly payment of $836 per month.  Over the 5 years his equipment lease, he would have saved $11,340, his monthly cash flow would have been improved by $189 and his ROI would have been even more impressive.

I realize there are many issues that demand your attention each day and it is easy to ignore issues that are not burning.  Don’t!  Maintaining your credit score is relatively easy and will have an important impact on the profitability, and maybe even the survival, of your business.

The $11,340 Credit Score Mistake is a post from: Business Cash Advance provider Instant Capital Solutions.

My last post discussed how American Express cut credit limits for business owners when it was needed most and now is advertising how they want to be a part of the economic recovery and a friend of small business.

For the record, they are not alone in their ability to abandon business owners in a time of need.  This Wall Street Journal article on August 12 discusses how wide spread the practice has been and the ability your credit card issuer has to conduct business any way they see fit.

How will you respond?

Amex and others hope business owners forget when times get better, will you?

Business Credit Card Limit Cutting Continues is a post from: Business Cash Advance provider Instant Capital Solutions.

If you’ll review past blog titles, you’ll see I’ve anticipated the current credit crunch since last summer, giving readers and clients ample time to prepare for a credit crunch that will almost certainly worsen before it becomes better.

The 1/22/06 Wall Street Journal had 46 related articles to the “credit crunch” including a great one that discussed why funding will get much harder for smaller companies (here).

Many of the biggest small business lenders are reeling with multi billion dollar sub prime mortgage losses and are reducing their lending activities. Citi recently announced they will increase rates on consumer credit and reduce lending limits on already committed and underwritten loans.

Fed Chairman Bernanke’s .75% emergency rate cut yesterday clearly helped calm the stock markets, and should help with liquidity. However, we are not out of the woods. In fact, I suspect we’re still in the middle of the forest.

As alternatives for business financing vanish, merchant cash advance has a wonderful opportunity to fill a void vacated by traditional lenders. From early evidence, that is exactly what is happening.

While some funding companies have had their credit reduced, the industry’s largest and most stable companies are adding additional lending capacity in anticipation of growing demand.

As suggested last summer, smart business owners will take the time NOW to become approved for reserve capital that can be accessed quickly in the event emergencies arise or current credit lines are reduced or eliminated.

Crunch Arrives – Problems will Worsen is a post from: Business Cash Advance provider Instant Capital Solutions.

The results of a recent survey of small-business owners found that the number one barrier keeping them from meeting their financial goals in 2008 is lack of access to working capital small businesses indicated that their own “credit crunch” outweighs all other business obstacles they will face in 2008 including taxes, staffing, seasonality and energy costs.

For the past year, news headlines have cried out that the U.S. is in a full-blown “credit-crunch.” While the impacts of the crisis vary from industry to industry, the common factor is that access to lines of credit and traditional financing is increasingly difficult to obtain, credit and capital are getting more expensive when they are obtainable, and consumers are feeling the pinch as banks tighten approval requirements. Small businesses, which are also consumers of credit, are no exception.

As a result, we has seen a significant increase in business volumes particularly with “alternative funding providers” that offer capital to small and mid-size business owners with personal credit scores as low as 525.

As the industry matures, new funding alternatives have come to the market place at the end of 2007 that offer greater funding options for small business owners who have been able to keep their credit score above 600.

As awareness of alternative funding continues to grow in the business community and options expand, we anticipate more business owners will continue to seek professional, objective guidance about the best financing programs to meet their needs.

Your Personal "Credit Crunch" – 2008’s Biggest Obstacle is a post from: Business Cash Advance provider Instant Capital Solutions.

Do you Remember October of 1987, “Black Monday” and the market drop of 23% in a single day? That would equate to a 3,200 point drop today.

There are many important lessons learned from that day which you can read in detail at Breakingviews.com. The question back then is the same question currently raised from the “credit crisis”: Will this financial crisis turn into an economic crisis.

Financial crises do not have to become economic crises. To date, this crisis is contained. The amount of loans that could default is not significant enough to push the economy into a recession or threaten the financial system. A benefit of globalization is that the debt is widely spread among investors and institutions around the globe. If the situation does get worse, the Federal Reserve and other central banks have a number of tools available to deal with the problem.

As you keep your eye on the economy, there are three factors to watch for that will indicate it this is the beginning of an economic crisis.

1) The first factor is short-term interest rates. If treasury rates stay low or decline further, investors are not reversing the flight to quality. If short-term treasury rates climb to where they were before the crisis, investors are more optimistic and markets are returning to normal.

2) The second factor is the commercial paper markets, especially the asset-backed securities market. This is where short-term loans are made to companies and sold to investors. Asset-backed loans are secured by specific corporate assets. In coming months, I hope to see that companies are able to issue new commercial paper at reasonable interest rates.

3) The third factor is the dollar. Watch the dollar to see if foreign investors and governments sharply reduce loans to and investments in the U.S. If they lose faith in the potential for good returns in the U.S. or lose confidence in our investment vehicles, the dollar will decline further and sharply.

I believe the credit crisis is overblown and have not seen any impact on our ability to help clients obtain the financing they need to continue to grow their businesses. I do not expect that to change, but will be watching these factors closely.

Your 20th Anniversary is a post from: Business Cash Advance provider Instant Capital Solutions.

The merchant cash advance industry continues to evolve into a rapidly growing industry since the product was originally introduced almost twenty years ago. Today, there are estimated to be over twenty merchant cash advance providers although the “big six” dominate the industry. There are also dozens and dozens agents, card processors and sales people offering the merchant cash advance product through various cash advance providers.

As more and more people are selling this product, capital is becoming a more reliable and available funding source to businesses nationwide that may not have access to traditional lending sources. Because a merchant cash advance is typically not a loan, (it’s a sale of future credit card receivables) it allows funding companies an alternative underwriting method to provide working capital to merchants that would not qualify for financing with traditional underwriting formulas.

It is estimated in 2007 alone that $600 million – $700 million worth of merchant cash advances will be provided to help grow tens of thousands of businesses nationwide. With that said, the marketplace has become extremely competitive.

Whenever an industry experiences rapid growth, there are some almost predictable consequences.

1 – Some merchants will be abused by “bad brokers”

2 – Capital will become more competitively priced

3 – The industry will become regulated or will self regulate

Regulation is by far the largest threat. Not to the funding companies, but to the merchants and those business owners needing capital quickly and effectively. If the industry grows too large or if there are significant complaints, the temptation to regulate will likely become too great and I suspect the end result will restrict how this industry can serve the needs of its clients.

It will be interesting to see how this develops over the next two to three years. In the short term, however, merchants today can serve themselves best by using one of the reputable funding companies and working with an independent, professional broker who will help them through the growing and complex network of companies to find the capital that fits them best.

The card advance industry is serving an important niche in American small business and I hope it can survive in its current form.

The Threat of Regulation is a post from: Business Cash Advance provider Instant Capital Solutions.

You know credit is an important part of any business, but it is critically important for the small business owner. It seems like almost every day I talk to a business owner who “had great credit before the business started.” Sound familiar?

There are two common mistakes I see business owners make that will quickly deteriorate your personal credit rating.

1 – No separate business entity

Most business owners have taken the steps to create a legal entity (S-corp, C-corp, LLC) and establish a federal tax ID number (not EIN number). However, most do not maximize the advantage of this separate entity when they seek business financing.

This happens either because you do not believe you can or do not know how to establish credit in the name of your company. While there is a lot to know about business credit agencies, vendor reporting, business lending banks and the rest, it is fairly simple to create a great credit score one you understand how the system works.

Without a separate business entity, however, you have no option but to personally obligate yourself for the debts of your business by signing for every loan or credit personally. Think of the “business credit card” you have. While it may have the company name on it, you are personally obligated for the charges you make because you used your social security number and signed personally when you applied.

If you apply with your company name and use the company tax ID number where the social security number goes, you have established credit that is in the name of your company only. There are only 40 business credit card companies (out of 500) that will offer their credit card with no social security number requirement.

2 – Signing personally

This happens as a result of point #1. Without a separate entity and strong credit to assign lending risk to, most business owners have no choice but to sign personally for most or all of the credit they need to grow their business.

This causes 1) Sleepless nights with growing debt you are personally responsible for 2) Quickly exhausting your personal credit limits which will negatively impact your personal credit score 3) Personal responsibility for the debts of your business.

When you reflect on your current credit strategy, there is almost nothing positive about personally signing for business credit. At the root of this problem is the fact that most business owners are so busy working IN their business they allow very little time to work ON their business.

Because of this, we have created the Capital Access & Rate Enhancement Program™ which is a trademarked process that can help any business owner position their company to have access to credit that is in the name of their company only. It can also allow you to gradually shift the debts you now personally guaranteeing to the company.

Access to capital and strong business credit will either be a constant problem or a competitive business advantage; with our unique process, the choice is yours.

I’ll provide updates here as this program develops.

How to Ruin Your Personal Credit with One Signature – or Two or Three…. is a post from: Business Cash Advance provider Instant Capital Solutions.

We provide money to small business owners for many different reasons. While the purpose of funding needs differ, one similarity is a desire for “low cost money”. As a self proclaimed “cheap skate”, this seems like a logical starting point, but I have considered this position over the years and my thoughts have developed.

The objective of “low cost money” is not to pay more than necessary and that is where we should begin our analysis. The comparison point for most is whatever the bank charges for money, usually prime plus two or three points. For reasons we will discuss, this is not a logical barometer at all.

When we look at a traditional bank, their primary responsibility is to accept minimal risk when making a loan (to protect their shareholders). They do this by saying “NO” to most business loans and when they actually do make a loan, they require personal loan guarantees, over 100% collateral and income/debt ratios that are not practical for most business owners.

Why? Because they work on such narrow margins, they can never afford to make a mistake and therefore shift 100% of the risk in their business loan to you, the borrower – business owner. In their environment, they can only make safe, secure loans because they are not paid enough to accept more risk.

By creating an open marketplace with multiple small business funding companies, we often create an environment where you, the business owner, decides which form of business funding is best and what cost is appropriate for your business.

A couple months ago a client with below average personal credit needed funding to purchase another truck for his business, and he wanted the loan to be in the name of his company, without any personal guarantee (we do this all the time).

His initial Paydex Score was not above 75 as many of our lenders require, but one lender was willing to fund his truck at prime plus ten. We almost did not present the offer to him because we were confident we could help him raise his Paydex Score and get an offer (or two) at prime plus three or four.

“Waiting will cost me too much money – I need the truck and I need it tomorrow” was his reply. His response helped me realize that business owners are more qualified to determine the best price for their funding, not me and certainly not a bank.

Another client in Arizona needed funding to purchase two full containers of tires from China. He spent months locating every bank in town that would not loan him money before he found us. His only other alternative was a “business friend” who would provide the funds in exchange for 20% equity in his company! While his investors wanted a part of his company, our funding company just wanted “more” money (as compared to a bank).

An auto dealer in Colorado agreed our money was much less expensive that giving 33% of his profits on every auto carrier to a “friendly investor”. A restaurant owner in Ohio accepted funding to expand her banquet facilities and their sales boomed. Our money ultimately cost them less than 15% of new profits over six months.

A florist in California used our funding to bridge a slow period rather than permanently lose a campus location where he was two months behind his rent. Spending “more” in the short term was more appealing than losing 40% of his sales over the long term.

These examples and the dozens of others each month confirm that YOU, the business owner, are the best judge of the appropriate cost of funds. In most situations, cost is not the key; access to capital is the key. Given that, a smart business owner who knows their business well is the most qualified to determine how well priced the money is. Not by the cost of funds, but by the opportunity it creates for future growth and profits.

When Paying "More" is Better for Your Business is a post from: Business Cash Advance provider Instant Capital Solutions.