EBITDA is an acronym for Earnings Before Interest Taxes Depreciation and Amortization. EBITDA is often used as a measure of a business’s cash flow. Also it is used frequently in many business valuation formulas, depending on the business’s specific industry.
In part 1 of this series, we discussed the various options to incorporate multiple businesses while keeping each business as a separate entity. But what if you want to keep all of your businesses under one roof?
Profitability is directly related to a company’s gross revenue, particularly as it relates to its varied customer types. What does gross revenue mean to your company’s profitability? Everything. Let’s back up to review the concepts we’ve covered in previous posts so we may explore gross revenue further.
Recently I took my nine year old daughter and a carload of her friends to our town’s Volunteer Fireman’s Carnival for an evening of ferris wheels, funnel cakes, and laughter–of course! It was a Friday night after a long week. Truly, I would have benefited from a simple dinner at home to unwind from the week. Sound familiar? However, I intuitively knew that the laughter of those children was most important and desperately needed…so off we went.
One of the most common questions I get from small business owners is, “when do I need an employee handbook?” In a perfect world, an employee handbook would be part of the startup protocol, but that usually isn’t the case. In the midst of building a website, working on business development and actually putting together a sellable product, writing policies and procedures is not top of mind.
In the recent Apple-Samsung case, the jury found that Samsung infringed six of Apple’s patents. While we think of Apple as having such technological superiority, three of the patents that Samsung were found to infringe were design patents. Unlike utility patents which cover any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof; design patents cover any new, original, and ornamental design for an article of manufacture.
The best solution to a problem lies in uncovering what the root cause of the problem really is. So often, this is the case when an entrepreneur is struggling with profitability in their business. Over the past few posts, we have discussed the concepts of how a minimum order policy and Pareto’s Principle applied to the customer/client base can be very powerful to help an entrepreneur improve the value of their business.
Proprietary information such as customer lists and recipes are intellectual property. However they are not formally protected in the same way as are trademarks, copyrights or patents. These and other types of confidential information can only be protected if they are treated as trade secrets.
If you own a business, you want to know that your entrepreneurial efforts will result in making money. However, many entrepreneurs struggle to recognize where they are making money and where they are not!
Most entrepreneurs find themselves extremely reluctant to turn away an order for any reason. The notion of telling a client or customer that their business or order is too small is frightening to even the most seasoned entrepreneur. However, if you don’t want to leave money on the table, and instead desire to make more profit, setting and enforcing a minimum order policy is absolutely necessary!
It takes a special kind of person to start a business: a rare combination of drive, ambition, creativity, tenacity and impatience for action. But even within the community of business experts and entrepreneurs there is a special breed of person known as a “serial entrepreneur.”
As I listen to the stories told by many entrepreneurs, it reminds me of the dangers they face in part because of their own abilities. Many entrepreneurs are literally jack of all trades. They are very good at doing many things! This trait has allowed them to strike out and start their own business. How in the world could this trait be bad you wonder?
Intellectual property is a concept that is not obvious to most people; you probably have heard of it, but what is it really? Intellectual property is the result of human ingenuity and creativity and the law provides mechanisms through which creativity can be protected. Intellectual property can be broken down into three parts.
Your worst nightmare comes true! You get an email on Friday afternoon from your largest customer indicating that they are changing suppliers for “strategic reasons.” They represent 20% of your sales revenue and 35% of your profits.
When you started your small or family business you more than likely developed a business plan. In this plan you laid out your purpose, vision, and strategy in great detail. As your business grew you created contracts, invoices, marketing materials, and other documents, all on paper, so that you had written evidence to signal agreements, to showcase your work, and to provide the necessary leverage should you ever have needed it.
A patent is a governmentally granted monopoly that gives an inventor the exclusive right to make, use, or sell their invention for a limited time, in exchange for disclosure of that invention. There are three types of patents: design patents, plant patents, and utility patents. Generally utility patents are being referenced when you hear the word ‘patent’ and these will be the focus of the rest of this article.
Did you ever hear the story of the businessman who was pulled over by a State Trooper? When told he had been going more than 20 miles per hour over the limit, the man gestured toward the traffic zipping by and quite reasonably observed “Officer, everyone out there is doing the same thing!”
Unimpressed, the trooper asked a question of his own. “Sir, have you ever gone fishing?” “Yes, of course,” the speeder answered, somewhat confused by the turn of conversation.
“Well,” continued the officer as he handed over the ticket, “did you ever catch all the fish?”
Recently, I had the good fortune to attend a conference where a gentleman and his wife shared their personal story about forgiveness in their business and personal lives. It was an unforgettable story that hit home.
When applied in a business situation, Pareto’s Principle likely will reveal to the entrepreneur that thier business is serving (at least) two very different sets of customers/clients. And in trying to do so, he or she and their staff will suffer anxiety, frustration, and the loss of company profit.
The Deceptive Busyness Trap℠ is a debilitating business problem eroding cash flow and stifling growth.It’s a common issue facing many business owners who, over time, unknowingly become subject to its influence.
The Great Recession has been a great teacher for many seasoned entrepreneurs. Those who have survived have been the ones willing to truly look at their businesses objectively. And in doing so, they have learned many lessons.
The various types of valuation reports produced by a business appraiser can be confusing to an entrepreneur, especially when the appraiser belongs to more than one valuation association. Under most appraisal standards, a business appraiser can produce two types of reports: a detailed appraisal report or a calculation report.
Just recently, one of my colleagues Bernadette, whom I have known for several decades, called me for help. As I listened intently on the phone, this successful woman entrepreneur shared with me that one of her biggest clients said something to her that was devastating. Before she even began to share her story with me, I could tell by the tone of her voice she was very upset.
If indeed, a greater amount of profit remaining at the bottom of the Profit & Loss Statement is what a business owner is striving for, then one should consider undertaking this exercise before attempting to grow the business by increasing sales.
“We need sales training” is a comment expressed by many business owners who feel frustrated that their company is not realizing its full growth potential. Many times this comment is rooted in a frustration caused by gaps in the existing sales process that impede profitable growth. The lack of an effective sales process is one of the top challenges for many entrepreneurs trying to grow a profitable business.
Recently I found myself looking around for a candid camera and asking “is this really happening?” You see, over the past three weeks or so, my own business continuity plan has been tested and tested and tested again.
Many people discuss the importance of pivoting in the context of a startup business. And I agree, once a business launches, the entrepreneur must be mindful of what is working and what is not. That’s when it is time to pivot the startup.
Before I share with you part two of my story about my own need to execute the business continuity plan as a result of my sudden and extended illness, I want to thank those of you who reached out to me to express your concern for my welfare. Thank you. Truly, I am doing very well and I very much appreciate your good wishes!
Understanding a company’s operating results is an important factor for a business owner to determine the value of a business. However, the operating results must be placed in the proper context by comparing them to results of the industry as a whole. By doing so, a business owner is able to understand how they are doing financially relative to their industry peers. This exercise is known as benchmarking.
How many times have you been to a cocktail or Christmas party, making friendly conversation, when someone in the group asks, “So what do you do?” Most business owners and consultants struggle with giving elevator speeches. Actually, let’s forget struggle and move straight to panic, dread, and sweat. They think, “How could I possibly sum up what I do in 10 seconds?
Bankers and Entrepreneurs rarely see eye-to-eye. Recently, my observation of this unfortunate reality caused me to chuckle as I sat with one of my clients and her business banker. What made me laugh was how two extremely accomplished individuals could define the term “special assets” so differently.
At some point in time, every business owner will leave their business (voluntarily or involuntarily). Through proper planning, an owner should expect to achieve their desired goals. Statistics show that the value of an owner’s business accounts for over 90% of their personal wealth. However, more than 75% of all business owners do not have a formal transition plan in place.
Just a few days before everyone rings in the New Year, I have a ritual that I undertake and enjoy immensely. It doesn’t involve highly caloric food, expensive Champagne or making a resolution. I have shared my New Year’s ritual with successful entrepreneurs and have always received a positive response. It’s really simple. It requires you to ask yourself three questions. What happens next, is up to you.
I believe that paying attention to those things around you which are becoming irrelevant may reveal something which will save your company from failure. In fact, if you want to increase the value of your business, pay close attention to what is becoming irrelevant in the world around you! It may be the best thing you could do for your company.
When you are running your business, do you have those moments where you stop and ask yourself “where did that come from?” Truly, you never saw it coming. Did you?
Interruptions are normal for every successful entrepreneur. In fact, if you are not interrupted several times before you reach for your second cup of coffee each morning, I would bet you may wonder if your email or cell phone service is not working… Yes, I am guilty of expecting to be interrupted and wondering what’s wrong when I am not!
No, I am not talking about those annoying detours that involve orange cones, stiff fines for speeding and wasted time. Although, I have to admit each of these will help me make my point in today’s blog.