Retiring from your business means more than finding a new owner. John M. Leonetti, author of Exiting Your Business, Protecting Your Wealth, helps you formulate a profitable plan

Congratulations!

You made it. Now let’s do our best to protect it.

Your business has been built on your hard work and passion for what you do. The long hours, the battles with the finances, the incremental gains that you fought tooth and nail for are now more behind you than in front of you. For many, exciting challenges still await your careers. For others, a quick exit is what is most desired. In either case, you made it, and a warm congratulations is due to you for your accomplishment.

Now it is time to enter the equally challenging phase of keeping it. “It,” of course, is the wealth that has accumulated in your illiquid business. That wealth is locked inside your business, much the same way that wealth is locked inside your home. Now, home may very well be where your heart is, but your business produces profits. If your business is where your heart is, then this book is a very good resource to assist you in viewing the business more as an investment and less as a job you love. The reason you want to think this way is because the majority of your wealth is likely tied up in your business, and without a plan to monetize or transfer that wealth, a great deal of your hard work may be lost.

Whether you want to exit over time or you are a get-me-out-right-away business owner who is burned out and dreads returning to work after enjoyable weekends and vacations, there is a way to begin planning your business exit today.

Don’t Wait Until Later

One of the difficulties of business exits is the perception of it being overwhelming and complex. With so much information to be processed in a business exit, many owners procrastinate in doing anything. Often this results in a failure to plan an exit, and, again, loss of hard-earned wealth in the illiquid business.

Begin your exit planning today.

Most business owners need to not only improve, but actually begin, designing their business exit strategy plans. Your preparation for the business exit will control the likelihood of you getting what you want. The more information you have and the more preparation you do, the better your odds of reaching your real goals and protecting your hard-earned wealth. Remember that your exit requires knowledge that spans many disciplines and is of varying levels of complexity. You need to know something about all of these different areas because you will be making decisions regarding all of them.

This author estimates that 85% of owner-operated business owners have one chance at a business exit. As with mountain climbing, the stakes are high. And mistakes can be permanent.

What Drives the Process

It is your goals and motives that drive the exit strategy planning process. There is a methodology by which you can determine both how ready you are for your exit, and what type of exiting owner you resemble.

If followed, these measurements will determine the path which your exit strategy plan will initially take. So, in order to analyze whether you are ready for an exit from your business, you will follow a process to answer these questions:

• Are you financially prepared for an exit from your business?
• Are you mentally prepared for an exit from your business?

Your financial and mental readiness will be ranked as either High or Low. Then, depending on your readiness for an exit, you can check your alignment with four different types of exiting owners. Those four types include:

1. The get-me-out-right-away-for-the-most-money exiting owner
2. The well-off-but-choose-to-keep-working exiting owner
3. The stick-around-and-grow-the-business exiting owner
4. The rich-and-ready-to-go exiting owner

Range of Exit Options

There are, in fact, many options for exiting a business. Some owners will simply close down the business. Others will liquidate and sell off their assets, if any remain. But others—many millions, in fact—will need a written plan to exit their business and protect their wealth.

Many of these business owners have a substantial amount of wealth tied up in their businesses. The five major transactions that owners can consider as the basis for their exit strategy plan are:

1. Sale of the business
2. Private equity group recapitalizations
3. Employee Stock Ownership Plans (ESOPs)
4. Management buyouts
5. Gifting programs

Don’t Go It Alone

Business owners wear many hats in order to handle the challenges of owning and running a business. They often adopt a do-it-yourself philosophy, which can extend to the business exit process. For instance, most business owners know something about the technicalities of exiting their business; they’ve thought about selling to a competitor or handing the reins to a family member.

Owners might know a little something about the technical pieces of a business exit, including accounting, taxation, estate planning, insurance planning, legal preparation, legal documentation and financial advisory services. But knowing a little bit about something can be dangerous; it can lead to a false sense of control and confidence. Why go it alone?

Assembling Your Team

A team of exit strategy advisors consists of a number of players, each having his or her own role and contributing to an overall execution of the exit strategy plan. The roles of the advisors are summarized.

Attorney. This advisor provides advice on legal agreements in the transaction as well as advice on estate planning documents for titling of assets.

Accountant. This advisor provides tax assessments for each exit strategy option. The accountant may also be called upon to provide cash flow projections for the company as part of a deferred payment arrangement.

Financial advisor. This advisor provides personal financial retirement projections and an investment strategy for the reinvestment of exit proceeds.

Insurance advisor. This advisor provides recommendations on life insurance policies, key-man policies, business policies, and long-term care policies—risk management tools to protect the owner’s wealth.

Mergers and acquisitions (M&A) advisor. This advisor provides insights as to the current marketplace for sales and transactions. The M&A advisor gives real-time feedback on the viability of an external sale.

Valuation advisor. This advisor provides a fair market value assessment of the company for purposes of measuring value and the viability of certain internal transactions.

Pulling It All Together

A marketplace of service providers, who vary in competence, are out there tripping over themselves to meet the needs of exiting owners. You must choose carefully amongst them to be certain that your exit strategy plan is the one being executed, not theirs.

Take charge of the exit strategy process with your newfound knowledge of business exit strategy planning so that your options are understood and your timing suits your personal goals. Customize your exit strategy plan to your liking. After a lifetime of success in business, you owe it to yourself to tackle this challenge of cashing in (or transferring your wealth) with the respect that it deserves.

“Reprinted with permission of John Wiley & Sons, Inc.” John M. Leonetti, Exiting Your Business, Protecting Your Wealth: A Strategic Guide for Owners and Their Advisors, 2008.

What Is Social Media?
That’s a good question, and the complete answer could fill pages without really delivering the clarity that a small business marketer might desire.

So here’s the simple definition for the purpose of this document. Social media is the use of technology combined with social interaction to create or co-create value.

In a way, the definition doesn’t really matter nearly as much as the application and changing role of marketing in a social media world.

Social media—and by that I’m lumping together blogs, RSS, social search, social networks, and bookmarking—presents the marketer with a rich set of new tools to help in the effort to generate new business.

Why Does It Matter?
It used to be that all you needed to be on the Web was a Web site. Today you need to think and act in terms of a total Web presence. And that means if you’re not participating in social media, you’re not really online.

What’s Changed?
Well, c’mon, just about everything, right? If you studied marketing in the textbook world, you likely covered the 4 Ps of marketing: you simply created a Product, figured out how to Price it, got it Placed in the market, and Promoted the heck out of it.

Today’s approach to marketing, the approach infused with social media, leans much more heavily on the 4 Cs of marketing. Tons of relevant, education-based, and perhaps user-generated Content that is filtered, aggregated, and delivered in a Context that makes it useful for people who are starving to make Connections with people, products, and brands they can build a Community around.

Content + Context + Connections + Community = Social Media Marketing

The Hierarchy of Social Marketing
I think one of the things small business marketers struggle with concerning the entire topic of social marketing is trying to jump into the next new thing without enough analysis of what they should focus on. This is an important, evolving and essential area of marketing for small businesses, but there’s a hierarchy to it. In other words, there is a logical progression of utilization that comes about much like Maslow’s Hierarchy of Human Nature.

As Maslow theorized, the ultimate potential of your marketing or human self-actualization cannot be achieved until the most basic human psychological needs such as breathing, eating and sleeping are first met. In fact, safety, love and esteem all come before transcendence. Now, before I edge too close to the deep end here, I’m simply comparing what I think is a bit like progressing up the social marketing hierarchy.

I recommend that small business owners look at the following progression or hierarchy as they move deeper into social marketing tactics. So, jump in, but do it in this order and don’t move on until you have the basics of each stage down and working for you.

1. Blogging—the foundation of the pyramid—read blogs, comment on blogs, and then blog. This is the doorway to all other social marketing.
2. RSS—Aggregate and filter content around subjects, and use RSS technology as a tool to help you repurpose, republish and create content.
3. Social Search—Often ignored in this discussion but I think it’s become very important for small business owners. By participating, you can stimulate and manage your reputation here.
4. Social Bookmarking—Tagging content and participating in social bookmarking communities can be a great way to open up more channels to your business. It can also generate extra traffic, but it takes work.
5. Social Networks—Branching out to take advantage of the potential prospects you might find on sites like Facebook or MySpace will frustrate—at least as a business tool—if you don’t have many of the above needs met. These networks take time to understand, and thrive on ideas and content. You’ve got to have much to share if you wish to build a business case.
6. Micro—I’ve lumped some of the more experimental social tools into the edgy trend of micro: social, real-time communication that will likely only confuse most small business owners. The confusion is not because they can’t figure out how to make them work, it’s just not obvious why they should spend the time. I believe Maslow suggested that self-actualization is a place most might never reach. In social marketing terms, Twitter, Plurk and FriendFeed might be some sort of sick transcendence.

Case Study: They Don’t Use Social Media in My Industry
Many small business owners still think they can take a pass on the power of online social media tools, particularly if they reside in seemingly low-tech industries like plumbing, fishing or lawyering. I want to share a quick interview I had with Jason Brown, 23-year-old co-founder of Brown Lures. That’s right, they sell fishing lures to guys and gals that probably don’t call hanging out at Web 2.0 conferences a good time. (I’m just guessing on that though.)

Brown credits his blog with changing the way people find him. He created a podcast that gives him great “fishing stories” and loyalty from guides up and down the Gulf Coast. He uses RSS and content tagging to automatically produce fresh blog content, and e-mail marketing to blow his competition away at trade shows. Using social media in industries that are still slow to adopt it is the killer competitive advantage.

In Brown’s words:
“We have been running waiting lists for products for about a year now, and no one has any clue how we are doing it without spending big advertising money. I love this stuff …”

Alas, I can still hear the cries from the cynics—We don’t need no stinkin’ social media, we just need more sales.

This excerpt is reprinted from Let’s Talk: Social Media for Small Business © 2008 by John Jantsch of Duct Tape Marketing. Sponsored by Microsoft Office Live Small Business. All rights reserved. Download the full free e-book here.

Turning any small business into a success is tough. Doing so in a market crowded with Walmartsized competitors is especially challenging. Yet America’s 26 million small-business owners—6 million of them with payrolls to meet—take on the task every year. Thousands fail, but many of those can be attributed to small businesses failing to capitalize on their biggest advantages: size and agility. Their owners/operators fail to recognize that to sustain and grow profits throughout the up-and-down economies requires a multitasking approach that constantly adapts to market changes. Small companies today must adapt if they are going to compete—and beat—the Big Box and chain competition.

The Power of Small
Move over, Big Box retailers, multinational conglomerates, global manufacturers and regional chains, small specialty stores, corner restaurants, business-to-business local service providers and micro-manufacturers aren’t going away. In fact, they’re becoming an even bigger thorn in your side, sometimes even changing the way you do business, and enjoying their successes all the way to the bank.

Every day tens of thousands of niche businesses can and do compete successfully in today’s global marketplace packed with mega-sized competitors. Some of those small businesses crush their competition, and some become a Big Box themselves!

Small Businesses’ Big Clout
A small business typically is defined as an independent business with fewer than 500 employees. Of the 26.8 million businesses in the United States in 2006, 5.9 million of those have employees and the rest are one-person operations that may rely on contract workers, according to statistics and analysis from the U.S.

Small Business Administration Office of Advocacy. Together these small businesses power the U.S. economy. Small businesses in the United States pack plenty of punch, as reflected by statistics from the U.S. Small Business Administration:

• Small businesses account for more than 99 percent of all employer firms in the United States.
• These businesses employ about half of all the employees in the private sector.
• Firms with fewer than 20 employees account for 31.2 million workers (U.S. Department of Commerce, Census Bureau).
• Throughout the past decade, small businesses provide 60 to 80 percent of the net new jobs annually. In 2004 (the most recent data available), small firms accounted for ALL of the net new jobs. A net new job refers to new jobs in excess of the number of lost jobs.
• Small businesses pay out close to half (45 percent) of total U.S. private payroll of $4.5 trillion.

The biggest mistake many small businesses make is thinking of themselves as small, says Martha Rogers, PhD, founding partner of Peppers & Rogers Group and coauthor of Rules to Break and Laws to Follow: How Your Business Can Beat the Crisis of Short-Termism (Wiley, 2008). “As a result, their owners think they cannot compete with bigger companies, and therefore they don’t try,” says Rogers. “Instead, they should be looking at the opportunities they have to beat large businesses at their own games.”

Building and Maintaining Your Brand
Branding is a company’s greatest asset, but a word of warning: it can be its greatest liability, too, whether you’re a small business or the Big Box competition. Even though “brand” isn’t a line item on the balance sheet, what customers think of your company, its products, its customer service, its employees and former employees, its community image and even its industry standing—all part of branding—help determine the long-term success or failure of a small business.

“Branding is just a jargon term for distinctiveness,” says marketing entrepreneur extraordinaire Jerry Shereshewsky, who also is CEO of Grandparents.com. His unique qualifications include development and marketing of successful products from Yahoo! to Mello Yello and Gevalia coffee. “There are many ways to think about brand, but it all comes down to how to stand out from the other people (businesses) who are engaged in what you’re engaged in.”

Positive Differentiation
Shereshewsky uses his brotherin- law Thomas Del Spina’s framing business as an example of positive differentiation of a product/service. It starts with the company’s name: Thomas Del Spina Fine Frames. The Connecticut small-business man markets himself and his business as a master framer as opposed to a frame shop. He positions himself as a craftsman and is very careful about everything he does that touches the customer—from business card to invoice, and everything in between. He even borrows art masterpieces from people to display in his store. His Website www.reproductionframes .com describes his business:

“Thomas Del Spina Fine Frames is the purveyor—both retail and to the trade—of the most exquisite frames available.”

Del Spina wants picture-framing to be a rich art experience rather than a carpentry job, says Shereshewsky. “You can go to Michael’s (the arts and crafts store) and get picture-framing done, and they actually are pretty good. But they will not have the range of frames and the apparent expertise of Del Spina. He’ll take a picture of your artwork and show how it looks in a particular frame on a computer screen, he will come and hang the picture, too. People pay a premium for his work, but price is almost never an issue.

“What all this does is take him out of the commodity business. That’s value added to the process. Somehow Del Spina has augmented the expected and delivered generic products with enhancements on the service package that surprise and delight the customer,” adds Shereshewsky.

Consider the creation and branding of Gevalia, the upscale coffee by mail that Shereshewsky helped launch. “We paid attention to every single detail,” says Shereshewsky. That means from product packaging, to phone center interactions, and even the design elements in the company’s invoices. All of it was designed to convey to customers that they were cared for and “cherished as a valued customer.”

This excerpt is reprinted, with permission of the publisher, from Battling Big Box: How Nimble Niche Companies Can Outmaneuver Giant Corporations © 2009 by Henry Dubroff and Susan J. Marks. Published by Career Press, Franklin Lakes, N.J., 800-227-3371. All rights reserved.

The Big Book of Small Business
By Tom Gegax with Phil Bolsta
Hardcover, 448 pages, $29.95
Collins Business
212-207-7000
www.harpercollins.com

There are countless books that explain how to start and run a business. What separates this one from the pack is its disarming honesty. In “The Big Book of Small Business: You Don’t Have to Run Your Business by the Seat of Your Pants”, Tom Gegax explains how he started Tires Plus and then almost ran it into the ground before turning it into a $200 million business. In tightly written chapters, Gegax details his experiences and then lays out exactly what you need and why you need it, covering everything from funding a business to helping your employees grow and succeed. It’s impossible to discount such hard-won lessons.

The Employer’s Legal Advisor
By Thomas M. Hanna
Hardcover, 224 pages, $24
Amacom
800-714-6395
www.amacombooks.org

One thing a small business can’t afford is a lawsuit. Thomas M. Hanna knows this all too well, which is why he penned “The Employer’s Legal Advisor”. Knowing that many disputes occur between the employee and the employer, he clearly outlines everything from being a good witness in court to preventing claims from surfacing by setting rules and timelines for employees. Instead of reiterating federal laws, Hanna gives real-life advice that could save you time and money, and ensure better relationships with your employees.

Photographing Arts, Crafts & Collectibles
By Steve Meltzer
Paperback, 160 pages, $24.95
Lark/Sterling
212-532-7160
www.sterlingpublishing.com

Taking product shots with a digital camera can be daunting. Steve Meltzer explains every detail of digital cameras and how to use them in “Photographing Arts, Crafts & Collectibles: Take Great Digital Photos for Portfolios, Documentation or Selling on the Web”. The overview of digital photography covers every part of the camera and how it works, without the technical jargon. The following chapters examine lighting and photographing two- and three-dimensional products, then wrap up with troubleshooting and resources.