bizthreads.net: Business Information for Entrepreneurs by an Entrepreneur

Dear Buzz,

I want to buy an existing company. How do I determine what it is worth?

Ollie

Dear Ollie,

Publicly traded companies make it pretty easy: just see what other people are paying for it! Take their share price and multiply it by the number of shares and you know exactly what (collectively) someone is willing to pay to own the company. Of course it's not a perfect calculation because the market is not always perfect but it's a good start. The best calculation is appropriately called “Enterprise Value” and it works well for any company.

market value — (cash and investments) / (divided by) net earnings

Best regards,
Buzz

Dear Buzz,

I'm concerned about the week between Christmas and New Year. I'm a freelance graphic designer working out of my home and I need the work during that time, however, many people are away or not interested in doing work over that week. How can I pay my bills and feed my family?

Dan

Dear Dan,

I talked to a few successful freelance business owners about this and received a mixture of responses. Some said that they plan their personal holidays during this time to coincide with the quiet time.

Another piece of advice I heard was to acquire as much business as possible early in November, even if it means earning slightly less for the job… but committing to a delivery time in early January. You'll be busy for the month of November and early December and the boost in income should carry you through the last of the month.

Still a third freelancer suggested tightening your belt for that one week and working on the business planning, identity development, website building, and brainstorming that you likely mean to do during the year but never actually complete.

Buzz

Buzz,

Our family's business has grown and now we have to rearrange our organizational chart. Should we rearrange it by function? By our newly developed regions? By product line-up? How?

Lorraine

Dear Lorraine,

Unfortunately, this isn't an easy question to answer because every industry is different. I think that functional organization charts can often create unnecessary bureaucracy in a company, reducing customer service in the long run. Regions are a good way to do it, especially if you are looking to expand even further or if those regions have a lot of unique business requirements.

Another way to consider changing it is by customer base, if you serve more than one type of customer. However you decide to do it, don't think about tomorrow… think about ten years from now when you've grown 100 times the size. Will you still be able to operate with the same chart?

While changing your organizational chart from time to time is okay, it does reduce your efficiency and your ability to serve customers for a time while everyone figures out who answers to whom and whether there are any gaps in service, so having a scalable chart now is best. And, to help drive down costs, think about what common aspects are shared by all departments (such as administrative functions) and create a department to deal with that.

Buzz

Dear Buzz,

I've just started a new business, a B2B software solution, and I'm out “knocking on doors” and selling my products. But I'm not meeting a lot of success. I'm pretty sure that I've targeted my audience and priced my products competitively. I don't want to lower my price, what should I do?

Marty

Dear Marty,

This is a common problem in sales. Many sales people knock themselves out by trying to build up additional service or by cutting the price down to practically nothing. However, neither of these two options is profitable.

Assuming that you're offering a quality product and excellent service, see if there's another way you can sell the product: perhaps it's your method and not the product that's keeping it from selling. (Do your competitors sell this way? If not, it could be an opportunity but there may also be a good reason why they don't.)

Another option is to think about a creative solution. For example, charge more for your product and work out a deal with a business consultant and corporate trainer who specializes in a related area and offer an entire solutions package: software, consultation, and training in that specific area.

Buzz

Laura asks, “Do door-to-door sales still work?”

Dear Laura,

According to SBTV , there are 13 million sales people making door-to-door calls resulting in over $28 billion in sales. The numbers show us that it is effective. But aside from the numbers we need to also do a gut check: What do your instincts tell you about door-to-door sales?

While it does generating buying activity, it may lower the perceived respectability of your business. I'm not saying that there's anything wrong with it, but I am suggesting that consumers may lump your business in with other door-to-door contact, including religious organizations or those companies that sound like they are the power company offering to lower your energy bill.

If you do want to use the face-to-face method of sales, it's okay to use door-to-door methods as long they are not your primary method of contact. Let people connect with you through the telephone or Internet first and then offer the value of coming to their home to display your wares. This makes you seem like you add value to their lives by saving them time.

Buzz

E.Y. writes, “Buzz! Help me! I want to start a business but I have no idea where to start. I feel overwhelmed by the possibilities.”

Dear E.Y.,

“Many people feel that way; you're not alone. If we met in person I'd start a dialogue with you about a few things including:

· What do you like to do? (As a hobby, for example.)
· What are you good at?
· How long have you done that?
· Would you say your knowledge on the matter is a little, intermediate, or a lot?
· Create a list of 5 — 10 things that you love to do.
· Create a list of 10 — 25 things that you feel other people need.
· Compare your two lists. Do you notice any overlap?
· Are there businesses currently doing any of the 5 — 10 things that you love to do?
· Do you think the marketplace can sustain another business in that sector?
· What would you do the same as those other businesses?
· What would you do differently?

Once you've asked yourself these questions, then you're ready to start… PLANNING! Click to MoreBusiness.com and check out the resources there (such as business plan templates).

Related Item: Health insurance leads can help you grow your business through a good return on investment.

Lenore writes, “Buzz we have some concerns in our medium-sized business over how to deal with harassment (i.e., sexual harassment or racial discrimination, etc.). Thankfully, we haven't seen any cases but we want to be best prepared for the possibility. How can we do that?”

Dear Lenore,

“Thanks for the question, Lenore. Next week I'll be writing about this in greater detail on morebusiness.com but I have two pieces of advice right now for you:

1. Create a written policy today! Having a policy in place won't prevent harassment from happening but it will ensure that you handle each case properly and efficiently.
2. In your size of business, there aren't a lot of options to turn to if someone does feel harassed. A panel, rather than a single human resources person, is a good choice to make sure that there are several people to turn to.”

Chris writes, “Buzz, I'm in an equal business partnership with one other person. Things started well and our business has been successful. Unfortunately, we've been disagreeing more and more lately about the direction our business should take. What should we do?”

Buzz answers,

“Chris, disagreements are common in business partnerships. The ones that stick together and do well can work though them, but every partnership faces them at some point. Before doing anything drastic, ask yourself if your visions are really far apart. If they're not, see if there is a way that they can be combined, or perhaps you can each take half of the business and keep it as the same business and simply operate two slightly separate halves… even going so far as to brand them as ‘divisions'. If your visions are really far apart, you've got some harder decisions to make. Is your business worth the hassle of disagreement? It might be easier and less stressful to simply sell out and move along. Although no one really wants that to happen, a strained partnership is actually the worse option.”

I've also written an article about this issue on MoreBusiness.com and provided help for partnerships in the planning stages.

Delaney L. writes, “Buzz, I serve a niche in which I sell information to both realtors and home owners. How do you recommend I market to them effectively?”

Dear Delaney,

“You'd be surprised how often I'm asked this question. Many people try to ‘kill two birds with one stone' and market to two niches. I think if your business is going well then you should expand!

My first recommendation, though, is to master one niche and add products that meet their needs. If you do want to market to another niche or if you already market to another niche, I would recommend separating your efforts. After all, in most cases neither niche uses the same online search terms to look for your information or goes to the same sources to find what you're selling.

In your specific case, I would guess that the information you sell might be passed over by realtors who are afraid it's too “watered down” to appeal to home owners’ general interests. And, home owners may not buy it because they are afraid it's too technical and geared more to realtors.

I usually end up recommending that you start two businesses. Or, if that's not practical, create two websites with their own separate domains. If you want to leverage your name and reputation, create each business “as a division of” your original business. If you're still getting traffic to your original business site, have a single splash page with two links: a home owners link that takes them to your new home owners page and a realtors link that takes them to your realtors page. This will also allow you to measure the success of each side of your business.”

Conner writes:

“Buzz,

I get a lot of prospects emailing me each day. I like it, of course, but it's very time consuming to respond to each one. I'm reluctant to send an automated message. What should I do?”

Thanks for the question, Conner. You definitely don't want to miss the opportunity to sell to each prospect. But don't disregard automated messages completely. I think they have value in two scenarios: if you are a one-person-show and you're on vacation for a week, they can let your prospects know that they have to wait. (You need a break, too!). If you're getting a serious backlog each day, consider an automated message that says “We will respond to your message, however, due to the volume of emails we receive it could take up to 24-hours.” Include a link to your website, of course. Also, consider not responding to emails during business hours. If you do a lot of face-to-face interactions, those emails can keep you from a critical part of your business. Jumping back and forth between the two can actually make both very time consuming. You might save time by letting your emails build up and responding after you close up shop for the day. Lastly, determine if you're answering the same questions over and over. We easily forget but that's the function of the Frequently Asked Questions (FAQs) section on a website. If people are still asking you questions and you are unable to post your answers on the web, create small snippets of well-written responses and cut and paste them into each email. Use Word's Office Clipboard for this.

Good luck! I'm glad to hear you've gotten so much business.

If you have questions you'd like me to answer, email me at buzz@bizthreads.net.