_Overview
A new Executive Advocate program helps small business owners in Texas achieve rapid results that multiplies their business valuation. The program uncovers the gaps in value drivers and maps their closure.

Problem Encountered
A small business owner had grown tried of her business (Burn Out) and was seeking more interesting opportunities. We were asked to evaluate the potential of selling the business. At that time EBITDA was $113,827. A business valuation, based on the Murphy Business Broker Opinion of Value (BOV) technology, was used to create a baseline value.

The problem facing this business owner was existing debt, which roughly equaled the BOV results. To sell the business now would mean losing her current job, paying off the debt,  and then having no funds to build the next job or to retire. The business needed a higher cash flow to pay down the debt and increase the selling price. Then the owner would have sufficient capital for her future plans.

Our Solution
Murphy Business Services was engaged to develop a Strategic Marketing Execution Map (SMEM). Business owners are engaged in many activities; but not all of them drive business values. The SMEM approach looks at those business functions and defines gaps between current performance and desired performance.

In this case, activities related to cash flow were causing the gaps. The owner already had many ideas on how to generate additional revenues, reduce the cost of goods sold, and better manage overhead expenses. When faced with defining performance gaps, these ideas solidified into tasks and goals that could be directed to the staff.

Results
The power of an organization with goals everyone understands cannot be understated. Having a Business Model everyone understands produces results. Increased revenues, better margins, reduced overheads all worked together to increase cash flow. In less than a year, this same business had an EBITDA $221,578, an increase of $107,751.

To understand how this effects the business valuation, it's important to understand that value is related to the risks involved in a change of business owners. Doubling the EBITDA will double the value no matter what multiples are used!

If the business is generating a cash flow from its internal systems, it's worth much more than one that relies on the skills of it owner. This area was also a gap identified by the SMEM. With new systems in place, this business also represented a reduced risk for a business buyer, raising the appropriate EBITDA multiples. In fact. the business valuation more than doubled and finding interested acquirers was easy.

The new problem facing this business owner is what to do after selling the business. Now that values are climbing so she can finance many business opportunities, which one should she pursue? She is currently engaged in an Executive Advocate Reinvention program that develops a Personal Business Model for her to use in deciding on her next career step.

An online Contact Us form is available to specifically request more information about Executive Advocate programs appropriate to your career situation.

_Customer Discovery is the process of having potential customers review your Personal Business Model and finding out if you really have a market, or just an idea that excites only you. Seeking investors before you have a proven your market is not only difficult, but if successful, the business is often lost to those same investors.

Finding sources of small business financing at this stage is often a better alternative than finding investors. Some businesses will eligible for term loans, such as the Small Business Administration backed loans offered through banks. Generally, all term loans, such as SBA notes or mortgages, are secured with collateral. A business still in the customer discovery phase may be short of collateral which is why many  business owners often jump right to finding investors. However, there is another alternative, the unsecured business line of credit.

A warning is needed here. Even though a business line of credit is not secured with specific collateral, it will still require the personal guarantees of the business owners, as do most other sources of small business financing. The advantages of an unsecured business line of credit over a term loan are:

1. They are based on the creditworthiness (FICO scores) of the borrower and not the value of a secured asset; And
2. You only pay interest on what is actually borrowed. As borrowed funds are paid back, not only is interest reduced but your credit "reserve" is increased.

The amount of funding you will need can determine the the sources for an unsecured credit line. There are two general approaches.

Business Credit Cards

A credit card is a line of credit. Credit card strategies are often used for amounts up to $100,000 (sometimes more). Lenders will issue these to business owners; however, there are many considerations to a credit card strategy, including cost and impact on the owner's personal FICO score. Consider using a business credit card consultant to assist in the development of an appropriate strategy for your specific situation.

Business Line of Credit

A line of credit arrangement with a lender becomes appropriate for amounts over $100,000. These can range as high as several million dollars as long as the creditworthiness of the owners and the use of funds support it. The costs are somewhat higher than term loans and typically lower than pure credit cards. Unsecured business lines of credit went away during the banking crisis; however, sources, such as eFund Solutions, are starting to appear for small business financing.

Raising cash through selling equity has it's place, especially in financing ongoing growth. However, selling ownership can be too expensive at the wrong time. Consider alternative sources.