Selling a Business in the NEXT Energy Boom

Selling a Business in the NEXT Energy Boom

Selling a Business in the NEXT Energy Boom

Those of us who work regularly in and around the oil & gas energy industry recognize the difficulties presented by the current depressed energy prices and it’s effect on energy services, production and exploration companies. We view the world through the process of Mergers & Acquisitions as we work with business owners to sell their companies. Many Texas businesses are heavily impacted by the swings in energy prices. We see machine shops, water disposal, inspections, welding, tank, vessels, trucking, temporary housing and many other energy related businesses that suffer the financial pain when energy prices and production declines. We also see these same companies reap the benefits of rising energy prices and production cycles. Unfortunately too many business owners have short memories.
“When the energy business is good many business owners think it will last forever. It won’t.” Dan Elliott
Like you, we have seen this play out before in different cycles and many energy companies (and related businesses) always seem to recover. Selling a business for the highest value is often driven by timing. Will you be ready when the market is?
If your goal is to sell your business in the next energy boom here are 3 things you can focus on now to make sure your business achieves its highest value in the next energy recovery cycle.

  1. Get your financial reporting up to standards that will one day survive a buyer’s due diligence.
    Excellent financial records increase the value of your business because it reduces the buyer’s perceived risk that poorly maintained financials mean more financial room for error. Make sure your accounting is done consistently from year to year and make sure your current tax structure (C, S, LLC, etc) is what will create the highest value transaction. Look at your financials as a buyer would or better yet give us a call and we can review your information and give you a report that identifies the areas for improvement. Tip: To most buyers Reviewed financial statements are almost as good as audited financials and a lot less expensive. If you have audited great, but if you just have compiled statements find a good business accountant to do reviewed statements.
  2. Work hard on Customer Concentration Issues
    A buyer often perceives risks if 1 or 2 customers dominate the revenue of your business. Ideally your largest customer should be less than 20% of your annual revenue (unless you have long term contracts which assure buyer purchases). Shifting customer concentration is often a long process, start now. Tip: Look at your commission plans for your sales people. Are you rewarding sales people who diversify their customer base?
  3. Review your insurance to be sure you are adequately covered for your business risks
    An under-insured claim is a nightmare for a business owner and can interfere with the sale of the business for many, many years. Do you have enough coverage? Do you have the right coverage? The “right coverage” question is even more important than how much coverage. We had a client get hit with a $2 million claim that he thought he had insurance coverage for. He didn’t. The deal to sell his business that we had on the table for millions of dollars was delayed until he found out he wasn’t covered, then that deal disappeared altogether. Talk to more than one agent and certainly more than just your regular insurance agent who may think they know your business but really don’t. Many commercial insurance agents will be more than happy to give you a review. Tip: Talk to an insurance agent who specializes in your industry. Your trade association knows who they are.
  4. Here’s an article on West Texas Oil industry as oil production continues full bore.

Far too many business owners don’t plan ahead for an opportunity that could arise without much notice. Selling a business for the highest value and best terms is never an accident. The value goes to the prepared.

Business Systems Create Profits and Value


We meet many business owners who are overwhelmed by the day to day fire drill they call a business and the thought of creating systems for their business is overwhelming to them. I always give the same advice:

 Start Small but START NOW!

You have to START…. 1 system no matter how small is better than no systems… 2 is better than get the idea.

But where to start? We recommend picking an important but relatively easy task or process that includes another person in your business. Work together, start with an outline and work down. Your objective at the end is to be able to create a simple checklist so that anyone can learn the process very quickly.

Here’s a sample of a simple process –  What happens when a check comes in the mail at your business?

1. Person opening mail gives Check to Mary

2. Mary stamps check for deposit only (stamp in Mary’s top right drawer)

3. Mary  makes 2 copies of check and puts 1 copy in daily check receipt file and the other in a/r process folder

4. Mary gives check to Joe.

There it is, Mary is done with the check. There would be another process written for Joe for what he does with the check and another process for Mary or whomever records what invoices the customer’s check paid.

Now name this system, it could be “Check Receipt Process” or whatever makes sense to you. Give Mary a copy and start a 2″ binder and put this system in the binder. There that’s a start and you probably got it done start-to-finish in 15mins.  Now when you or Mary have an idea on how to improve this system (do you really need 2 copies of check? ) you just mark-up the system in the binder quick in easy.

Wait a day or two then knock off another system in a few weeks you could have 8- 10 critical business systems in your binder. And why do you want the systems in your binder?

So if Mary doesn’t come to work for 2 weeks or Mary quits. All you have to do is hand the process to the new person who handles the checks and you’re off and running. No training, just have the person work the system.

Systems makes managing a business easier, improves customer service and accuracy and reduces the cost of training.

Here is the best book ever written for business systems.  It is an easy read and gives you a great context that will help you look differently at your business.

Remember Start Small but START NOW!   SSSN




Common Characteristics of Profitable Businesses

As a Business Broker I’ve had the opportunity to meet with and analyze more than 2,000 businesses. I have come to discover that there are 6 basic characteristics that are almost always found in profitable businesses.

6 Characteristics of Profitable Businesses:

  1. The business owner has an firm grip on reality. They understand the good and the bad of their industry and their business.
  2. The business owner spends the money to get good advice. They have an accountant, attorney and financial adviser that is competent in the specific industry and size business.
  3. The business owner makes a good faith effort to have systems and procedures in place so that their product or service experience is repeatable. The vast majority of activity is done the same way each time.
  4. The business owner is always trying to find ways to do #3 better.
  5. The business owner doesn’t blame his employees and his customers for his results. It is shocking to me how often this is the case in bad businesses.
  6. The business owner owns the business for a reason other than it’s just a way to make a living. The owner might want to sell the business to fund their retirement or next venture or pass the business on to their kids or create enough profit to fund a charitable cause important to them or operate a business to allow them enough free time and money to pursue an important cause.
Businesses and business owners with the above characteristics are much more likely to be profitable, more valuable and easier to operate than businesses without these characteristics.
Are there other characteristics that are important to you as a customer? Can you identify businesses with these 6 characteristics?


So you’re in do you get out?

I was meeting with a business owner the other day and he said to me “When I started this business I never gave any thought to how I would get out of it, never crossed my mind.”

His business now does over $3 million in sales and has significant value….but no where near the value he thinks it has…….for one reason.

He’s never looked at his business the way a buyer for the business would look at it.
In my line of work, I see this nearly everyday. Business owners don’t understand, or at least they don’t have an appreciation for, the difference between a good business for them and a business that would be valuable to someone else. Understand how to value a business from the eyes of a buyer is an important part of the business owners job.
A perfect example was the business owners (let’s call him John) strategy as it relates to the real estate the business utilizes.
John started the business 10 years ago, it grew quickly and started generating good profits. About 6 years ago John decided he needed a new, bigger, building for his growing business. John also decided he wanted exposure on a major freeway so everyone would be able to see his business.
John located a great building with an excellent location. He went to his bank who was willing to give him a commercial real estate loan to buy the building because the business had the cash flow to pay the note. Everything was great. He moved into his new, bigger business and life was good.
However, John was only focused on making the note payments on the building. As he said to me “the business paying down the debt on the building is my retirement fund.”
Now fast forward to today.
John’s business is generating a profit for himself of $10,000 per month or $120,000 per year. Pretty good, wouldn’t you say?  Maybe……maybe not.
The area around John’s business has grown and property values have increased while Johns note has stayed the same. Good right? Not necessarily.
John’s note is $8,000 per month which the biz can afford…BUT  the real estate is now worth much more than he paid for it. If John were to lease the property out at today’s fair market value he could lease the building for $15,000 per month.
But remember John’s biz profit is $10,000 per month. If John was getting fair value for the property he would get $15,000 per month which is $7,000 per month more than the $8,000 monthly note payment.
If we adjust John’s monthly expenses to reflect fair value for the building then John’s monthly profit drops from $10,000 per month down to $3,000 per month ($10k – $7k).
John is now stuck.  His business can’t afford a fair rent but he needs the building to run his business. John’s real estate value makes his business value very low. A buyer who pays fair value for the real estate won’t have enough cash flow from the business to pay the note and a reasonable salary for himself.
John came to me thinking he was in a great situation and left thinking his situation was not nearly as good as he thought.
Do you have a business that one day will need to be sold? What concerns do you have as you look ahead to that day?


Virtual Assistance | Delegating Your Social Media

Guest Post from Professional Virtual Assistant Susan Poirier 



(Disclosure: I use Susan’s VA services and I am not receiving any compensation for this post.)


In today’s ever competitive business climate, social media is not a passing fad or simply a source of amusement for the younger generations. It represents an essential platform as part of your marketing mix. Consumer buyer behavior now reflects their consistent quest for up to the minute information about your company’s products and services. People buy from people and customers prefer the immediacy of the web, the data they can search, the recommendations they find and a community for their voice. You need to not only have an online presence but to be actively listening to your prospects, colleagues, partners, competition and clients.


Social Media (SM) is a key facet in your viral efforts to drive business to your website, enhance company recognition, build your brand, create market segments, meet your clients and prospective client needs for information and customer service, join communities, disseminate news, press releases, product launches, improve customer service, troubleshoot issues and listen to the chatter about your company.


A recent survey by Deloitte revealed that 60% of consumers are going online more often to locate the best products and services and their decisions are greatly influenced by the tools, information and service they find when they visit websites or perform a search. Brand loyalty and reputation are still based on the quality of the customer experience.

Whether you are B2B or B2C, your social media presence should represent a strong role in your marketing and online energies.  Your message must reach your audience where THEY reside, not where you think they are. Whether you choose to blog, send an e-newsletter or generate dialog via Facebook, Twitter, Pinterest, LinkedIn, Instagram or Google+, you need to discover where your client “hangs out” and greet them on their territory.  Remember, you will need to utilize more than one neighborhood to reach your target markets.


You don’t generate revenue by posting on your blog, scheduling social media updates, searching for relevant content or images for your e-newsletter, creating Google keyword alerts, content marketing, editing/proofing your website or sending appointment reminders.  While these sample tasks are vital to your daily business operation, they are all low payoff activities that do not directly produce income.  They inhibit your “real” productivity. Sustainable growth is derived from doing more of what creates growth and less of what seizes your time in the name of growth.  You must determine the most profitable use of your working hours.


“Simplify, delegate, or eliminate other low payoff routines and activities that absorb too much of your time. This common-sense approach frees you for productive work on high priority items.” Strategic Essentials


Your valuable time is best spent focusing on your core genius, doing what only YOU can do to produce revenue for your business.  Essentially, your income is limited by your time. If you are hindered with all of the backend details and daily minutia, you are not able to concentrate on business development, customer experience, creating relationships, engaging with your tribe, creating new products, planning your goals and action steps or networking with other industry thought leaders.


Case Study

Social Media Woes:

You are set up with some basic social media platforms, but realize that to create engagement, increase visibility, generate a sense of trust and build your tribe, you need some assistance.

Enter the Virtual Assistant


  • Discuss key market initiates, where do your clients commune, who is the competition 
  • Important industry keywords 
  • Create keyword alerts across multiple services 
  • Enhance social visual image of social media pages 
  • Set up news aggregators to deliver targeted content 
  • Create RSS feeds for industry blogs for post commenting or content generation 
  • Design content calendar 
  • Find/follow pertinent groups or lists 
  • Research, write and deliver relevant posts 
  • Edit/proof your blog content 
  • Regularly monitor and update your social media
  • Other VA industry secrets employed!

In reviewing this list of a fewof the social media management processes we administer, how much time do YOUhave to spend to successfully handle your online reputation and brand?  Maintaining your online presence can represent a highly significant amount of hours that take you away from your core genius. Is this the best use of your precious time?

These are low payoff activities but in the digital world, they are crucial essentials to building your positive online presence.

If you want to operate at your maximum efficiency level, focusing on only your high payoff activities, please contact us today!


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