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Fred Herbert is an author, speaker, consultant, trainer, coach, Lean/Six Sigma Black Belt, and expert in performance excellence and building business value. Mr. Herbert has over 20 years experience as owner of various small businesses. He has been involved in the Quality Industry since 1998 and helped a Texas company win the Malcolm Baldrige National Quality Award and the Texas Quality Award. He has twice served as a Baldrige Examiner and twice as a Texas Award for Performance Excellence Examiner.
You can follow Fred and pick up some valuable advice on his blog.
Fred recently released his eBook titled “How to Prepare Your Business For Sale”. This eBook is available on Amazon and Barnes & Noble.
Fred is also has a new program titled “Business Turnaround Blueprint”, that focuses on helping struggling business make the turn toward success and increased profit.
MO: Where does your entrepreneurial spirit come from? Who or what were your early influences or inspirations?
Fred: To some degree I must have been born with it. My dad was a struggling one man appliance repairman that I helped during the summer and weekends. At about age 13 I remember telling him that we needed buy trucks, hire repairmen, and develop a marketing plan so we could grow the business. Later I was influenced by my father-in-law who was a very successful branch manager of a large lumber company. I remember wanting to be like him in many ways.
MO: Can you talk a bit about your background and experience with launching, building and selling businesses? What are some of the most important lessons you’ve learned along the way?
Fred: I started a printing company at the age of 21 and sold it after 14 years. I learned a lot about business during that time. Several times the business was on the brink of disaster and we were able to turn it around to profitable again.
Along the way I learned the importance of financial metrics. I remember hear a quote from Carney, founder of Pizza Hut, stating something like “if you don’t know every day whether you made a profit or not, you don’t know how to run your business”. I took that to heart and developed a way to know every day how we did and make adjustments accordingly.
Another big thing I learned was the importance of creating a schedule that would help us more effectively keep our promises to customers. The “I think I can have done by Friday” approach was not working, so I developed a scheduling board that showed us exactly what our workload was and what time availability we had for squeezing in additional work.
In relations to selling a business I learned not to let my untrained CPA set it value. Knowing what I know now, I would have had a Professional Business Valuation done on it before I sold it. You should have some value your business that does it full time. My CPA read some formulas in a book and came up with some numbers for me that I now realize were way off.
When I started my consulting business a few years ago, I shocked to learn how few business owners are successful in selling their business. I have a real passion to help business owners with the struggles they face every day in their business. I know what it is like to not have enough money to make payroll, getting turned down by bankers, facing unpaid suppliers, and forced bankruptcy. You might be able to say I have made many mistakes and want to help others avoid them (they are not fun).
MO: Can you provide our readers with some tips on getting a premium price when selling their business?
Fred: The first thing you have to do is understand the buyer’s perspective. I talk about that all the way through the book. The problem is that as owners, we are too close to the business to see it from another person’s point of view. I am a big advocate for getting input from others to help you see what it right before your eyes.
Along the same lines, you have to be able to show the potential buyer that the results you have had will continue or even get better after you leave the company. The buyer is going to be very risk adverse, so you need to convince them they will keep the customers, key employees, suppliers, and profitability. Failure to do this is what I feel kills most deals.
The seller has to not take it personal and realize that a good buyer will be looking at the numbers and the risk factors to make a decision. The owner will often take this approach personally but it is the reality of selling a business.
Get a copy of “How to Prepare Your Business For Sale”. I walk the reader through the “Key Value Drivers” that make all the difference in the value and salability of your business.
MO: What are the most common mistakes you see business owners make and how can they avoid them?
Fred: A very big issue is poor financial records. I have talked with many business brokers who tell me that poor financial records have killed many deals. A buyer is making a decision based on the numbers and if they can’t trust the records, that can’t make a good decision on the companies real value.
My advice here is to get with your CPA and get your P&L and Balance sheet cleaned up at least 3 years back.
On a related note, compare your performance metrics with that of the industry you are in. The buyer will have a warm fuzzy feeling about your business if you can show how you are outperforming the industry averages.
Lastly, plan ahead. Get started on building the value of your business 3 to 5 years ahead of when you are ready to sell. So many owners wait until the last minute and wonder why they are in the 82% group that can’t sell their business.
MO: What are some of the first steps an entrepreneur needs to take when starting the process of selling their business?
Fred: Getting a copy of my book would be a good start. It really gets down to the basics of working on all the areas that make a good, well managed company. In the Quality Industry, we call it a “Balanced Scorecard”. You must take a balance approach to every facet of your business. Look at your leadership team, your customers, products and services, employees, processes, suppliers, etc.
As mentioned earlier, because the owner is so close to it, I often recommend that they bring in a 3rd party such as a consultant or broker to help them see their business from to potential buyers point of view.
MO: Can you talk about your new training program focused on “Business Turnaround?”
Fred: I have created a new program called “Business Turnaround Blueprint”. This program has a focus on helping business owners that need to make a quick transformation. This requires more than just reading a book or attending a seminar so I developed a hands on approach where I work closely with my client. In this program I spend several days on-site with my client doing a full assessment of all the challenges they are facing and develop a “blueprint” on what can be done immediately to change course. From there I work closely with the owner in a coaching role to help them implement the turnaround strategies required and regularly review and analyze performance metrics.
Since I do these all myself, I can only take on about 10 clients a year. I am developing a training course with this material to expand my reach but recognize that the premium program will get the fastest results.
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