Y'all! I have been hard at work making some educational content to help you get top dollar for your profitable Texas business. In this series, I am going to lay out the top sins small business owners unknowingly commit that are costing them lots of money... and how to fix them!
I invite you to tune in using the audio link, read the text, or watch the video. Then, hit me up and let me know what resonated for you by scheduling a call to discuss your unique circumstances.
00:01 Hi, welcome everyone. My name is Katie Milton Jordan and today I'll be sharing with you the two deadly sins that most small business owners make that costs you lots of money and how to fix them.
And as we jump into this presentation, I will give you a quick introduction. My name is Katie Milton Jordan. I am a Texas business broker. Small business owners hire me to help them get top dollar for their company from the perfect buyer both quickly and confidentially. And a few quick facts about me. If you really knew me, you would know that I haven't always been a business broker. A business broker is a new transition for me. As a matter of fact, I have a background in both personal and business coaching. I'm certified by the International Coaching Federation as well as holding a certification in C-IQ®, which is Conversational Intelligence®. But that's beyond the scope of today's presentation.
00:55 So I'll move on and let you know that I have always been entrepreneurial. I purchased my first company in 2010.
And if you really knew me, you would know that I once owned a carnival game business. It almost caused my husband and I to get divorced before we ever got married. But again, that's a story for another time. We now co-own and operate a sports fishing operation and both of us are much happier with this business service and this business model. I share this with you really because I want you to understand that I do have real life experience in running businesses and in owning and operating businesses. I'm going to be sharing that with you today as well as real life experiences from those of my clients. And with that, let's jump right into our content.
01:50 Let's jump into the deadly sin number one. The number one deadly sin that most business owners do and don't realize that it's costing them is that most business owners hide cash.
And what I mean by that is that I don't think I've ever spoken to a business owner that didn't either legally or illegally hide cash from the IRS in order to reduce their taxable income. This is pretty common in business and it isn't always illegal.
However, when you hide cash, there are two major things that happen for you -- One, from a buyer's perspective, it is hard to get a buyer to pay for your business for something that you can't document and support on paper.
02:45 So if you've never reported cash and we can't show it to a prospective buyer in your books, you're not going to get paid for it when you go to sell your company. The other thing is, let's do just a simple mathematical equation for a second. Most of the time companies will sell for a multiple of revenue or a multiple of your earnings. And so in this example, let's say, um, well, no, let's make this a little bit easier...if you don't report cash, you might be able to get a $2,000 tax savings, in this example, right at the end of the year. But the problem is, that $2,000 tax savings is going to cost you about $20,000 in business value when you go to sell. So you're stepping over dollars to save dimes. Overcome this deadly sin by not hiding cash.
03:38 So, to take that one step even further, I strongly recommend that you work with a knowledgeable CPA that understands that you're building an asset that you someday may want to sell so that they can help you legally find these tax loopholes because they exist and smart CPAs know where they are, and they know how to maximize your profit and maximize your business value. So, work with a really good CPA that can help you do this the right way and don't hide cash.
Deadly sin number two, most business owners have messy books if they have books at all. There are tons of business owners that don't have a professional bookkeeper that's working on their books and they're just entering information into an excel spreadsheet the best that they can. This is not a good practice, especially if you're considering selling your business at some point in time.
04:38 So, don't have messy books. The reason that this is a challenge for you when it's time to sell is because when a prospective buyer comes in and looks at your books, if your books are all over the place, you're going to have a really hard time proving the profitability of your company as well as proving your credibility because messy books and disorganized books just bring doubt into the buy/sell equation. And you don't want any reason for someone to mistrust you or any, any whiff of distrust, so the way to overcome this is to make sure that your books are clean. Make sure your books are accurate, make sure that your books are professional. And don't wait until you can't keep up to start doing your books. Hire someone to do your books professionally as soon as you get into business. Also get into the habit of tracking your expenses, your profit, and everything right away from the very beginning.
05:33 Don't leave this to the end. And if you'd like an introduction to a knowledgeable bookkeeper or a knowledgeable CPA with strong referrals and very good reputation and you're here in Texas, please touch base with me. I'd be happy to share some really good contacts with you.
And that brings me to my final side. I would love to connect with you and hear more about your business and where you're headed with your business growth and what your exit strategy is, or just answer any general questions that you have about business valuation or maximizing your business value.
Book a free no obligation strategy call now using my online scheduler below so that we can discuss your unique circumstances. With that said, thanks so much for your time and I look forward to seeing you soon.
Katie is coach, entrepreneur, and deal-maker that partners with business leaders in creative ways to maximize potential. She understand the complicated lives of entrepreneurs and believes the world would be a better place with even more successful small businesses. A fourth-generation entrepreneur, Katie purchased her first business in 2010 and has partnered with hundreds of business leaders to accomplish their goals, challenges, and visions for a bigger future. Katie is certified in Conversational Intelligence® — the neuroscience of leadership, and holds a B.A. in Business Management from Luther College in Decorah, Iowa.