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06 EcOnOMY nOW — Strategies for success in today’s unique financial climate 16 OUR EXPERT — Raymond Joabar on making plans now for a brighter future 18 cARDMEMBER STORiES — An insight into the business tactics being employed by your peers
FinAnciAl PlAnninG —
A Practical Guide to Business Growth
cARDMEMBER STORY — Warren Brown CAKELOVE
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open Book — financial planning
welcome to the latest in our series of guides providing practical advice to help grow your business. This issue focuses on financial planning, a term that refers to managing your business through economic cycles and varying stages of growth so that you are poised for future financial success. There’s no doubt the u.s. economy has been adversely affected by the collapse of the housing bubble and rising worldwide oil prices. and this has a significant impact on business owners, both as contributors to the economy and as consumers. it can be easy to forget that the economy is cyclical – good times inevitably follow bad, and vice versa. However, if you make the most of your knowledge and plan well, your business can become more adept at weathering the storms that crop up from time to time. it’s worth the effort: a little planning now goes a long way towards ensuring you are well-positioned to enjoy the benefits of the eventual turnaround. Just as you would plan your personal finances to accommodate the different needs you have at different
in a cyclical economy, a carefully considered financial plan is your primary asset, allowing you to emerge stronger from uncertain times
stages of your life, so too should you be considering the specific needs of your business at each stage of its growth. whether you are expanding your business, consolidating your operations or handing over the reins, you need to make informed decisions to ensure that you achieve all of your goals. in the first part of this open Book, we provide our experts’ take, as raymond Joabar and christophe le caillec offer tips on how to keep your business strong and resilient. in the second part, we’ve identified four cardmembers with businesses at various stages of maturity, who have adopted a range of techniques which enable them to fulfill their individual ambitions. we’re sure their stories will resonate with you, no matter what stage your business is currently in. we hope this installment from our open Book series contributes to your financial planning expertise by helping you make informed decisions and revealing potentially rewarding ideas you may not yet have considered.
financial planning — MaSTHEaD
financial planning — cOnTEnTS
Edited and Produced by
Winkreative 611 Broadway Suite 632 new York, nY 10012 www.winkreative.com Creative Director — TYlER BRûlÉ Managing Editor — JEnnifER McalEaR Editor — DaviD WORREll Design Director — MaURUS fRaSER Designer — MaDS TØRK Photo Editor — STEpHEn lEDgER-lOMaS Production Editor — JacqUElinE DEacOn Sub-editors — anTHOnY BanKS laURa vOgEl Editorial Assistants — claUDia cORRiERi DaviD pROTERRa
EcOnOMY nOW — Nothing is more important for a successful entrepreneur than an understanding of how best to respond to macro- and micro-economic trends. We reveal the key strategies to consider OUR EXpERT — financial planning How can you maintain your business during uncertain times? OPEN Expert Raymond Joabar presents his guide to staying ahead of the game caRDMEMBER STORY — STaRTUp Kid Car NY is revolutionizing the way children travel in the Big Apple. CEO Topher McGibbon explains how he got his show on the road
caRDMEMBER STORY — gROWTH Texas Driving Experience is a business in the fast lane. But what steps are necessary for an already successful company to keep growing? caRDMEMBER STORY — plaTEaU With five bakeries and a café already open, CakeLove is a thriving brand. We discuss the next phase with CEO Warren Brown caRDMEMBER STORY — EXiT Handing over a business you have built up over time calls for careful planning. At Florida-based Airparts Company Inc. the succession plan is a family affair
Account Director, Winkreative — MEigHan DOBSOn Project Manager, Winkreative — Diana KEH For American Express OPEN SM — aMY fiTzgiBBOnS JaMi KElMEnSOn JaiSHRi KOTHanDaRaMan MaRcElla SHinDER
economy noW —
Illustration: Daniel Haskett
successful business owners often have a few things in common. They build strong relationships, not only with their customers, but with banks and suppliers. They are resourceful, negotiating through troubled times and emerging more resolute as a result. and they display ingenuity, devising brilliant strategies for maximizing the potential of their businesses. Through our dealings with business owners, we’ve come to understand that each of these traits is essential when it comes to surviving – indeed, flourishing – during an economic downturn. The current fiscal situation is on everyone’s minds, and it is generally agreed that while the economy is not at its most robust, there is no reason why a well-run business cannot thrive with the help of thoughtful financial planning. in keeping with the spirit of open book, we would like to take this opportunity to present a comprehensive exploration of aspects of financial planning that are essential in the current economy. from exploring possibilities for diversification (including taking a look at expanding into
financial planning is all about responding to the prevailing fiscal climate. proper planning noW Will enable you to Weather any storms ahead
overseas markets) to buying futures contracts that set guaranteed exchange rates against foreign currencies; from outsourcing certain areas of your operation to making moves towards minimizing energy waste – we offer suggestions to businesses of all sizes with input by our own christophe le caillac, vice president and lead financial officer at american express open. but, first of all, we would like to focus briefly on something that should underpin every facet of financial planning – a good credit score. no matter how much you and your business are affected by macroeconomic factors, at a micro level you should make every effort not to default on payments. you can be certain that any failure to make payments will catch up with you. instead, be proactive about boosting your credit score and obtain your company’s report from one of the major reporting agencies such as experion or dun & bradstreet. continue to use credit responsibly, and keep your personal and corporate accounts separate. The result will be confirmation of the old adage that credit comes where credit is due.
economy noW — foreign affairs
foreign affairs With the dollar flirting with record lows against other currencies, it may be time to turn your business model upside down t today’s global economy has transformed business. We import from china, buy technology from europe and have assembly lines in mexico. it is no wonder that even the smallest businesses feel the sting when exchange rates make foreign goods more expensive. because the dollar has lost value against many world currencies (including a 15 percent decline against the euro between september 2007 and april 2008), the increased cost of foreign products is reason for growing concern for even the healthiest companies. fortunately, there are a number f of ways to minimize the impact of the dollar’s weakness and even to turn the situation to your advantage. 1. — Understand the Impact The effect of foreign exchange rates is not always obvious. With supply chains that criss-cross the globe, there may be several currencies involved in manufacturing even the simplest product. but a good foreign exchange strategy should be as simple as possible. start by asking yourself two key questions: Which of your inputs come from strong-currency regions, like the eu and Japan? and, what would a 10 or 20 percent price increase from those suppliers mean to your business? armed with this knowledge, you can begin to evaluate alternatives from a new perspective. is it possible – perhaps even profitable – to begin looking at alternative sources of goods and services? are there domestic vendors that you may have overlooked previously based on cost? as the exchange rates shift, so should your sourcing strategies. — Hedge Your Bets f for companies that are inextricably linked to suppliers in europe, there are two challenges: The poor exchange rate itself and the uncertainty generated by exchange-rate volatility. When foreign goods are priced in their local currency, uncertainty in exchange rates means uncertainty in pricing.
one strategy for alleviating that risk and uncertainty may be buying a foreign exchange futures contract. This can be done by using a brokerage transaction that guarantees you a set exchange rate. any business that can predict payments to foreign suppliers can benefit from locking in rates in advance. “be sure to work with a reputable company for foreign exchange since even small spreads in the exchange rate can translate to thousands of dollars,” says christophe le caillec. “The idea behind a foreign exchange futures contract is to protect the margin you make on selling your product or service. it’s not about speculation.” le caillec adds, “it’s important to get advice from a trusted advisor such as your stock broker or banker to determine the most appropriate way to reduce your foreign exchange exposure.” of course, a similar strategy would be to lock suppliers into longer-term contracts priced in dollars. That, in effect, transfers all the foreign exchange risk to the supplier. While this option can be an attractive alternative, it may simply cause the supplier to further raise prices.
Turn the Tables f fortunately, every foreign exchange challenge brings an equal opportunity. These days, a weak dollar means that your goods and services are less expensive for foreign (especially european) buyers. “This makes diversifying geographically an especially important strategy,” says le caillec. large, untapped markets may exist for your product in europe, where your prices are now significantly less than they were just a few months ago. value of 1 us dollar to yen
“don’t be daunted by the opportunity to sell internationally,” he adds. “fortunately, f fortunately, we are at a time when the internet can play an amazing role in selling globally.” Thanks to online advertising, automated payment and quick shipping, selling products to a customer in paris, france, can be just as simple as selling f to a customer in paris, texas.” t f for any business, protecting yourself from further exchange-rate inflation can be crucial – but the opportunity for new markets may make the current economy look brighter. value of 1 us dollar to euro
¥90 Sept 2007 Nov 2007 Jan 2008 Mar 2008
€0.62 Sept 2007 Nov 2007 Jan 2008 Mar 2008
Copyright 2008 Yahoo! Inc.
Copyright 2008 Yahoo! Inc.
economy noW — groWing against the tide
groWing against the tide Strong leadership often requires aggressive action. Now is an ideal time to explore bold new markets and strategies for growth a company’s response to turbulent times doesn’t always have to be defensive: sometimes the best plan is to push for sales in new markets and go for growth. of course, growing when those around you are shrinking takes gusto: it can mean looking at bold strategies like diversification, acquisition and international expansion. or it could simply mean learning to think more creatively by providing solutions to your customers that will help maximize your value to them. There may never be a better time to explore the range of possibilities. — Diversify “Just as there are industries that have been negatively impacted – there are also those that are almost wholly disconnected from the larger trends, and some that are historically counter-cyclical,” says christophe le caillac. “unlock new growth by targeting customers in
those sectors that are stable or growing.” healthcare and energy are among those industries that tend to be less affected by macro-economic cycles. entertainment is another that has, historically, shown growth during recessionary times (in fact, market trackers report that sales of video games continue to break records – both consoles and game software sales were up 63 percent in early 2008 over the prior year). and then there is the government sector, a stable and largely untapped source of revenue for many small businesses. it could be worth your while to explore how your business may be able to find customers in these industries as a means to weathering a financial downturn. one way of reaching out to a broader range of prospects could be to experiment with online marketing strategies including email marketing and payper-click ads. — Buy Low When industries are stagnant or shrinking, stronger companies will nonetheless have opportunities to increase their market
share by acquiring their competitors. and a weak economy is the perfect time to spot opportunities. if a company’s finances are faltering, but their customer base is intact, they could be an ideal acquisition. of course, purchasing can also be used to expand into new industries. but don’t stray too far afield. good financial deals may not seem so great when the economy improves and you find that your acquisition is not a good strategic fit with your core business. — Go Global if you have strong customers in the u.s., chances are you’ll find equally valuable customers in other Western countries, and, during a slow economy is a great time to explore options. The dollar’s decline against the euro means that american products will be more competitive from a price standpoint. “The current situation is shifting to where the opportunities lie,” says le caillec. “cover your back, but also look at where the opportunities are and where they are going. people who are exporting are doing extremely well at the moment.”
goods and services from the u.s. have never been cheaper for customers in europe and Japan. now it’s up to you to find them and close the deal. investigate the sba’s office of international trade (www.sba.gov/oit/) or a u.s. export assistance center. — Start Closer to Home There are, of course, smaller steps you can take to reposition yourself without fundamentally altering your business model. if your company’s sales are tied to consumer spending, and consumer spending is down, it might be best to focus your energies on finding new uses for your existing products, or selling upgrades to existing customers. find new ways to win customer’s hearts during lean times and you’ll reap the rewards in improved customer loyalty when things turn around. Whether staying close to home or venturing into new territory, those who face today’s economic challenges head-on, by adamantly pursuing growth despite bleak forecasts, may well come out ahead – and if we’re lucky, they may just bring the rest of the u.s. economy with them.
economy noW — labor of love
labor of love Challenging economic times may cause you to evaluate payroll cuts. Stop short of major surgery and opt instead for a heart-to-heart with your employees layoffs and downsizing tend to go hand-in-hand with uncertain economic conditions. When times are tough, one of the first places that companies look to decrease costs is their labor force. small businesses need to weigh such cost-cutting decisions carefully as reducing the workforce too much can mean a loss of critical knowledge and skills. it can also leave a business understaffed when the situation turns around. There is a delicate balance between optimizing staff and cutting costs, but it is not necessarily an either-or proposition. With careful and creative planning, it may be possible to do both. here’s how: — Consider Outsourcing adding capacity does not have to mean adding employees: There are many opportunities to outsource a variety of business functions. generally, the less visible the job is
to customers, the more benefit there may be to outsourcing it. functions like accounting, marketing, and even human resources can be safely assigned to companies or teams outside the four walls of your office. outsourcing can mean sending work down the street, or across the globe. There are ample opportunities to hire smart, reliable firms outside the u.s. to perform data-intensive tasks like accounting, customer service, database maintenance, and software development. international outsourcing firms have the twin advantages of being extremely cost-effective and performing a lot of work during the u.s. overnight or early morning hours, helping you accomplish more in less time. a great place to start an outsourcing search is www.outsourcing.com. — Keep What You’ve Got if you are wary of replacing staff with outsourced labor, negotiating may be a better option. payroll has the reputation of being untouchable, but in difficult circumstances, employees have been known to take cuts across the board rather than face layoffs.
“everything is negotiable,” says le caillec. “offering employees options – including reduced work hours or additional time off – may be enough to keep current staff on board while still reducing payroll expenses by ten or twenty percent. of course, this is only a short-term strategy. even the most loyal employees will expect their full salary back eventually.” Go Virtual remember, payroll is not the only expense associated with having staff. The cost of overhead – rent, phones and it infrastructure in particular – grow in direct proportion to the number of employees physically present in the office. These same overhead expenses are ideal cost-cutting targets. a temporary move to a smaller space, or cutting some of your phone lines, can save big bucks in a hurry, and help you endure through tough times. When cutting deep into overhead, consider taking your workforce virtual. online tools make telecommuting more feasible than ever. consider using a voip (voice over —
internet protocol) service like skype, packet8, or accesspoint, which can connect work-athomers while also saving hundreds of dollars over a standard phone service. Web 2.0 tools like hosted exchange servers and google docs can make a virtual workforce even more productive than a typical office team. Working from home is often seen as a valuable perk, actually making your culture more desirable to employees, as well as being a cost savings to the company. many studies suggest that home-office workers may even put in longer hours since they don’t commute and are happier because they can spend more time with their families. — The Heart and Soul employees are the heart and soul of your business. as tempting as it can be to slash payroll costs during tough times, you’ll need those same resources to make a successful rebound. rather than downsizing too quickly, evaluate the alternatives and find a win-win situation that leaves your company whole and your employees happy and ready to embrace the good times.
economy noW — this price isn’t quite right
this price isn’t quite right As prices for fuel and raw materials spike, smart business owners will take fast action. according to the u.s. energy information administration (eia) the inflation-adjusted price of gasoline hit a new milestone in march 2008, when, at just over $3.21 a gallon, it became more expensive than at anytime since World War i. and when the eia reported that the price of a barrel of oil passed $130 a few months later, it too set all-time-record highs and caused ripples throughout the economy. of course, the price of petroleum is not the only thing being affected. crops like corn and soy are being doubly impacted by increasing transportation costs and a rapidly growing demand. raw building materials like steel and concrete are also experiencing shortages and price spikes. inflation presents a real challenge for small businesses, but creative entrepreneurs can find several options for dealing with increasing prices, from passing along cost increases to curtailing usage.
Adding a Surcharge one of the most common strategies for dealing with volatile prices is to pass them on to customers in the form of surcharges. fuel surcharges, for example, are common among delivery and service companies that rely on transportation. “The key strategy here is to separate the cost of the raw material – like fuel – from the underlying value of your product or service,” says le caillac. “have your customers make the distinction between your value and the uncontrollable third-party costs like the costs of gas or steel or concrete.” eventually, if costs remain high, the price of the product or service will probably have to increase. but, in the short-term, a surcharge helps customers adjust to the new pricing. and since surcharges can be based on actual market conditions, a calculated surcharge can be a built into long-term contract as a way to share the risk with customers without seeming to raise prices. Retool to Reduce fuel prices in particular are driving companies and consumers to make difficult —
decisions in the areas of transportation and energy use. fewer people are willing to commute long distances to work, and more are looking to purchase goods and services that are fuel-efficient or promise energy savings. When it comes to conservation and costcutting, companies that take action now will be less susceptible to price hikes in the near term … and more competitive in the long run. “take a look at all aspects of how you deliver goods and services to your customer,” says le caillec. “is there an opportunity to move a distribution center closer to larger customers or to use alternative transportation?” With gasoline prices at record highs, the return on investment could be quite significant. Reducing Waste “reduce, reuse and recycle” is not just an environmentalist mantra, but a great way to uncover cost savings throughout your organization. challenge your staff to identify areas where raw materials can be reclaimed or reduced, and review your energy bills frequently. two simple places to start are making the switch from incandescent —
and halogen lighting to compact fluorescent lightbulbs (cfls) and using powerstrips instead of plugging electrical equipment directly into wall sockets. also consider installing motion-sensor-activated lighting so that unused offices and conference rooms aren’t constantly ablaze. encourage “paperless communication” – there are easily installable software counters that can keep a tally on how may pages are printed – thereby saving on printer wear-and-tear, electricity and paper. Keep in mind the secondary effects of inflation. higher fuel costs, for example, will have an impact on employees who commute by car. as the cost of living increases, employees will be looking to their employers to help them stay afloat. Keep a lid on wages by helping employees reduce their own costs: encourage telecommuting (as discussed on page 13) or implement four-day work weeks where possible. as increasing prices ripple through the economy, all aspects of business are likely to feel the impact. creative solutions – and fast action – are likely to pay off sooner than you might think.
open eXpert — financial planning
Name: Job Title:
Illustration: Noli Novak
raymond Joabar senior vice president, product management and development leads the credit card portfolio and manages line-ofcredit products 1992
The recent economic uncertainties – evident in oil prices, the housing market, and international exchange rates – present entrepreneurs with a confluence of challenges, but also with opportunities. in this perfect storm of macroeconomic tides, those businesses that turn their attention to collecting receivables, cutting unnecessary costs, and building revenue diversification will be poised for continued success. improve collections and cash floW faster is always better when it comes to converting invoiced dollars to cash, but it never seems to happen quickly enough. start by getting maximum value out of your money. collect payments as early as possible and hold on to your own money as long as possible. keep detailed records of the money that you are due and consider using charge cards or credit cards to pay bills – allowing yourself an extra period for repayment for short-term needs. When an account becomes severely past due, ask yourself if the customer is worth it. —
With the economy taking some hits recently, raymond Joabar offers his take on hoW you can manage a resilient business through ups and doWns
are they a source of referrals? can you afford to lose their business? you may find that you would be better off without a customer that is causing you to carry a very substantial unpaid balance. finally, regularly evaluate ways to reduce or eliminate outstanding receivables, not just from delinquent accounts, but across the board. simple strategies that can make a big difference in cash flow include: checking a client’s credit up front; offering (or requiring) faster payment terms; accepting credit cards; and, as a last resort, using collections agencies. boost the bottom line by cutting costs big fixed expenses like payroll and rent are an obvious place to start. look carefully before eliminating valuable staff, key marketing efforts or vital customerfacing services. instead, look to renegotiate big contracts for real estate leases and loan repayment schedules. in turbulent times, landlords and other vendors are more interested in weathering the storm than squeezing every last cent out of their customers. — When cost-cutting, look to your internal or external resources such as your bookkeeper, accountant or finance department for innovative advice. make use of credit card discount programs and cash-back or rewards programs to reduce the cash used. take advantage of invoice terms to either slow down payments or realize discounts for faster payments. no matter how sleepless your nights, keep one thing in mind: a clean credit record is priceless. do whatever it takes to pay bills on time, stick to the terms and covenants of financial agreements, and keep your credit score as high as possible. if you become really strapped for cash in a given month, paying off even a portion to vendors is better than paying nothing at all. it shows that you are acting in good faith, just as you would want your customers to act with you. find neW groWth opportunities When the economy is down, it is an excellent time to look for customers in new markets – both domestic and global. — marketing your business online can open new markets you never expected to reach – and, even more importantly, help you do so with great cost-efficiency. Though it requires an upfront investment, building a new web site or selling your products or service online allows you to reach more people, for less cash, in the long run. also, while you’re looking for costcutting measures and new sources of growth, remember so are your vendors, competitors and customers. The time could be ripe to forge new partnerships or offer your customers bundled packages that you and related businesses can provide jointly. it could just be a win-win all around. keep an eye on the big picture remember that no business is perfect – economic cycles take their toll on all entrepreneurs in one way or another. but with a clear strategy and careful execution, any business can get through the tough times and emerge better prepared to take advantage of the expanding markets that are sure to follow. —
CARDMEMBER STORIES — STARTUP: KID CAR NY
Name: Company: Founded: Location:
Text: Stuart Husband Photography: Mackenzie Stroh
TOPhER McgIBBON KID CAR NY 2006 NEw YORK, NY
STARTUP: KID CAR NY
YOU’vE hIT ON A wINNINg BUSINESS IDEA – BUT STARTINg UP IS OfTEN hARD TO DO. ThE ENTREPRENEUR BEhIND A CAR SERvICE fOR KIDS REvEAlS hIS ROUTE TO SUCCESS
Mcgibbon wasn’t always so convinced of Kid Car NY’s viability. A native of Atlanta and an alumnus of Columbia University and the Ross School of Business at the University of Michigan, he reviewed U.S. census data after his initial conversation and discovered that only 20,000 children were born annually in New York City at the time: “It wasn’t enough,” he says. “I let the idea go and went back to the tech field, which is what I’m trained in – financial software, product marketing.” But a perfect storm of circumstances caused him to reconsider. New York state law raised the mandatory car-seat age from four to seven, effectively doubling his potential market; and New York City’s post-9/11 baby boom increased the number of under-five-year-olds by 30 percent, while, at the same time, growing numbers of parents were opting to raise their children in the city rather than migrating to the suburbs. “lo and behold, this was now a great market,” says Mcgibbon. “This was a wave that we’d be perfectly placed to ride.” To raise the needed funds for Kid Car NY’s eventual launch in 2006 Mcgibbon canvassed old high school friends and put together a group of investors, got a loan from the Small Business Administration, and bought startup equipment on credit. “I’m 34 now, and I was one of the few people who started my own enterprise right out of business school, and it made capital-raising that much more difficult. we own our cars and don’t use independent contractors, and it costs me $30,000 to put a car on the road not even counting drivers or training. So debt is a fact of my life and I don’t always sleep that well. But, then, this is the life of an entrepreneur,” he says with a grin. “I take reservations, I get behind the wheel, I’ll make the coffee. I’ll do whatever I have to do.” Kid Car NY rates range from $28 for a single journey within Manhattan to $100-plus for an airport run. As Mcgibbon explains, when you hire one of his luxury Nissan or honda minivans (all in maroon, “to mark us out from the legions of black Town Cars”), they come complete with specially trained drivers who ensure that seats are properly installed (as opposed to the 90 percent that the National highway Traffic Safety Administration estimates are not), thus buying convenience and peace of mind along with the ride. That may go some way to explain why Kid Car NY currently has hundreds of local families on its member database, though, says Mcgibbon, “that doesn’t include the families that visit New York City from within the U.S. and abroad.” Mcgibbon won’t reveal how many cars or employees Kid Car NY has – “mostly for reasons of competitive advantage,” he says – but indications are that the service is flourishing. Extra services such as Kid Car After Dark, Kid Car MD (for pediatric appointments), Kid Car Brooklyn and Kid Car hamptons (for visits to the beach) have been introduced. Also, Mcgibbon has been finding that parents – and new mothers in particular – appreciate the service even more than their kids do “It lessens their sense of isolation,” he says. “we get them beyond the twenty blocks that every new parent tends to stick, over to, say brunch parties in Soho. we’re allowing friends to reconnect; there’s definitely a social element to it. It’s part of the reason that our motto is ‘get Out and go.’ ”
Six years ago, while having brunch in New York’s Time Café, Topher Mcgibbon was hit in the face by a piece of buttered waffle thrown by a toddler at the next table. Instead of getting irate, Mcgibbon was inspired. “It was a Newtonian moment for me,” he recalls. “I was sitting with some doctors, and it prompted a conversation about safe transportation for young children; I found out, firstly, that the New York state law mandating that children under the age of four be restrained in a child-safety seat didn’t apply to taxis, and that over 2,500 children were injured yearly in taxi-related crashes. Secondly, I learned that most U.S. hospitals require that newborns leave the premises in a car seat. That’s when the idea was born.” Today, Mcgibbon is the CEO of Kid Car NY, a Manhattan-based car service designed specifically to whisk newborns home from the maternity ward, and their older brothers and sisters between play-dates, tutors or piano practice, in safety-seated splendor (along with parents or caregivers, of course – “we don’t take unaccompanied kids or parents,” says Mcgibbon with a smile).
CARDMEMBER STORIES — STARTUP: KID CAR NY
every day, and it’s gold for a business like this. It’s allowed us to get to where we are today.” Mcgibbon balances such fidelity against rising gas prices and talk of a nascent recession, and is cautiously optimistic about the future. “I can’t give out numbers,” he says when asked about burn-rates, “but our vehicles are almost at the point of paying for themselves. Our revenues are covering our variable costs and going a long way toward covering our fixed costs. I anticipate us being cash-flow-positive within 12 months.” with a scalable model, he floats the possibility of Kid Car Boston, los Angeles, San francisco, or washington, DC – “cities with higher car ownership but perennial parking problems.” he’s even had inquiries about the possibility of ferrying cab-wary seniors around Manhattan. Yes, he concedes, they’ve had to raise their rates to cover gas price hikes, and a couple of people have nixed the service as belts tighten. “But we’re a luxury that quickly becomes a necessity,” he says with a smile. “People make an emotional connection with our drivers and our service. It’s not long before they wonder how they ever lived without us.”
OPPOSITE PAGE ABOVE
Such is Kid Car NY’s customer loyalty that enough have signed up to the $300 yearly membership fee to enable the company to manage its growth. “Because of our niche, we can grow organically and we don’t have to buy 50 cars at a time,” says Mcgibbon. “we can reach the magic number of sign-ups and add a vehicle that’s fully utilized before it even hits the road. That differentiates us from every other car service in the world.” Moreover, the company is currently finishing up its second capital-raise, financed almost wholly from its member base. “Our waiting list went up from about 25 to around 100 families at one point,” says Mcgibbon. “we were approaching angel groups and even local investment funds but we were either too small or too low-tech. So our members stepped in; they said, “OK Topher, I’ll write you a check.” we’ve got several sets of parents involved in this next round. They know that we offer something special. If they phone and need a car immediately, but we don’t have one for, say, 20 minutes, they’ll say OK; it’s more important for them to know their kids will be safe than to stick to a schedule. They’re prepared to accommodate us. That happens
Dorian White at the control center
FOR MORE INFO ON KID CAR NY SEE: www.kidcarny.com
Keeping the back-seat drivers happy
Door-to-door service, Kid Car-style
STARTUP CONSIDERATIONS — Early stage companies always wrestle with the perennial question: where is the money going to come from? finding the right sources of funds that are both plentiful and flexible is challenging, even in the best of times. Be sure to consider the following factors when starting a new venture:
1. 2. 3. 4. 5. 6. 7. Your personal credit record is important. Can you afford to borrow to support a new business? Secure some credit before you quit your day job. Explore both leases and loans. If your startup requires vehicles or equipment, you will find lenders willing to finance these items because they act as good collateral. Look around for investors and partners. It takes a long time to nurture investor relationships, so start early and be persistent. Nothing helps a new business thrive like strong sales. work hard to balance investment in new capabilities with real demand from the marketplace. If you build it, they may not come.
Is there a strong enough need for the business you’ve created? Hold something back. Prepare a one-year budget that leaves you with a good cushion in the bank. Things usually take twice as long (and cost twice as much) as you expect. Register your business with credit bureaus such as Dun & Bradstreet, Experian or Equifax. fill out the basics about your company and ask your vendors to report your payment record. The more information that creditors can obtain about your business, the more likely it is that you’ll receive a favorable decision from them.
Consider how your company will be impacted in times of economic uncertainty.
CARDMEMBER STORIES — GROWTH: TExAS DRIvInG ExpERIEnCE
Name: Company: Founded: Location:
Text: Stuart Husband Photography: Ture Lillegraven
DAWn STOkES TExAS DRIvInG ExpERIEnCE 2004 FORT WORTH, Tx
GROWTH: TEXAS DRIVING EXPERIENCE
DAWn STOkES, CEO OF TExAS DRIvInG ExpERIEnCE, TAlkS ABOuT HOW HER BuSInESS IS GROWInG AT A RATE THAT OuTpACES EvEn HER yEllOW CORvETTES
“I’ve been a car kook for as long as I can remember,” says Dawn Stokes. “I’ve always had a need for speed.” As Stokes speaks, a fleet of ten yellow Z06 Corvettes race past her. And while they don’t literally have her name on them, they have the next best thing – the name of her company. Texas Driving Experience (TDE), a racing academy and safe-driving school, is located midway between Dallas and Fort Worth, amid the impressive surroundings of the Texas Motor Speedway. This 1,500-acre site boasts a 1.5-mile track with 24-degree turns and a 200,000-plus seating capacity. “It’s actually the second biggest sports facility in the States, after Indianapolis Speedway,” says Stokes. “And I’m really proud to be a part of it.” If the petite, blond Stokes cuts an incongruous figure in these burnt-rubber, testosterone-heavy surroundings, she’s quick to assure that she’s right at home. She still has the first car she ever bought when she was 14 – a 1963 convertible Corvair Monza Spyder, now “retired” to her garage. During her previous life as a harried health-care executive, she enrolled in high-performance driving schools as an outlet for job-related stress. “I quickly saw the value of these schools, both as a way of letting off steam and of making better drivers of people,” she says, in ebullient tones. “I got caught in a workforce reduction in 2003, by which time I was married and divorced, and the mother of a young son. I definitely felt like I was at a turning point. I could have carried on in the corporate world, but my entrepreneurial spirit was leading me in a different direction.” Stokes’s decision to marry a hobby with a passion was largely inspired by the fact that 6,000 teenagers die in car-related accidents in the u.S. every year. “That’s an intolerable statistic,” she says heatedly. “I thought, do we not realize the potential we’re losing?” Thus fired up, Stokes drove out to Texas Motor Speedway, walked in, and pitched her idea, which she’d christened SkIllZ – for life. “They weren’t impressed,” she says with a laugh. “I thought it was going to be easy because I was going to save the world, but they soon put me straight. They said you’ll need $5 million-worth of insurance for a start. And I’d done no costings and had no business plan. As a woman, it was hard to get them to take me seriously at first. It could get really frustrating when they’d address remarks to my male employees rather than me. It was an important and difficult lesson, but it’s helped me in other strategic partnerships.” To prove her seriousness, Stokes cashed in her 401k (“I know,” she says, laughing, “you are never supposed to do that”), went MIA from her accountant and financial advisor for a year and a half, and pre-sold three events before she even had any cars. “I was incredibly bullish,” she says. “But it was clear to me from the start that a teen driving school was going to be a hard marketing sell. It had to be cool enough to stand out from traditional Drivers’ Ed, but at the same time it had to reassure Mom and Dad, who were freaked out that their kids were coming to a racetrack.” To raise serious cash, Stokes started a service aimed at people like her former self – corporate thrill-seekers. “It’s a total adventure for the CEO or the executive or sales team,” she says. Within months of setting up Texas Driving Experience, Stokes was fielding calls from Fortune 500 companies seeking a team-building exercise for their workforce that would be a little more white-knuckle than golf or paint-balling. She saw the number of events rise from 12 in 2004 (at which time she was only in business for a few months) to 150 in 2007, with almost 200 planned for 2008. Revenue has also increased exponentially, from $153,000 in 2004 to $1.5 million in 2007; this year TDE is on target to hit $2.3 million. Winning the Make Mine A Million $ Business program, designed to help female entrepreneurs grow their businesses with a combination of money, mentoring and marketing, was key to helping Texas Driving Experience to pass that magical milliondollar figure in annual revenue. “Make Mine A Million was truly the best thing that ever happened to this company, beams Stokes. “It validated who we were and got us taken a lot more seriously. ” On a typical weekend afternoon at the Speedway, the range of Texas Driving Experience’s activities is readily apparent. A team from a finance company which has hired the Corvettes is furiously high-fiving
CARDMEMBER STORIES — GROWTH: TExAS DRIvInG ExpERIEnCE
company-owned vehicles,” says Stokes. “And they’re very keen on the team-building side as well. As times get tougher, companies want to invest in their employees and retain their loyalty. So we’re expecting teams of thirty people out here at least three times a week. It has the biggest growth potential of all our offerings – it’s projected to add over $100,000 in bottom-line revenue this year, with a $250,000 goal for 2009.” Stokes also has her eye on physical expansion of the business. She’s been asked to replicate TDE in other American venues including Monterey, California, as well as Dubai and Bahrain in the Middle East. “Speedway Motorsports, Inc. owns and operates seven tracks, including Texas Motor Speedway, so there is much potential for other locations. The growth has been steady up to now, but the fleetsafety side should take things to a whole new level and open up a load of new opportunities. It’s a pretty exciting time for us.” While exploring the options, she’s already secured the appropriate state domain names – floridadrivingexperience.com, californiadrivingexperience.com, etc – “so that, if we ever need ‘em, they’re ready to go!” she says with a grin. Does she still feel the need for speed? “Absolutely,” she says beaming. “But now I don’t even need to get in a car to get it. Running this company is so cutting-edge; my adrenalin’s just flowing all the time.” GROWTH COnSIDERATIOnS — periods of fast corporate growth can be a heady time. new opportunities seem to be everywhere. It’s tempting to put the pedal to the metal and grow, grow, grow. Growth, however, can be a serious drain on cash, and may also impact profits in ways you don’t anticipate. Before you spin out of control, consider these points:
1. Ensure that your new venture won’t place undo strain on the overall business. —
after a frenetic spin round the infield track with TDE’s drivers. At the same time, the SkIllZ school is taking teens through the intricacies of wet-road driving, tailgating, and the ABS braking system in their brand-new Toyota Scions. The cars are aptly emblazoned with the legend “Drivers’ Ed Was never like This!” Stokes congratulates the corporate riders as they remove their helmets and make for TDE’s souvenir trailer; she then moves on to give a rousing pep talk to the teens. “It’s still the part of the company that I’m most passionate about,” she says of SkIllZ. “We get letters from people saying we’ve probably saved their lives because of the things we’ve taught them. That’s a pretty big incentive to get up in the morning and come to work.” As it approaches its fourth year in business, Texas Driving Experience is looking for new growth opportunities. In June of 2008, Stokes inaugurated the SkIllZ – for life Fleet Safety Training program, in which some of the giant oil and energy companies based in the area will send their drivers to TDE to brush up their handling skills. “It’s the teen school, transferred to drivers of
Will the new opportunities be as profitable as the core business? How long will it take to ramp up sales of a new product line or expand to a new territory?
2. More salaries, rents and utilities can amplify cash needs. —
Will the core business be able to provide enough cash to cover both the investment in new growth opportunities, as well as any potential losses?
Growth investments can decrease profits for a number of years. —
If bankers or investors are looking for bottom-line results, they are likely to factor in non-operating expenses such as depreciation or amortization
4. Spending for the sake of growth should yield a good return on investment (ROI). —
Do you know what return your investment is bringing or likely to bring? If you have several options, invest in those that are likely to provide the highest growth potential based on the numbers.
Dawn Stokes with a revved-up customer
OPPOSITE PAGE RIGHT
OPPOSITE PAGE LEFT
Instructor George Shepherd imparts his experience
Professional driver Josh Gilbert
FOR MORE INFO ON TEXAS DRIVING EXPERIENCE SEE: www.texasdriving experience.com
The fleet at rest
CARDMEMBER STORIES — PlATEAu: CAKElOVE
Name: Company: Founded: Location:
Text: Stuart Husband Photography: Mackenzie Stroh
wARREn BROwn CAKElOVE 2002 wAShIngTOn, DC
YOuR BuSInESS hAS hIT ITS STRIDE, BuT ThAT DOESn’T MEAn YOu CAn REST On YOuR lAuRElS. wARREn BROwn, CEO Of CAKElOVE, IS PuShIng On fROM ThE PlATEAu
the love Café, naturally – in the Maryland/ Virginia/D.C. area (a sixth location, in national harbor, Maryland, will launch later this year). he has won numerous accolades, including DC’s Small Business Person of the Year Award in 2006, published CakeLove: How to Bake Cakes from Scratch, and has a food network baking show called Sugar Rush. Oprah has lauded him, but his most glowing testimonials come from the kids he teaches in his Introduction to Baking classes held at his Silver Spring, Maryland, location (“Your cakes were so good, I wanted to marry them,” six-year-old Shauna, wrote, enthusiastically, in the class guestbook). Brown is inclined to downplay his achievements, however. “I’m offering what’s already well-known, but I’m just making it a little better, by using the freshest ingredients,” he says. “It’s not revolutionary, it’s just back to basics. But I’m hopefully getting people fired up about food.” Brown has always appreciated the feel-good factor in food; he grew up outside Cleveland, Ohio, where, he says, “My mom always encouraged us to cook, and I really felt a sense of accomplishment in producing a family meal. with baking, in particular, you kind of surrender yourself to the process; the preparation and presentation is so meticulous.” Brown’s real cake epiphany came when he was ferrying one of his homemade chocolate offerings to a family-reunion dinner back in 1999. “People at the airport, complete strangers, were coming up to me and practically cooing over this thing, saying, ‘You made this from scratch?’ ” he recalls. “It was like having an adorable child or puppy in tow. I was getting the same reaction on the plane, and I’m thinking: OK, if this is what happens with one cake, what would happen if people were encountering whole shelves of them?” At that point, Brown was laboring at what he calls “a job I didn’t really like” – after earning a B.A. in history at Brown and a Master’s in public health from george washington university, he’d become a litigator in health-care fraud. “I was just out of law school, I’d just broken up with my girlfriend, and I was one of millions of lawyers in D.C.,” he says. “I felt I had more to offer, so I found myself considering the bakery idea really seriously.” with faith that if he baked it, they would come, Brown started producing seven to ten cakes a week out of his apartment, in tandem with his law practice – a baking/ litigating workload that brought on an ER visit for exhaustion. with momentum building, he took out a $125,000 bank loan and opened his first Cakelove – with the apt motto: “Cakes from Scratch” – in D.C.’s up and coming u Street corridor (Brown is a proponent of urban economic development and looks to make an impact where he can). It set the template for the Cakelove empire: an interior that’s both compact and airy, where customers can order personalized cakes and watch the layering and icing process in action. Enthusiastic and knowledgeable staff proudly wear Cakelove T-shirts – “Make Cakelove not war” being a particular favorite. “The first shop took off almost immediately,” says Brown. “But I knew it could if I stayed focused and did it right. Because of my relaxed attitude people underestimate how much this whole venture was calculated. My idea was to focus solely on cakes. They have the best margins, so why waste your time on other things?”
It’s a bright spring day on the waterfront of Baltimore’s famous Inner harbor, but it’s not just the sun that’s bringing a smile to the faces of the patrons of a light, airy and funky food emporium on Boston Street. foodies scan the rows of cupcakes in mouthwatering combinations (just a taste: chocolateraspberry, strawberry-vanilla, lime-lemon). Also on display are formidable strawberry layer cakes oozing buttercream icing as well as a particularly lethal-looking chocolateand-ganache concoction, aptly named My Decadence. The customers’ rapturous expressions tell a simple story. we’re here at Cakelove, to meet 38-year-old warren Brown, the company’s charismatic founder and CEO. “People associate cake with celebration, good feelings, and memories,” he says, as a white-haired woman practically skips out of the shop with a large slice of Cynthia’s Sin (a delicious combination of chocolate, caramel and peanut butter). “It’s a really rewarding thing.” It’s certainly proved so for Brown. Since Cakelove’s founding in 2002, he’s opened five locations, plus a café – named
CARDMEMBER STORIES — PlATEAu: CAKElOVE
whatever the future holds, Brown’s already proud of what Cakelove’s achieved. “My sister says I sell memories,” he says, taking a nibble on a cupcake. “Most people taste this stuff and they’re right back to their childhoods, birthday parties, good times. Making them happy makes me happy. So, whether we have seven stores or seven hundred, I’m confident that we’ll be sticking around.”
OPPOSIte PaGe tOP
(for this reason, he says, he won’t be opening another love Café, which sells sandwiches and savories alongside the cakes: “It’s too complicated and it dilutes the brand.”) growth has come at a moderate pace – Brown opened one new Cakelove location a year for the first few years, with the last three coming in the last nine months – and, so far at least, his product seems impervious to economic teetering. “Our core customers don’t regard cake as a luxury; they regard it as an essential part of their lives,” he says, grinning. “I’m amazed by the breadth of the customer base – we get young and old and all shapes and sizes, and when they find a cake that’s good they’ll not only come back for more, they’ll pass the word on. Most of our exposure, and the other opportunities that have come my way like the TV show, are all due to word-ofmouth.” Perhaps people are also responding to the green values that Brown espouses; three of his stores and his office are powered by electricity generated from wind turbines (“I’m looking to get more heavily involved in windpower as the business grows,” he says), while recycling of glass and cardboard is mandatory, and customers are (gently) dissuaded from using plastic bags. Brown doesn’t give out any financial figures for the business – “let’s just say we’re profitable, and the bank likes us,” he says archly – but he concedes that he’s now got the base he needs to continue to grow – if that’s what he wants. “People say, ‘Oh, you should grab money from a rich investor and add 700 stores in five years,’ ” he says with a smile. “I’m not compelled to try that. I want to keep the company in my own image, to have my own recipes, my imprimatur on it,” says Brown. “I’d like Cakelove in places across America, beyond its borders, even, but I want to keep the quirky feel. It shouldn’t get too ubiquitous; it should be a place that people feel they’ve discovered.” he shakes his head. “growth is a challenging thing, particularly when food and gas prices are killing us. we’re having to raise our prices, which makes me more cautious – instead of opening another four to six stores next year, I’m thinking it might be just one. At this point, I’m finished with major cash outlays. I’d rather people came to me.” he adds with a grin: “After all, when you don’t grow is when you can actually enjoy the profits.”
Warren Brown spreads the love
OPPOSIte PaGe BelOW
A delicious birthday surprise
A cornucopia of cakes
FOR MORe INFO ON CakelOVe See: www.cakelove.com
Customers at CakeLove’s Canton, MD, store
PlATEAu COnSIDERATIOnS — Mature companies have iced the process of providing value to customers, now the business should be tuned to meet the needs of the owner. Consider the following points if your business has reached plateau stage:
1. Restructure finances for cost savings. — A mature business is in the enviable position of being “bankable.” Take advantage of this by locking down lower rates and seek bigger credit lines. Withdraw some cash. — use the improved financial structure to move some cash into your personal life. It’s about time the business started paying you back for your original investment… with interest. Negotiate with vendors. —with size comes privilege. now is the time to step back and reevaluate your purchasing power. go for better pricing and longer payment terms. Invest in efficiency. — Improve your technology and upgrade your equipment – but only where it will have an impact on efficiency. Try to centralize and consolidate processes where possible. Save where possible. — Build a war chest for future growth and acquisition. Position for exit. — Is the business the best size to interest a strategic buyer? find the optimal size and benchmark your financial performance against recent acquisitions, competitors or industry leaders. think about succession. — To whom will you pass the business? Start grooming a lieutenant now. Build a trusted team of managers who can run the place without you.
CARDMEMBER STORIES — EXIT: AIRPARTS COMPAny InC.
Name: Company: Founded: Location:
Text: Stuart Husband Photography: mackenzie Stroh
MARTA MAXwEll AIRPARTS CO. InC 1963 fORT lAuDERDAlE, fl
Exit: AiRPARtS comPAny inc.
hOw DO yOu TRAnSITIOn A BuSInESS yOu hAvE SPEnT yEARS ShAPIng In yOuR Own IMAgE? In ThE CASE Of AIRPARTS, yOu MAkE PlAnS TO kEEP IT In ThE fAMIly
Behind the nondescript façade of a lowslung building near fort lauderdale Airport lies a treasure trove for airplane enthusiasts. hundreds of plane components are stacked on floor-to-ceiling shelves; the packages and boxes boast such obscure products as “Avex Rivets,” “valve Cover gaskets” and “Mouse Milk lubricant.” Trucks shuttle constantly between the loading bay and the nearby runways. This is the headquarters of Airparts Company Inc., one of the foremost u.S. wholesalers of parts and engines for the general-aviation industry. upstairs, in an office adorned with wooden models of the jets and planes that make up the company’s market – Cessna, hawker Beechcraft, learjet, Piper – sits Airparts’ unlikely CEO, a bright, vigorous woman named Marta Maxwell. next to her sits her dapper, convivial husband george, the company’s vice-president. Marta’s children, Andy and Emy, Airparts’ sales manager and general manager respectively, oversee the daily comings and goings; this is the epitome of a family business. Airparts began life in Marta’s garage in wichita, kansas, in 1963; 45 years later, Airparts boasts over 50 employees, a network of 1,200 dealers which provides a cozy cushion of 8,500 customers in 70 countries including most of latin America, Europe and Africa, as well as Pakistan, Israel, and even Papua new guinea, and revenue of approximately $43 million per year. “It just goes to show what a little determination can do,” says Marta, with justifiable pride. Make that determination spiked with canny business acumen. Marta began Airparts when she and her first husband, a pilot looking for work at Cessna, left their native Argentina for kansas. “wichita has always been the air capital of the world, and was a magnet for pilots back then,” says Marta. “Cessna, learjet, Beechcraft and Boeing are all based in the town, and there was a lot of traffic between there and latin America. I originally sold things like headphones and sunglasses to the pilots, but then they started asking me if I could get hold of tires, brakes, fuel pumps and such, to help them service their planes. They spoke no English, so I acted as a broker for them. That’s how the business originally got off the ground.”
CARDMEMBER STORIES — EXIT: AIRPARTS COMPAny InC.
It’s this attention to detail that’s won Marta the numerous business-leadership awards that vie for space with the model planes on the company’s shelves, including the Small Business Person of the year (u.S. SBA for kansas) in 1989 and Exporter of the year (u.S. SBA) 1988. “we haven’t been 45 years in the business without learning a thing or two,” she opines, a twinkle in her eye. Marta married george Maxwell, an aeronautical engineer who’s also a pilot, in 1982, and they relocated the main part of their business to fort lauderdale while still maintaining a subsidiary office in wichita. The move to florida was convenient on two counts – many of the small jets are now maintained on the East Coast, and the Maxwells had an eye on their eventual retirement. however, Marta and george aren’t about to fly their Citation jet into the sunset just yet. They still assiduously attend the office and play a central role in company decision-making. But their exit strategy has always been to hand the company on to the next generation. Andy has been taking the company into new territories, Brazil and Mexico this year, possibly Argentina and Panama next. Emy has a degree in business administration and is in charge of Airparts’ finances. “we’re hoping that the kids will take up the mantle,” says george, as Andy and Emy join them at the conference table. “we haven’t actually worked anything out formally yet. But the outlook for the industry is good. More and more people are deserting the major airlines and using the private jets and turboprops whose parts we sell, and, because our business has always been predominantly export, we have some protection from any downturn in the u.S. economy. Our orders are very healthy, thanks to the weak dollar; domestic sales are steady but foreign sales are buoyant. And we’re always looking to venture into new markets; as one market drops, another – Russia or China, for example – rises.” for these reasons – not to mention continuing growth of around 20 percent a year – there’s been a lot of outside interest in the Airparts brand. “we’ve had several companies call us, expressing interest in buying us out,” says the pragmatic Emy. “But we’re just not interested at the moment.” “If someone comes along and offers us $200 million, I’m not sure if you’ll find these two working in Airparts any longer,” is george’s wry view of any potential buyout. “But in the meantime, our prospects for international growth are sky-high,” offers Andy, who has inherited Marta’s former role of initiating new connections and business partnerships. “Every time I travel, people ask me, ‘when are you going to open up here?’ not only are we a one-stop shop for these companies, we also have a cast-iron reputation for honesty and probity. And that’s priceless.” Most of that reputation, as Andy and Emy are quick to acknowledge, rests on Marta and george’s tenacious drive and personal charm. But the family is facing the prospect of the change of Airparts’ principal crew with equanimity. “The most important lesson I have learned in business is that the name of the game is friendship,” says Marta. “you need to get to know the locals and their customs wherever you sell, and oil the business wheels, and Andy is great at that, while Emy keeps a tight rein on our expenses. I know that with these two, the future of the company couldn’t be in safer hands.” EXIT COnSIDERATIOnS — Transitioning a business to the next generation can be a perfect plan, or a natural disaster. It requires a delicate balance between financial security for the founder, and the future health of the business for the next generation. here are a few points to consider when preparing your business for family succession or sale:
however, there was some initial turbulence to negotiate. Marta divorced in 1969 and was awarded the fledgling company as part of the settlement. She found herself with two young children and banks that were less than enthusiastic about her plans to expand the business. One manager actually advised her to open a beauty parlor instead. fortunately the vice president at her local bank, who, as luck would have it was also a woman, granted her the loan she needed. It provided a boost to the cash flow of the business and was the key to its success. “I knew there was a market, and no one was serving it,” says Marta. “I went out and cultivated the personal relationships with the pilots and the air companies.” (Indeed, Marta’s multilingual barbecues became legendary in pilot circles.) “The entire growth of the company has been, predominantly, by word-of-mouth,” she continues. “People know not only that we are reliable, but also that we’ll go the extra mile for customer service – we’ll stay open that extra half-hour, we’ll even hop on our own jet on friday evening to deliver an urgent part to Argentina or Brazil if you need us to.”
6. oPPoSitE PAGE
The Airparts team keep it in the family
Airparts’ Andy puts a consignment together
FoR moRE inFo on AiRPARtS SEE: www.airpartsco.com
have one or more “magic metrics”– those numbers that drive the health and valuation of the business. Before you hand over your company or put it up for sale, be sure your metrics look as good as they can. Get an outside advisor. — Any business transition deserves to have objective parties moderating the process. Investment bankers can provide important legal and financial advice as well as prevent the parties from getting too emotional. consider all the options. — Any business worth passing on may also be worth selling outright. Make sure you understand the true goals and desires of the next generation before turning down any potential buyers. Remember Uncle Sam. — Meet with an estate planner or tax attorney. Selling a business to heirs can have huge tax consequences, for both seller and buyer. Be sure you understand the long-term ramifications of both valuations and actual payments. Get comfortable with risk. — few buyers (related or not) will pay your full purchase price in cash. It’s likely that sellers will have to “earn out” some of the purchase price over time. think long-term. — what will you do once the business is no longer yours? will you still have some degree of involvement or act as a consultant? Consider your life after the business, then make an exit deal that is aligned with your future interests.
Know the key value. —All businesses
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