Shift your mindset from owner-operator to owner-investor

And create favorable conditions for timing your exit

by Chia-Li Chien | Feb. 09, 2015

Shift your mindset from owner-operator to owner-investor by Chia-Li ChienHave you ever heard, “you can’t finance your retirement, so let your children take out a student loan”? Well, this is to encourage you take of yourself first, right? In reality, you are financing portion of your retirement when you exit your business, regardless to whom you sell.

In Succession Financing in Family Firms. Small Business Economics, Koropp (2013), an empirical study shows that both internal and external transfer involves some debt or equity financing,  especially in family owned businesses (FOB). The study indicates that models of multiple owners (including husband and wife teams), multi-generational business or having a family member as CEO or a non-family member CEO, all have a propensity for financing debt. The authors also point to a four-year study which revealed that of all the FOBs transferred, 57% transferred internally and 43% externally, using debt financing.

They also suggest that owners need to shift their mindset from owner-operator to owner-investor.

Treating your business as an investment is critical during the reign of your empire. Just like the stock market, there are many factors that impact your return on investment in business. Savvy professional investors would say, “You can’t time when to buy or sell your stock.” But business owners can create favorable conditions to enhance the timing of their exit.

Create a Business Succession Portfolio for Tomorrow

It provides an economic value measurement for today

by Chia-Li Chien | Jan. 22, 2015

During a recent business trip to Washington DC, when the east coast got hit with a winter storm, I was in the middle of it. The first snow of the year in the area, it dumped about 2 inches during peak commute hours. The road was not plowed in time to accommodate the high volume of rush hour traffic. Many commuters got stuck on the road, very unhappy with the average 2.5 hours delay in getting in to the office. (Of course, the kids were happy campers because school was closed.)

In became apparent that the problem was not the snow, because we can probably all agree that 2 inches is not that much. The problem was that the municipality did not handle the logistics and tactics well, despite their own forecast. They put themselves in reactive mode, faced with the situation of having to handle a situation they had created—not to mention the many complaints from grumpy commuters caught in the gridlock.

Approximately 10% of Family Owned Businesses (FOB) are transferred to a third generation, according to Le Breton-Miller (2004) and Harter (2008a). Most business owners’ number one priority is, historically, growth in top line and bottom line, whatever the business. (Top line means sales and bottom line means net profit.)

Spot Industry Trends

And lead your business toward success.

by Chia-Li Chien | Jan. 14, 2015

Three companies that J. Berr identifies, in 6 Brands That May Not Make It Through 2015, published in December 2013 [2] and 2014 [1] include:

Radio Shack (NYSE:RSH)
Sears Holdings (NASDAQ: SHLD)
Martha Stewart Living Omnimedia (NYSE:MSO)

It’s really heart breaking and also, disturbing, to see companies listed as “brands in danger of disappearing.” At the same time, the article also identifies many outstanding companies [1] such as:

Facebook, Inc. (NASDAQ: FB) Inc. (NASDAQ: AMZN)
The Walt Disney Company (NYSE:DIS)
Apple Inc. (NASDAQ:AAPL)
Google Inc. (NASDAQ:GOOG)

Obviously, every business has a unique lifecycle. Some businesses thrive and adapt quickly as their industry evolves and the company trends along the way. There are many factors that determine whether a business will grow consistently or lose ground.

There’s Power in Those Numbers

Leaverage data now for your best year ever.

by Chia-Li Chien | Dec. 08, 2014

There’s Power in Those Numbers by Chia-Li ChienMost business owners like you don’t live in an ivory tower. You get out and about stay on top of what’s going on in the market and focus on capturing those opportunities. As a private small business, you are a part of the Research and Development (R&D) arm of Fortune 1000 companies. Your innovation in products and services are a part of the stats and stories that inspire many new entrepreneurs.

As you approach the year end, I hope you will find a way to leverage the power of numbers and get closer to your own target numbers. To start, I want to make sure you’re forecasting next year’s numbers. This set of numbers could help you sustain or increase your market shares, as well as cost-effectively execute and reach your goals.

Many of you might have a set of assumptions that helps you finalize your forecast or plan. Your internal historical data is a critical piece of information for that process. It provides accurate data for the forecast and allows you to focus on execution. Most importantly, this data helps you hold your team accountable for the success of the plan.

So where should you get these external assumptions that will predict accurately the success of your plan or forecast?

Get out of the Wilderness and into the Promised Land.

How a Succession Plan can help you find your way.

by Chia-Li Chien | Nov. 06, 2014


The Promised Land by Chia-Li ChienHave you ever noticed in business, as in life, everything can become routine? The day in and day out pursuit of growth and profitability can make you feel like you’re wandering in the wilderness. And while it sustains you, you have grown tired of the same old manna. Every day. Every week. Every month. And before you know it, it’s been years of the same thing. You start to think of yourself as a Moses, spending forty years wandering in the wilderness.

Ways out of the Wilderness

It doesn’t have to be that way. There are things to look forward to and to work toward, with end results that will be rewarding as well as profitable. So let’s explore the three types of succession planning, and stop this pointless wandering.

Meet Your Business Goals with Forecasting: Creating a Forecasting System

[Original article published at AMA Playbook] or

by Chia-Li Chien | Aug. 28, 2014

In my previous article, How Well Do You Forecast in Business? we explored the difference between forecasting and budgeting. We concluded that regular monitoring  to forecast and reforecast can help businesses achieve goals proactively.

Remember, forecasting is a process, not just a set of numbers.

But what if you’re tasked with forecasting a project, an initiative, a new product, a new manufacturing plant, a new call center, downsizing workforce due to closure of office location, a change in workforce capacity, power plant pump capacity in maintenance, payroll system changes, upgrade of an e-commerce website, expansion in China or India, etc.? The good news is that there is a forecasting process you can follow.

Let’s take a look at the forecasting process:

Business Succession Takes “Considerable Planning.”

by Chia-Li Chien | Sept. 19, 2014

Business Succession Takes “Considerable Planning.” by Chia-Li ChienIn my experience, I’ve found that privately-held business owners want to have a successful business cash out event, regardless to whom they sell, and still create a win-win situation for both buyer and seller. However, according to economic expert Rob Slee, there are some timing factors that must be aligned (2009):

•    Business Timing: Does the business have a solid key management team that can operate with or without the owner or founder?

•    Economic Timing: Where is the economic cycle and its related Industry trending in Market M&A (Merger and Acquisition) movement (not performance)? (See details from Slee; 2007.)

•    Personal timing of the owner—the readiness for owners to move on to something else more or less challenging.

One of the best business growth predictors involves considerable time and planning, according to the research paper from Manolova, Brush, Edelman & Shaver (2012). This is largely due to the owner’s desire to be in survival mode instead of desire to take his or her business to the next level. The research found that most businesses don’t grow rapidly. Instead, most businesses grow over time in sales, employees, market share, etc.