Members of SCORE (Service Corp of Retired Executives), an organization created and supported by the U.S. Small Business Administration, offer in-person and online counseling for both for-profit and non-profit
organizations on Martha’s Vineyard.
In a new, regular column, The Times has invited SCORE members to discuss business issues familiar to Vineyard business owners and managers. SCORE members will also answer questions from readers, posted at mvtimes.com.
“I think I have a great idea for a business. There is nothing like it on the island… I need help getting it started.”
“The new services I am offering are unique on the island. What I need help with is marketing. Should I be using social media…?”
“I have been the owner and ‘face’ of this business for 30 years. Enough is enough. I would love to retire, but I have to sell this business. How do I make that happen?
These are typical challenges that SCORE volunteer mentors are asked to tackle. In fact, only thinly disguised because all SCORE counseling is confidential, these are the real questions that have been posed by clients during the past year.
Question 1: “I think I have a great idea for a business. There is nothing like it on the island… I need help getting it started.”
Island entrepreneurs are ready to roll out a new business often before doing the important pre-work called for. SCORE counselors remind new clients that many start-up companies fail for lack of a Business Plan. A Business Plan is a document that asks the entrepreneur to describe the proposed business, determine what competition it faces, define its unique attributes, and develop a preliminary budget that identifies start-up expenses and the expected cash flow.
SCORE clients receive a simple-to-follow printed guide that helps in the development of the Business Plan and may work with the counselor to complete the process. There are times when working through the development of a Business Plan informs the client that the idea, while great, is unaffordable.
Question 2: “The new services I am offering are unique on the Island. What I need help with is marketing. How should I be using social media…?”
Social Media, tweeting, twittering, Facebook, for example have opened up new channels for marketing unimaginable even five years ago. However, as the SCORE counselor suggested, when it comes to marketing professional services, research indicates that clients select a doctor, lawyer, accountant etc. based on the referral coming from trusted friends, family members, colleagues — people whose judgment is considered sound.
For this SCORE client it was suggested that the client conduct some informal marketing research among existing clients to determine what, if any, social media the prospective clients rely upon.
(In future columns, In Business will explore the pros and cons of web-based marketing and social marketing in depth.)
Question 3: “I have been the owner and ‘face’ of this business for 30 years. Enough is enough. I would love to retire, but I have to sell this business. How do I sell, and what is it worth?
As is often the case, this longtime owner of a business has no “next generation” to take over the operation. The business owner wanted to sell the business to a trusted employee who “knows” the business and is as committed to its success as the owner.
The challenge in this situation is determining what the business is worth, setting a price that both the owner and the buyer can afford, and finding a way to generate that payment.
For this SCORE client counselors Norman Werthwein, a certified public accountant (CPA) and Michael Adell, with a masters’ degree in business administration, reviewed documents the client’s accountant prepared and asked a lot of tough questions. The client rents office space, the furniture is aging, the computers are leased. And few of the client’s customers return annually for service. Further, the professional services offered are not unique to this company and the competition is fierce.
Determining the value of the firm was impossible, according to Mr. Adell. “There was nothing in the business model — no proprietary software, no contracts for ongoing customers, no facility-owned, nothing to suggest a decent payoff,” he said.
All the SCORE counselors could recommend was that the owner arrange a monthly buy-out that would be some percent of revenue on a sliding scale over a couple of years. Such an arrangement would be an incentive to the current owner to help in the transition and make the deal affordable.
Was the SCORE client pleased with that answer? No. The client wanted out with a sizeable payoff. Sometimes SCORE counselors have to deliver bad news.
To receive free SCORE counseling, visit the SCORE website (SCORe.org). To attend a SCORE workshop register at the ACE website (www.acemv.org/courses). Submit comments or questions for future “In Business” columns to either email@example.com or firstname.lastname@example.org.
Susan Silk is a semi-retired communication consultant. Prior to moving to the Island full-time, she was the founder and president of a communication consulting and training firm in Chicago.