We’re opening a new business. What position should I hire first?
First of all, anyone starting a new business has to have self-awareness and understand what they’re really good at and what they’re not good at. It’s important you don’t waste time trying to be great at things you’re not good at.
In a nutshell, you need to find the right person who is good at tasks you aren’t good at.
I’m interested in selling my company, but I’m not sure how to calculate it’s worth. Can you help?
Your business is worth what someone is actually willing to pay for it. Many entrepreneurs overvalue what their company is because it’s worth more to them because it’s their baby. They feel a strong emotional attachment to their company and it can be difficult to look at their business objectively like an investor or buyer does.
A business’s value is always driven by cash flow. A company may possess tangible assets that have financial worth, but buyers typically aren’t interested in that. What the buyer really wants to know is this:
- “How much money am I going to make?”
- “What will company expenses look like after I purchase this business and make changes?
- “How successful will the company be should it hit its goals and forecasts?”
There’s a lot of pieces to this, but ultimately the worth comes down to cash flow. And so, we here at Finance JW start first with figuring out what a business’s cash flow is. Then we work with the business owner to determine and strategize how we are going to maximize cash flow.
Maximizing cash flow is what you must do if you’re an entrepreneur who wants to sell a company one day.
What can I do as a small business owner to better prepare for the tax season?
So first of all, there’s no such thing as a tax season. There is a “tax season” for CPAs in which they have to process taxes. But in reality, what you should always be doing is answering these two questions when it comes to your business strategy:
- What is good for my operations?
- What is good for my taxes?
And then you must balance those two concepts!
Here’s an example.
I’ve seen people go and buy equipment they don’t need in order to lower their taxes. A good rule of thumb: if you’re not going to make money on a purchase like that, it’s probably not the best idea in the world.
So, we would say you’re proactively always having a conversation with your CPA/Financial Advisor asking what do I look like going into next year? How do I best prepare for the future? What should I be doing now?
Your CPA should be consultative and forward-thinking. Many CPAs are given information and then spit out what you owe. Make sure you work with someone who is more proactive for your business.