Do Not Worship Money

Don’t Worship Money

By Dan Lemanski

dan@lemansinc.com

When I was engaged to my wife and we planned to marry, we went to counseling to prepare ourselves for the event. The minister advised me to, “not replace God in my life with the worship of money”. That was more than thirty years ago and at the time I could not understand what he was trying to tell me. At the time I thought that it was important to be able to support one’s family and lifestyle, but after working with business sellers and buyers since 1994 his wise counsel is starting to become clearer.

I advise sellers and buyers of businesses consistently over the years that I have never sold a business because of the numbers. When I make that statement (and sometimes I am reluctant to do so until I get to know them better), they give me a look similar to a deer peering into oncoming headlights at night. I interject immediately that they should not misunderstand me because the financial data is important but it is not the primary reason for them selling or buying a business. The decision to sell or buy is a quality of life issue primarily that motivates people to sell or purchase a business or make other significant buying decisions. If you don’t believe that consider the last major purchase you have made in your life and the reasoning behind your justification to make that purchase. From the home you live in to the consumer products you buy, it is based on how you feel about that purchase emotionally that is a higher motivation for making that transaction.

What we have to be careful of is buying things or justifying the purchase of something beyond our budget (been there done that) and justifying it because we think it is going to enrich our lives monetarily beyond our wildest dreams. Greed is the overriding emotion that kills deals and causes people to fail in selling or buying a business. As a broker, I try not to make value judgments of someone’s decisions. I may have an opinion but the opinion of my client or customer is what matters and I try to understand their true motivations. I only pray that their decisions include genuinely “improving their quality of life”. Yes, buying a business truly can enhance your life and give you control over your own destiny.

In Genesis the Bible provides us insight when we read the passages about Abraham, Isaac and Jacob (consecutive generations) who were negotiating with God a “quality of life issue”. The only way that they became successful was when they put their trust in God first and then the material things were provided for them by him and as a result they had better relationships not only with God but all the people they came in contact with. Trusting God first is a challenge for all of us but if we do his strength, grace and mercy shall carry us through. You can be successful in business as well as life if you are selling or buying for the right reasons with a God centered life based on worshipping God and not money. If you trust in God he will provide and you will make appropriate choices in life and business.

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The Small Business Balance Sheet

My cell phone rang and I answered, “Hello this is Dan, how can I help you”? “Dan, this is Wanda”. Wanda has a nice Childcare Center that she was considering selling and I had been working with her over the past weeks in evaluating the financials of the business to determine what price to position it in the marketplace. “I’ve decided to hold off on selling my business. After my husband and I discussed it, I think we will not get enough for the business to satisfy our needs and so it is probably better that I continue to run the business and try to get my numbers up to improve the potential selling price of the business,” she said.

I provide my clients with information they need to know about their business and the “state of the market” during current economic times. They decide if they are willing to sell and at what price, I do not make that final decision. But the historical financial data of the business is a significant factor in determining the value of any business. The current balance sheet is a financial document to review. It gives you a “snapshot in time” and affords you a window in the health of a small business. The simple formula Current Assets - Current Liabilities = Cash Flow affords you insight into how well a business is managing the Cash Flow and whether they appear to be paying their bills in a timely manner. In addition, Short Term and Long Term Liability are key factors. More often I see that business owners who wish to sell are influenced by the amount of short and long term debt to derive the value of their business (of course they want to pay all of the debt off and have some additional cash left wouldn’t anyone?).

In Wanda’s case (which is typical), if she sold her business for what she felt like it was worth she may not break even and that is why her decision is to “hold off a little while”. In today’s economy, this view is becoming more prevalent. Small businesses are experiencing declining revenues and declining profits. Hopefully, they are paying attention to payroll costs and other factors to keep them in line with revenues and profits. If not then debt begins to accumulate due to restricted cash flow. But even under the best of circumstances many small businesses today are realizing additional debt just to keep themselves afloat.

Sometimes (not always), small business owners decide to sell due to their debt load. When they contact a Professional Business Broker they really want someone to solve their debt problem by selling the business for more than the debt they owe. In Wanda’s case, she has a wonderful little business and it is still profitable (even during these tough economic times), but two things may have tripped her up a little bit. First, about a year ago she decided to buy the commercial property her childcare operates out of and perhaps paid a premium for it shortly before the decline in property values (all commercial property will be subject to an appraisal for bank financing and hers was appraised). In addition, shortly after the purchase of the property the center experienced a broken water pipe over one weekend which caused her to lose children as she was forced to close the center for almost two weeks for repairs to be completed. While we can make a case for lost revenues and higher than normal labor cost (after all, she did not want to lose teachers so she had to keep paying them or lose her staff), it creates a distraction for prospective buyers. So I agreed with Wanda and we will review her situation at the end of the year.

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