Articles

2022 Industrial Robotics Industry Report

By: Benchmark International
October 7, 2022

Industrial robotics is now critical across many sectors for the automation and manufacturing of many tasks, including loading, packaging, labeling, and inspection.  They are commonly used in the automobile and heavy engineering sectors and are becoming more common in many other sectors.  In the past, robots were mostly only used in the automotive and manufacturing industries, but more sectors are adopting them today  These sectors include defense, healthcare, aerospace, food & beverage, education, and electronics.  There is also an increase in demand for telesurgery and elder care, as well as bomb dispersal, monitoring, and mine detection.  There are currently around 2.7 million industrial robots in use worldwide, a number that is quickly rising.

These robots improve productivity and profitability for businesses by replacing laborious and repetitive tasks previously performed by people with automated efficiency and a high degree of accuracy.  They can also be used for a safer workplace, performing tasks in hazardous environments, vacuum chambers, and areas where there is the risk of dangers such as explosion or radiation.  Research shows that the use of robots saves companies up to around 20% in costs.  Robots are a large driving factor of the world’s newest industrial revolution, referred to as Industry 4.0.  It has been estimated that, by the year 2025, robots will displace 85 million jobs currently held by people.  But, at the same time, it’s also estimated that this change will open up 97 million jobs for workers.  Robots are often used for basic tasks in entry-level positions, which means that companies can create more high-level roles.  This is good news for younger workers, raising the level and pay at which they can enter the workplace and opening up more opportunities for creativity and management.

Surging market growth
The global robotics market was valued at $32.32 billion in 2021 and is forecast to reach $88.55 billion by 2030, growing at a compound annual growth rate (CAGR) of 12.1%.  As the manufacturing and electronics sectors continue to see strong growth, it drives growth for the industrial robotics market.  Many industrial processes are being streamlined by the use of artificial intelligence-powered robots, as well as collaborative robots, and new technologies continue to evolve rapidly.  In the last five years, the surge in global demand for industrial robots has been unmistakable.  In 2021, the global industrial robot market volume was made up of 496,000 units.  Growth is being driven in the sector by automation that helps to boost productivity, improve quality, and cut down on errors.

The COVID-19 pandemic also accelerated the growth of the robotics industry due to a worker shortage.  Robots helped many manufacturers keep up with production peaks; at the same time, they were dealing with systemic shocks.  In fact, China’s industrial robotic production increased by a record high of 29% in the first half of 2020.

Challenges to market growth include high initial investment, maintenance costs, and compatibility issues.  There are also some safety and data privacy concerns.  At the same time, increased adoption of robotics for handling semiconductors is expected to open up opportunities for the industrial robotics market in the near future.

Players in the market are expected to vie for competitive dominance through strategic alliances, mergers and acquisitions, and innovations in R&D.

A significant growing trend in the robotics industry is the increasing use of collaborative robots, or “co-bots.”  Co-bots are designed to work alongside people, and they use safety-rated sensors that allow workers to safely share the work space with them.  There is also a steady rise in the use of underwater robotics, legged mobility, machine learning, and self-driving vehicles.  the market is expected to see growing adoption of micro-electromechanical systems, cloud robotics, and next-gen tech accessories, as well as more employment opportunities and robotic advancements.

There is also increasing development of new types of robots that offer simple setup and installation.  By removing any need for any special training in coding or programming, many of the barriers that previously prevented businesses from investing in robots are being removed.

Geographical Picture
North America currently leads the global industrial robotics market, with large-scale adoption in various industries, including entertainment, education, healthcare, and especially military defense.  The U.S. Department of Defense was given $7.5 billion to spend on robotics in 2021.  In the 3rd quarter of 2021, robot orders in the United States were up 35% compared to the same period in 2020.  More than half of the orders came from non-automotive sectors, representing a large change in traditional market trends.  The average robot density in the United States is 228 units per 10,000 employees.  In 2021, more than $17 billion was poured into VC-backed robotics startups.

The world’s top three robotics communities are all located in the U.S.: Boston, Massachusetts; Pittsburgh, Pennsylvania; and Silicon Valley in California.  Pittsburgh is often referred to as the robotics capital of the world, home to more than 100 robotics companies.  Corporate and venture capital investors have put $4.3 billion into Pittsburgh robotics companies in the last five years alone.  The cities of Austin, Texas, and Denver, Colorado, are also emerging.  The country of Denmark is also making large strides in robotics.

The Asia-Pacific region is expected to see the fastest growth in market share due to the increasing  use of automation in Japan, China, and India, with China leading the market growth in this region to improve efficiency and industrial production.  Honda Motor is the largest robotics company in the world, with a revenue of $142.4 billion, employing nearly 220,000 people, and headquartered in Tokyo, Japan.

By |2024-09-20T19:13:58-04:00October 12th, 2022|Categories: Articles|

Key Motherhood Skills All CEOs Need

By: Randy Garn
Entrepreneur Leadership Network

An in-depth conversation with Jess Toolson, founder and CEO of Mixhers, about how being a parent has shaped her skillsets.

Motherhood arms women with several important skills that serve them well as CEOs, such as quick, efficient prioritization and the ability to nurture employees toward better performance, says Jess Toolson, founder and CEO of the Mixhers supplements company.  A mother’s inherent three-dimensional interpretation of situations comes in handy too:  “Problems come, sometimes quickly and urgently, and I need to provide solutions that are not only well thought out, but timely, because sometimes non-decisions are more damaging than incorrect ones,” Toolson says.

I wanted to have a chat with her, in part to find out how budding entrepreneurs can successfully step into a CEO position.  But early in the course of the conversation, she offered something that surprised me, and which changed the nature of the discussion.

“I feel like motherhood, above everything else I’ve done in my life, prepared me for being a CEO,” she said.

I found this fascinating, so we dug more into the concept, and what resulted took my breath away – key things that motherhood taught her about being a CEO.

1. Quick Problem Solving and a Three-Dimensional Perspective
Being a CEO requires a knack for quick-witted problem solving.  Most of the time, you must think through problems at a high level, looking at them three-dimensionally in order to arrive at a solution that you and your company can work towards and stand behind.

It is that key executive’s deciding vote which carries the most weight in determining company trajectory, and Jess said she was surprised how comfortable she felt when pushed into such situations, then detailed how being a mother prepared her to think through decisions calmly and from multiple perspectives.

“The power to problem solve is a life skill that’s just as important in motherhood as it is in the life of a CEO,” she explained.  “As a mother, I would try to look at challenges three-dimensionally: How can I see all sides of the issue?  What different approaches could I utilize?  What are the possible outcomes?  As a CEO, I try to take the same approach.  Problems come, sometimes quickly and urgently, and I need to provide solutions that are not only well thought out, but timely, because sometimes non-decisions are more damaging than incorrect ones.  Once I feel I have sufficiently thought out an issue, I try to act with a combination of confidence and flexibility.”

2. Prioritizing Quickly and Efficiently
The sky is not always falling.  Not every fire must be put out immediately, and there are (almost) no mistakes that cannot be reversed or fixed.  However, there is a mode that must be employed when dealing with the day-to-day demands of running a company.  Jess quickly realized that prioritizing would be an enormous part of her job description.  Luckily, as she explained, she felt prepared pretty much from the start.

“Being a parent taught me how to prioritize.  There are always one million things that need to be done, but there’s inevitably something that needs to be done first,” she said.  “At Mixhers, I’ve been able to look at what needs to be handled today, what can wait for tomorrow, and what’s a problem for next week.  This allows my team to chew off bits and pieces of a task, rather than take on the entire thing all at once.  Prioritizing intelligently has helped productivity, increased morale, and simplified our processes.  It’s also allowed us to celebrate wins and push through losses.”

3. Nurturing Employees Lead to Better Performance
A dramatic shift has taken place in the way employees are viewed, particularly over the last few years.  Rather than just warm bodies in seats from 9:00 to 5:00, employees are more often now regarded as individuals, whose performance is the sum of a number of different parts and circumstances – all of which an employer should understand and support.

Jess already felt a natural inclination to treat people like this, motivated in part by her experience as a mother.

“Good mothers have the ability to see their kids for who they can become with proper nurturing,” she observed.  “They also understand, on a circumstantial level, what’s driving behavior.  They always want their kids to know that even if they’re experiencing something hard, and even if there’s discipline or timeouts involved, they are there to be a child’s champion.  That’s what I’ve tried to implement at Mixhers.  I want my team to feel that I believe in them.  They need to know I can look past growing pains and well-intentioned mistakes, because potential is only realized when we work through those things together.

“I think I may take more time than the typical CEO in getting to know employees – their personal lives, their challenges, triumphs and skillsets.  Though this takes time, the payoff is immense.  Potential is reached more often, productivity increases and risks typically turn into rewards.”

By |2024-09-20T19:14:01-04:00October 5th, 2022|Categories: Articles|

Why Does EBITDA Get Adjusted?

Author: Brendan Nussbaum
Transaction Support Analyst
Benchmark International

In the world of small to mid-market mergers and acquisitions, a number that is very important is a company’s adjusted EBITDA.  The adjusted EBITDA is meant to find a company’s true normalized earnings by taking away any outside influences or ownership influences on the company’s bottom line.  Some companies do not have to make many adjustments in order to find adjusted EBITDA, while some companies may need many adjustments to arrive at adjusted EBITDA.

EBITDA
The EBITDA of a company can be found relatively simply by taking the net income and adding back interest payments, income taxes, depreciation, and amortization.  The reason for these being included in the bottom line varies.  Interest expense is added back as this is an expense that could be reduced or eliminated depending on how ownership has financed the growth of the company.  Income taxes are added back as they are deductible from a company’s tax returns.  Depreciation and amortization are both added back as they are both non-cash expenses that a company incurs.  A company does not pay any physical cash for its depreciation and amortization expenses, meaning that they do not affect the company’s bottom line.  These expenses are all then added back to the company’s net income to compute EBITDA.

The Adjustments
Following the calculation of EBITDA, further adjustments are made to the number to try and get to the normalized earnings of a company in a given year.  There are a few categories that these adjustments can fall into, the first is an owner’s compensation adjustment, the second are expenses that are not going to continue following a transaction, and thirdly, one-time income or expenses that are an anomaly and not typical in a fiscal year.  A key feature that must be true of every adjustment is that it must be able to be sourced back to the income statement.  Balance sheet transactions are not eligible to be added back an included in adjusted EBITDA.Owner’s compensation is an adjustment that is fairly common across industries and can either be positive or negative and varies based on every scenario.  In the first case, sometimes an owner is making much over the normal salary for an owner in their role and is expecting to exit the business after a transaction.  In this case, the excess salary paid to this owner compared to a fair market rate will be added back to EBITDA.  The opposite is true if the owner is making less than a fair market rate, then any amount that the market rate exceeds the owner’s true compensation will be negatively added back.  Distributions, however, do not count towards a potential adjustment since they do not have an impact on the income statement.  This gives a clearer picture of what the business would be earning if the owner were paid at a market rate.The second typical category is expenses that are not expected to continue after a transaction.  These expenses can take many forms and some companies have many more of these add backs than others.  These expenses could include golf or vehicle expenses that are personal to ownership that will not continue once the owner is no longer with the company.  This helps to show the number of expenses that were going towards generating revenue for the company and excluding the expenses that were personal in nature to the owner that will not continue into the future.

The final category of adjustment that exists is a one-time expense or income that was some sort of anomaly.  Typical examples of this would be abnormally high bad debt or the PPP loan.  In the case of bad debt, if a company has a certain level of bad debt that is average for a period of time with an outlier due to a customer not paying its debt, it would usually be reasonable to add that back since it was a one-time expense that is not normal for the company.  On the other hand, there can also be a negative adjustment for income such as a PPP Loan or a gain on the sale of an asset, these are not typical income for a company and should in this case, be negatively adjusted for.

In the end, the point of all these adjustments is to see what the normalized earnings for a company over the past few years has been, taking out any anomalies and influence of current ownership, so a buyer can see what the normalized earnings of the business have been.

By |2024-09-20T19:14:04-04:00September 22nd, 2022|Categories: Articles|

14 Recommendations For Small Businesses That Are Growing Quickly

Forbes Business Council
Council Post – June 16, 2022

Explosive growth is exciting for any business, and watching your brand become a success feels rewarding.  While you and your team should definitely celebrate that win, you should also be prepared for the side effects of explosive growth.  Your team may need to expand to keep up with demand, as well as increase production and marketing efforts.

These are all decisions that can be made strategically in advance in the event of unexpected growth to help your team more seamlessly adjust to the changes.  To help you do this, a panel of Forbes Business Council expert shared their recommendations for scaling operations to handle an influx of new customers.

1. Hire For Where You Want To Be
I received some of the best advice from a mastermind member: Don’t hire for where you are; hire for where you want to be.  I have always manifested the growth of my businesses and always use that advice.  Having the right staff that fits your culture and lives by your core values will step up when needed to serve all your customers.

2. Prepare A Growth Strategy
All companies, regardless of size and revenue, should prepare a growth strategy, have a plan for how to respond to threats and opportunities and manage resources accordingly.  Actions like forecasting cash requirements and clearly communicating changes to staff will also provide a solid foundation to support the needs that come with rapid growth.
3. Have Great Leaders On Your Team
Surround yourself with leaders that can establish systems and processes for operations as well as coach and mentor more leaders.  Alternatively, improve operations to organize the chaos and build a strong culture with great growth-minded or high-ownership people.  Allow leaders to focus on strategy, vision and overall direction without getting lost in the whirlwind.4. Use A CRM To Gather Contacts
When you’re experiencing rapid growth in your business with an influx of new customers, you should have the right systems, such as CRM, to capture their contacts and foster relationships so they’ll buy from you again.  Remember that acquiring a customer costs more than selling to an existing customer.

5. Identify Any Inefficiencies And Work To Eliminate Them
Rapid growth for the first time is both exhilarating and terrifying.  The best way to scale initially is to identify the operational inefficiencies that already exist and rectify those first.  That could mean hiring new staff or simply expanding the CRM capabilities already in place.  However, if not handled immediately, massive growth will amplify those issues and could cause catastrophic failure.

6. Focus Operations Around Your ROI
Make sure when scaling an operations function for a rapid growth business that you are still operating carefully with the business’s objectives in mind and an ROI at the heart of what you do.  If you can make sure your operations are taking some of the painful and time-consuming parts from your revenue-generating function, you’ll get a great return and something that you can scale quickly.

7. Hire In Advance
It is easier to invest in your team on the front end than when the chaos of growth is occurring.  If you can’t hire in advance, then make sure you hire experience you can trust.  Handing off operational responsibility can be stressful, so make sure you vet your candidates well.  The goal should be finding someone with more experience than you in the areas you need covered.

8. Ensure Your Business Model Supports Scale
When experiencing rapid growth, your business model must support scale.  This is often overlooked.  In order to scale effectively, your company needs a core offer that’s scalable and your systems in place need to support taking on more clients without sacrificing profits.

9. Hire Freelance Workers
Small business owners have access to a vast network of skilled professional freelancers unlike ever before.  Rather than bringing on a full-time team member, consider using outsourced or gig worker talent to bridge the gap.  If growth continues or stabilizes, you can than make the move with certainty.

10. Have Well-Documented Processes
Prepare for it by having operations that are scalable.  Have processes in place to provide your services that are documented, known across your organization and part of the company DNA so they will take place every time.  Develop relationships that can supplement technology and resources just in case.  Automate using a marketing stack with a low bar of entry, so you can more easily train new employees.

11. Follow The ‘Scale In Five’ Methodology
For scaling a business with rapid growth, there really is a very specific “scale in five” methodology that I recommend.  It involves developing a high-performing team, building procedures and processes, designing KPIs and scorecards to manage the business and team, reviewing timely and accurate financial reports and developing your leadership skills as the owner.

12. Hire Selectively
Scaling quickly can be overwhelming and you might try to get just anyone on staff.  Don’t do that.  Take the time to build out the team that’s going to continue to help you grow.  Hire in areas that you don’t excel in, and trust that the people you hired are skilled enough to do the work without micromanagement.  You get time back in the long run when you hire the right people.

13. Keep A Healthy Number Of Staff
Always maintain a healthy bench in your organization.  The prevalence of lean manufacturing principles has slowly eroded the ability of many businesses to be resilient and handle change management well.  Don’t get so lean that it makes you too vulnerable to disruption.

14. Limit Knee-Jerk Reactions
Keep scalability in mind when establishing procedures and processes.  When experiencing explosive growth, it can very much feel like the pressure is on and immediate action is needed.  Try to limit these knee-jerk reactions and focus on methodically establishing the right kind of process that can be replicated and scaled up, which is what ultimately can ease the pressure you’re perceiving.

By |2024-09-20T19:14:08-04:00September 1st, 2022|Categories: Articles|

Phases of Half-Retirement

By: jimmue

I wish I could tell you that Half-Retirement was as simple as flipping a switch…poof, you are Half-Retired.  However, Half-Retirement is more of a journey than a decision.  We observe many business owners begin down the path towards Half-Retirement and have seen that there are definitely some “phases” along this path.

Here are the phases towards Half-Retirement we have seen.

Phase 1:  Half-Retired in name only
Business owner says something like, “Wow, that sounds great.  I’m going to do that.”  They come into work the next day and tell their staff they are Half-Retired, but nothing really changes.  The owner still comes to work, still has stress, and the business is still dependent upon them.  This isn’t Half-Retired; it’s Half-Delusional.
If the business owner does not get out of this phase, they run the risk that precious years will go by and they may lose the opportunity to enjoy Half-Retirement because they did not get to work on the process.

Phase 2:  One-Tenth Retired
Read the detailed article here, but the gist is that the owner takes off half a day each week to move towards Half-Retirement.  There are a couple of ways to achieve one-tenth retirement.  First, you can just brute force it.  Start taking time off immediately and fix issues (if there are any) as they come up.  Many owners are surprised how few problems pop up when they commit to taking consistent time away from the business.
The other method is to work the Half-Retire Blueprint, remove four hours of work from your recurring calendar and then commit to taking the time off.  Either method can work, and one-tenth retirement is a great start.
However, one-tenth retirement is fairly easy to accomplish, This isn’t the difficult portion of the Half-Retirement Roadmap.  Some owners take this easy victory and stop working towards full Half-Retirement.
Phase 3:  Half-Retiring
You can also call this phase “in process.”  Business owners who are actively working toward Half-Retirement are Half-Retiring.  They aren’t Half-Retired yet, but they are moving towards it.  We see two types of Half-Retiring owners.
The first type is following the roadmap and is on the path towards achieving Half-Retirement.  They have a sense of urgency, and even though progress may ebb and flow, they stick with it.
The second type is more of a do-it-yourselfer.  This type reads the Half-Retire site or picks up a copy of the book and makes progress as they can.  This progress is certainly commendable, but it lacks urgency.  No one trying to Half-Retire is thirty years old.  There is a limited window to enjoy the spoils of Half-Retirement.  Every month spent fiddling around and “trying” vs. succeeding is one month less of enjoying Half-Retirement.  String together two or three years of “trying” to Half-Retire and the business owner may as well have sold the business.  The benefits of Half-Retirement are lost to slow execution.Phase 4:  Half Half-Retired
Yes, you are reading that right.  This crowd is over the hump.  They are halfway to Half-Retirement.  These business owners already see many of the benefits of Half-Retirement.  Their business is running better than ever, and they are taking big blocks of time away from the business.  Their stress levels are down too.
There is still some hard work to complete, but they have momentum and success upon which to build.  They see the finish line and continue working the Half-Retire Roadmap until fully Half-Retired.Phase 5:  Fully Half-Retired
These business owners have worked hard to complete all the steps in the Half-Retire Roadmap.  They now enjoy a stable income, stress-free business environment, and robust work-life balance.  Make it to this phase, and you have our sincere admiration.

Phase 6:  Hall of Fame
Some business owners not only make it to being fully Half-Retired, they crush it!  We have seen business owners open “second offices” in South Beach to work their half-days.  Some have even set up offices in foreign countries to give them an excuse to travel to Italy.
One Half-Retiree is toying with fulfilling his dream of playing on the Senior PGA Tour.  Another is taking a year-long mission trip to Africa.  One Half-Retiree is changing his business model to a not-for-profit and working to change the lives of children of the working poor.  He owns thousands of apartment units and is shifting the corporations to non-profit status as well as donating all profits to his charity.

By |2024-09-20T19:14:22-04:00August 24th, 2022|Categories: Articles|

UPDATE:  Inflation Reduction Act of 2022 Implications and Considerations

Author: Ari Marin, SVP, Family Wealth Strategist

August 2022 – The Inflation Reduction Act, “the Act,” amounts to the largest investment encountering climate change in U.S. history and allows Medicare to negotiate drug prices.  The Act also increases IRS funding and changes some tax policy and tax credits.

Select Key Updates of New Legislation

Consumer Incentives:  The Act provides some incentives for households and businesses in the form of tax breaks and rebates.

  • For new cars, a $7,500 tax credit for purchase of “clean” vehicles through 2032.  However, limits apply, and available tax credits depend on where the cars are assembled, what they cost and the buyer’s modified adjusted gross income.
  • For used cars, the lesser of 30% of the sales price or $4,000 tax credit for some used electric vehicles.  The availability of this credit also depends on the buyer’s income, the sales price of the vehicle and other sales qualifications (the car must be at least 2 years old, it must be the first sale of the used vehicle, and buyers can only receive the credit once every three years).
  • 30% tax credit for solar panels through 2032.  The credit would fall to 26% in 2033 and 22% in 2034.
  • Rebates for the purchase of new electric appliances.  Funds will be allocated to the states and each state will determine use of those funds.  Income limitations and caps may apply on availability of rebates for individual consumers.
  • Rebates may also be available for non-appliance upgrades such as ventilation, insulation, air sealing, electric load service upgrades and wiring.
Income Taxation of Businesses:  The Act’s tax provisions are designed to not raise taxes directly on middle-class households.  Though experts disagree, higher business taxes can add costs elsewhere that affect individuals.  This can include increased prices, smaller profits for shareholders and lower wages paid to employees.
  • Corporate alternative minimum tax that imposes a 15% minimum tax on “adjusted financial statement income” for corporations with profits more than $1 billion.
  • A 1% excise tax on the fair market value of any stock repurchased by “covered corporations” as defined, upon repurchase of stock from their shareholders.
  • Extension of Limitation on Excess Business Losses on pass-through businesses for two more years.  The law which disallows pass-through owners from using business losses attributable to trades or business exceeding amounts ($250,000 single $500,000 married filing jointly adjusted for inflation) will be extended by 2 years until 2029.

Internal Revenue Service Funding:  The Internal Revenue Service increase in funding to improve its customer service and tax enforcement.

Affordable Care Act (ACA):  Extension of the expanded ACA program through 2025 for eligible individuals and families who purchase their health insurance through the federal Health Insurance Marketplace.

By |2024-09-20T19:14:25-04:00August 22nd, 2022|Categories: Articles|

What’s The Difference Between Recurring And Repeat Revenue?

Courtesy of:
Benchmark International

If you are considering selling your business, you will need to have a clear understanding of its type of customer revenue because it can significantly impact the value of your business.  Sometimes people confuse recurring revenue with repeat revenue, but it is essential to understand how they are not the same thing.

Recurring Revenue
Recurring revenue stems from a contractually bound legal agreement for a solution delivered over time.  It is usually contractual over one or multiple years, and because it may carry penalties or fees if the customer leaves, it an be counted on into the future.  This makes it highly valued by prospective acquirers because of its predictability and lower risk. 

However, recurring revenue does not have to be contractual to be valuable.  Depending on the business and the services offered, it can be too costly or too much of a hassle for a customer to leave or switch providers.  An excellent example of this is customer relationship marketing companies that collect large amounts of valued data over time, making it more beneficial for clients to stick with their services.  Below is a list of the different types of recurring revenue.

Memberships & Subscriptions:  This is a no-brainer.  Customers have to continue to pay for a product or service regularly if they have to become a member or subscribe.

Consumables:  These are products that people use and regularly need, such as toilet paper, toothpaste, and soap.  These items need to be replenished, and customers often tend to stick with their favorite brands.

Warranties:  Warranties can also keep a customer for an extended period of time and they usually yield high profits because they are paying for something that may not ever be needed or used.

Contracts:  Contracts are another way to lock the customers into an extended relationship with your company.

Service Fees:  Offering maintenance or training on a product is a great way to get recurring customers and maintain a steady revenue stream.

Multiple Streams of Income:  Try branching out into various revenue streams through vertical integration or buying other segments of the production line.  Selling different yet similar products can grow revenue.

Repeat Revenue
Repeat revenue typically happens regularly but is not contractually bound on a yearly or longer-term basis.  However, there can be an invisible contract that occurs in some cases because replacing the service is either too expensive or time-consuming.

Recurring revenue is always more valuable than repeat revenue, but they can still be beneficial.  You can increase the value of repeat revenue for a buyer by carefully tracking your customers, their satisfaction, and how long they have been with you.  An acquirer can be more confident in the reliability of your repeat revenue if you can show them tangible proof that they are happy with your services, such as through customer satisfaction surveys and case studies.  You should keep track of this regularly and look for trends that could be helpful indicators of how you can continually improve your level of service.  This level of dedication will also prove to the buyer that you are serious about the quality of your company.

In either case, customer loyalty is a valuable commodity for any business.  Did you know that loyal customers are worth 10 times as much as their initial purchase?  And it can cost five times more to get new customers that it does to retain existing ones.  A 5% increase in customer retention can boost a company’s profitability by 75%.  This is why your customer base is so crucial to your company valuation.

Metrics for Measuring Recurring Revenue
So, we know that recurring revenue is more valuable than repeat revenue.  But how do you measure it?  CFOs commonly use the following metric formulas to measure recurring revenue.

Customer Lifetime Value (CLV)
Formula:  ((MT x AOA) AGM) ACR
MT = Number of Monthly Transactions
AOA = Average Order Amount
AGM = Average Gross Margin
ACR = Average Customer Retention (in Months)

Average Revenue Per User (ARPU)
Formula:  Total Revenue/Total Subscribers

Churn and Retention Rates
Retention Rate:  % of Customers retained from Period to Period
Churn Rate:  % of Customers Lost from Period to Period

Customer Lifetime Value to Customer Acquisition Cost (CLV-to-CAC) Ratio
Formula:  CLV/CAC
CLV = See above
CAC = Total Sales & Marketing Costs/Total New Subscribers Added

Annual Recurring Billings (ARB)
Formula:  The Sum of All Customers’ Annual Subscriptions & Usage

Recurring Revenue Can Increase Value
When getting ready to enter into a merger or acquisition, one way to increase its value is to create a recurring customer base.  While both repeat and regular customers are always better to have than one-time customers, it’s the frequent customers that will be the most beneficial for your bottom line.  This is because this source of revenue is the most stable and predictable, which buyers prefer, and gives you a competitive edge.  If you can find ways to create a recurring customer base, your company will stand out, attract more buyers, drive up the value of the business, and cause it to be sold faster.

Before making any decision or taking any action, you should consult a professional financial or legal advisor who you have provided with all pertinent facts relevant to your particular situation.

By |2024-09-20T19:14:28-04:00May 11th, 2022|Categories: Articles|

The 5 Faces of Leadership and What They Mean For You

Courtesy of:
Entrepreneur Magazine
By:  Ken Gosnell

Business owners have many styles that help them lead an organization effectively.  Here’s how to use that knowledge to your advantage.

Team members who wish to become valuable to their organization will need to understand how its leader thinks.  Business owners can be complicated to understand because they often look at decisions and choices through multiple lenses.  It is essential to understand the following five faces of leadership to understand better which face an employee may need to speak to when addressing an issue or discussing an idea.

1. The seer

A leader who knows where they are going and why they want to get there.

Good leaders know where they want to go, but they never want to go alone.  Team members who can understand where a leader is working to take the organization can often influence the leader when they can speak about the ultimate vision.  Many leaders reject good ideas because they don’t know how to align that decision with where they are leading the organization.

2. The steward

A leader who knows where they are going and what they need to get there.

The best leaders see themselves as stewards of the organization.  When a leader has this face, they realize that they have resources under their care, and they must utilize those resources to help the company grow.  A team member who seeks to influence their leader will understand how decisions will impact the overall resources of a company and think thoroughly about how to maximize those resources for their best potential.

3. The strategist

A leader who knows where they are going and who they want to go with them.

Good leadership is always about people.  This face of the leader thinks deeply about how to put people in the organization in the right seat in order to bring about the best results for the team member and the organization.  When team members address the leader about a decision, it is always wise to consider who is involved and impacted by the decision.  Most leaders have a vision for next-level leaders in the organization and know what they desire to help the next-level leader take the next step in their personal or professional development.

4. The sage

A leader who knows where they are going and knows what to do to get there.

The sage leader understands the processes and systems that will help the team member and organization to function at the highest level.  Good leaders build good strategies and know-how to get better results.  Team members who wish to help the leader should seek to help them develop better processes.  The best next-level leaders in an organization work to make better decisions and work to create better processes and systems to ensure that everyone in the organization performs better.

5. The scientist

A leader who knows where they are going and is willing to find new ways to get there

The scientist leader is curious to find new and better ways to do old things.  This face of a leader leads to innovation and change.  Many leaders seem like they are not willing to change, but leaders are always willing to change if they can see and understand a better way to do things.  Team members can become very valuable to leaders when they know where and why they’re trying something new.

Leaders are often like diamonds – they have many sides that help them to take charge of an organization effectively.  Next-level leaders who wish to help their leadership succeed will understand different sides or faces that they have and will work to engage through that lens.

Before making any decision or taking any action, you should consult a professional financial or legal advisor who you have provided with all pertinent facts relevant to your particular situation.

By |2024-09-20T19:14:31-04:00April 14th, 2022|Categories: Articles|
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