New corporate entities and Hailey’s Comet both come around about once in a lifetime. Why should you care, read on, I’ll get to that.
The L3C is a form of limited liability company (LLC) it has many characteristics of a typical LLC, it is a for-profit entity, offers a flexible ownership structure so each member’s management responsibility and financial stake may vary according to individual needs, and members enjoy limited liability. Lastly, like a LLC, the L3C is classified as a “pass-through entity” for federal tax purposes.
There is one major distinction between the L3C’s & LLC’s; both are profit-making entities, but the primary purpose of the L3C is not to earn a profit, but to achieve a socially beneficial objective, with profit a secondary goal. Sounds like the old Control Data Corporation model!!!!!
Why is it important to you? Have you ever gone to the federal government’s website recovery.com and gotten past all the jobs created or saved baloney? If so, you were redirected to a site grants.gov where all the “stimulus” money is being given away. Millions given away to study yaks mating calls or oil drilling in Brazil. Almost none is designated for small business! The vast majority is reserved for government, schools and non-profit corporations. That’s right, the job creating engine know as small business gets almost nothing. Government jobs do not create GNP, small businesses do.
OK, I promised there would be something in it for you, here it is; Start one! Start a L3C.
Haven’t you always wanted to start a company to save the planet or your fellow man? The urge is there, but where is the start up dollars and how will I get paid? Here it is. Start up a non-profit L3C and achieve non-profit 501 (c) 3 status and be able to take donations. Apply for the grants to get funded and keep writing grant papers. How do you get paid? Easy, just because it’s non-profit doesn’t mean you can’t take home a salary. I’m not advocating taking big fat 6 or 7 figure paychecks like some of the big non-profits with household names pay their CEO’s, but pay yourself fairly. Feel good that you finally followed your heart and are using your talents to help the earth and its inhabitants.
Worth checking into. Careful, now there is no excuse to not do good work!
Saturday, March 27, 2010
Your Stock Doesn’t Know You Own It
Peter Lynch in his book One Up On Wall Street, once said “a stock does not know you own it.” It sounds silly, but many people believe that good things happen to good people and since they are good spouses, parents, mentors, employees and can mix a great martini that the stocks they buy will always go up.
Stock value has everything to do with the company, and nothing to do with you.
Small businesses are similar. Sure it might be your name on the door like Bob’s Garage, but the value is derived from the company value, with a little left over for personal Goodwill. But remember if too much of the company is tied to the persona of the owner, it is worth less to a perspective Buyer who replaces you. Colonel Sanders might be an exception where his persona kept on after he sold KFC, but that gets into a whole different topic of branding.
I recently had a meeting with a business owner who I had put a market value on his business of just under $2 million. Nice business, had some of his adult children involved in the daily operation, but the truth is that he was the innovative and driving force in the business and as he approached retirement age, that drive as slowing down. So were sales and profits. Very typical in the life cycle of a business. The key is to recognize this early and sell the business to someone who will invigorate the business before the business starts to slide. Better to rise up a business from flat sales than to try to right a sinking ship.
After presenting my analysis of the market price I asked the owner what he thought the business was worth. He stated $5 million! Checking to see if I missed something I inquired as to how he got to that figure. The answer was $2 million for my wife and I and $1 million for each of our three children. Hard to counter logic like that, even though I tried. We never did come to terms on a listing price.
The sad truth is that today I could sell the company for $2 million and have a steady pool of Buyers looking for a business like this, but if he holds on to the business for a couple more years and the slide continues, we will be selling it for far less, if we can sell it at all.
Remember, a business doesn’t know you own it…….or how many children you have.
Dave Roeser
Stock value has everything to do with the company, and nothing to do with you.
Small businesses are similar. Sure it might be your name on the door like Bob’s Garage, but the value is derived from the company value, with a little left over for personal Goodwill. But remember if too much of the company is tied to the persona of the owner, it is worth less to a perspective Buyer who replaces you. Colonel Sanders might be an exception where his persona kept on after he sold KFC, but that gets into a whole different topic of branding.
I recently had a meeting with a business owner who I had put a market value on his business of just under $2 million. Nice business, had some of his adult children involved in the daily operation, but the truth is that he was the innovative and driving force in the business and as he approached retirement age, that drive as slowing down. So were sales and profits. Very typical in the life cycle of a business. The key is to recognize this early and sell the business to someone who will invigorate the business before the business starts to slide. Better to rise up a business from flat sales than to try to right a sinking ship.
After presenting my analysis of the market price I asked the owner what he thought the business was worth. He stated $5 million! Checking to see if I missed something I inquired as to how he got to that figure. The answer was $2 million for my wife and I and $1 million for each of our three children. Hard to counter logic like that, even though I tried. We never did come to terms on a listing price.
The sad truth is that today I could sell the company for $2 million and have a steady pool of Buyers looking for a business like this, but if he holds on to the business for a couple more years and the slide continues, we will be selling it for far less, if we can sell it at all.
Remember, a business doesn’t know you own it…….or how many children you have.
Dave Roeser
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