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Top Questions Business Buyers Want Answers To

If you’re thinking about selling your business in Chicago or greater Illinois, it’s essential to know the questions business buyers will want answers to. For example, one of the more obvious questions is: “If this is such a good business, why is it for sale?”

Answering this question appropriately could be the key to making a sale (or losing one). If you give a vague answer, buyers may assume the worst and stop showing interest in your business. If you have owned your business for 10-15 years and are just ready for something new, buyers will likely understand. However, if you have only owned the business for a few years or less, that may raise some red flags to buyers of why you want to sell, so be careful how you approach this question.

A common reason for selling is because of health issues, and if that’s the case, it’s fine to be open about that with potential buyers, so they have a complete understanding of your reasoning. The worst thing you can do as a seller is giving vague answers or no answers, as buyers will tend to see that as a red flag and potentially walk away. Honesty is always the best policy.

Navigating selling your business or company can be challenging if you’re trying to do it alone, which is why retaining a business broker or intermediary may be extremely useful. Business transaction professionals have experience with all types of business opportunities, dealing with buyers and sellers, what information needs to be provided and have a handle on the entire business sale preparation and process from analysis to closing on the sale.

One of the most valuable insights a business broker can offer is how to address buyer questions, such as:

Why should I buy a business rather than starting my own?

How are businesses priced?

What does it take to be successful?

How long has the business been in business?

How long has the present owner owned the business?

How much money is the business making?

Are the books and records readily available?

Will the new owner help me learn the business?

These and many other questions are ones that business brokers and M & A professionals here at ABA deal with every day, equipping them to help you prepare honest and valuable answers. So if you’re interested in hiring a business broker in Chicago, the Chicago Suburbs, or the State of Illinois to help you sell your business or consult on an exit strategy, contact us here or schedule a free consultation by selecting a date and time that work best for you.

Copyright © 2021 American Business Acquisitions

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What You Should Know About Selling Your Chicago Business

It goes without saying that selling your business is one of the most important decisions you will ever make. Your business represents years, decades or perhaps a lifetime of hard work, dedication and passion. When it comes time to sell, there are a few key steps you don’t want to miss, which is what we will outline in this article.

Plan Ahead. One of the most important steps you can take as a seller is to actually begin the sales process and planning far in advance of the date you plan to put your business on the market. Working with an experienced business broker in Chicago, even before you’re ready to sell, is a great way to ensure that you have everything ready and know what to expect when the time comes. Doing this can also help you avoid the abundance of pitfalls that can come with selling a business.

A business broker can also help identify weaknesses in your business and help you address those issues. Your broker can help you with everything from strategy and negotiations, maintaining confidentiality and establishing the market value of your business, to connecting you with other seasoned professionals, such as accountants and lawyers.

Be Flexible. Another important thing to remember when selling your business is to remain flexible and open-minded. Selling your business may not go as planned, and you will need to remain respectful to your potential buyers and be able to anticipate that they will need a multitude of information to make an empowered decision.

The right “seller psychology” is essential. You should not attempt to rush or force a sale or overprice your business. In short, you need to keep “your head in the game” and as much as possible, keep your emotions out of the process. 

Be Realistic. It’s important to understand the statistics so you can be realistic in your approach and expectations. About 75% of sellers will end up receiving their asking price, and businesses listed as “all cash” generally do not sell. Seller financing will be highly likely, so the more realistic you can be about the terms of your sale, the better chances you have of selling the business. Another way to increase your odds is a reasonable down payment. Being will to offer financing will make  statement to prospective buyers that you believe in the business and its ability to generate revenue.

In summary, keeping an open mind and keeping your emotions out of the process will increase your chances of selling. It’s understandable that you may be ready to sell and move on, but the reality is that you won’t be able to just walk away, there is a process to be respected. Transitioning the business to a new owner is usually an ongoing process, and working with a business broker can help you navigate this process with ease and increase the chances of selling.

For a free consultation on selling a business or hiring a business broker in Chicago or across the State of Illinois, please schedule a virtual meeting http://calendly.com/abameeting or contact us to find out how we can help you achieve the highest value and close on the sale of your business or company.

Copyright © 2021 American Business Acquisitions

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10 Ways To Avoid Wrecking A Deal When Selling A Business

Selling a business is a complex process, especially when it comes to finalizing the deal. There’s a lot of room for error, misunderstandings and unexpected occurrences that can throw the process for a loop. It’s imperative to carefully think through the entire process well in advance and try to be as organized as possible while keeping all parties informed.

We’re going to take a look at the top 10 ways to avoid wrecking a good business deal.

  1. Confidentiality – At the top of the list for a reason, the number one way to avoid wrecking a good deal is honoring confidentiality. This is vital to not only avoid a breach, but to maintain a level of professionalism and respect. Hiring an experienced business broker in Chicago can help you with the art of maintaining confidentiality.
  2. Be Flexible – No deal has ever gone “exactly” as it was planned, so be flexible and open-minded as you navigate the process. Never go into a deal expecting all your terms to be met. If you’re too rigid, this can also be a turn off to the other party involved and ruin the deal.
  3. Be Open to Negotiations – Negotiations are extremely important, and this goes hand-in-hand with being flexible. You may not be able to have all of your terms met, but you can always work something out as a compromise to keep everyone happy and the deal moving forward. Sellers are used to being their own bosses, but when it comes to successfully selling a business, no factor is quite as important as a willingness to negotiate.
  4. Prepare Ahead – If you want to lessen the risk of losing out on a good deal, make sure you’re well prepared ahead of time. Sellers will want to make sure they have several years of records as well as legal and accounting documentation ready and well-prepared. Serious buyers will want to see these records as well as the financial information for your business. It’s always better to be overprepared in these situations.
  5. A Realistic Selling Price – An If you inflate your price too high, it will decrease the number of serious buyers that show interest, and could also make the seller seem uninformed. If you’re not sure where to price your business, hiring a business broker can be extremely valuable.  If you’re in the Chicago area, visit our home page and contact us to hand over the valuation expertise.  One of the best ways to increase your chances of finalizing a sale is to establish a fair price for your business.
  6. Maintain Operations – Once the business hits the market, it can be easy for the seller to lose sight of the day-to-day operations and “check out” before the business is sold. You’ll want to continue to operate your business as though it’s not for sale in order to maintain the reputation and value of the business. The reality is, it make take months or even years to sell and close a deal, so you don’t want to lose customers, operational flow or value in the process.
  7. Keep up the Momentum – A sure way to kill a deal is by losing momentum, initiative and letting communication go dormant. The process can be long and tedious, but working with a business broker to help sell your business can help you make sure you take the necessary action, have someone to look to for guidance and who can help you maintain momentum.
  8. Consider Your Buyer’s Needs – If you plan ahead and have your documentation ready, this will be attractive to any serious buyer. You can expect your buyer will need a variety of information from sellers such as appraisals of assets, information on environmental regulations, and more.  Sellers should have this kind of key information ready and waiting.
  9. Leverage Competition – Encouraging and knowing how to leverage competition can give you a leg up when it comes to closing a great deal. Having a competitive situation on your hands is a good problem to have given that the buyers will know there is more than one interested party. Brokerage industry professionals understand the delicacies of presenting this information.
  10. Seller Participation – Finally, sellers must stay involved in the entire process. Even after the business is sold on paper, offering to help with the transition goes a long way and creates a lot of trust and respect in the process. This can also help ease buyer concerns and make them more likely to close the deal knowing you will be there to help.

There are many potential reasons why a deal could fall apart.  You won’t be able to control every single variable, but by following the ten tips outlined in this article, you will be well on your way to increasing your chances of successfully completing a deal.

For a free consultation on selling a business or hiring a business broker in Chicago or across the State of Illinois, please schedule a virtual meeting http://calendly.com/abameeting or contact us to find out how we can help you achieve the highest value and close on the sale of your business or company.

 

Copyright © 2021 American Business Acquisitions

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Selling A Business In Chicago? Here Are 3 Warning Signs To Look For In A Potential Buyer

When buyers are looking to purchase a business in Chicago, the most important step is to perform their due diligence when it comes to researching the business and the seller. A large percentage of sellers, however, fail to do the same by investigating the buyers.

The process of working with a prospective buyer can have challenges and disruptions. Deals fall through all the time, costing both parties a tremendous amount of time, effort and resources. Sellers often lose money during this process, but if you know what “red flags” to look for ahead of time, you can avoid potential disruptions and make sure the process of selling your business in Chicago is easy and smooth.

Selling your Chicago business? Here are a few key questions you will want to ask a potential buyer:

-What other businesses have you considered, if any?

-How much equity will you be committing? 

-Do you have any experience in this specific business, niche or market? 

Warning signs you should look for when dealing with a buyer

It’s imperative to look for these red flags early on in order to avoid wasting time and money. Here’s what to look for:

Lack of communication

Poor communication from a potential buyer could mean lack of commitment and seriousness about purchasing your business. An interested buyer will make sure you know they’re interested! If there is little communication, “flakiness” or lack of interest, it could indicate the buyer changed their mind or was never serious to begin with. It’s best to move on and explore other options in this case. 

The buyer delegates the process to someone else

Another potential red flag is when the process becomes turned over by the buyer to a junior member of their team. A serious buyer will likely want to be involved and invested in the process. Make sure you’re clear on the buyer’s intention with the business and that those intentions align with yours.

Failing to provide details (especially financial)

If the prospect fails to provide key information, especially information regarding their financial capabilities to complete the deal, this is definitely a red flag. You want to make sure you have a buyer who is invested fully in the process, willing and able to provide the necessary information to ensure a smooth process. 

If any of these red flags pop up, reach out to the prospective buyer and ask to meet in person to discuss the situation.

Trust your intuition during the process – if you feel that a potential buyer isn’t fully committed, is simply window shopping or has unrealistic expectations of the type of deal to be made, simply move on. It’s better to cut your losses earlier and free your time and energy for buyers that are a better fit.

It’s not done until it’s done!

Warning signs can present themselves during the entire buying and selling process, especially just prior to closing the deal. Pay extra attention if:

  • the attorney representing the buyer is inexperienced or overly aggressive
  • there are multiple requests for last minute changes
  • communication falls out the as closing the deal approaches

A potential remedy for these situations is to get your own attorney involved to come to a resolution that works for anyone.

The process of selling your business is bound to have some challenges, but being able to spot warning signs early on can help keep everything on track and working as smoothly as possible. Working with a business broker in the Chicago area is an excellent way to not only spot the red flags, but be able to respond appropriately.

If you’re ready to sell or buy a business in Chicago, click here to contact us. We’re here to help make the process easy and make sure all of your questions are answered.

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Copyright © 2021 American Business Acquisitions, Inc.

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The Transformative Benefits of the Entrepreneurial Operating System®

Damon Neth is a Professional EOS Implementer™ of the Entrepreneurial Operating System®.  He co-authored a best-selling book entitled X-Formation: Transforming Business Through Interim Executive Leadership.  He also has founded five companies and acquired four other companies.  Additionally, Damon Neth is an accomplished entrepreneur and a leading EOS® business coach.

EOS® is a powerful set of business tools that provide a framework that empowers companies to create a clear vision throughout their entire organization, and in the process, boost the health of the company as a whole.  This article discusses EOS® and how it could potentially transform your organization.

What is EOS® All About?

EOS® is based on the book Traction: Getting a Grip on Your Business, which is written by Gino Wickman.  The effectiveness of EOS® is underscored by the fact that EOS® is currently utilized by over 10,000 companies around the globe. 

EOS® is a powerful set of tools that, as Neth explained, “are being used by businesses every single day to grow, transform and capitalize on opportunity and deal with problems.  These tools provide strategic advantages and strategic tools that many organizations implement to become better, to beat their competition, to become stronger.”

How Can EOS® Benefit Your Company?

Through EOS®, it is possible to establish a clear vision for your organization.  Neth points out that cultivating this vision is about finding clarity of purpose so that every team member is pulling in the same direction.  When used from the top to the bottom of a company, the tools provided by EOS® can have a transformative effect.  Discipline and accountability are key focal points of EOS®, as it is through discipline and accountability that the health of companies can be enhanced greatly.

At the core of EOS® is the concept that everyone should share the same company vision.  That means that there must be good, consistent and steady communication.  In order to facilitate this level of communication and understanding, it is necessary to have a transparent system in order to remove barriers, blockers and impurities.  When properly utilized, EOS® creates an opportunity through which everyone can not only identify their own issues, but also find ways to solve those issues.

Managing People

The most important asset that any company has is its people.  As a result, it is absolutely essential to not only find the right people, but also to guide those people as efficiently and effectively as possible.  As Neth explained, “You’ve got to be clear and transparent with people about what you need and about what success ultimately looks like.  You want to make certain that everyone in the organization understands their job.” 

In a world that is becoming increasingly complex, the role of the generalist is quickly being eroded.  In its place, we discover that people’s roles within companies are, by necessity, becoming more and more specific.  All of this points to the increasing importance of clarifying people’s roles within companies, and what is expected of them.  Gray areas need to be eliminated as they impair team members’ understanding of their duties and responsibilities.

Communication is Key 

Everyone in the organization should understand not only the role of their respective department, but also their role within that department and the organization as a whole.  Once again, the key to success boils down to good communication and clarity of purpose and roles within the organization.  Everyone must be rowing in the same direction, and it is through weekly measurables that true progress can take place.

Copyright: Business Brokerage Press, Inc.

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A Private Equity Firm Veteran’s Advice for Business Owners Preparing to Sell

What kinds of insights about selling a business might come from experts at private equity firms?  This article includes advice for sellers from industry veteran Lamar Stanley.  Stanley is a Director at Gen Cap America, which is a lower middle market private equity firm in Nashville, Tennessee.  Since 1988, Gen Cap America (GCA) has made 60+ investments across seven committed private equity funds. 

Before joining GCA, Stanley was with the Nashville based private-equity strategy group, Diversified Trust Company.  Stanley holds a B.A. degree from The University of the South and an M.B.A. from The University of Chicago. 

Understanding Small Business

Over the decades, Stanley has amassed a considerable amount of knowledge and expertise.  He points out that it is easy for people to lose sight of the fact that many so-called “overnight successes” are actually the result of ten or twenty years of hard, thankless work.  It is through these years of laser-like focus that entrepreneurs are able to bootstrap their business.  Additionally, these business owners need to not only have a vision, but also the insight to bring on great people to help build their business.

The Benefit of a Deal Attorney

Stanley feels that working with a deal attorney can make a tremendous amount of difference, as it can increase the chances of a successful transaction taking place.  Deal attorneys understand the deal process, which can make all the difference when it comes to streamlining the process. 

“Deal fatigue” can derail what would otherwise be a good deal.  This term applies to how deals can sometimes drag on for months.  Working with an experienced deal attorney can help expedite the entire deal process.  In turn, it can help to avoid the dangers typically associated with deal fatigue.

Preparing in Advance for a Sale

Stanley believes that it is critical for a business owner to think about selling as soon as possible.  Ideally, a business owner should be thinking about selling when they start their business.  He realizes that most business owners can’t hope to prepare for selling as soon as they create the business.  But the point is clear, the sooner they begin the process the better.  Business brokers and M&A advisors can best serve business owners by helping them understand that they shouldn’t wait until a month or week before they are ready to sell their business to get their respective houses in order. 

There are so many important factors involved in getting a business ready to sell.  They range from customer concentration and diversifying suppliers to preparing financial statements and working capital estimates well in advance. 

In particular, Stanley points to the danger of business owners having to deal with preparing their business for sale while continuing to operate the business during the sales period.  What must be avoided is for business owners to essentially have two jobs at the same time, as this increases the odds of deals falling apart from deal fatigue.  The sooner a business broker is involved in the process, the better.

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The Psychology of Selling – Are You Sure You’re Ready?

More than likely, selling your business is one of the biggest decisions of your life.  Unless you own a business, it is impossible to understand just how all-encompassing of a process it can be.  With that stated, it is important for business owners to step back and seriously reflect on whether or not they are truly ready to sell.  The psychological aspects of selling are not trivial.  Various aspects must be taken into consideration before initiating the process to sell.

There are many reasons why it is vital to step back and think about whether or not you are really ready to sell your business.  Far too many business owners believe they are ready to sell, only to discover (much too late) that an executed sale is not optimal for their plans. 

Selling When There is No Other Choice 

Selling a business because there is no other choice, such as situations concerning failing health, personal issues or problems with a business partner, isn’t a true choice at all.  In this situation, the psychology of selling is essentially irrelevant, as you have one option, namely, to sell.

The Case of Burnout 

In other cases, owners eventually hit a brick wall and have no choice but to consider selling.  As burnout sets in, owners may feel that the time is right to “hang up their hat” and put their business up for sale.  However, as the process evolves, even those experiencing some level of burnout can discover that they are not emotionally or psychologically ready to sell.  In many cases, people make this realization only once it is too late.  

Take the Time for Self-Reflection 

Quite often, a company becomes interwoven into a business owner’s sense of self, sense of place in the world and even, to an extent, sense of self-worth and identity. When business owners are unaware of this fact, it can be something of a shock to their system to begin the sales process.  Many people simply are unaware of the strong hold that their business has on them. 

Owners need to invest some time in self-reflection and ask four key questions: Do I really want to sell?  If the answer is yes, then why do I want to sell?  Will I regret selling once my business is sold?  What will I do after I have sold my business?  Answering these questions involves far more than evaluating your business.  They also involve diving into emotional issues that could be central to your future.

Are You Really Ready to Sell? 

One of the best ways of determining whether you are ready to sell, and preparing your business for that potential sale, is to work with a business broker or M&A advisor.  Business brokers are experts at helping business owners deal with every aspect of the process of selling a business.  They can act as experienced guides that can use that experience and expertise to help you determine if you are truly ready to sell. 

If it turns out that you are indeed ready to sell, a brokerage professional can help you prepare so that you can achieve the best price possible once your business hits the market.

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When Should You Think About Selling Your Small Business?

There are many reasons why small companies are put up for sale.  Some of the more common reasons can actually have little to do with the company’s general performance.  For example, many small business owners discover that they need to sell for health reasons or personal concerns, such as divorce or partnership issues.  While a business downturn or fear of a larger competitor looming on the horizon might prompt many business owners to sell, economic drivers are not the only issue.  Owners may want and need to sell, but often it isn’t always that simple.

Many business owners are looking to retire, but are unpleasantly surprised to learn that they simply can’t afford to do so.  Still yet, many business owners don’t truly want to retire or sell, but instead they just want more freedom in their lives.  The day-to-day responsibilities of owning and operating a small business can take their toll.  Many business owners are looking to make a change and would love to be free of this burden.  This class of owner has already “checked out” mentally, and this can have profound negative consequences for their businesses.

When an owner wants out but discovers that he or she simply can’t afford to sell or retire, it will come as no surprise that there is usually an accompanying drop off in enthusiasm.  Ultimately, the vast majority of owners will start to lose focus.  Often, we find that they stop investing the capital necessary to continue the growth of the business, which can trigger other events, such as the loss of key staff members and/or customers.  Losing a top customer to a major competitor can further accelerate the downward spiral.  The failure of the business to maintain its footing and competitive advantage can lead to a more aggressive posture by existing competitors or even encourage a new competitor to move into the market.

In time, the owner may come face-to-face with the harsh realization that they have no choice but to sell if they are to salvage any of the business’s value.  The best way for a business owner to safeguard against this situation is to sell when his or her business is doing well, as this helps to ensure an optimal price. 

Working with a business broker, even years before one is interested in selling, is one of the single smartest moves any business owner can make.  The time to think about selling your business is now, as no small business owner knows what life or the market will bring.

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You Want to Buy a Business in Chicago? Here are 3 Factors to Consider

Do you think you have what it takes to be a business owner, but don’t want to start from scratch? Then you may be a great candidate to buy an existing business in Chicago!

While it can initially cost more to buy an existing company, there’s also way less risk.

  • The product or service has already been market tested
  • The brand is established
  • You can secure financing more easily
  • There isn’t any lost startup time

There are many elements that go into buying a business in Chicago or elsewhere, including environmental and social factors. Let’s take a closer look at some of these and how they might influence your decision to purchase.

Health and Safety Policies

A health and safety policy is a general approach to a company’s commitment to health and safety. A good policy details how the business will minimize the risk of injury and illness from workplace operations. While some industries are naturally higher risk than others, all businesses must have policies and procedures in place to protect employees.

Here’s some things to think about when you’re considering your options.

  • Do you want to choose a business that has well-established health and safety policies in place?
  • Do you want to create your own policy?
  • Do you want to delegate and possibly even hire a specific person to create and implement your health and safety policies?

Health and safety policies might sound like a boring aspect of owning a business, but it’s crucial to have strong ones in place in order to protect your employees and your business. If the business you intend to purchase already has policies in place, then it’s one less key operational responsibility to worry about.

Employee Well-Being

If you’re hoping for a smooth transition, buying a business with existing employees can be a smart decision. For example, consider keeping employees that hold certain licenses the business needs to operate. This saves you the time and hassle of having to interview and hire someone new and qualified.

However, if you choose a business with disgruntled employees, they aren’t likely to stay on board during the transition. Employees are the heart of the company, so if you’re buying a business with happy employees, then you’re generally in good shape.

Here are some tips to maintain employee happiness and well-being.

  • Pay a fair wage
  • Encourage open communication and ask for feedback
  • Keep morale up with a healthy work/life balance
  • Protect employee’s health and safety
  • Provide clear communication about employee expectations as well as company policies, manuals, and benefits

When looking for a Chicago-based business, keep employees’ well-being and performance in mind. Depending on the type of business, finding and keeping valuable employees can be difficult. Employees who are fulfilled and treated well are more likely to stay at a company and continue to perform exceptional work.

Don’t get off to the wrong start at the beginning. Build positive rapports by including existing employees on the new employment terms and respect the systems and relationships already in place.

Corporate and Social Responsibility

Consumers feel it’s important for businesses to demonstrate responsibility and take stances on current social movements. From our experience, we agree.

Chicago businesses that practice social responsibility tend to make more ethical decisions that protect their communities, leading to increased consumer trust.

Consumers like to support companies that share their values.

  • Consumers are willing to pay more if a company has a strong ethical footprint or mission
  • Consumers feel a shared connection with the business due to mutual values
  • Companies with strong social responsibility are more likely to be referred to friends and families, as well as promoted on social media platforms by loyal consumers

Rather than starting from scratch, you can purchase a business whose social and ethical values align with yours and carry on their reputation. Bonus – you’ll also have a solid customer base already established.

In Conclusion

As the major metropolitan city of the Midwest, Chicago is an excellent choice to start your business ownership adventure. It’s a city that thrives on innovation and holds American values and reputation to a high standard. When buying a business in Chicago (or anywhere, for that matter), it’s important to keep these factors in mind. They can help you make a more informed purchase decision that allows you to start working and growing your business right away. To learn more about buying a business in Chicago, contact American Business Acquisitions today.

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Is Your Business Charging Enough For Goods & Services?

A small increase in what you charge for your goods and services can make a tremendous difference to your bottom line.  The fact is that many businesses could charge more for their goods and services than they do, but fail to do so.  Owners often do not realize the great value of charging just one-percent more.  In this article, we’ll explore how charging even slightly more can dramatically impact your business.

Let’s consider a hypothetical example.  A business owner tells a potential buyer that he or she could safely increase their prices by 1.5% and do so without the price increase causing any negative impact to sales or business disruption.  The savvy buyer quickly realizes that the business, which has $70 million in sales, is leaving $1 million dollars on the table by not increasing its prices by 1.5%.  A smart buyer realizes that after purchasing the business, all he or she has to do is institute this small price increase in order to achieve a sizable increase in profits.

In his best-selling book The Art of Pricing, Rafi Mohammed explores the often-overlooked area of pricing.  He keenly observes that one of the biggest fallacies in all of business is to believe that a product’s price should be based on the cost of the product.  In The Art of Pricing, Mohammed points to several examples.  One comes from the restaurant industry.  He points to the fact that McDonald’s keeps entrée prices attractive with the idea of making up profit shortfalls in other areas, ranging from desserts to drinks and more.  Or as Mohammed points out, McDonald’s profits on hamburgers is marginal.  However, its profits on French fries are considerable.

Mohammed’s view is that companies should always be looking to develop a culture of producing profits.  He states, “through better pricing, companies can increase profits and generate growth.”  Importantly, Mohammed points out that it is through what he calls “smart pricing” that it is possible to extract hidden profits from a business.  Summed up another way, pricing couldn’t matter more.

All too often business owners, in the course of their day-to-day operations, fail to place sufficient importance of pricing.  Any business looking to achieve more will be well served by first stopping and taking a good look at its pricing structure. 

Likewise, buyers should be vigilant in their quest to find businesses that can safely increase prices without experiencing any disruption.  At the end of the day, small changes to pricing can have a profound impact on a company’s bottom line.

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