Startup Storytelling – Create a Business Worth Talking About, and Tell Stories About Your Startup

This is one way to approach the whole of business startup, I think. In fact, it is one way of considering your value proposition. If your business is not worth talking about, then you should probably not start at all. But your business is worth talking about. Avoid second-hand stories, because yours must differentiate you.

They have to be good stories and have a purposeful message. In these days of information overload, a good story will always win over dry ‘corporate speak’ or ‘marketing hype’. If you are starting a business, your experience is a treasure trove of stories. Do not be shy. You have learned many lessons and can make them useful for others.

Entrepreneurs Stories to Attract Attention

Entrepreneurs need stories badly. If you contact someone and say, “I’m calling from the Googleplex and I..,”you will probably get attention. If you are making a presentation and you are introduced by the chair saying, “Will is from Goldman Sachs..,” your audience is likely to be very attentive.

But neither of these apply to you. And you need to attract attention fast, however good your (unknown) product or service.

Injecting some humor is good, unless like me you risk forgetting the punch line. The story need not be long and should follow the advice of Chip and Dan Heath (authors of Made to Stick) who say, “For an idea to stick, for it to be useful and lasting, it’s got to make the audience:

  • Pay attention
  • Understand and remember it
  • Agree/Believe
  • Care
  • Be able to act on it.”

Reveal Who You Are

Your story will reveal who you are implicitly, without having to churn out out your resume, or hand out your business plan. The story will of course be true and even if you are telling a story against yourself or one that demonstrates a lesson you have learned, make it positive in tone.

That does not mean that stories need to be embellished and there is nothing wrong with revealing your emotions. It could be that the lesson learned was a hard one. Your brand certainly needs its story and it should not be defensive. It should be narrative. “It’s about communicating who you, as a business, are-discovering your identity, not inventing a new one willy-nilly. Positioning helps a company become what it is, not something it’s not,” says Stephen Dunning, author of The Leader’s Guide to Storytelling.

Rehearse Your Story

Storytelling may sound easy. It is not, and you need to prepare yourself, just like you would for any presentation. Craig Wortmann, author of What’s Your Story? has an excellent piece of advice, “Approach your presentations as if your clients or people will not be allowed to take notes or refer to any documentation.”

Craig’s storytelling mnemonic, IGNITE, is worth you noting for creating your own stories-make them:

  • Intentional
  • Genuine
  • Natural
  • Improvisational
  • Total
  • Engaging.

Find a storytelling buddy and rehearse your story together. If you do not like that idea, record it and listen to it on your own. Better still record it on your webcam and play it back to review how it goes. If if you have no webcam, tell it to the bathroom mirror! A live story telling will be different because you will get feedback from the audience, but a rehearsal will iron out obvious shortcomings.

Where the Subject Sources Are

The sources of subjects for your storytelling are most effective if they come from your own experience. But they can also be:

  • second-hand; I told a story to a trainer friend and he loved it enough to ask if he could use it and he has already told it with more panache than my original, but then he is an excellent storyteller;
  • from your company experience; successes of employees, customer experiences, neat problem solutions, examples of creativity;
  • from articles that quote experience or stories recounted in books; you will find Patagonia founder, Yvon Chouinard’s book Let My People Go Surfing is full of them;
  • presentations of stories retold by you in your own context, if they make strong and memorable accounts that are pertinent.

A storytelling story

A former colleague of mine, George, whose storytelling is a big contributor to his business success, always made me smile when we were on gigs together. He carries a battered old leather briefcase with him. It is so old and worn that the handle is long gone. When he arrives at the front, he needs a large table by the lectern, on which he can spread out a whole bunch of notes and papers before he starts talking. He is a business school professor and this underlines his professorial status.

What the audience does not know is that, while he delivers his presentation as if he had never done so before and does occasionally refer to the papers on the table, it is a presentation he has made many times before, with the same old notes from the same old briefcase. But this ritual is one of many reasons why he makes the presentation a winner every time. He tells the stories like it is the first time they have been aired.

How Much is a Business Worth?

How Much Is a Business Worth? A Business Valuation Will Tell You

So you’ve finally found a business that interests you, it’s time for a business valuation. Remember a business is worth only whatever someone is willing to pay for it at a given point in time. At this point that someone is you!

Why Do I Need to Do My Own Business Valuation?

The business valuation is one of the most important steps in determining whether you buy this business or not. If the Seller’s broker or an outside source has created a valuation report, fine. Get a copy but don’t put a lot of credence in it us it as a guide line. You still need to do your own evaluation.

Remember, the Seller’s accountant has been trying to save the Seller from paying as small an amount of taxes as legally as possible. What shows on the bottom line for tax purposes, in most cases, are not the true earnings of the company. neither does the balance sheet show true market value of the company’s assets because he has been depreciating the business.

Ok, What Do I Need For A Business Valuation?

The following documents are critical for you to do your business valuation.

1. Profit and loss statements for three years, created by an accountant, not created on the seller’s computer.

2. Balance sheets for three years.

3. Federal Tax Returns (IRS) for three years.

4. Interim financials and balance sheets for the most recent reporting period.

5. Complete list of equipment, furniture and fixtures assigned market value.

6. Recent evaluation reports if any.

7. Appraisals on business assets.

8. Marketing and business plans including financial projections.

9. Brochures.

You have gathered all the information you will need to make a buying decision. You are now ready to…

Start Your Business Valuation of The Seller’s Business.

Remember, most businesses are managed in a manner to pay as little income tax as possible to the owner, not to see how much taxes they can pay. That’s why it is important to get a true financial report. You do not have to explain to the Seller why you are reconstructing the financials.

This is a very critical process to decide the worth of the business you are proposing to purchase. If you don’t feel comfortable, get some help.

Some Sellers will have already have done this, that’s okay, but you still want to do your own reconstruction. If the Seller presents you with a business valuation report with the financials reconstructed, watch out for overstated add backs or those items that can’t be verified. You only use numbers that can be verified from the financial information you have gathered yourself.

Things to Watch Out For

Sometimes, in an all cash business, the owner will not report all of his income. I do not listen to Sellers who want to add value to their business from unreported income. I tell them, too bad! The Seller either pays the piper up front or he pays when he sells. I figure if he will lie to Uncle Sam, he’ll lie to me. This should be a red flag.

This profit and loss reconstruction is the major factor in you determining the true worth of the business. You need to discuss each cash flow item with the Seller. You can do this in person or over the telephone. Don’t make a big deal out of this, but do get the information.

If the Seller asks why you need this information, tell him the truth. You are reconstructing his financial statements to show a true market value of his business. Many Sellers are hesitant to discuss some of the perks they have paid themselves. They probably have expensed items that were totally for personal use. These are the items you are trying to locate.

You will use this information only to justify the numbers you find through your reconstruction of the financial statements. You need to make the Seller feel comfortable in discussing these expense items. Assure him this kind of information stays with you and him only.

This process will help you determine the available dollars for you to service the debt, pay yourself or a manager, and give you a reasonable return on investment.

I know what you’re thinking…

This Sounds Complicated And I Need Help!

My book,Who Wants To Be the Boss?, has a whole chapter devoted to business valuation.

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How Much is My Business Worth?

If you are considering selling your small business, it will be important for you to evaluate your business in order to derive a reasonable asking price. Experts recommend that you assess the business from more than one angle in order to obtain an accurate picture of how much your business is worth.

Rules of Thumb Methodology

Begin by analyzing the history of your business to determine how much profit the business has been earning in excess of your own salary and benefits. Project future data based on your specific history, as well as general market trends to establish if the past is a fair representation of the future. This is typically known as “Rules of Thumb” methodology.

Market and Industry Trends

In examining trends, it is necessary to consider such items as supplier price changes, competition, and how the particular industry is performing. Also, take a look at prices paid recently for comparable companies in similar locations. Additionally, compare your company’s year-end gross profit and operating income to other industry competitors. If your company is closer to the top of the range in profitability, you can command a higher price for your business.

Owner Benefits

Then investigate the value of your business by using the Multiple Method; a pre-determined multiple (usually between 1 and 3) multiplied by the earnings of the business. The earnings or “Owner Benefits” amount can typically be used as an effective basis. This number is the total funds that you can foresee being available from the business based on past experience. The value is derived by adding the owner’s salary and benefits to the business’s profits; then adding back non-cash expenses.

The multiple that is used is mainly based on the industry. It is usually one time the value calculated if the business owner is the entire business, such as consulting or freelance services. Businesses with a solid customer base and more than 3 years in business most likely will be worth 3 times the basis.

ROI

Another calculation that should be looked at is the Return on Investment (ROI) that a buyer could expect to receive if they purchase your business. This is calculated simply as Gain from Investment minus Cost of Investment divided by Cost of Investment.

Assets

In addition, take into consideration the value of the business’ assets. This includes inventory and equipment.

Overall, it is important to keep accurate financial records. Buyers seeking financing to purchase your business will need to present information to back up the price being paid for the business.