Tag Archive for 'assets'

Four IP questions to tell if you get it

One of the most interesting aspects of the marketplace is the evolution of how businesses leverage assets. For most of history, business leverage came from these three categories in this order:

1. Muscle power (human or animal);

2. Tangible stuff (raw material, inventory, tools, etc.);

3. Information (intellectual property, or IP).

Historically, the strongest cavemen, the biggest horses, the fastest ships, the largest factories, all had an advantage over lesser competitors. We’ve all seen this: “Largest inventory in the region.”

But here’s the interesting part: As the marketplace has evolved, the order of importance and the value of assets has inverted. Studies show increasing emphasis is being placed on IP and the ability to leverage it with less emphasis on leveraging tangible assets.

And what about muscles? Increasingly in the global marketplace, human brawn is number four on a list of three.

The good news is small businesses are joining this global trend of leveraging IP more and tangible assets less. They’re increasingly using technology in exciting new ways, doing more virtual business and are as likely to develop a strategy for doing business across an ocean today as they did across town 20 years ago.

Regarding how essential IP is to a small business’s 21st century competitiveness, more and more small businesses get it.  The bad news is there still are far too many who don’t. As an example, incredibly, almost half of small businesses still don’t even have a website.

To see if you “get it,” consider these four questions:

1. If I gave you for free (a) a truckload of inventory or (b) a special technology that would help you serve customers better, which would you choose?

2. Do you spend more time (a) thinking about products and services or (b) finding technology to more effectively serve new customer expectations?

3. Do your employees (a) use the same technology in the direct performance of their jobs today that they did 5 years ago or (b) different technology (not just new machines)?

4. If you purchased another business, which would be more valuable to you: (a) the inventory and equipment, or (b) the digital records of their customers: names; contact info, including email; what they buy; when they want it; why they buy it; and how they use it?

If you chose (a) for any of these questions, it’s likely your business’s performance is on a declining trajectory. But if you chose the (b) options, congratulations, you get it about IP.

Write this on a rock … In the 21st century, leverage intellectual property more and tangible assets less.

Acquiring a small business: Should you buy stock or assets?

Acquiring a small business that is already established in the marketplace and has customers coming in the door is an excellent strategy that serves two different purchasers:

1. A start-up gets a jump-start on small business ownership by not having to start from a blank sheet of paper.  The existing location, customer list, even the phone number, has real value.

2.  An established business can use the growth-by-acquisition practice to provide an accelerant to augment the more deliberate organic growth.

Either way, both buyers have to take the same steps in making such an acquisition, including the due diligence, which includes making the decision of whether to purchase the company by buying the stock or allowing the existing business to dissolve and merely buy the assets.  Both have their own particular merits, but in the main, buying assets is typically the more likely choice.

Recently, on my radio program, The Small Business Advocate Show, I talked about how to make the “stock versus assets” decision with one of the resident attorneys in my Brain Trust, Cliff Ennico. We discuss specific examples of when you should buy just the assets of a company and when you should buy the stock. We also talks about when to incorporate and when to use a limited liability company (LLC).

Cliff Ennico specializes in legal and tax issues for small businesses and is a popular instructor at eBay University. He is a frequent contributor to Entrepreneur magazine and the author of The ebay Seller’s Tax and Legal Answer Book and Small Business Survival Guide.

I hope you’ll take a few minutes to listen to my visit with Cliff, and be sure to leave your own thoughts. Listen Live! Download, Too!




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