Take Five #091: Simple, step-by-step business finance flowchart, and more
Top five must-reads this week in the world of SMB acquisitions and operations
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Take Five #091: Simple, step-by-step business finance flowchart, and more
1. Recurring Revenue vs. Recurring Cash Flow: Why it’s important for searchers to know the difference
2. How to model and implement commission structures to drive growth (and how not to)
Before putting any kind of commission structure into place, you’ll need to articulate the results that you want to see more of. Then you’ll have to start thinking about the unintended consequences that your new policies may be ushering in.
For example, let’s say you want to grow ARR. If you fail to incentivize anything other than Revenue, this could lead to heavy discounting. That discounting, in turn, directly hits your gross margin.
While a 5% discount may seem immaterial on a 20% net margin business, this is actually a 25% hit to Net Margin. Think about that.
In perpetuity agreements have their flaws too. While they may reduce churn, you don’t want your Ops team doing all the work to keep those longer-term clients happy while the Sales team reaps all the benefits.
Read the rest of Finance of Scale’s post here.
3. 💲💲 Simple, step-by-step business finance flowchart
4. Advice for buyers acquiring a business valued below $1M
The biggest issue you’ll face buying a business below $1m?
You are relying heavily on the assumption that you can match or beat the performance of the founder.
At larger sizes, the founder is probably not involved in the business as much, and has built a solid team who will usually stay with the business.
Below $1m, not so much.
Here’s a framework for trying to figure out how much the founder is driving the business:
Find the Mastering Digital Acquisitions by Onfolio article here.
5. Asset purchase heads up: Sales tax add-ons can stack up fast…
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Great tips to think about!