There are clearly qualities that make a person an ideal candidate to be a business owner. On the other side of the coin, however, it’s clear that owning a business isn’t for everyone. Let’s take a look at some of the unique personality aspects that help motivated individuals identify owning a business as a good fit for them. You Seek to Guide Your Destiny A common reason people become business owners is that they want to have more control over their lives. After all, if you’re working for someone else, your fate is never truly in your own hands. You can always be fired or let go. When you are a business owner however, not only do you have control over your job itself and the tasks you accomplish on a daily basis, but you can also determine who you work with and where you work. You also need to have optimism to keep working with the belief that things are moving in a positive direction. You are Comfortable with Risk When you take the role of business owner, you invite a certain degree … [Read more...]
Can You Buy a Business Without Collateral?
If you’ve ever gotten any type of substantial loan, chances are that you’re already familiar with the concept of collateral. This is when something of value is pledged as security. As a result, the lender has something of value that they could potentially take if the loan is not repaid. Collateral is designed to protect the lender. Of course, the most common example of collateral is your house when you have a mortgage. Oftentimes, those looking for a loan to buy a small business wonder if they can do so if they have no collateral. Let’s take a closer look at some of the most popular options in this situation. The 7(a) Loan Assistance Program If you’re lacking collateral and looking for a business loan, it’s a good idea to check with the Small Business Administration. The SBA 7(a) loan is one of their most popular programs. While it can be used for establishing or acquiring a new business, it’s also commonly used for long and short-term working capital, refinancing business debt, or … [Read more...]
What is a Partnership Agreement?
A partnership agreement is a legal document that provides an outline of how a business will be run. This agreement will often be used by small for-profit businesses when two or more people are involved. It’s an essential document to have, especially in the case when a dispute arises between partners. Even if you have gone into business with a friend or relative, you should have this document in place to make sure everyone is protected. Let’s take a look at some of the key elements that should be in this document. The Basics It goes without saying that your partnership agreement should include the basics, such as the name of the business and the names of key parties involved. You’ll also want to outline the goals of your partnership and how long it will last. Rules and Responsibilities When you create your partnership agreement, you’ll want to make sure it offers a lot of clarity on different points with an eye to everyone’s responsibilities. Think through what concerns or … [Read more...]
What Are Your Flaws?
As a business owner, your natural inclination is likely to be considering the strengths of your business and how to perform even better in the future. However, the truth is that sitting back and thinking about your flaws can actually benefit you in the long run. When you have a full understanding of where you are lacking, it will empower you to make the best strategic decisions for the future. These changes, in turn, will help you receive top dollar when you go to sell your business. Here are 4 areas you should be evaluating: 1. Your Products How diverse are your products? If you rely upon the sale of just one product, that puts your business in jeopardy. You should be thinking about additional products you could add. This will also open you up to new opportunities for customers and revenue. 2. Your Workforce There has been much publicity about the current trends in businesses struggling to find staff. Further, there are a variety of trades, such as tool and die, where there is a … [Read more...]
BizBuySell Insight Report for 2022
BizBuySell has issued their latest insight report, which summarizes market growth and trends from last year. In this report, they have several interesting areas to report including a summary of how lower sales prices and rate hikes impacted the value of businesses in recent months. The report can be found at https://www.bizbuysell.com/insight-report/#reportArchive. Overall Trends in 2022 Buyers currently appear to have some leverage when it comes to the prices of businesses on the market. When comparing 2022 with 2021, we see a 4.7% increase in closed transactions. Comparing it to the year prior, there is a 19% gain. Obviously, 2020 sales were negatively impacted by COVID. While sales grew substantially in the first half of 2022, there was a decrease in momentum in the second half of the year due to inflation and interest rate increases. The number of transactions recorded by BizBuySell.com in 2022 are actually fairly comparable to 2021, with numbers of 9054 and 8647, respectively. … [Read more...]
Expectations for Business in 2023
BizBuySell just released its latest insight report, which tracked sales and growth in 2022 and compared it to the prior year. Overall, we are seeing a high demand for service-based businesses as well as an increase in restaurant business sales. The insight report also reveals what business brokers across the country are expecting for 2023 and beyond. Data on Service Business Sales In 2022, 39% of the acquisitions tracked by BizBuySell were service businesses, and their transactions were 7% higher than 2021. The service sector typically includes predominantly financial and healthcare related businesses. These types of companies are usually considered to be low-risk. Across the map, buyers were willing to pay more for service businesses last year. In fact, the median sales price for service businesses rose 4% over 2021. It’s interesting to note that the sales prices were even higher than the pre-pandemic levels. Also, there is a trend towards buyers seeking out socially responsible and … [Read more...]
5 Ways that Sellers Can Focus on the Positives
When you are looking to sell, always focus on the positive aspects of your business. Many business owners fail to properly make a case for the benefits of their businesses to prospective buyers. Be sure to make it clear that your business has stability and ample financial health. Let’s take a closer look. 1. Prepare in Advance Preparing paperwork in advance will help to make sure that everything is in proper order and you’re not scrambling at the last moment. When your records are organized and correct, your prospective buyer will be able to truly see the value of your business. Buyers will also like to know that you have robust accounting processes that they can rely on in the future. You should also make sure that inventory is in stock and that any necessary upkeep has been done. All of these updates are part of the big picture when it comes to presenting your business in the best light to buyers. 2. Reveal Your Methods of Operations You’ll also want to demonstrate that you … [Read more...]
The Top 3 Reasons Why Deals Fall Through
No one likes to think about the deals that didn’t succeed. However, the fact of the matter is that sometimes things go wrong during the process and a sale doesn’t successfully close. We have pinpointed the most common reasons why this happens into three main categories. By understanding the issues that can prevent a deal from finalizing, we are able to dramatically maximize the odds of success for clients. 1. Issues with the Seller If a seller lacks a strong reason for wanting to sell his or her business, that seller is often unable to be flexible on the terms of a deal. As a result, when complexities arise during the sales process, the seller doesn’t have the patience, commitment and/or stamina to work to overcome those issues. In many cases, a seller has presented an unrealistic price for the business and simply cannot be realistic about the true value the business will sell for on the market. Another common issue that arises with sellers is that they are not fully transparent with … [Read more...]
The Four Essential Stages of a Closing
When it comes to reaching a successful closing, there are four important stages to keep in mind. In this article, we will take a look at the process and what sellers can expect. If you are planning to sell a business, it is also helpful to understand in depth what the stages are from a buyer’s perspective. The Letter of Intent (LOI) The letter of intent is one of the responsibilities that your business broker or M&A advisor will take on to assist you. Your letter of intent should include the price, terms, time frame anticipated as well as other factors, such as the seller’s transition and training. Details such as what is included and what is not included in the deal should always be addressed in this agreement. Due Diligence The due diligence process is also an essential step. Your business broker or M&A advisor will guide you during due diligence. All important facts and documentation should be evaluated, ranging from tax returns and internal P&Ls to leases, bank … [Read more...]
Take Inventory of Your Company
Most business owners don’t give a second thought to the idea of going to the doctor for an annual physical. So why do they not give the same level of care and consideration to their company? The fact of the matter is that many executives literally go decades without giving their companies a “physical.” They only stop to truly evaluate their business when required by regulations or another matter forcing them to do so. Consider an Annual Valuation Let’s take a look at some of the reasons why business owners should get an annual valuation. The first issue concerns the curveballs life often throws at us. At any given time, you and your business could be unexpectedly hit with everything from partnership issues or life changes like a divorce to changes in bank relationships. When you keep careful track of the value of your business, you will know in advance how potential changes would affect you. Perhaps even more importantly, you will gain an understanding of the health of your … [Read more...]
5 Elements for Buyers to Investigate
When you’re in the process of buying a business, it’s important to stay logical. No matter how good the opportunity may seem at first glance, be sure to carefully evaluate the business in a step-by-step manner. Regardless of how excited you might be about the prospect of ownership; you’ll want to have your guard up when you go through the due diligence process. Let’s take a look at 5 of the most important questions to ask yourself before signing on the dotted line. 1. Do you have a personal interest in the business? Needless to say, owners have made businesses successfully thrive even if they lack a personal interest in what is being sold. However, you might want to stop and ask yourself if you do indeed have a passion for the goods or services offered by the business in question. If you are uninterested, you may find it harder to make a long-time commitment. 2. What is the business plan like? It’s helpful to see the goals of the current owner and evaluate which of these goals have … [Read more...]
Defending Your Asking Price
When you’re putting your business on the market, one of the top considerations is your asking price. Once you have a fair price established, let’s take a closer look at how business brokers and M&A advisors work with their clients to back up that price with details concerning why it is justified. Telling the Story A key aspect of defending your asking price is telling the story of your business. Your brokerage professional will help you go over the details of the story so it is properly conveyed to prospective buyers. Buyers, of course, will want to understand the story behind the business so that they can understand its history and why it is for sale. You will want to feel prepared to interact with prospective buyers and how to discuss details concerning its value. Your business broker or M&A advisor will put together written materials about your business. These also help buyers gain clarity on the story of your business and its sales message. Seeing Your Buyer’s … [Read more...]
Common Legal Mistakes That Sellers Make
Nothing strikes fear in the heart of a business owner like a legal mistake. The best way to ensure that you will avoid serious legal issues is to work with a trusted and experienced team. Otherwise, it’s easy to accidentally miss necessary steps. When you’re selling a business, there are a lot of moving pieces, and that means that there are ample opportunities for things to go wrong. It’s always best to be prepared. When mistakes are made, it can not only mean a significant expenditure of your time, but also your money. These kinds of issues can also bring your sales process to a total halt and perhaps derail your deal completely. There are more than a few sellers who overlooked the importance of working with an attorney. When you are selling a business, it should come as no surprise that there is a great deal of paperwork. Your attorney will guide you to make sure that all necessary preparations have been made from a legal perspective. When your prospective buyer sees that your legal … [Read more...]
What Does the Road Ahead Look Like?
Each quarter, the Market Pulse Report issues a report revealing information about market conditions The report is supported by M&A Source and the International Business Brokers Association. The data that is analyzed is based on a comprehensive survey of business brokers and M&A advisors. The report focuses on Main Street businesses (with values up to $2MM) and the lower middle market (values between $2MM and $50MM.) The research is conducted and then the report is published each quarter to reflect the state of the industry. In this article, we will look at some of the key takeaways of the report and what it reveals about the path ahead for buyers and sellers. Tracking the Labor Shortage For the second quarter, the report revealed a variety of interesting information. One massive data point from the report is that the labor shortage continues to be a significant variable for business owners. A staggering 92% of report respondents state that the labor shortage has negatively … [Read more...]
What Will Your Buyer Be Looking For?
The buyer loves your business; it’s just what he or she has been looking for. He has reviewed your financial statements and has made an offer contingent on several items. You’ve reviewed the offer and it looks fine, so what’s next? The contingencies in the deal mean that the buyer or his or her advisors have some concerns. In larger deals, this process might be called due diligence. However, in the smaller business sale, the items of concern are usually spelled out as opposed to a general review of everything. The reason for this is that larger businesses or companies have a lot more areas of concern than the typical smaller business. Most contingencies concern the review of financial statements and/or business tax returns. Others may involve lease issues, the seller staying on for a set period of time, or some very specific issue such as repaving the parking lot, if the landlord won’t or isn’t required to. Unfortunately, some contingencies may be hiding other ones such as a … [Read more...]
Storytelling and Its Role in Selling a Business
When it comes to selling a business, there is more to it than just relaying the facts. It’s also important to emphasize the story behind the business. Business brokers and M&A advisors are also storytellers, as they must convey to buyers the story behind the business and how it can ultimately be transformed. It is through storytelling that humans organize the information they have about the world. In short, storytelling is an exceptional way to learn lessons in life and a great way to frame information about a business to sellers. Telling Your Story Everything begins with the financials, in short, the facts of the business. When a business broker or M&A advisor begins working with a seller, he or she will look to gather those details. Once that information has been gathered, it is possible to begin to create a story. That story can be presented in many ways, including through a confidential business review or confidential information memorandum. While many, if not most, … [Read more...]
How to Transfer Your Business to a Family Member
Are you thinking of transferring your business to a family member? This occurrence is fairly common, especially among small businesses. Here are some considerations that will help with your planning and decision making. Do You Have a Good Contract? Sometimes close family members are tempted to skip a contract, but it’s always a mistake not to have things in writing. When you create a buy-sell agreement, it helps keep things clear between the parties involved. Make sure that your documentation is thorough. It should cover a wide variety of details including the amount being paid, your continued involvement, and the business value. Does Your Family Member Need Financing? When it comes to selling businesses to family members, seller financing is common. You could even consider agreeing to a private annuity. This will allow payments to be spread out over many years. One benefit to providing financing assistance is that you will receive a steady stream of income along with interest on the … [Read more...]
Why Is Confidentiality So Vitally Important
When it’s time to sell a business, you will want to keep confidentiality first and foremost in your mind. The reality is that many deals do not succeed when confidentiality is breached and others learn that your business is for sale. Let’s take a look at why this is the case. What Can Occur When Confidentiality is Compromised? If vendors or suppliers find out that your company is for sale, it can negatively impact your business in different ways. One common occurrence is that vendors begin to change the terms they have established with you. Even a small change might end up not being minor at all, as it could impact cash flow. The same can be said for word of your business being for sale reaching your creditors, as they could also suddenly change their terms. Another major issue that could be caused when confidentiality is breached is that your employees and customers might begin to worry. Employees could even start looking for new jobs. Your customers might worry about the new … [Read more...]
Selling a Business Means You Should Expect the Unexpected
No one ever said selling a business was predictable. However, the truth of the matter is that every sale is different. Even the reasons behind a business owner deciding to sell his or her business vary tremendously. If you are getting ready to sell, it’s important to be aware of the various aspects that could catch you off-guard. If you are prepared for the unexpected, you’ll be mentally ready for the sales process, which often does not go as planned. Even the smoothest and most streamlined sales encounter a few road bumps along the way. Price Considerations When it comes to the price structure for a potential sale, many business owners have numbers in their minds that do not meet with reality. As a result, a potential offer could be far less than what they expected, and this causes conflict and delays. Your brokerage professional will prepare you with a thorough valuation so you can have a clear idea of the fair market price of your business. Be sure to ask any questions that you … [Read more...]
What You Need to Know About Partnership Agreements
There have been countless instances when someone has gone into business with a relative or close friend and made the mistake of skipping a formal agreement. No matter how good a friend may be, you will always want to get the terms of the partnership in writing. A partnership agreement is a vitally important document that is designed to protect all parties. It will reduce the possibility for disagreements or misunderstandings down the line. When you make sure you have everything documented legally, it will greatly serve you and your partner(s). Building Your Partnership Agreement Your partnership agreement should first and foremost address the general rules of the partnership. This means it should cover who owns what, and how you will handle profits and losses. It should cover the basics of issues that may seem obvious, such as what are each partner’s roles and duties. And it should also address the details pertaining to resolving small potential problems that you may never expect to … [Read more...]
