What Do You Need to Do to Get Your Business Ready to Sell?

In his recent article in Smart Business entitled, “How to get your business, and yourself, ready for sale,” author Adam Burroughs explores the key points of getting your business ready to sell.  Burroughs points to the truism that, at some point, almost every business owner must sell his or her business.  For this reason, it is critical to think about what it takes to get your business ready to sell.  Simply stated, it is best to explore and plan for selling your business long before you actually need to place your business on the market.  Let’s explore some key points for selling your business. Broadening Your Options Burroughs interviews Scott McRill at Clark Schaefer Hackett.  McRill notes, “The sooner you think about your exit, the more options you’ll have for yourself and the business when the time comes.”  A savvy business owner will always want to give himself or herself as many options as possible. McRill wisely points out that early planning is key, and a failure to engage in … [Read more...]

Selling Your Business, Taxes & Tax Structures

It is never too early to start thinking about what tax structure you should use when it comes time to sell your business.  A simple, but undeniable, rule of life is that taxes matter and they can’t be overlooked.  Author Tim Fries at The Tokenist has written an excellent and quite detailed overview article on what tax issues business owners need to consider before selling their business.  His article, “What Tax Structure Should You Use When Selling Your Business?” explores many aspects of a topic that many business owners fail to invest enough time in, namely taxes. As Fries astutely points out, the taxes involving the sale of a business can be complex and are usually unknown to those selling a business for the first time.  Your tax structure can influence how much money you receive at the closing of your deal, so it’s a very good idea to pay attention to all aspects of taxation and your business.  It is key to remember, “When you are selling your business – as far as taxes are … [Read more...]

Tackling Growth Delusions When Buying a Business

There is no doubt about it, it can be exciting to buy a new business.  However, in the process, it is very important that you don’t become unrealistic about future growth.  Keep in mind that in the vast majority of cases, if a business is poised to quickly grow substantially, the seller would be far less interested in selling.  Richard Parker’s recent article for Forbes entitled “Don’t Be Delusional About Growth When Buying a Business” seeks to instill a smart degree of caution into prospective buyers.  Parker notes that when evaluating a business and talking to the owner, many buyers come away with a sense that enormous growth is just “sitting there” waiting to be seized.  In particular, Parker cautions those buyers who are buying into an industry that they know nothing about; those individuals should be very careful.  When buying into an industry where one has no familiarity, there can be a range of problems.  The opportunities that you see may not have been tapped into by the … [Read more...]

Understanding Corporate Social Responsibility (CSR)

If you don’t exactly understand what corporate social responsibility (CSR) means, don’t worry.  We’ll cover the main points you need to know.  CSR is increasingly seen as something that companies of all sizes need to be aware of, so let’s take a closer look at a few of the finer points. There are 4 basic pillars in CSR: the community, the environment, the marketplace and the workplace.  The community pillar of CSR refers to your company’s contribution to the local community; this contribution can take a variety of forms ranging from financial support to personal involvement.  The second pillar of CSR is the environment.  The simple fact is that people around the world are becoming much more environmentally aware.  You can be quite certain that a percentage of your customers and/or clients have environmental concerns.  Increasingly, consumers want to know that the companies that they are purchasing from have good environmental practices.  There are many ways that businesses can show … [Read more...]

Understanding M&A Purchasing Agreements

M&A purchasing agreements can have a lot of moving parts.  A recent article from Meghan Daniels entitled, “The Makings of the M&A Purchase Agreement” serves to outline a range of facts including that every M&A deal is different.  The article, which serves as a general overview, raises a range of good points. Components of the Deal It should come as no surprise that M&A purchase agreements have various components.  Everything from definitions and executive provisions to representatives, warranties and schedules, indemnifications and interim and post-closing covenants are all covered in these purchase agreements.  Other key factors included in M&A purchase agreements are closing conditions and break-up fees. Advice for Sellers In her article, Daniels includes a range of tips for sellers.  She correctly points out that negotiating a purchase agreement (as well as the different stages involved in finalizing that agreement) can be both time consuming and stressful.  As any good business … [Read more...]

Key Mistakes that Could Impact Your Sale

The old saying, “an ounce of prevention is worth a pound of cure,” most definitely applies to any business owner that believes he or she will someday want to sell his or her business.  The bottom line is that every business owner has to transition out of ownership at some point.  In a recent Inc. article, “Four Mistakes That Could Lower Your Business’s Value and Weaken Its Salability,” author Bob House explores 4 mistakes that could spell trouble for business owners looking to sell. No doubt House explores some excellent points in his article, such as that you should always have what he calls, “a selling mindset.”  The reason this mindset is potentially invaluable for a business owner is that when operating in this way, sellers are essentially forced to stay on their toes.  Or as House writes, “a selling mindset encourages continual innovation, growth, and investment, helping your business stay ahead of the competition and at the top of its potential.”  Having a “selling mindset” means … [Read more...]

Exploring the Offering Memorandum

Are you a business owner who is interested in selling?  If so, there are some strategies you should undoubtedly use.  At the top of the list is the all-important offering memorandum.  The offering memorandum, often referred to as a selling memorandum, is a straightforward but highly effective way to help you obtain the highest possible selling price. Shaping the Executive Summary The offering memorandum must be factual.  However, at the same time, this memorandum allows for a bit of business promotion and selling, which can be included in the executive summary portion of the document.  After all, potential buyers will want to know more about your business and why buying it would be a savvy decision.  In short, the executive summary section of the offering memorandum goes over the highlights of your company.  It should include an outline of several key factors.  Everything from an outline of the ownership and management structure, description of the business and financial highlights to … [Read more...]

Effectively Utilizing Confidentiality Agreements

Every year countless great deals, deals that would have otherwise gone through, are undone due to a failure to properly utilize and follow confidentiality agreements.  A failure to adhere to this essential contract can lead to a myriad of problems.  These issues range from employees discovering that a business is going to be sold and quitting to key customers learning of the potential sale and taking their business elsewhere.  Needless to say, issues such as these can stand in the way of a sale successfully going through.  Maintaining confidentiality throughout the sales process is of paramount importance. Utilizing a confidentiality agreement, often referred to as a non-disclosure agreement, is a common practice and one that you should fully embrace.  There are many and diverse benefits to working with a business broker; one of those benefits is that business brokers know how to properly use confidentiality agreements and what should be contained within them. By using a … [Read more...]

The Hidden Benefits of Planning Your Succession Strategy

Succession planning is something that many business owners fail to think about; however, it turns out there are benefits to succession planning that might not be immediately obvious upon first glance.  In this article, we’ll explore a recent Accountancy Daily article, “Succession Planning for Business Owners,” which details the wisdom and benefits of succession planning. Accountancy Daily polled 500 SME owners and uncovered a variety of interesting facts.  At the top of the list is that one-third of owners felt more confident about the future of their businesses when they had a coherent succession strategy.  In what can only be deemed a surprising finding, the poll discovered that 17% of respondents noted that succession planning actually brought them closer to their families.  In short, the Accountancy Daily poll found that succession planning came with a variety of unexpected benefits.  In other words, it is about more than preparing to hand one’s business over to a new party. Author … [Read more...]

Business Owners Can’t Always Sell When They Wish

A recent and insightful Forbes article, “Study Shows Why Many Business Owners Can’t Sell When They Want To” penned by Mary Ellen Biery, generates some thought-provoking ideas.  The article discusses an Exit Planning Institute (EPI) study that outlined the reality that many business owners can’t control when they are able to sell.  Many business owners expect to be able to sell whenever they like.  However, the reality, as outlined by the EPI study, revealed that the truth is that for business owners, selling is often easier said than done. In the article, Christopher Snider, President and CEO of EPI, noted that a large percentage of business owners have no exit planning in place.  This fact is made all the more striking by the revelation that most owners have up to 90% of their assets tied up in their businesses.  Snider’s view is that most business owners will have to sell within the next 10 to 15 years, and yet, are unprepared to do so.  According to the EPI only 20% to 30% of … [Read more...]

Great Tips for Helping You Find a Buyer for Your Business

No one keeps a business forever.  At some point, you’ll either want to sell your business or have to retire.  When the time comes to sell, it is important to streamline the process, experience as little stress as possible and also receive top dollar.  In Alejandro Cremades’s recent Forbes magazine article, “How to Find a Buyer for Your Business,” Cremades explores the most important steps business owners should take when looking to sell.  Like so many things in life, finding a buyer for your business is about preparation.  As Cremades notes, you should think about selling your business on the day you found your company.  Creating a business but having no exit strategy is simply not a good idea, and it’s certainly not a safe strategy either.  Instead you should “build and plan to be acquired.”  For Cremades, it is vital to decide in the beginning if your preferred exit strategy is to be acquired.  If you know from the beginning that you wish to be acquired, then you should build your … [Read more...]

Q2 Small Business Transactions Take a Dip but Strong Market Remains

Small business transactions have been enjoying record numbers.  But as of the second quarter of 2019, the numbers have begun to take a small dip.  Experts feel that the trade war with China is playing a role, according to a recent article, “Q2 Small Business Transactions Down as Trade War Questions Remain.” The numbers don’t lie, as the number of transactions stood at 2,444 for Q2, which is a drop of 9.6%.  But the simple fact remains that businesses are still selling at record levels.  As BizBuySell points out, there were 4,948 transactions reported in just the first half of 2019.  That means that 2019 could be the second most active business-for-sale market since BizBuySell began tracking data back in 2007.  In other words, the Q2 9.6% drop certainly doesn’t mean that the sky is falling.  Deals per broker are declining, and many are looking to the current trade war between the U.S. and China for answers.  Increased tariffs and associated worries are, according to many experts, behind … [Read more...]

The Variety of Variables Involved in Selling Your Business

Selling a business is more than a big decision, as it is also quite complex.  Finding the right buyer for a business is at the heart of the matter.  In the recent Forbes article, “Ready to Sell Your Business? Follow These 3 Tips to Find the Best Buyer,” author Serenity Gibbons outlines that selling a business is a multifaceted process with a lot of moving parts. A central variable for those looking to sell a business is to have a coherent and well thought out exit strategy in place.  She points out that at the top of your to-do list should be selling your business the right way, and that means having a great exit strategy in place.  In fact, many experts feel that you should have an exit strategy in place even when you first open your business. Another key variable to keep in mind is that, according to Gibbons, only an estimated 20% to 30% of businesses on the market actually find buyers.  This important fact means that business owners, who usually have a large percentage of their … [Read more...]

A Closer Look at 3 Major Factors to Consider When You Buy a Business

The simple but undeniable fact is buying a business is one of the single greatest financial decisions a person can make.  Buying a business can lead to great financial success or great financial failure.  This fact helps to underscore why it is so important to work with an experienced broker who can help guide you through the often labyrinthian process of buying a business. In a July 2019 article from Smallbusiness.co.uk, author Kyle Carins explores three key factors that everyone should consider before they buy a business.  The first factor covered in Carins’ article, “3 Things to Consider When Buying a Business,” is appeal vs. viability.  Appeal Vs. Viability Not surprising, the most important variable for most prospective owners is that the business is indeed viable.  Not being able to differentiate between an appealing business and one that is viable can lead to financial disaster.  As Carins points out, “Do you want to make money or do you want to fulfill a dream?”  Sometimes … [Read more...]

Dealing with Inexperience Can Ruin the Deal

The 65-year old owner of a multi-location retail operation doing $30 million in annual sales decided to retire.  He interviewed a highly recommended intermediary and was impressed.  However, he had a nephew who had just received his MBA and who told his uncle that he could handle the sale and save him some money.  He would do it for half of what the intermediary said his fee would be – so the uncle decided to use his nephew.  Now, his nephew was a nice young man, educated at one of the top business schools, but he had never been involved in a middle market deal.  He had read a lot of case studies and was confident that he could “do the deal.” Inexperience # 1 – The owner and the nephew agreed not to bring the CFO into the picture, nor execute a “stay” agreement.  The nephew felt he could handle the financial details.  Neither one of them realized that a potential purchaser would expect to meet with the CFO when it came to the finances of the business, and certainly would expect the CFO … [Read more...]

The Variables that Drive and Influence Business Valuations

If you’ve never bought or sold a business before, then the factors that drive and influence business valuations likely seem a bit murky.  In a recent Divestopedia article from Kevin Ramsier entitled, “A Closer Look at What Drives and Influences Business Valuations,” Ramsier takes a closer look at this important topic.  Business brokers and M&A advisors play a key role in helping business owners understand why their business receives the valuation that it does.  No doubt, the final assessed value is based on a wide array of variables.  But with some effort, clarity is possible. In his article, Ramsier points out that “value means different things to different buyers” and that the “perceived value depends on the circumstances, interpretation and the role that is played in a transition.”  It is important to remember that no two businesses are alike.  For that reason, what goes into a given valuation will vary, often greatly.  Looking to EBITDA Ramier points to several metrics including … [Read more...]

Is Your Business Really Worth Handing Over to the Next Generation?

Before you begin your business, you should be thinking about how you will hand that business over to someone else.  No one runs a business forever.  Whether you sell your business or let a relative inherit it, at some point you will need to step away.  When you finally do separate from your business, it is critical that you are certain that it is worth handing over.  In his January 2019 article in Forbes magazine entitled “Make Sure Your Business is Worth Handing Over,” author Francois Botha dives in and explores this very topic. In this article, Botha emphasizes that family businesses should not “fall into the trap of prioritizing job creation for their children.”  Instead, that the priority should be to perpetuate the business.  Botha cites the co-founder and chairman of The Leadership Pipeline Institute, Stephen Drotter, who feels that the main goal of any business needs to be its suitability. Drotter established five principles designed to assist family businesses as they seek to … [Read more...]

Erase the Stress of Selling Your Business by Finding the Right Buyer

There is no denying the fact that life is much, much easier when one can find the right buyer for his or her business.  Buying or selling a business can be a stressful affair, but much of that stress can be eliminated by getting the right support. The Concept of the “Right Buyer”  In the recent Inc. article entitled, “How to Find the Right Buyer for Your Business and Avoid Negative Consequences,” Bob House builds his article around a relatively simple and straightforward, but powerful, concept.  House’s notion is, “the right buyer is worth more than a big check.” House correctly points out that far too many sellers become fixated on exiting their business and grabbing a big pay day.  In their focused interest in the sum they will receive, these sellers ignore a range of other important details.  In part, sellers often miss the single greatest variable in the entire process: finding the most qualified buyer.  The simple fact is that if sellers want to reduce their long-term stress, then … [Read more...]

Do You Know What Kind of Business Owner You Really Are?

Does your business have real, long-lasting longevity or is your business a temporary entity that will vanish the second you stop working on it?  In his insightful article in The Business Journals entitled, “Are You Living for Today as a Business Owner or Building Value?” author Kent Bernhard asks a very important question of readers, “Are you a lifestyle business owner or a value accelerator?”  Many business owners have never stopped to ask this very important, yet basic, question regarding their businesses.  So, let’s turn our attention to this key question that all business owners must stop and ask at some point. As Bernhard points out the core issue here is how a given business owner defines the idea of success for him or herself.  As Chuck Richards, the CEO of CoreValue Software notes, “At the end of the day, a lifestyle business is just a job.”  Richards goes on to note that this is fine for many people.  But if this is the case, it is a choice that one is making.  Therefore, … [Read more...]

Business Buyers Can Leverage SBA Lending

Finding the money to start your own small business can be a challenge.  Over the decades, countless people have turned to the Small Business Administration (SBA) for help.  A recent Inc. Magazine article, “Kickstart Your Business Dreams with SBA Lending,” by BizBuySell President, Bob House, explored how SBA lending can be used to the buyer’s advantage. The article covers the basics of an SBA loan and who should try to get one.  House notes that the SBA doesn’t provide loans itself, but instead facilitates lending and even micro-lending with a range of partners.  The loans are backed by the government, which means that lenders are more willing to offer a loan to an entrepreneur who might not typically qualify for one.  The fact is that the SBA will cover 75% of a lender’s loss if the loan goes into default.  Entrepreneurs can benefit tremendously from this program.  In some cases, an SBA loan even means skipping the need for collateral.  SBA loans can be used for those looking to open a … [Read more...]