You only sell your business once. So it is crucial to get it right the first time. When the perfect buyer emerges with a great offer, it pays to be prepared and “strike while the iron is hot.” No two deals are alike, every transfer of business ownership is unique. However, there are some common requirements that all sellers need to fulfill in order to get the deal done when they have the opportunity. The more you prepare, the more successful you will be…Guaranteed! Unfortunately, there are many great businesses that never get sold simply because they do not have the required financial data or information readily available when a buyer is ready to move and makes an inquiry/offer. The truth is you can have an industry leading business with outsized margins and high scalability. But if the seller can’t “Show the Money” in black and white , the chances of the business getting sold are slim to none. We as professional business brokers see it all the time and it is a shame. If your … [Read more...]
Family Businesses
A recent study revealed that only about 28 percent of family businesses have developed a succession plan. Here are a few tips for family-owned businesses to ponder when considering selling the business: You may have to consider a lower price if maintaining jobs for family members is important. Make sure that your legal and accounting representatives have “deal” experience. Too many times, the outside advisers have been with the business since the beginning and just are not “deal” savvy. Keep in mind that family members who stay with the buyer(s) will most likely have to answer to new management, an outside board of directors and/or outside investors. All family members involved either as employees and/or investors in the business must be in agreement regarding the sale of the company. They must also be in agreement about price and terms of the sale. Confidentiality in the sale of a family business is a must. Meetings should be held off-site and selling documentation kept off-site, if … [Read more...]
Two Similar Companies ~ Big Difference in Value
Consider two different companies in virtually the same industry. Both companies have an EBITDA of $6 million – but, they have very different valuations. One is valued at five times EBITDA, pricing it at $30 million. The other is valued at seven times EBITDA, making it $42 million. What's the difference? One can look at the usual checklist for the answer, such as: The Market Management/Employees Uniqueness/Proprietary Systems/Controls Revenue Size Profitability Regional/Global Distribution Capital Equipment Requirements Intangibles (brand/patents/etc.) Growth Rate There is the key, at the very end of the checklist – the growth rate. This value driver is a major consideration when buyers are considering value. For example, the seven times EBITDA company has a growth rate of 50 percent, while the five times EBITDA company has a growth rate of only 12 percent. In order to arrive at the real growth story, some important questions need to be answered. For example: Are the company's … [Read more...]
“WHY??” Entrepreneurs Sell Their Businesses
“Pursue one great decisive aim with force and determination” – Carl von Clausewitz I remember selling my first home and having the realtor say to me “Selling your home will be the most important and stressful transaction you will ever undertake”. While this may ring true for most people, selling a house is a “walk in the park” compared to selling your business especially a family business. Selling a company is hands down the most important, complex and stressful financial transaction the majority of entrepreneurs will ever do. The sale of your business is bound to result in many sleepless nights. Your years of blood, sweat and tears all come down to an eventual exit which is inevitable no matter how you do it. I know what you are thinking…. Why would any sane, logical person put themselves through the emotional roller coaster of long hours, stress, and nail biting inherent in selling a company? In our many decades of collective Business Broker experience we have identified many … [Read more...]
The Baby Boomer effect- WHY Right Now is the Time to Sell Your Business
"My advice is to never do tomorrow what you can do today. Procrastination is the thief of time and money"— Charles Dickens So you have thought about selling your business in a couple years? The Baby Boomer retirement trend is something definitely worth considering. Here's WHY. The Baby Boomers are turning 65 at a clip of over 11,000 per day. This trend will continue over the next 18 years. Professionals in the exit planning, business brokerage, and financial services industries have dubbed this "The Ten Trillion Dollar Opportunity", because this will be the largest wealth transfer in the history of the United States. Just a few weeks ago BizBuySell.com said sales of privately owned businesses were up 54% in 2014 compared to the same time in 2013. This increase in business sales is unprecedented!! Retirement was the number one reason for those sales in the fourth quarter of 2014, according to a survey by Pepperdine University and two trade groups. The U.S. isn't getting any … [Read more...]
Selling your business?? Here is why you should never, ever, ever negotiate the sale on your own!
There is a saying in the legal profession “Any lawyer that represents himself has a fool for a client.” So you have made the decision that you want to sell your business. There are many questions to ask yourself and your professional advisors. One of the most important will be, do I need a Broker or Intermediary to help me sell my business? The answer is YES. There are some rare scenarios in which a broker is not needed to find a buyer but, an Intermediary (whether it be a Broker or Lawyer) is ALWAYS recommended when negotiating the terms and sale of a business. A smart seller will NEVER represent themselves in a transaction of this magnitude. Here is why: Picture two different football teams about to play each other on a Sunday. One team is from the NFL. The other team is a group of amateurs. The NFL team consists of professionals whose average height/weight is 6’6” 300lbs. They live, breath, and practice football every day. They watch hours of film and train religiously so … [Read more...]
The truth about M&A firms- A must read for any business owner contemplating a sale!
The current marketplace for buying and selling a business unfortunately can be treacherous terrain. Unlike Real Estate which utilizes an MLS ( Multiple Listing Service), the private business for sale market does not and this makes it much more challenging than selling a home or commercial space. So therefore when the decision has been made to sell, it is crucial to hire a professional brokerage firm with a proven track record that knows how to sell businesses in this inefficient market. If not, it can be a long, expensive and frustrating process. Let me explain! Even the best, most profitable and fundamentally sound businesses never get sold- If you hire the wrong firm. Here are some things to think about when hiring an M&A Firm or Investment Bank to sell your business. The first thing you should know is M&A Firms survive by charging retainers; NOT by selling companies! Here is the cold hard truth about this industry that they do not want you to know. The majority of … [Read more...]
CONTROL YOUR OWN DESTINY… and make a fortune doing it!!
If your goal is to be highly successful in business and in quality of life, then I encourage you to take a moment and read this little gem of investment advice. Imagine if Warren Buffet came to you and said I have an investment strategy that you seriously should consider and it is very simple. “You have to invest almost all of your money, time and energy. If you have a great year you will get a 3-4% Max return and if you have a bad year and one of the many market factors works against you then you will lose all of your entire investment; without even seeing it coming!” Even though this advice came from one of the most successful businessman of all time, would you take it?? Of Course you wouldn’t!! Yet hundreds of millions of Americans make this investment everyday by going to work for someone else. Think about it, most people hope for a 3% to 4% salary raise each year. So your upside is capped. Your downside is unlimited because if your get laid off, replaced, or fired ALL of … [Read more...]
EXIT PLANNING; is it worth my time? ABSOLUTELY!
The exit planning process is a great thing to do especially if you are contemplating leaving your business in the next few years. There are a number of reasons to think long and hard about an exit strategy however, the most important reason of all is to maximize the value of your business. As business brokers we see TONS of Owners leave a lot of wealth on the table when they exit their companies for one simple reason: Lack of Preparation!! Many Owners have spent decades and maybe even a lifetime building your business into what it is today. You Deserve to get Top-‐Dollar. Transitioning from your company will definitely be one of the most important and complex decisions you will EVER make. It is so disheartening when an owner has to pay double the amount of taxes that he would have had to pay had he planned better. Even worse is when there is a profitable business that looks fantastic on paper but carries no value to a buyer and is never sold. ALL of this can be avoided! There are … [Read more...]
How To Be A Great Entrepreneur
What’s the difference between a corporate executive and a great entrepreneur? According to a study that was done by Carnegie Mellon thesis students, entrepreneurs don't start out with concrete goals. Instead, they constantly assess how to use their personal strengths and whatever resources they have at hand to develop goals on the fly, while creatively reacting to contingencies. By contrast, corporate executives set a goal and diligently seek the best ways to achieve it. Which one are you? According to the Harvard Business Review, the following traits are necessary DNA to the making a great entrepreneur. Obviously, you need to have some kind of smarts or intelligence and guts. Luck doesn’t hurt either. But as you embark on your journey, remember what some of the great entrepreneurial leaders of our time had when they created their businesses. 1. Vision. See the forest through the trees. 2. Passion. Do what you love. 3. Make Decisions. Own it. 4. Be A Team … [Read more...]
