It has been said that the sale of a business is usually event driven. Very few owners of businesses, whether small or large, wake up one morning and think, “Today I am going to sell my company.” It is usually a decision made after considerable thought and usually also prompted by some event. Here are a few common “events” that may prompt the decision to sell: Boredom or “Burn-out” – Many business owners, especially those who started their companies and have spent years building and running them, find that the “batteries are starting to run low.” Divorce or Illness – Both divorce and illness can cause a rapid change in one's life. Either of these events, or a similar personal tragedy, can prompt a business owner to decide that selling is the best course of action. Outside Investors – Outside investors may include family, friends, or just plain outside investors. These outside investors may be putting pressure on the owner/majority owner in order to recoup their investment. No Heir … [Read more...]
Considering Selling? Some Important Questions
Some years ago, when Ted Kennedy was running for president of the United States, a commentator asked him why he wanted to be president. Senator Kennedy stumbled through his answer, almost ending his presidential run. Business owners, when asked questions by potential buyers, need to be prepared to provide forthright answers without stumbling. Here are three questions that potential buyers will ask: Why do you want to sell the business? What should a new owner do to grow the business? What makes this company different from its competitors? Then, there are two questions that sellers must ask themselves: What is your bottom-line price after taxes and closing costs? What are the best terms you are willing to offer and then accept? You need to be able to answer the questions a prospective buyer will ask without any “puffing” or coming across as overly anxious. In answering the questions you must ask yourself, remember that complete honesty is the only policy. The best way to prepare … [Read more...]
Is Your “Normalized” P&L Statement Normal?
Normalized Financial Statements – Statements that have been adjusted for items not representative of the current status of the business. Normalizing statements could include such adjustments as a non-recurring event, such as attorney fees expended in litigation. Another non-recurring event might be a plant closing or adjustments of abnormal depreciation. Sometimes, owner's compensation and benefits need to be restated to reflect a competitive market value. Privately held companies, when tax time comes around, want to show as little profit as possible. However, when it comes time to borrow money or sell the business, they want to show just the opposite. Lenders and prospective acquirers want to see a strong bottom line. The best way to do this is to normalize, or recast, the profit and loss statement. The figures added back to the profit and loss statement are usually termed “add backs.” They are adjustments added back to the statement to increase the profit of the company. For example, … [Read more...]
Do You Have an Exit Plan?
“Exit strategies may allow you to get out before the bottom falls out of your industry. Well-planned exits allow you to get a better price for your business.” From: Selling Your Business by Russ Robb, published by Adams Media Corporation Whether you plan to sell out in one year, five years, or never, you need an exit strategy. As the term suggests, an exit strategy is a plan for leaving your business, and every business should have one, if not two. The first is useful as a guide to a smooth exit from your business. The second is for emergencies that could come about due to poor health or partnership problems. You may never plan to sell, but you never know! The first step in creating an exit plan is to develop what is basically an exit policy and procedure manual. It may end up being only on a few sheets of paper, but it should outline your thoughts on how to exit the business when the time comes. There are some important questions to wrestle with in creating a basic plan and … [Read more...]
Prepare Your Business for Sale (NOW!)
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...]
“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...]
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...]
