Finding the Best Business for You

Owning a business and owning the right kind of business for you are, of course, two wildly different things.  Owning the wrong kind of business can make you absolutely miserable.  So if you are considering buying a business, it is prudent that you invest the time and effort into determining the best kind of business for your needs and your personality.  In a recent Forbes article, “What is the Right Type of Business for You to Buy?” author Richard Parker explores how buyers should go about finding the right business fit.

Parker is definitely an expert when it comes to working with buyers as he has spoken with an estimated 100,000 buyers over his career.  In that time, Parker has concluded that it is critical that you don’t “learn on your own time.” 

His key piece of advice concerning what type of business to buy is as follows.  “While there are many factors to be considered, the answer is simple: whatever it is you do best has to be the single most important driving factor of the revenues and profits of any business you consider purchasing.”  And he also believes that expertise is more important than experience.  Parker’s view is that it is critical for prospective buyers to perform an honest self-assessment in order to identify their single greatest business skill and area of expertise.  The last thing you want to do is pretend to be something that you are not.

Parker makes one very astute point when he notes, “Small business owners generally wear many hats: this is usually why their businesses remain small.  Remember that every big business was once a small business.”  As Parker points out, whoever is in charge of the business will ultimately determine how the business will evolve, or not evolve.  Selecting the right business for you and your skillsets is pivotal for the long-term success of your business.

All of this adds up to make the process of due diligence absolutely essential.  Before buying a business, you must understand every aspect of that business and make certain that the business is indeed a good fit for you.  According to Parker, if you don’t love your business, it will have trouble growing.  This point is impossible to refute.  Owning and growing a business requires a tremendous amount of time and effort.  If you don’t enjoy owning and/or operating your business, success will be a much more difficult proposition.

Finding the right business for you is a complicated process even after you have performed a proper evaluation of your skills and interests.  After all, do you really want a solid business with great potential for growth that you would hate owning?  By working with brokers and M&A advisors, you can find the best business fit for your needs, personality, and goals.  These professionals are invaluable allies in the process of discovering the right business for you.

Copyright: Business Brokerage Press, Inc.

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Great Tips for Selling Your Business

It takes preparation and focus to sell most businesses.  The reality of the situation is that it can take years to achieve this goal.  Partnering with a business broker or M&A Advisor is a smart step towards selling any business, as these pros know the very best tips.  In that spirit, let’s take a look at some great tips for selling your business.

Getting your business ready to sell means carefully evaluating the foundation.  Any significant problem can send buyers “running for the hills,” so be sure that you work out any problems well before placing your business on the market.  If you have any litigation or environmental issues, you most definitely want to address those issues before it is time to sell.  Nothing will scare away prospective buyers quicker than pending litigation or the specter of a potentially costly environmental clean-up.

A second key issue you’ll want to address is determining who exactly has the legal authority to sell the business.  If a board of directors or majority stockholder situation is in place, then selling a business can become more complex than it would be if you were dealing with a sole proprietorship or partnership.  Again, the last thing you want is for “legal surprises” to occur when you get ready to sell a business.

If you have non-negotiable items, be certain that those items are discussed upfront.  Revealing your non-negotiable items at the very beginning of negotiations will save everyone involved a great deal of trouble.

Tip three involves maintaining a flexible mindset.  In most circumstances, you simply can’t have everything that you want.  Both buyers and sellers need to be flexible.  Sellers will want to be flexible about any real estate.  Buyers may not want real estate associated with a given business, and you need to be prepared for this.  Sellers should also be prepared to accept valuation multiples for lack of management depth and other factors, such as reliance on a small number of customers.

At the end of the day, sellers should partner with experienced professionals such as attorneys and business brokers.  You’ve put a lot of time, energy and resources into building your business.  When it comes time to sell, it is only prudent to put together the best team in order to achieve optimal results.

Copyright: Business Brokerage Press, Inc. 

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It’s Time to Exit. Are you Ready?

Thinking about whether or not you are ready to exit is an important question.  It’s something that every business owner will have to address at some point.  Importantly, you don’t want to wait until the 11th hour to prepare to sell your business.  There are far too many pieces in this particular puzzle to wait until the last minute.  You’ll want to begin the process sooner by asking yourself some key questions. 

Determining Value

First, you’ll need to determine the actual value of your business.  It is a harsh truth, but what you think your business is worth and what the market feels that it is worth may be two very different things. 

This point serves to underscore the importance of working with a business broker or M&A advisor early in the process.  An experienced broker knows how to go about determining a price that will generate interest and seem fair.  Remember that at the end of the day, it will be the marketplace that determines the value of your business, but working with a seasoned professional is an excellent way to match your offering price with what the market will ultimately bear.

Going Within

Secondly, you’ll want to consider whether or not you truly want to sell.  It is not uncommon for business owners to begin the process of selling their business only to realize a few hard facts.  Wanting to sell and the time being right to sell are often two different things. 

Upon placing your business on the market for sale, you may learn that you’re not emotionally or financially ready.  If this happens to you, consider it a learning experience that will serve you well down the line.

Get Your Ducks in a Row

If you have done a financial assessment, a little soul searching and have begun working with a business broker or M&A advisor to determine that now is a good time to sell your business, then there are several steps you’ll need to take.  You can be sure that any serious prospective buyer will want a good deal of information regarding your company. 

At the top of the list of items potential buyers will want to see are three years of profit and loss statements as well as federal income tax returns for the business.  Other important documents ranging from lease and lease related documents, lists of loans against the business and a copy of a franchise agreement, when applicable, are all additional documents that you will need to provide.  You should also have a list of fixtures and equipment, copies of equipment leases, lists of fixtures and equipment, and an approximate amount of inventory on hand.  A failure to not have this information organized and ready to present at a moment’s notice could be a costly mistake.

Working with professionals, such as accountants, lawyers, and brokers, is a savvy move.  Owning and operating a business can be a complex process, and the same holds true for selling a business.  Investing the time to seek out experienced and professional advice is the first step in selling your business.

Copyright: Business Brokerage Press, Inc.

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What You Need to Know About the Golden Age of Business Acquisitions

Business acquisitions are red hot, and all kinds of businesses are being snapped up.  Some people are under the impression that only large businesses are being acquired, but this is far from the reality of the situation.  It would surprise many to learn that so much of the “action” is, in fact, small businesses buying other small businesses. 

In his Forbes article, “Take Advantage of the Golden Age of Business Acquisitions,” author Christopher Hurn explores the true state of the “acquisitions game.”  His conclusions are quite interesting.  In Hurn’s opinion, there has never been a more active time in the realm of business acquisitions.

If you own a business and are looking to grow, then you may want to consider acquiring a competitor in order to consolidate the market.  As Hurn points out, there are many reasons that you might want to consider acquiring a business in addition to consolidating the market.  These reasons include acquiring a new product or service, acquiring a competitor that has superior technology or even identifying a business that you believe is primed for substantial growth.

Yet, there are other forces at work that are combining to make this moment the “golden age of acquisitions.”  At the top of the list of why now is a good time to investigate acquiring a business is demographics.  According to a 2019 study by Guidant Financial and Lending Club, a whopping 57% of small business owners are over the age of 50.  The California Association of Business Brokers has concluded that over the next 20 years about $10 trillion worth of assets will change hands.  A mind-blowing 12 million businesses could come under new ownership in just the next two decades!  As Hurn phrased it, “The stars are aligning for the Golden Age of business acquisitions.”

This all points to the fact that now is the time to begin understanding what kind of acquisition would best help your business grow.  Hurn believes that turning to the Small Business Administration in this climate of rapid acquisition is a savvy move. 

In particular, he points to the 7(a) program and a host of reasons that the SBA can benefit small businesses.  Since the SBA lowered equity injection requirements, it is now possible to finance a staggering 90% of business acquisition deals with loan terms up to 25 years and lower monthly payments.  Additionally, the SBA 7(a) program can be used for a variety of purposes ranging from expanding or purchasing an existing business to refinancing existing business debt.

Hurn truly does have an important insight.  Baby Boomers will retire by the millions, and most of them will be looking to sell their businesses.  With 12 million businesses scheduled to change hands in just the next 20 years, now is a highly unique time not only in the history of acquisitions but also in the history of business. 

Business brokers understand what is involved in working with the SBA and acquisitions.  A seasoned business broker can point you towards opportunities that you may have never realized existed.

Copyright: Business Brokerage Press, Inc.

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Determining the Right Time to Sell

Determining when it’s finally the right time to sell can be a tricky proposition.  If you are thinking about selling your business, one of the best steps you can take is to contact a business broker.  A good business broker will have years, or even decades, of proven experience under his or her belt.  He or she will be able to guide you through the process of determining what you need to do in order to get your business ready to sell.

One major reason you should contact a business broker long before you think you might want to sell is that you never know when the right time to sell may arise.  Market forces may change, unexpected events like a large competitor entering your area, or a range of other factors could all lead you to the conclusion that now, and not later, is the time to sell.

In a recent The Tokenist article, “When is the Best Time to Sell a Business?”, author Tim Fries covers a variety of factors in determining when is the best time to sell.  At the top of Fries’ list is growth.  If your company can demonstrate a consistent history of growth, that is a good thing.  Or as Fries phrases it, “What never varies, however, is the fact that growth is a key component, buyers will look for.”  Growth will be the shield by which you justify your price when you place your business on the market. 

If your business is experiencing significant growth then you have a very strong indicator that now could be the time to sell.  Fries points to a quote from Cerius Executives’, CEO, Pamela Wasley who states, “When your business has grown substantially, it might be time to consider selling it.  Running a business is risky, and the bigger you get, the bigger the risks you have to face.”  Again, growth is at the heart of determining whether or not you should sell.

Knowing the “lay of the land” is certainly a smart move.  For example, have there been a variety of businesses similar to your own that have sold or were acquired recently?  If the answer is “yes,” then that is another good indicator that there is substantial interest in your type of business. 

Reviewing similar businesses to your own that have sold recently can help you determine how much buyers are paying for comparable businesses.  This can help you spot potential trends.  In short, you should be aware of market factors.  As Fries points out, everything from relatively low taxes and low interest rates to strength in the overall economy and an upward trend of sales prices can impact the optimal times for a sale.

Now, as in this exact moment, might not be the right time for you to sell.  Getting your business ready to sell takes time and preparation.  Fries points out that smart sellers “look for a good time, not the perfect time” to sell a business.  Working with a business broker is a great way to determine if now is the right time to sell your business and what steps you have to take in order to be prepared for when the time is right.

Copyright: Business Brokerage Press, Inc.

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Should You Sell Your Family Business?

When the complicating variable of family is added to the equation of selling a business, the situation can get rather messy.  Family usually complicates everything and businesses are, of course, no exception.  Ken McCracken’s recent article “Family business: to sell or not to sell?” 6 questions to help you make the right decision,” seeks to decode the complexities so often associated with family businesses. 

Consider the Market 

The foundation of determining whether or not now is the right time to sell must begin with market forces.  Determining how much your business is worth is a key variable in any decision to sell. 

The best way to determine the worth of your business is to have an outside party, such as a business broker, evaluate your business.  What you believe your business to be worth and what the market dictates could be very different.  You may discover that your business does not have the value that you hoped for.  If this is the situation, then selling simply may not be an option.

What is Next for You?

Tied to knowing your market value is understanding what you will do next after you sell your business.  For example, do you have a family member who can run the business without you?  What will you and any family members who work for the business do after the sale goes through?  You may discover that the sale could be very disruptive for you personally.  All too often, people fail to recognize the emotional and mental stress that comes along with selling a business.  Many owners begin the selling process only to discover that they are not emotionally ready to do so.  While everyone wants to be unemotional in making their business decisions, this is not always the case.

Due Diligence 

You will also need to deal with the issue of due diligence.  Working with a business broker is an excellent way to handle the due diligence process.  Business brokers usually vet prospective buyers ahead of time, which can save you a great deal of aggravation and wasted time. 

McCracken believes business owners should investigate how the prospective buyer handled previous acquisitions.  Specifically, McCracken believes that business owners should look to how well the prospective buyer honored previous commitments, as doing so is an indicator of how trustworthy a buyer may be. 

Planning for Negotiations

Finally, McCraken believes it is essential to know who will oversee negotiations.  It is key to note that many deals that could have otherwise been successful, fall apart due to poor negotiations.  A business broker can be invaluable in negotiations.  After all, who wouldn’t want someone with dozens, or even hundreds, of successful transactions advising them?

Selling a family business can be emotionally charged and can cause significant life changes for not just you, but for members of your family as well.  Often, family businesses were built up over a lifetime or even over generations, which can make the decision to sell quite emotionally charged.

Copyright: Business Brokerage Press, Inc.

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Why You Should Focus on Proper Exit Planning

If you are like many business owners, you are primarily focusing on building your business.  Yet, as we’ve covered here many times before, you should start thinking about what you’ll need to do to sell your business before you even officially launch.  Many businesses can take years to sell or even fail to sell all together.  For this and many other reasons, it is important to invest some time and energy into thinking about proper exit planning and strategies. 

Walker Deibel’s recent Forbes article, “How Proper Exit Planning Benefits the Buyer and Seller,” Deibel discusses his interview with Exit Planning: The Definitive Guide, author John H. Brown. Brown and Deibel both agreed that, when properly handled, exit planning can help both the seller and the buyer. 

Exit planning can make a business more transferable.  As Deibel points out, when buyers are evaluating businesses, transferability is a key factor.  A buyer must feel that he or she can walk into a business, take it over, keep it running effectively and even grow the business in the future. 

A key aspect of being able to buy a business and having that business be successful is that all relationships from vendors to customers are transferable.  A good management team, one that can step in and help a new owner thrive, is a must.  Building that team in advance is a savvy move for any business owner looking to sell his or her business.  Concerns on any of these fronts can spell doom for a seller.  If a buyer doesn’t feel that they can operate a business, then they probably shouldn’t be buying it.

Great exit planning most definitely benefits the seller as well.  As Deibel notes, when sellers engage in exit planning, they realize how much money they need in order to exit.  In turn, this forces sellers to become very focused and goal-oriented.  Sellers will take proactive steps to ensure that their business is as appealing to a potential buyer as possible.

Ultimately, proper exit planning is a win-win, one that benefits both buyer and seller.  Exit planning can provide sellers with much-needed clarity while simultaneously lowering the overall risk that sellers face.

Buying or selling a business is a multifaceted, and often quite complex, process.  The sooner you begin working with a professional, like a business broker, the better off you’ll be in finding the right business for you and your particular needs.  For most people, buying or selling a business is the financial decision of a lifetime.  Having a proven trusted partner, one that knows the lay of the land, is simply invaluable.

Copyright: Business Brokerage Press, Inc.

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The Top Ways to Create an Attention-Grabbing Sales Ad to Sell Your Business

A major part of selling your business is getting the word out.  After all, the more people that know your business is for sale, the better off you’ll be.  In Bob House’s recent article, “How to Create an Effective Business for Sale Ad and Ensure It Gets the Best Result,” House gives readers an assortment of tips that he believes will help sellers attract higher offers from real buyers.

Getting the Word Out

As House wisely points out, many buyers wait until the last second to dive in and create a good sales ad.  In fact, many buyers fail to grasp the real importance of creating a quality and compelling advertisement.  Imagine creating a good sales ad like you would going fishing with a group of friends.  The more friends you have on your fishing trip, the greater the odds that someone catches a fish.  In much the same way, the more people who know you are selling your business, the greater the chances that you’ll get some serious “bites.”

Tips for Receiving More Attention 

House has five key tips for attracting more attention from prospective buyers via your sales ad.  At the top of the list is to be descriptive.  Your sales ad should give an excellent description of your business and its unique features.  As House notes, you want to “paint a clear picture.”  In other words, now is not the time for mystery.  You want prospective buyers to have a very clear idea of what kind of business they could possibly buy.

Headlines Count

Secondly, you should have a great headline.  People have always skimmed, but the rise of the Internet has taken skimming to a whole new level.  Your sales ad should have a very engaging and interesting headline.  You want to capture people’s attention.  A good place to start is by determining what your business’s best feature is and emphasizing that feature in your headline.

Incorporate Top-Notch Images

Third, the old saying that a picture is worth a thousand words absolutely applies to selling a business.  Just as a great headline will capture people’s attention, the same holds true for a great picture.  Consider having a professional photographer take the photo, as he or she may have tips to make your business look its best that you may simply not know.

Your Financials

Fourth, your ad should definitely include key financials.  Any serious buyer will be very concerned, if not obsessed, with your financials.  Information such as cash flow and income statements are a good idea as may potential buyers focus their business searches around key financial metrics.

Don’t Forget the Final Step

Finally, if there has ever been a time in your life to proofread, this is the time.  In fact, you should consider hiring a proofreader to look over your ad for grammar and spelling mistakes.  As House notes, you want prospective buyers to realize that you are attention oriented and responsible.  A simple grammar or spelling mistake could wreck a potential deal.

Creating a great sales ad is an art form.  One of the best ways to ensure that you have a great sales ad is to work with an experienced business broker.  Business brokers know what buyers are looking for, have great marketing professionals at their disposal, and can help you frame your business in the best light possible.

Copyright: Business Brokerage Press, Inc.

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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 early planning could lead to a lower selling price.  If you want to get the best price for your business, then planning for the eventual sale as far in advance as possible is a good move.

Planning in Advance

According to Burroughs, business owners should start planning to sell their business at least 2 to 3 years before they actually plan to sell.  Part of the reason for this is so that business owners will have enough time to make operational improvements designed to maximize the business’s overall value. 

A Financial Review

At the top of every business owners “preparing to sell” list is to have a third-party review the business’s financial situation.  This is excellent advice for, as frequent readers of this blog know, any serious prospective buyer will look long and hard at your business’s financials.  Getting your business’s financial house in order means that you should turn to an accounting firm for help.  You’ll want to review financial statements for at least the previous 2 to 3 years.

Burroughs points out that when it comes to selling a business, there are many variables that business owners often overlook.  At the top of the list is the management team. 

Your Management Team

Prospective buyers can get very nervous about the stability of the management team once ownership has changed hands.  Often, the new buyer may only sign on the dotted line if the owner agrees to stay on after the sale during a transition period.  Having a competent and proven team in place, one that is dedicated to staying with the company will help you get your business ready to sell.

There are a lot of variables involved in preparing to sell a business.  The sooner that you get experts involved in the process, the better off you will be.  A business broker can serve as a guide – one that can point you in the right direction.  Find a broker with an abundance of experience, and you’ll have an invaluable ally who can help you navigate the process.  It can take a lot of time and effort to sell a business.  Working with a business broker can keep you from reinventing the wheel at every step of the process.

Copyright: Business Brokerage Press, Inc. 

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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 concerned – you’re ultimately selling a collection of assets.”

Fries points out that taxes and selling a business are no small matter.  It is possible that up to 50% of the sale of a business can go to taxes. Don’t worry if you are learning this for the first time and feel more than a little shocked.  However, this fact does a good job of illuminating the importance of setting up the right tax structure for your business.  While you might not be able to get around taxes altogether by investing the time and effort to set up the right structure for your business, you can keep from paying more taxes than is necessary.

There are a lot of variables that go into how much you will ultimately have to pay in taxes.  Let’s take a look at some of the key questions Fries raises in his article.

  1. Is your sale considered ordinary income or is the sale considered capital gains?
  2. Are you operating as an LLC, a sole proprietorship, a partnership or are you operating as a corporation?
  3. What portion of the sale price goes to tangible assets as compared to intangible assets?
  4. Is there a difference between your tax basis and the proceeds from your sale?
  5. What does your depreciation look like?
  6. Don’t expect that the buyer will instantly agree to your terms.
  7. Realize that the decisions you make during negotiations with a buyer will have tax implications.
  8. Is an installment sale right for your business?
  9. With C corporations, sellers usually want a stock sale whereas buyers generally prefer an asset sale.
  10. Cashing out immediately, where you receive all your funds at once, will increase your tax liability.
  11. Have you considered switching to an S corporation?
  12. Have you consulted with experts to decide which tax structure is best for you?
  13. Have you consulted with a business broker?

Selling a business is obviously complicated.  Finding a seasoned business broker can help you demystify many aspects of buying and selling a business.  Ultimately, having the best deal structure and finding the right buyer can be a labyrinthian process.  Having the very best professional help in your corner is simply a must.

Copyright: Business Brokerage Press, Inc.

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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 existing owner for a range of reasons.  You couldn’t possibly guess what these reasons might be without more of a knowledge base.  Since you are an outsider, you likely lack the proper perspective and understanding.  In turn, this means you may see growth opportunities that may not exist, as the seller may have already tried and failed.  Summed up another way, until you actually own the business and are running it on a day to day basis, you simply can’t make a proper assessment of how best to grow that business.

The seductive lure of growth shouldn’t be the determining factor when you are looking for a business.  A far more important and ultimately reliable factor is stability.  The real question, the foundation of whether or not a business is a good purchase option, is whether or not the business will maintain its revenue and profit levels once you’ve signed on the dotted line and taken over.  You want to be sure that the business doesn’t have to grow to remain viable.

As Parker points out, the majority of small business buyers will buy in a sector where they don’t have much experience, and that is fine.  What is not fine is assuming that you can greatly grow the business.  Of course, if new buyers can achieve that goal, that is great and certainly icing on the cake.  But don’t depend on that growth.

In the end, everyone has some ideas that work and some that don’t.  You may take over a business and, thanks to having a different perspective than the previous owner, are able to find ways to make that business grow.  But realize that many of your ideas for growing the business may fail completely. 

A professional business broker will be able to help you determine what business is best for you.  A business broker will help keep you focused on what matters most and steer you clear of the mistakes that buyers frequently make when buying a business.

Copyright: Business Brokerage Press, Inc.

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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 that they are environmentally aware.  They range from recycling and using low-emission and high-mileage vehicles whenever possible to adopting packaging and containers that are environmentally friendly. 

The third pillar of CSR is the marketplace.  Proper corporate social responsibility includes the responsible utilization of advertising, public relations, and ethical business conduct.  Another key element in the marketplace pillar is adopting fair treatment policies towards suppliers and vendors, contractors and shareholders.  In other words, the marketplace aspect of CSR means rejecting exploitative business practices in favor of fairer and more equitable business practices. 

The final pillar of CSR concerns the workplace.  In the workplace pillar, CSR encourages the implementation of fair and equitable treatment of employees, as well as observing workplace safety protocols and embracing equal opportunity employment and labor standards.

Adopting CSR practices in today’s business climate is a prudent decision, as it serves to increase both shareholder and investor interest, while simultaneously encouraging a company’s value.  Likewise, embracing CSR practices can make it easier to attract a buyer and that party may be willing to pay a higher selling price.

Typically, buyers want a business that has many of the attributes supported by the four pillars of CSR.  Buyers want businesses that enjoy a high level of customer loyalty and have good overall relations with the local community.  Additionally, buyers want businesses that have quality relationships with their suppliers and vendors as well as loyal and dependable employees. 

Sellers must realize that buyers want products, goods and services that are in line with the current trends of the marketplace and have an eye towards future trends.  Finally, buyers want as little “baggage” as possible.  You can be certain that buyers don’t want to find any skeletons lurking about in the company closet.  The proper utilization of CSR can address all of these concerns and, in the process, make your business more attractive to a potential buyer.

 

Copyright: Business Brokerage Press, Inc.

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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 broker will tell you, business owners have to be careful not to let their businesses suffer while they are going through the complex process of selling.  Selling a business is hard work, and this fact underscores the importance of working with a proven broker.

Likewise, Daniels observes that any serious buyer is likely to look quite closely at your business’s financials, which is yet another reason to work with key professionals during the process.  Additionally, you don’t want to wait until the last moment to get your “financial house in order.” 

You can be completely certain that prospective buyers will want to examine your finances closely before making an offer.  The sooner you begin working on getting your finances together, the better off you’ll be.

Use Trusted Pros

Another key point Daniels makes is that there will be tension, as every party is looking to protect their own best interests.  Having an experienced negotiator in your corner is a must.  Make sure your negotiator has bought and sold businesses in the past, and he or she will understand what pitfalls and potential problems may be lurking on the horizon.  Daniel’s view is that the sale price isn’t the only variable of importance.  Factors such as the terms of the deal must be taken into consideration.

The bottom line is that there are many reasons to work with a business broker.  A business broker understands the diverse complexities of an M&A purchase agreement.  They also have experience helping business owners organize their financial information and can prove invaluable during negotiations.  For most business owners, selling their business is the single most important business decision they will ever make.  Find someone who understands the process and can act as a guide through the process.

Copyright: Business Brokerage Press, Inc.

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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 that business owners have no choice but to perform periodic reality checks and access the strengths and weaknesses of their businesses.

Mistake #1 Poor Record Keeping

For House, poor record-keeping tops the list of big mistakes that business owners need to address.  As House points out, both potential buyers and brokers will want to examine your books for the last few years.  The odds are excellent that before anyone buys your business, they will look very closely at every aspect of your financials, ranging from your sales history to your operating costs. 

Mistake #2 Failure to Innovate

The next potential mistake that business owners need to avoid is a failure to innovate.  House notes that a lack of tech-savviness could make your business less attractive to prospective buyers.  The simple fact is that virtually every business is now impacted in some way by its online presence, whether it is the quality of that presence or lack of it altogether. 

For House, a failure to maintain an active online presence could be associated with a failure to innovate.  Even if your company is innovative, if you do not maintain a coherent and robust online presence, this could portray your company in a negative light.

Mistake #3 Unstable Workforce

House also feels that having an unstable workforce could spell trouble for your business’s value and negatively impact its salability.  Most prospective buyers will not be very eager to buy a business that they know has a lot of employee turnover.  In general, new business owners crave stability.  Attracting and keeping great employees could make all the difference when it comes time to sell your business.

Mistake #4 Delayed Investments

The final factor that House notes as a potential issue for those looking to sell their business is delaying investments and improvements.  House states that it is important for owners to continue to invest even if they know they are going to sell.  Investing in your business can help it expand, grow and showcase its potential future growth.

Another excellent way to prevent making mistakes that could interfere with your ability to sell your business is to begin working with a business broker.  A top-notch broker knows what mistakes you should avoid.  This experience will not only save you countless headaches but also help you preserve the value of your business.

Copyright: Business Brokerage Press, Inc.

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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 a general review of your company’s products and/or services should all be covered.  Additional points to include would be variables, such as information about your market, and the reason that the business is for sale.

Your executive summary, simply stated, is extremely important.  A coherent and compelling executive summary will motivate prospective buyers to learn more.  In short, you want the executive summary of your offering memorandum to shine.  It should capture the attention and the imagination of anyone that reads it.

Other Essential Elements to Include

Some elements are absolutely a must to have in your offering memorandum.  An overview of your company and its history as well as its markets and products are all good places to begin your offering memorandum.  Other key elements ranging from distribution, customers or clients and the competition should also be included. 

Factors such as management, financials and growth strategies should not be overlooked, as many prospective investors may flip to those sections first.  Finally, be sure to include any competitive advantages you may have as well as a well-written conclusion and exhibits.  The more polished and professional your offering memorandum, the better off you’ll be.

An easy way to improve the overall quality of your offering memorandum is to work with a seasoned business broker.  A professional business broker knows what information should be included in your offering memorandum.  He or she will also know what not to include.  Remember that your offering memorandum may be the first point of contact between you and many prospective buyers.  You’ll only get one chance to make a first impression.

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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 confidentiality agreement, the seller gains protection from a prospective buyer disclosing confidential information during the sales process.  Originally, confidentiality agreements were utilized to prevent prospective buyers from letting the world at large know that a business was for sale. 

Today, these contracts have evolved and now cover an array of potential seller concerns.  A good confidentiality agreement will help to ensure that a prospective buyer doesn’t disclose proprietary information, trade secrets or key information learned about the business during the sales process.

Creating a solid confidentiality agreement is serious business and should not be rushed into.  They should include, first and foremost, what areas are to be covered by the agreement, or in other words what is, and is not confidential.  Additional areas of concern, such as how confidential information will be shared and marked, the remedy for breaches of confidentiality and the terms of the agreement, for example, how long the agreement is to remain enforced, should also be addressed. 

A key area that should not be overlooked when creating a confidentiality agreement is that the prospective buyer will not hire any key people away from the selling company.  Every business and every situation is different.  As a result, confidentiality agreements must be tailored to each business and each situation.

 When it comes to selling a business, few factors are as critical as establishing and maintaining confidentiality.  The last thing any business wants is for its confidential information to land in the hands of a key competitor.  Business brokers understand the value of maintaining confidentiality and know what steps to take to ensure that it is maintained throughout the sales process.

Copyright: Business Brokerage Press, Inc.

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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 Glen Foster makes the point that business owners frequently underestimate the level of effort and time needed to sell a business.  The fact is that selling a business is usually a layered process that can even take years to complete.  Importantly, business owners must understand that in the time it takes to sell, the market may have changed or their own financial or personal situations may have changed as well.  Additionally, selling can be an emotional and stressful process which further complicates the entire matter. 

For most business owners, selling a business represents the single greatest financial move of their lives.  As such, it is often accompanied with significant stress and anxiety.  It is essential not to underestimate the emotional and psychological side of the sales equation.  Properly planning years in advance for the sale of a business will help business owners prepare for the emotional and psychological stress that can result from both the sales process and the eventual sale itself. 

A key part of the stress of selling a business is that business owners are often left wondering “what comes next?” after selling.  Developing a succession strategy is a way to think through such issues well in advance.

Another key aspect of succession planning is to take the steps necessary to make sure that your business is ready to be sold.  As Foster points out, you wouldn’t put a home on the market with significant problems, and the same holds true for your business.  If you want to receive the optimal price for your business, then your business should be in tip-top shape.  This means diving into your books and records and getting everything in order.  Working with an accountant or an experienced business broker can be invaluable in this process.

Copyright: Business Brokerage Press, Inc.

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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 businesses that go on the market will actually sell.  Snider believes that at the heart of the problem is there are not enough good businesses available for sell.  In short, the problem is one of quality.

As of 2016, Baby Boomer business owners, who were expected to begin selling in record numbers, are waiting to sell.  As Snider stated in Biery’s Fortune article, “Baby Boomers don’t really want to leave their businesses, and they’re not going to move the business until they have to, which is probably when they are in their early 70s.”

The EPI survey of 200+ San Diego business owners found that 53% had given little or no attention to their transition plan, 88% had no written transition to transition to the next owner, and a whopping 80% had never even sought professional advice regarding their transition.  Further, a mere 58% currently had handled any form of estate planning. 

Adding to the concern was the fact that most surveyed business owners don’t know the value of their business.  Summed up another way, a large percentage of the business owners who will be selling their businesses are Baby Boomers who plan on holding onto their businesses until they are older.  They have not charted out an exit strategy or transition plan and have no tangible idea as to the true worth of their respective businesses. 

In Snider’s view, the survey indicates that many business owners are not “maximizing the transferable value of their business,” and additionally that they are not “in a position to transfer successfully so that they can harvest the wealth locked in their business.”

All business owners should be thinking about the day when they will have to sell their business.  Now is the time to begin working with a broker to formulate your strategy so as to maximize your business’s value.

Copyright: Business Brokerage Press, Inc.

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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 business accordingly from day one.  That means it’s essential to understand your market and know what prospective buyers would be looking for.  

According to the Leadership Development Program, Kauffman Fellows, acquirers buy businesses for a range of reasons including: 

  • Driving their own growth
  • Expanding their market
  • Accelerating time to market 
  • Consolidating the market

Some of the more potentially interesting reasons that acquirers buy a business include to reinvent their own business and even to respond to a disruption.  At the end of the day, there is no one monolithic reason why a given party decides to buy a business.  But there are indeed some general factors that acquirers are known to commonly seek out.

Additionally, Cremades believes that for those serious about finding a buyer, it is critical to make connections.  Or as Cremades states, “strategic acquisitions are about who you know, and who knows you.  Start making those connections early.”  He also points out that buyers are not always who one expects in the beginning of the process.  Keeping this fact in mind, it is important to stay open and always look to build solid relationships and keep those relationships up to date regarding your status.  Getting your company acquired won’t happen overnight.  Instead, it is a process that can take years.  Therefore, networking years in advance is a must.

Like many seasoned business professionals, Cremades realizes how important it is to work with a business broker.  If you have failed to network properly over the years, then a broker is an amazingly valuable ally.  They are about more than offering sage advice, as business brokers can also make potentially invaluable introductions and help you navigate every stage of the acquisition process.

Copyright: Business Brokerage Press, Inc.

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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 the Q2 dip. 

A recent BizBuySell poll of business owners noted that 43% are experiencing rising costs as a result of tariffs on Chinese goods.  Summed up another way, the trade war with China is impacting small businesses across the board. 

Ultimately, consumers will also feel the pinch as well with a whopping 64% of businesses noting that they will raise prices in order to address rising supplier costs.  Another attention-grabbing statistic is that 65% of small business owners are considering switching to suppliers not based in China, and 54% are looking for U.S. based supplies.  If this trend continues it could mark a dramatic shift.

There is, however, ample good news.  According to BizBuySell, buyers looking for a business will discover that the supply of quality listings on the market is increasing.  In short, now is a good time to buy a business, as the number of businesses listed as “for sale” grew by a healthy 5.2% in Q2 when compared to the same time last year. 

The “business for sale” inventory is growing.  According to Bob House, President of BizBuySell, “Businesses are performing better than ever.”

Some of the top performing markets by sales included Baltimore, Portland, Seattle, Austin and Dallas.  Those interested in buying a business will find that now is truly a historically good time to do so.  Working with a seasoned business broker can help you find a business that is right for you.  While the trade war has injected some uncertainty into the overall climate, there is no doubt that now is a historically unique time to buy a business.

Copyright: Business Brokerage Press, Inc.

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