Great Ways for Business Owners to Save Money
Business owners are constantly seeking ways to cut costs and boost profits to make their businesses as attractive as possible to buyers. Fortunately, there are many surprisingly simple strategies to save money across various aspects of your business.
1. Embrace Digital Solutions
One effective way to save money is by going digital. Just as you should evaluate which tasks can be outsourced or handled in-house, consider which operations can be performed digitally. For example, if you don’t experience a high call volume, replacing a receptionist with a voicemail system could be a practical solution.
Why not experiment with digital tools to identify those that can streamline your operations and reduce costs? However, be cautious of potential price hikes; over time, the costs associated with digital tools may exceed your initial expectations. It’s important to periodically audit and reevaluate the tools you regularly use.
2. Consider Outsourcing Wisely
Outsourcing can be another powerful way to save money, but it requires careful consideration. While it has gained popularity in recent years, outsourcing can also lead to unexpected challenges. As a business owner, it’s essential to evaluate each role you consider outsourcing to determine if it’s a strategic fit. Remember, outsourcing isn’t a one-size-fits-all solution; it should simplify your operations and reduce costs. But if it causes complications, it might not be worth it.
3. Keep Key Tasks In-House
While outsourcing can be beneficial, not every task needs to be delegated. Sometimes, keeping certain functions in-house makes more sense. No one understands your business better than you do, so take the time to assess which tasks should remain internal. This thoughtful approach can reveal significant cost-saving opportunities year-round. Also, when you go to sell your business, prospective buyers will want to know you have valuable key employees who plan to stay on and support the new ownership.
4. Leverage Free Resources
Never underestimate the value of free resources. Seek out free educational lectures, SBA seminars, and other opportunities to gain insights that can help you save money. Local banks often offer free or low-cost programs to help clients enhance their business skills, which can reduce your reliance on expensive consultants.
5. Shop Around for Better Deals
Always be prepared to shop around. Whether you’re purchasing goods or services, there’s likely a better deal available. Don’t hesitate to contact your suppliers or contractors and negotiate for better terms. While you may not always secure a lower price, it’s worth asking.
By maintaining a proactive approach and not taking anything for granted, you can uncover ways to reduce your business’s operating costs. It may require patience and effort, but the savings can accumulate significantly. Ultimately, these kinds of changes will boost your bottom line and make your business more attractive to buyers.
Copyright: Business Brokerage Press, Inc.
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Don’t Settle for Less Than a Highly Accurate EBITDA
If you, as the seller, want to receive the best price for your business, it’s essential to understand that your adjusted or normalized EBITDA will serve as the foundation for the purchase price. This EBITDA will be used as a multiple to negotiate the final price. Every dollar counts; for example, if your EBITDA is off by $50,000 and the multiple is three, the final acquisition cost of your business is reduced by a significant $150,000. In short, these multiples matter, underscoring the critical importance of reaching an accurate EBITDA for your business.
Let’s explore a couple of common EBITDA adjustments that sellers should be aware of. One adjustment may come from a one-time event, such as an insurance settlement, legal expenses, or PPP loan forgiveness. Unusual expenses associated with the growth of the business can affect the adjusted EBITDA. Another factor is the conversion based on GAAP accounting, which can vary widely.
Balance sheets are crucial when it comes time to outline the financial health of a business. It is common for smaller businesses to focus solely on profit, often neglecting to review their balance sheets as frequently. Balance sheets should be presented clearly, allowing potential buyers to understand the true assets and liabilities involved in the sale. It is best to be upfront with this information to prevent any surprises during due diligence.
At the end of the day, business owners should keep three important points in mind when preparing to sell their business. First, consider having a Quality of Earnings analysis performed. This will provide a clear understanding of your business’s health. Second, ensure that your key managers and employees are prepared and capable of running the business during the transition period. Third, take all necessary steps to review your financials, and be ready for GAAP reporting requirements during due diligence.
Importantly, sellers should not cut corners on any of these three points, as all are vital to the successful sale of your business. It’s important to note that selling a business is not a one-dimensional process; it encompasses many different aspects. Business brokers and M&A advisors are critical to the process, as they understand what it takes to defend an EBITDA. This helps to ensure that sellers receive the right price for their business.
Copyright: Business Brokerage Press, Inc.
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EBITDA and What It Means for Selling Your Business
Selling a business is rarely as straightforward or fast as business owners would like. Unless you’ve sold a business before, there will be unforeseen obstacles. Even if you’ve sold a business before, you will likely run into hurdles along the way. The fact that every business is different, and this impacts the variables associated with the sale of a given business. Market conditions change daily, and that means knowing the current “lay of the land” is of critical importance. All of this underscores the value of working with a business broker or M&A advisor.
A lack of important financial data can be a major problem for business owners looking to exit their business. You can expect any serious buyer to jump in and take a detailed look at your business. Every detail of your EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, will be examined. EBITDA will play a role in calculating the value of your business.
Determining the value of your business via EBITDA uses different approaches and tools such as the Quality of Earnings Analysis Report or Q of E. GAAP accounting is used as the basis for financial reporting and differs substantially from how many businesses deal with their accounting practices. It is a shift that can catch business owners off guard, as the end result can be a dramatic shift in the EBITDA.
Potential buyers will receive many different documents regarding both the operational and financial health of your business. In general, this process is called due diligence. Any serious buyer will invest considerable time and attention to this due diligence process. Therefore, it is vital for business owners to disclose accurate information and provide documentation that will support the EBITDA of the business. Preparing to sell your business is usually a unique event, and it is one that takes considerable planning and knowledge of the process.
EBITDA is typically used as a way to attach value to your business by using a multiple of the EBITDA. It is all but guaranteed that a potential buyer or investor will perform a review of your income statement. That means they will likely figure out an adjusted EBITDA that they feel makes the most sense. In the end, there may be a difference between the buyer and seller on the EBITDA, and this is something that sellers realize going into the process.
The time to prepare for selling your business is now. An experienced business broker or M&A advisor knows the ins and outs of EBITDA and its layered complexity. The sooner you begin working to prepare your business to be sold, the better.
Copyright: Business Brokerage Press, Inc.
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Unlocking Your Potential Through Business Ownership
As a business owner, you gain freedom and the potential to earn more than you might otherwise earn. If you are ready to tackle the hard work involved in business ownership, you may be prepared to take the next step. Two main advantages to being a business owner include forging ahead with more freedom and also boosting your income. However, you must be prepared to take some risks.
Grow Your Income
Owning your own business gives you the opportunity to grow your income. While owning a business can dramatically boost your income, this typically comes with both increased risk and more work.
Generally, the longer a business owner maintains their business, the greater the potential for profits. Business owners who have operated their businesses for ten years or more generally earn over $100,000 per year. It’s important to remember that it may take years before you achieve the income level you desire. Building a successful business takes time, and increasing the profits of an existing business can also require significant effort. Regardless, being a business owner gives you much greater control over your financial destiny.
Determine Your Lifestyle
Owning a business also grants you control over your lifestyle. Working for someone else often means sacrificing some degree of freedom. Employees are typically required to show up for work at specific times and adhere to set hours. As an employee, you must abide by various rules and regulations established by your employer. In contrast, being a business owner allows you to choose when and how you work. You establish the rules and can manage your time and life in ways that an employee simply cannot.
Are You Ready?
One of the most crucial factors in determining your readiness to own a business is your willingness to assume some risk. Simply put, there is no way to be a business owner without dealing with risk. Owning a business is not the same as working for one; your fate is in your own hands, which means accepting at least a modest degree of risk.
Of course, not all businesses succeed, and it’s essential for prospective business owners to understand that, despite the money, time, and effort invested, a business may still fail. By carefully considering what kind of business is right for you and working closely with a business broker or M&A advisor, you can significantly increase your chances of selecting a business that aligns with your personality, needs, and expectations.
Being a business owner means you are ready to take both action and responsibility. You must be forward-looking, seek out opportunities, and be willing to assume risks. A business broker or M&A advisor can be an invaluable ally in determining whether you should become a business owner and helping to identify the right business for you.
Copyright: Business Brokerage Press, Inc.
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Selling Your Business: Key Questions and Answers
Selling your business is a significant decision. You’ve invested considerable time, money, and effort into building and running it—perhaps it even represents your life’s work. Now that you’ve decided it’s time to sell, getting the best professional advice is crucial. This is where working with a professional business broker can be the key to not just selling your business, but selling it at the best price and terms possible.
Here are some common questions sellers often ask, along with answers based on experience and expertise. If you have additional questions, don’t hesitate to consult your business broker.
What Can Business Brokers Do, and What Can’t They Do?
Business brokers are specialists who facilitate the smooth sale of businesses. It’s important to understand their capabilities as well as their limitations. A professional broker helps sellers price the business and structure the sale in a way that benefits both the buyer and seller. They can locate potential buyers, guide negotiations, and assist in completing the transaction.
However, a business broker isn’t a miracle worker who can sell an overpriced business. For a business to sell, it must be priced and structured appropriately. The market ultimately dictates what a business will sell for. The seller’s flexibility with terms and down payment options can also influence the selling price and the likelihood of a successful sale.
How Long Will It Take to Sell My Business?
On average, it takes about five to six months to sell most businesses. However, this is just an average—some businesses may take longer to sell, while others may sell more quickly. The quicker the broker has all the necessary information to market your business, the shorter the process is likely to be. Pricing the business right from the beginning also plays a major role. Some sellers overprice their businesses, thinking they can always lower the price later. Unfortunately, this strategy often backfires because buyers may avoid an overpriced listing entirely.
What Happens When There’s a Buyer?
When a buyer is seriously interested in your business, the broker will assist in preparing an offer. This offer may come with contingencies, such as a review of financial records, lease agreements, franchise agreements, or other important business details. The buyer’s offer will be presented for your consideration. You can accept the terms, make a counteroffer, or decline it altogether. Keep in mind, though, that the buyer can withdraw their offer at any time if negotiations don’t move forward.
Your broker will present all offers to you for consideration. The first offer might not be perfect, but it’s essential to review it carefully. Sometimes, the first offer can be the best one you’ll receive. While you shouldn’t accept just any offer, all offers deserve close examination.
Once you and the buyer agree on terms, the broker will help with satisfying any contingencies. It’s crucial to cooperate fully with the buyer during this stage to avoid any perceptions that you’re withholding information. Buyers may bring in outside advisors to review your business, and once all conditions are met, the final paperwork will be prepared and signed. After the sale is finalized, funds are distributed, and the buyer takes possession of the business.
How Can I Help Sell My Business?
You can assist in the process by fully cooperating with your broker and any other advisors, such as accountants or attorneys. Buyers will require up-to-date financial information, so it’s helpful to work with your accountant to provide this. If you have legal representation, make sure they’re familiar with the business sale process and are available to attend the closing, especially if you want a quick sale. Delays caused by your attorney’s schedule could give the buyer a chance to reconsider or amend their offer.
Ultimately, your team of advisors should all be working toward the common goal of selling your business at the best possible price and terms, while closing the deal as quickly as possible. Cooperation with all parties involved is key to a successful sale.
Copyright: Business Brokerage Press, Inc.
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The Critical Role of Storytelling in Selling a Business
Every business has a story to tell. In fact, selling a business involves the art of storytelling as you must pique interest and enthusiasm in the mind of the buyer. Through storytelling, you can convey not only the history of a business, but also its future.
Good business brokers and M&A advisors are storytellers who know how to relay the core truths and the core values of a given business. Storytelling is a fantastic way for business owners to let the world know more about their business, why it is special and what it can offer another owner in the future. A good business story will convey the future of the business and help a prospective owner see themselves as the lead character in an ongoing narrative. Great stories and great businesses are ones that can clearly present their truths and encourage the recipients of the story to take action.
When it comes to selling a business, the story must begin with the financials. As soon as a business broker begins working with a seller, they will collect as much information as possible about the business including financial information. The financials help to paint a picture of a business in a way that no other information truly can.
It is only once brokerage professionals have the financials in their hand that they can begin to craft the true and compelling story of the business. Once this information has been digested and analyzed, it can be presented in many forms including a confidential information memorandum or a confidential business review.
While there is no denying the role of facts and the financials in painting a picture of a business, it is not the only factor. Emotions undoubtedly play a role in the decision-making process. A good story is one that is able to seize upon the imagination and help the recipient of the story see themselves in the story.
A prospective buyer has to be able to see themselves owning the business in question. In fact, the buyer has to be the hero of the story, who takes over the business and guides it into a very successful future. Like all successful sales, it is necessary to sell not just the physical item—in this case, a business—but also the dream that accompanies it. It is key to convey to the buyer how they will benefit from owning the business.
If you are planning to sell your business and can successfully convey to a prospective owner how he or she will benefit from owning your business, then much of the battle is already won. An experienced business broker can help owners cultivate, shape and present the right story for their business, and achieve the optimal selling price in the process.
Copyright: Business Brokerage Press, Inc.
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