Around the Web: A Week in Summary
A recent blog post from BusinessBroker.net entitled “How A Business Broker Can Help You” discusses the important role a business broker has when it comes to buying a business and how they can help you.
It is important to work with an experienced business broker that you can relate to and that you feel comfortable with. A broker can help you find listings that appeal to you and fit your needs that you might not have found on your own.
There are many big and small steps in the process of buying a business and working with a business broker can help you through these steps to make it easier and more manageable. Some, if not most, brokers have a real estate license so they can broker property transactions and assist with leases.
Some other processes a broker may help you through include answering questions about provided information on businesses presented in a marketing packet, requesting additional information from the seller, scheduling appointments to meet with the seller, making a written offer, etc.
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A recent article from Forbes entitled “Thinking About Selling Your Business? Beware Of These Five Deal Killers” lists key actions to be aware of when selling your business that may kill the deal you’re working on and how to avoid this. A mistake could not only kill the deal but it also may significantly hurt the value of your business as well as your chances of selling. Keep these five deal killers in mind when selling your business:
- Telling Your Employees Before The sale – A key here is to not tell any staff members until the deal is done and signed. You don’t want the news spreading and have employees concerned, unfocused and even quitting.
- Allowing The Buyer to Work In the Business Prior to Closing – Involving the buyer in the business operations before the deal is done has the potential to overwhelm them and cause them to feel they are not prepared to take over.
- Thinking You Can Handle The Transaction On Your Own – Whether it’s a business broker, attorney, or CPA, having an experience professional to help and advise you is always a good idea.
- Telling Your Suppliers Or Vendors Before You Close – You want to have clauses and contracts in place to address terms with your suppliers for the transaction months, if not years, before the closing. But don’t tell them why.
- Not Being Prepared To Defend Your Valuation And Not Having Clean Due Diligence Records – You want to make sure all your financials and record keeping are in place and organized. The more that everything is out in the open and organized, the easier it is to prove the value of your business.
Click here to read the full article.
A recent article from Inc. entitled “How to Sell Your Business to a Competitor and Not Get Burned” looks at how to sell to a potential strategic buyer in your market while protecting yourself in the process. The key here is to gradually release information and protect yourself using the following practices:
- Put agreements in place to protect the business – Have the potential buyer sign a non-disclosure agreement and a non-solicitation agreement.
- Disclose Information Gradually – Even if you have agreements in place, you don’t want to share everything about your business right away. Some information you will have to give right away like financials but try to keep things like customer names and critical information private for a while.
- Trust Your Instincts – Once a price is agreed upon, the reality is you will have to release all information about the business. By this point you should have spent enough time with the buyer to determine if you can trust them or not. If you don’t, then stop the deal.
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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.
Around the Web: A Week in Summary
A recent article from Talk Business & Politics entitled “What you can expect when selling your business” reviews the importance of taking time to prepare your business for a sale and what you may need going into the process.
Key suggestions include:
- Plan ahead and start early because it can take years to properly prepare your business for sale
- Ready your business so that problems are fixed and a buyer can realistically take over
- Utilize qualified accountants, attorneys and other professionals who have experience with business transactions
- Make sure you have financial statements prepared by an accountant
- Be prepared to accurately show your assets such as real estate, inventory and client list
- Have realistic expectations
Click here to read the full article.
A recent article from The Ledger entitled “Better, not necessarily bigger, when selling a business” looks at the different factors that go into determining a business’s value and how to use these factors to build a more valuable business.
There was a time when you had to grow your business bigger for it to become more valuable. The goal for most business owners now, though, is to build more valuable companies.
The reason one company sells for more than another has to do with a number of factors. In order to grow a more valuable company you have to take look at multiple business value drivers. Some of these drivers include business scalability, happy customers, recurring revenue streams, increasing annual profits, proactive steps to improve cash flow, etc. Most buyers want to buy a profitable business with a history of increasing profits that they can grow, and these value drivers can demonstrate that.
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A recent article from Africa.com entitled “How to Sell a Business on a Budget” provides tips on how to keep the cost of selling your business low if you are low on resources. Some suggestions include:
Be prepared: Start gathering documents and records early to avoid last minute costly surprises. The earlier you start, the more time you have to structure your business in a way that will yield you a higher sales price.
Find the right business broker: You don’t want to simply go with the first broker you meet. Interview multiple brokers and ask about their qualifications, reviews, experience and how long they expect it to take to sell your business.
Market your business online: Online business-for-sale advertisements give you the opportunity to reach lots of buyers with relevant information while keeping the sale confidential.
Envision the business’s future: Buyers are thinking about the future, so be sure you can demonstrate the potential growth opportunities that exist for your business.
Click here to read the full article.
Read MoreAround the Web: A Week in Summary
A recent blog post from Transworld Business Advisors entitled “Pre-Sale Checklist for Selling Your Business” provides a comprehensive list of things you should have prepared before selling your business.
The checklist includes several documents such financials, leases, and employee lists. These documents give insight into many different aspects of your business. Having these documents will help you prepare to answer questions a buyer might ask and make your business more attractive to potential buyers.
Not only will this list help you prepare for discussions with buyers, it also helps you identify strengths and weaknesses in your business. This can help identify areas to make improvements to your business in advance of the sale to make it more valuable and easier to sell.
Click here to read the full article.
A recent blog post from BusinessBroker.net entitled “Business Assets” discusses the role of assets when considering the criteria for purchasing a business.
In one scenario, if you are buying a business that does not generate a profit then you are essentially buying the assets. Assets can make it easier to obtain financing. These assets also come with possible tax implications and future replacement costs.
In another scenario, if you are buying a profitable business then you are essentially buying the cash flow, and assets may be less of a factor. The key is to see how the owner made the business profitable.
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A recent article from Northern Nevada Business Weekly entitled “Now might be the time to sell your business” details signs that it may be time for a business owner to consider selling and external factors that make it a good time to explore a sale.
Signs that an owner may want to consider selling include:
- Decision making that once was easy becomes a major event
- Difficulty prioritizing
- Ineffective problem solving
- No longer enjoying the business
- Dreading the workday
Current external factors that make this a good time to explore a sale include:
- Strength of the economy
- Low inventory of attractive businesses for sale
- High number of buyers in the market
Click here to read the full article.
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