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.
Around the Web: A Week in Summary
A recent article from The Enterprise entitled “Steps to take before buying a business” explains the five things that every buyer needs to do before completing the purchase of a business.
Buying a business versus starting one from scratch has its benefits. However, it also has some major financial implications that are imperative to consider. While either choice is a major commitment to make, here are five steps to take before signing on the dotted line on a purchase agreement:
- Determine the type of business you are interested in.
- Take the time to complete your due diligence.
- Enlist the help of an experienced attorney.
- Develop a plan to finance the purchase.
- Review your personal financial position in detail.
If you are indeed going to opt for purchasing an already existing business over the choice to start a new one from scratch, then it’s important to have your ducks in a row. You want to make sure that you’re choosing a business you’ll be passionate about running, or at least knowledgeable about, and that your financial and legal protections are in place. A wonderful place to start when you’re beginning to look at businesses is with a business broker who can help you to find the right fit for you.
Click here to read the full article.
A recent article from Albuquerque Journal entitled “On reporting the deal ‘consistently’ on returns” provides a business brokers’ detailed answer to a business owner’s question regarding how to report their business sale on their taxes.
When a small business is sold to a larger company, there is always the matter of taxes for the buyer and the seller at the end of the year. The way that the purchase price is reported to the IRS holds implications, that are often conflicting, for each party. However, to avoid the tax returns being challenged by the IRS it is best that both party’s returns report the allocations the same way. To resolve this issue, a clause is commonly added to the purchase agreement that states that neither party will file their tax return until both agree upon the allocation of the value and assets of the business. According to Jim Hamill, this clause is a good thing to have added to the agreement, but how things will be allocated should be agreed upon before the agreement is signed.
Click here to read the full article.
A recent article from Journal Enterprise entitled “A Brief Guide to Selling a Business” explains the best practices for selling a business for an inexperienced seller.
There are many reasons to sell a business. While some individuals may sell what’s left of a failing business, others may have only started the business to sell it for a profit or may sell a perfectly thriving company in order to retire. Whatever the reason for the business sale, there are many potential problems that remain consistent across the board. For a smooth business sale, follow these pieces of advice:
- Seek professional help – Working with a business broker can help you to navigate the more time consuming and complicated aspects of selling a business such as negotiations, finding interested buyers, preparing your business for sale, and otherwise guiding you through the process.
- Organize the paperwork – Without easy-to-read, complete and properly prepared financial, tax and other documents, your business will not be easy to sell. A diligent buyer will want to see all of these papers while they are performing their due diligence so having them prepared and organized before they are requested will make for smoother sailing.
- Plan your offer and recheck business details – In other words be clear on what you are looking for in the sale of your business and make sure you are up-to-date on the goings on within your company. It would be very problematic to have an interested buyer bring problems within your business to your attention that you are not already aware of or are in the process of handling.
Many factors go into the sale of a business and the process can be time consuming and lengthy. For these reasons, a seller should step into the process with preparation and professional assistance.
Click here to read the full article.
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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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Around the Web: A Week in Summary
A recent article from M&A Source entitled “Risk Of Recession: Should I Sell My Business Now” discusses the considerations a business owner should take when deciding whether or not to push through a recession.
With many financial professionals predicting a recession in the near future, it is expected that business owners will be wondering what to do. If you’re torn between selling your business now before the recession hits or staying on board and weathering the storm, here are some things to consider:
- It’s important to get clear with yourself about why you’re looking to sell your business. If you’re feeling burnt out or no longer share a passion for your company, it is less likely to survive an economic downturn.
- Ask yourself whether or not your business is recession proof. This is dependent upon the industry, but if you are not a recession proof luxury business, then it may be best to exit sooner rather than later.
- If your drive for the business remains intact, and you believe the company is able to survive a recession, then it may actually increase the company’s value when the temporary downturn has ended.
Determining when to sell a business, to whom, or whether to sell it at all can be a complex decision. For the best outcome, be sure to consult multiple professionals and be aware of all of your options.
Click here to read the full article.
A recent article from Heating Ventilating & Plumbing (HVP) magazine entitled “Selling your business? Don’t fall for attractive high valuations” explains the reasons why it’s important for business owners to avoid choosing the business broker they work with simply based on who provides the highest valuation.
After the years of hard work and dedication it takes to build a company, it is understandable why one may be wooed by a high valuation number. To an owner, the value that their company holds is often limitless. However, in the marketplace, an extremely high multiple can cause serious buyers not to take the listing seriously. Therefore it is important that when receiving a valuation, business owners make sure that the individual performing the valuation uses a wide range of assessment criteria. This will provide a fair, accurate valuation of the business and increase the chances of completing a transaction with a serious buyer that is ideal for all involved parties.
Click here to read the full article.
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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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