Around the Web: A Week in Summary
A recent article from Atlanta Small Business Network entitled “The Confidential Marketing Process to Sell a Business and the Role of a Business Broker” discusses the difficulties that come with trying to market and sell a business and how a business broker can help ease some of these struggles.
It can be disastrous if employees, customers, competitors, or other third parties find out a business is for sale. It is important to develop a successful confidential marketing plan that is tailored to your unique business.
Your plan and your documents should highlight what is unique about your business without revealing too much. After identifying your potential buyer profile, you can determine a strategy to market to these potential buyers.
The most widely used form of advertising for businesses for sale are business listing websites. These websites allow brokers and sellers to provide a comprehensive profile of the business without revealing confidential information. This is where a business broker’s skills and knowledge come into play.
An experienced business broker knows how to write a listing ad and blind profile that will best describe your business with all the key information that buyers will look for. They know what appeals to buyers and can help your business stand out to impress.
Click here to read the full article.
A recent article from Forbes entitled “Thinking About Hiring A Business Broker? Ask These Eight Questions First” provides insight into the types of questions you should be asking when looking for a business broker. This helps ensure you’re finding the right person to help you sell your business.
It is recommended to reach out to several business brokers and ask these eight questions to find your best fit:
- Are you a member of the International Business Broker Association (IBBA), and do you hold the certified business intermediary (CBI) designation?
- How many deals, on average, do you close each year?
- What certifications or designations do you hold regarding business valuations?
- Do you work full time as a business broker, or do you do residential/commercial real estate as well?
- How long have you been a business broker, and have you ever sold your own business?
- Check out your business brokers’ online reviews.
- How long do you expect it will take to find a buyer and close the transaction?
- How much can you sell my business for, and what is the likely deal structure?
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A recent blog post from The Value Focus entitled “Seven Factors That Will Increase The Value of Your Business” discusses how several elements of a business can impact how much the business is worth. Knowing how these factors impact the value of a business can help a business owner work towards building greater value in their company.
The seven factors highlighted in the article include:
- Poor Quality Financials – how well-prepared and accurate are the financial statements
- Up/Down Sales History – how reliable are the revenue streams
- Business Growth Prospects – what paths to growth exist
- Sustainable Competitive Advantages – what do you have that your competitors do not
- Unpredictable and/or Uncontrollable Profit Margins – how stable are the earnings
- Management Depth – who is running the show
- A Diverse Product and Service Mix – is there a balance of variety and focus
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A recent blog post from BusinessBroker.net entitled “Ready to Sell Your Business?” discusses the steps one needs to take in order to sell their business and what the process of selling a business is like.
Before you begin the process of selling your business, it is very important to make sure you are ready to sell and move on. It can sometimes be difficult to make the decision to sell a business, something you’ve put so much time and energy into building. When selling you must be prepared to let go and see the buyer make changes.
Once you are ready to sell, a key step you can take to help ensure the process goes as smooth as possible is to find a professional business broker. Working with a business broker can help you gather all the necessary paperwork and financial information you will need to go through with a sale. The broker can also evaluate your business to determine a selling price that is fair in today’s market and market your business to qualified buyers.
Click here to read the full article.
A recent blog post from CPI entitled “5 Exit Strategies Everyone in the Business Industry Should Know” reviews the different types of business exit strategies and which one might benefit you the most depending on your business and what you want to get out of it.
Some of these exit strategies include:
- Letting the business take its course
- Liquidation
- Selling to an interested buyer, management, or employees
- Acquisition
- Initial Public Offering
It is important to understand the many different types of exit strategies there are based on your industry and goals. Thorough planning, professional help, and timing are all key components of this process.
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A recent blog post from Exit Strategies Group entitled “5 Ways to Make Your Business More Sellable” offers practical tips to help make your business more appealing to buyers. These tips include:
- Cleaning up financials
- Building a team
- Diversifying your customer base
- Document, systematize, and automate
- Earnings quality
These actions can help improve marketability, sell-ability, and sale-readiness. Keep in mind that being prepared to sell is the biggest advantage. Creating a plan and getting counseled on selling your business well-beforehand can be extremely beneficial.
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A recent article from Smart Business Network entitled “Dealmaking is the best way to transform your business” provides insight as to why you should keep an eye on the market and keep an open mind about dealmaking.
There is more to dealmaking than just buying and selling businesses. A business can purchase scale, acquire new technologies, diversify into new markets and implement long-term strategies to build a more valuable business. If you aren’t doing these things, your competitors probably are.
The goal is to position yourself to be competitive in your market and a leader in your industry. It’s up to you to identify the right move for your company and develop a strategy to put yourself in this higher position. Dealmaking remains a top way to transform your business, whether it’s big or small.
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A recent article from Smart Business Dealmakers entitled “Be Ready To Answer The Tough Questions When You Sell Your Business” discusses the challenges that sellers often face when it comes time to sell their company.
UHY Corporate Finance Director Jeremy Falendysz stresses the importance of educating and preparing yourself about the business sale process years in advance of when you intend to sell. He also shares these common seller challenges:
- Are you psychologically ready to sell?
- Are you prepared to hear harsh criticism?
- Are you prepared to answer difficult questions?
A prepared seller will be able to face these challenges and make the business sale process easier on all parties involved.
Click here to read the full article.
A recent blog post from Transworld Business Advisors entitled “Closing the Deal: Understanding What to Expect” reviews 8 key components of the closing after a deal is agreed upon. The road to close has many stops along the way. Some of these include due diligence meetings, opening bank accounts, applying for a lease assignment, and preparing government tax forms.
At the closing, the buyer and seller will review and sign several important documents. Some of these include the sale agreement, loan documents, and forms for transfers of intellectual property.
After all documents are signed, funds are dispersed (often wired) and the deal is officially finalized. The business is now under new ownership.
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A recent blog post from Allan Taylor & Co. entitled “7 of the Worst Times to Sell Your Business” provides examples of bad times to look at selling a business and insight into finding the right time to sell.
Consider the following factors when contemplating a sale:
- Watch Your Numbers – Numbers can look undesirable to a buyer for a variety of reasons, and your financial statements are your business’ foundation. There are few excuses for bad financials. If your numbers don’t look good, start working to improve them well in advance of a sale.
- Industry Decline – Most buyers want a business in an industry that has staying power or is on the upswing. Buyers want to make sure they’re investing in an industry that will be around long-term and has potential for growth. They don’t want to buy a business if they know, for example, the biggest player in the industry has just shut down multiple locations.
- Wanting an Out – A lot of owners sell when they’ve reached a point of overload or burnout. While it’s okay to get tired of running your own business and wanting to move on, consider the amount of work that it can take to sell. The selling process alone can often take about a year. Proper exit planning can take several years.
- Losing Key People – Few things hurt a business more than one of your top managers leaving. One of the things buyers will look for is a strong layer of upper management.
- Business is Too Small to Support a Sale – There needs to be enough cash flow from your business to pay the new owner with enough cash left over to reinvest in the business and service debt.
- Banks Aren’t Lending – It is always harder to sell a business when the economic environment is bad. If the economy is in a recession or banks simply aren’t lending to anyone for whatever reason, business sales will suffer. You want to sell when the money is flowing.
- During A Personal Crisis – While sometimes unavoidable, you want to consider what will happen if you try to sell during a personal crisis such as divorce, illness, etc. The process can be hard to focus on, it will be harder to keep your emotions out of important decisions, or your personal situation may have already hurt the business. If you feel a personal crisis is looming in the distance, it is best to start the sales process as soon as you can.
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A recent blog post from Certified Business Brokers entitled “Buying a Business – Make Your Acquisition a Good Investment” discusses the comprehensive due diligence process a buyer should go through when considering purchasing a business. Some of the most important intel you can have is the future profit potential of a business and how much you can impact that future.
Some key considerations to think about while buying a business include: what the business can be capable of under new management, skills the current owning might be lacking that you can provide, additional marketing that could be pursued, and will the demand for the product or service grow.
It is also important to thoroughly review the pricing model of the business, physical assets, intellectual property, employees and benefits, taxes, etc.
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A recent blog post from Exit Strategies Group entitled “Secrets to Business Valuation – a Lesson from Curly” discusses the three main factors that help determine how much a business will sell for. We often see similar companies of the same size sell for vastly different amounts. What this usually boils down to is cash flow, growth and risk.
Cash Flow – What matters most to investors is future cash flow. Owners look at using free cash flow to either pay themselves, pay debt, or reinvest in the business. When comparing two similar businesses with the same revenue, one company might operate more efficiently and generate a higher cash flow which will make that company more desirable.
Growth – The more cash flow is expected to grow, the more investors will have at their disposal which brings up the value of a business. If a company is expected to grow at a faster rate than another, it will be favored by investors.
Risk – Investors decide how much risk to put into a company based on how certain they are that the company will either grow or perform the way it has. The more certain they are, the more they’ll pay.
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A recent article from Forbes entitled “Five Things You Can Do This Year To Increase The Value Of Your Business.” provides tips and tricks to help business owners increase the value of their business and also ensure they’re ready when it’s time to find a buyer.
Some of these tips to increase the value of a business include:
- Clean up your financials – Stop running personal expenses through the business.
- Diversify your revenue – Make sure you have multiple revenue streams to minimize risk of business failure.
- Know your numbers – Have clear figures for past performance and realistic growth projections.
- Get control of your accounts receivable – Keep payment terms short so that the buyer doesn’t need as much initial working capital to keep the business running.
- Establish some form of recurring revenue – Any type of recurring revenue is better than one-time revenue.
Click here to read the full article.
A recent article from INSCMagazine entitled “Why Do You Need a Business Broker?” provides insight as to why working with a business broker can be the best option when it comes time to sell your business.
Business brokers can help you complete and present a financial analysis of your business to paint a clear picture for potential buyers. The business broker will also use this analysis along with industry and economic indicators to determine an appropriate selling price. Your business broker will work in way that maintains confidentiality so the sale doesn’t affect operations. They will take steps to ensure a potential buyer is a genuine and serious candidate for acquiring your business. Your business broker will also bring experience in negotiations and closing deals to your transaction. Having one of these professionals on your side gives you a major advantage.
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A recent article from The Business Journal entitled “Valuation Helps Set Plan for Succession Transitions” discusses how important a business valuation can be when it is decided to either pass on the business to the next generation or sell it.
There are many stones to turn over when determining the value of a business, and knowing when to start this process is critical. It is recommended to start the process between three to five years before the current owner plans to leave the business. This ensures you have time to thoroughly analyze all of your financials and address any factors that may affect your valuation.
Three main approaches in valuing a business include asset, income, and market. Asset goes over assets and liabilities to create a floor value. Income looks at the business’s cash flow and how that is estimated to continue. Market looks at transactions for similar companies.
Once the value is established, it can help determine when might be a good time to sell, who it might be sold to, and if it’s likely to be a strategic buyer or financial buyer. These are all important in understanding the next step for succession planning.
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