Selling a Business Articles

The business valuation is a major factor that influences the overall selling price of the business. Business appraisals are based upon a multitude of criteria and indisputable records such as comparables, projections, discount rates, EBITDA multiples, and more. While the appraiser may have all the information he or she needs, the business elements might be overlooked. That's why it's extremely helpful for business appraisers to first grasp the purpose of an appraisal prior to getting started. Unfortunately, the appraiser is often unaware of additional considerations that may enhance or even devalue a business' overall worth. Is There Unwritten Value? Business owners generally agree that prospective buyers are mostly looking for quality in depth of management, market share, and profitability. Though undoubtedly more subjective than documentation, figures, and calculations alone, information regarding key business elements such as market, operations, post-acquisition, value drivers, … [Read more...]

Recently, Business Brokerage Press performed a survey of business brokers across the country to see what sells at the highest rate, and what they discovered was very interesting. Retail business sold at 17%, food and drink related businesses at 14%, service oriented businesses sold at 25%, auto related businesses sold at 9%, manufacturing businesses sold at 16% and distribution businesses sold at 11%. Businesses for sale labeled as “other” sold at 5% and professional practices at 4%. What is a Service Business? Looking at this gathered information, it is clear that “service type businesses” are very hot and doing quite well. The range for what is considered a service type business is, in fact, rather broad. It encompasses everything from a dry cleaner and hair stylist business to a massage therapy chain or dental practice. Just so long as a business is providing a service and doesn't fall into another category, it falls under the “service oriented” banner. Food and Drink … [Read more...]

It is always important to try and put yourself “in the other person’s shoes.” This fact is of paramount importance when dealing with prospective buyers. Thinking like a prospective buyer could, in fact, be the difference between selling your company and not selling your company. It is easy to think that because everything is going smoothly with the sale of your business that the tough part is behind you. That may be true, but then again there could still be problems ahead. Issues can come up at a moment’s notice when either your prospective buyer or his or her advisor raises a red flag. Additionally, the larger the business for sale, the greater the complexity. The “Little Things” that Could End Up Quite Big Financial statements are of considerable importance. Quite often you’ll see contingencies regarding financial statements and/or business tax returns, so be ready and organized. Lease issues is another common category for contingencies and an area of concern. Sellers and … [Read more...]

It is no great secret that sellers often aim high. The logic sellers use is simple, “I can always reduce my price.” While that is true, sellers do need to remember that if the asking price for your business for sale is initially too high, buyers won't even take a serious look. In short, your selling price must be bound by reality and what the market will bear. Pricing Does Matter When an asking price is too high buyers will simply move on. But in the meantime, you may have lost a qualified buyer that would have been very interested at a lower price. Pricing isn't a factor that should be played with, instead it should always be treated in as professional of a manner as possible. Instant Millionaire? Maybe and Maybe Not Some sellers want to become instant millionaires and sell a business for top dollar. Sometimes this is warranted and sometimes the numbers don't support lofty business valuations. Every situation and every business is different. It pays to be … [Read more...]

“Independent Business Owner” is a phrase with two meanings. Of course, it means being the owner of an independent business. But another way to look at “Independent Business Owner” is to let this phrase define the very personality of the person at the helm. Independent, Confident, Self-Assured, Strong-Willed. These are vital entrepreneurial attributes, but, ironically, they can sometimes work against the business owner when it comes time to sell. Since business owners are the type who know about selling — either products or services– and about making deals — haven’t they had to cope with suppliers, customers, and competitors throughout their business careers? — it’s not surprising that owners approach selling their businesses with these tried-and-true tactics and ideas. Sellers who have spent years building a business are often unaware of how completely different the process of selling a business can be. Savvy sellers, realizing the importance of a selling approach equal to this … [Read more...]

Every company has weaknesses; the trick is to fix them. There is a saying that the test of a good company president or CEO is what happens to the company when he or she leaves. Some companies–on paper–may look the same, but one company may be much more valuable due to weaknesses in the other company. Not all problems or weaknesses can be resolved or fixed, but most can be mitigated. Fixing or lessening company weaknesses can not only significantly improve the value, but also increase the chances of finding the right buyer. Here are some common weaknesses that concern some buyers, causing them to look elsewhere for an acquisition. “The One Man Band” Many small companies were founded by the current president, and he has made all of the major decisions. Since he has not developed a succession plan or exit strategy, there is no one in place to take over if he gets hit by the proverbial truck. He is the typical one man band; and, as a result, the company is not an attractive target … [Read more...]

You've made the big decision to put your business for sale. Your reasons for selling are valid, carefully-considered, and “good” – the kind that won't make a prospective buyer shy away. Now, you may tell yourself, comes the fun part. You'll come up with a price – maybe a little high, but why not? – and let gut instinct (an attribute common to successful business owners) lead the way. Wait just a minute. Or maybe a quarter of an hour; however long it takes you to bone up on your negotiation skills with the following steps as a guide. Being a smart negotiator is tantamount to effecting the successful sale of your business. Gather Your Forces The first step is to engage the help of a business broker professional. He or she understands the sales negotiation process as well as tactics for marketing the business for sale. Before sitting down with your business broker, however, you should gather the following information: profit and loss statements (for three years), current federal … [Read more...]

Who best understands my business? When interviewing Business Brokers and M&A Advisors to represent the sale of your firm, it is important that you discuss your decision process for selecting one. Without this discussion, a Business Broker / M&A Advisor can’t respond to a prospective seller’s concerns. Are there any potential buyers? When dealing with a Business Broker, it always helps to reveal any possible buyer, an individual or a company, that has shown an interest in the business for sale. Regardless of how far in the past the interest was expressed, all possible buyers should be contacted now that your company is available for acquisition. People who have inquired about your company are certainly top prospects. Lack of communication? It is critical that communication between the seller, or his or her designee, and the Business Broker involved in the sale, be handled promptly. Calls should be taken by both sides. If either side is busy or out of the office, … [Read more...]

When the day comes to sell a business, it is important that prospective buyers understand why you have made this decision. Buyer’s find this important and having a valid reason why it is time for you to sell can make your business more attractive to prospective buyers. After all, it is only natural that you will have to retire at some point even if the business is thriving. In fact, it is safe to state that buying a successful business from an owner that is retiring is just the kind of the situation that most buyers look for but they understand it can be for other reasons. Owning a business and retirement, of course, is far different than retiring from a job. You likely have many friends ranging from vendors and employees to customers, clients and other business owners. It is vital that your departure does not disrupt the operation of your business and that prospective buyers understand that you have taken steps to ensure a smooth transition. In short, you want to create a situation … [Read more...]

A common mistake that many make when preparing to buy a business or sell a business is to overlook all the various legal issues involved. A legal mistake can bring the entire process to a screeching halt or even worse case cost you a small fortune. For this reason, it is important to carefully evaluate the full slate of relevant legalities. This article will explore some of the key legal points one needs to consider long before placing your business for sale. Mistake #1 Neglecting to Have a Non-Disclosue Agreement Having potential buyers sign a Non-Disclosure Agreement, or NDA, is critically important when selling your company. One benefit to having this agreement signed and sealed is that in the event that the deal falls through, which often happens, the buyer can't disclose the details to other parties. However, if you don't have an NDA, the buyer could reveal important aspects of your discussions. This could impact any future sales. Mistake #2 Failing to Get an Experienced … [Read more...]