Blog

The simple fact is that family businesses are different. After all, a family business means working with family and all the good and bad that comes with it. While an estimated 80% to 90% of all businesses are family owned, relatively few are properly planning for what happens when it comes time to sell a business. According to one study, a whopping 72% of family businesses lack a developed succession plan which is, of course, a recipe for confusion and potentially disaster. Additionally, there are many complicating factors, for example, studies indicate that 40% to 60% of owners of family businesses want the business to remain in the family, but only 40% of businesses are passed to a second generation and a mere 10% are passed down to a third generation. Let's turn our attention to a few of the key points that family business owners should consider when selling a business to other parties. Confidentiality should be placed at the top of your “to do” list. When it comes to … [Read more...]

The old saying that “there is no replacement for experience” is a truism that has stood the test of time. The simple fact is that a lack of experience or expertise can dismantle your deal. Consider the following scenario – a business owner nearing retirement owns a multi-location operation that is doing several million in annual sales. He interviews a well-respected and experienced Business Broker and is impressed. However, the business owner's niece has recently received her MBA and has told her uncle that she can handle the sale of his business and in the process, save him a bundle. On paper, everything sounds fine, but as it turns out the lack of experience or expertise gives this business owner less than optimal results. Let's take a look at a few problems that recently arose with our nameless, but successful, business owner and his well-meaning and smart, but inexperienced niece. Error #1 No Confidentiality Agreements One problem is that the business owner and his … [Read more...]

Not everyone wants to sell a business when they feel as though they have to sell. Life changes, such as divorce or illness, can trigger the sale of a business. Everything from declining business revenue to partnership problems and more can send business owners scrambling for the exit sign. However, selling your company isn't always an option, especially for small businesses. In this article, we will take a closer look at just such a situation. The business under consideration is a successful distribution business, which is also a classic example of a value-enhanced business. The two owners each draw several hundred thousand from the business each year to go along with a range of other benefits. If hypothetically, the business was to sell for $2 million dollars, each of the owners would receive approximately $1 million. Of course, this sounds like a sizable amount. So, what is the problem? When one stops to factor in such variables as taxes, closing expenses and debt, that $1 … [Read more...]

If you own a business, then ownership transition should definitely be a central topic in your planning. A few years ago, MassMutual Life Insurance Company conducted a very interesting and thought-provoking survey of family-owned businesses. Obviously, family-owned businesses have their own unique needs and challenges. The MassMutual Life Insurance Company survey certainly underscored this fact. While the survey was conducted a few years ago, the information it contained is more relevant and actionable than ever. Let's take a closer look at some of the key conclusions and discoveries. Founder Control One of the most important findings of the survey was that a full 80% of family-owned businesses are still controlled by the founders. The survey also discovered that 90% of family-run businesses intend to stay family-owned in the future. Lack of Leadership Plans Leadership is another area of great interest. Strikingly, approximately 30% of family-owned businesses will in fact … [Read more...]

The reasons to sell a business can be divided into two main categories. The first is a sale that is planned almost from the beginning or by an owner who knows that selling is or should be a planned event. The second is exactly the opposite – unplanned; the sale is motivated by a specific event such as health, divorce, partnership disputes, business crises, etc. However, in between the two major reasons, are a host of unpredictable reasons. A seller may not even be thinking of selling when he or she is approached by an individual, group or another company, and an attractive offer is made. The owner of a business may die, and the heirs have no interest in operating it. A company may bring in new management who decides to sell off a division or two; or maybe even decides that selling the entire business is in the best interests of everyone. A major competitor may enter the market, forcing an owner to elect to sell a business. And the competition may not just be another company. The … [Read more...]

The first key is to have your accountant take a look at your accounting procedures and make recommendations on how to improve them. He or she may also help in preparing financial projections for the coming year(s). Getting your company's financial house in order is very important in establishing the value of your firm (business valuation). The second key is to review the reputation, image, and marketing materials of your company. Certainly, the quality of your product or service is paramount, but how your firm presents itself to customers, clients, suppliers, etc. – and the outside world – is also very important. The appearance of your facilities and customer services – beginning with how people are treated on the telephone or in the waiting/reception area – are the kind of first impressions that are critical in dealing with your customers or clients. Don't forget about the company's Web site; in many cases, it is the initial introduction or "first impression" of your company. Now … [Read more...]

Burnout is a strange phenomenon in that often a business owner doesn’t know that he or she is experiencing it until it is too late.  Owners who feel beleaguered and over stressed frequently want to sell a business and move on. However, buyers are not so eager to accept burnout as a believable reason for why an owner wants to sell a business. It is the responsibility of every business owner to be on guard against potential burnout.  After all, it is better to “cash in” than to “burnout”.  In this article, we will examine a few of the key warning signs that you may be on the verge of burning out. Sign 1: Loss of Interest in Owning Your Business Once upon a time, you were likely excited about your business. But if those days are long gone, then it might be time to move on. Owning a business is hard work and eventually over a long period of time, it can take a toll. If you find each day to be boring, then it is probably time to sell, move on and start a new chapter in your … [Read more...]

It is common for executives at companies to undergo an annual physical. Likewise, these same executives will likely examine their own investments at least once a year, if not more often. However, rather perplexingly, these same capable and responsible executives never consider giving their company an annual physical unless required to do so by rule or regulations. Most Business Owners Don't Know Recently, a leading CPA firm undertook a study that was quite revealing. In particular, this study concluded that a whopping 65% of business owners don't know the value of their company and 75% of the surveyed business owners had their net worth tied up in their businesses. Phrased another way, 75% of business owners don't know how much they are worth! Perhaps most striking of all was the fact that a full 85% of business owners have no exit strategy whatsoever. Having Recurrent Business Valuations is a Must Business owners should know what their businesses are worth at least on an … [Read more...]