When it comes to reaching a successful closing, there are four important stages to keep in mind. In this article, we will take a look at the process and what sellers can expect. If you are planning to sell a business, it is also helpful to understand in depth what the stages are from a buyer’s perspective. The Letter of Intent (LOI) The letter of intent is one of the responsibilities that your M&A Advisor will take on to assist you. Your letter of intent should include the price, terms, time frame anticipated as well as other factors, such as the seller’s transition and training. Details such as what is included and what is not included in the deal should always be addressed in this agreement. Due Diligence The due diligence process is also an essential step. Your M&A Advisor will guide you during due diligence. All important facts and documentation should be evaluated, ranging from tax returns and internal P&Ls to leases, bank statements, and … [Read more...]
selling a business
Preparing for Selling your Business and Retirement
Business owners are truly committed to their businesses. As a result, it is very difficult for them to step away even when they approach retirement age. It is not uncommon for business owners to keep working into their golden years. But the truth of the matter is that at some point almost every business owner will need to embrace retirement and sell their business whether it is for health issues, moving to a new location, or simply for greater peace of mind. If you find yourself in this situation, it could feel overwhelming. After all, most people have not sold a business before. As a result, they are not clear on what the process is and don’t know where to begin or who to contact. Every business owner should be thinking about the eventual sale of their business because this future event should determine many of your current activities and decisions. Let’s take a look at some things you can do well in advance to increase the probability of selling your business. Automate … [Read more...]
How to Get Ready to Sell Your Business
You may have heard the advice, “the best time to prepare to sell is when you start your business.” While this statement is far from realistic for most business owners and may even sound humorous, it does contain a certain amount of wisdom. When it comes to getting the best outcomes selling your business, preparation cannot be undervalued. No matter where you are in the journey of running your business, we encourage you to prepare as much as you can. With that in mind, let’s take a look at some considerations and decisions that you’ll need to make when you do get ready to sell. It’s never too early to begin pondering the answers to these questions. If you are involved in the day-to-day running of your business, logic would dictate that you’re quite busy and don’t have time to dedicate a lot of time towards the process of selling your business. The good news is that is one area where a Business Broker or M&A Advisor will make all of the difference. Brokerage professionals … [Read more...]
How Changing Market Conditions Can Impact Your Business
Recently, the International Business Brokers Association (IBBA) and M&A Source released its survey report. This survey features feedback from an impressive 301 brokerage professionals across 44 states with 266 transactions taking place in the quarter. The report had numerous key findings that will be of interest to those looking to buy or sell a business. The Emergence of Covid-Proof Businesses One key fact of interest is that a full 25% of businesses are still operating below capacity due to the pandemic’s enduring impact. The Market Pulse survey concluded that a quarter of all small and medium sized businesses are either in a position where they are temporarily closed or are operating below capacity. On the other side of the equation, the survey noted that 29% of businesses have either emerged as “Covid proof” or have actually benefited from the pandemic. For sellers with Covid resistant businesses, now could be an excellent time to sell. For buyers, there are … [Read more...]
Selling Your Business? Do-It-Yourself is Risky Business!
When the owner of a business makes the decision to sell, he or she is taking a giant step that involves the emotions as well as the marketplace, each with its own set of complexities. Those sellers who are tempted to undertake the transaction on their own should understand both the process and the emotional environment that this process is set against. The steps outlined below are just some of the items for a successful sale. While these might seem daunting to the do-it-yourselfer, by engaging the help of a M&A Business Advisor, the seller can feel confident about what is often one of the major decisions of a lifetime. 1. Set the stage. What kind of impression will the business make on prospective buyers? The seller may be happy with a weathered sign (the rustic look) or weeds poking up through the pavement (the natural look), but the buyer might only think, “What a mess!” Equally problematic can be improvements planned by the seller that appeal to his or her sense of … [Read more...]
The Psychology of Selling Your Business – Are You Sure You’re Ready?
Most likely, selling your business is one of the biggest decisions of your life. Unless you own a business, it is impossible to understand just how all-encompassing of a process it can be. With that stated, it is important for business owners to step back and seriously reflect on whether or not they are truly ready to sell. The psychological aspects of selling are not trivial. Various aspects must be taken into consideration before initiating the process to sell beforehand to avoid all kinds of issues. There are many reasons why it is vital to step back and think about whether or not you are really ready to sell your business. Far too many business owners believe they are ready to sell, only to discover (much too late) that an executed sale may not be optimal. Selling When There is No Other Choice Selling a business because there is no other choice, such as situations concerning failing health, personal issues or problems with a business partner, isn’t a true choice at … [Read more...]
The Importance of Owner Flexibility When Selling a Business
You shouldn’t expect to sell your company overnight. For every company that sells quickly, there are a hundred that take many months or even years to sell. Having the correct mindset and understanding of what you must do ahead of time to prepare for the sale of your company will help you avoid a range of headaches and dramatically increase your overall chances of success. First, and arguably most importantly, you must have the right frame of mind. Flexibility is a key attribute for any business owner looking to sell his or her business. There are many variables involved in selling a business, and that means much can go wrong. An inflexible owner can even irritate prospective buyers and inadvertently sabotage what could have otherwise been a workable deal. Be Flexible on Price A key part of being flexible is to be ready and willing to accept a lower price. At the end of the day, the marketplace will determine what your business is worth. There are many reasons why … [Read more...]
Four Common Seller Mistakes When Selling a Business
Sellers of businesses are just like everyone else in that they can make mistakes. In this article, we’ll explore some of the most common mistakes that we see along with some of the repercussions. 1. Not Seeing the Buyer’s Point of View The first major mistake that sellers make is that they simply fail to look at the situation from the buyer’s perspective. One of the smartest moves any seller can make is to step back and ask themselves two key questions. “What information would I expect to see if I was thinking about buying this business? “Would I trust the information being presented to me if I was the buyer?” While there are many other questions sellers can ask to help reframe their thinking, these two simple questions can orient a seller’s thinking towards a buyer’s perspective. Additionally, investing the time to understand the buyer’s position can help avoid a range of problems and help smooth out the negotiation process. It is also important to understand … [Read more...]
Price or Terms: The Structure of the Deal When Selling a Business
An old saying in negotiating the sale of a business goes like this: The buyer says to the seller, “You name the price, and I get to name the terms.” Another saying used to explain the actual value of the term full price: “If we could find you a business that nets you $500,000 a year after debt service, and you could buy it for $100 down, would you really care what the full price was?” It seems that everyone is concerned only about full price. And yet, the price is just part of the equation. If a seller is willing to accept a relatively small down payment and carry the balance, a higher price can be achieved. On the other hand, the more cash the seller wants up front, the lower the price. If the seller demands all cash, barring some form of outside financing, the price lowers – and, in most cases, the chance of selling decreases as well. Even in cases where outside financing is used, such as through SBA, etc., the lender will do everything possible to ensure that the price … [Read more...]
Confidential Business Reviews Should Establish Trust
When you are selling a business, your Business Broker or M&A Advisor will likely create a Comprehensive Business Review, or CBR. This comprehensive document can then be presented to prospective buyers once they have signed all necessary confidentiality documentation. It is essential that this document builds trust between both parties, as this will go a long way towards achieving a successful deal. Be Honest The bottom line is that your CBR will be 95% positive. The majority of the document will be dedicated towards selling and promoting your business. Therefore, it only makes sense to disclose some potential problems. When handled correctly, the disclosure of problems can actually be a strong asset. For example, current weaknesses of your business could become strengths in the mind of the buyer. For example, a business with a very poor online presence represents a substantial opportunity for a buyer to improve marketing and communications. Summed up another way, … [Read more...]
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