A recent and insightful Forbes article, “Study Shows Why Many Business Owners Can’t Sell When They Want To” penned by Mary Ellen Biery, generates some thought-provoking ideas. The article discusses an Exit Planning Institute (EPI) study that outlined the reality that many business owners can’t control when they are able to sell. Many business owners expect to be able to sell whenever they like. However, the reality, as outlined by the EPI study, revealed that the truth is that for business owners, selling is often easier said than done. In the article, Christopher Snider, President and CEO of EPI, noted that a large percentage of business owners have no exit planning in place. This fact is made all the more striking by the revelation that most owners have up to 90% of their assets tied up in their businesses. Snider’s view is that most business owners will have to sell within the next 10 to 15 years, and yet, are unprepared to do so. According to the EPI only 20% to 30% of … [Read more...]
Great Tips for Helping You Find a Buyer for Your Business
No one keeps a business forever. At some point, you’ll either want to sell your business or have to retire. When the time comes to sell, it is important to streamline the process, experience as little stress as possible and also receive top dollar. In Alejandro Cremades’s recent Forbes magazine article, “How to Find a Buyer for Your Business,” Cremades explores the most important steps business owners should take when looking to sell. Like so many things in life, finding a buyer for your business is about preparation. As Cremades notes, you should think about selling your business on the day you found your company. Creating a business but having no exit strategy is simply not a good idea, and it’s certainly not a safe strategy either. Instead you should “build and plan to be acquired.” For Cremades, it is vital to decide in the beginning if your preferred exit strategy is to be acquired. If you know from the beginning that you wish to be acquired, then you should build your … [Read more...]
Q2 Small Business Transactions Take a Dip but Strong Market Remains
Small business transactions have been enjoying record numbers. But as of the second quarter of 2019, the numbers have begun to take a small dip. Experts feel that the trade war with China is playing a role, according to a recent article, “Q2 Small Business Transactions Down as Trade War Questions Remain.” The numbers don’t lie, as the number of transactions stood at 2,444 for Q2, which is a drop of 9.6%. But the simple fact remains that businesses are still selling at record levels. As BizBuySell points out, there were 4,948 transactions reported in just the first half of 2019. That means that 2019 could be the second most active business-for-sale market since BizBuySell began tracking data back in 2007. In other words, the Q2 9.6% drop certainly doesn’t mean that the sky is falling. Deals per broker are declining, and many are looking to the current trade war between the U.S. and China for answers. Increased tariffs and associated worries are, according to many experts, behind … [Read more...]
The Variety of Variables Involved in Selling Your Business
Selling a business is more than a big decision, as it is also quite complex. Finding the right buyer for a business is at the heart of the matter. In the recent Forbes article, “Ready to Sell Your Business? Follow These 3 Tips to Find the Best Buyer,” author Serenity Gibbons outlines that selling a business is a multifaceted process with a lot of moving parts. A central variable for those looking to sell a business is to have a coherent and well thought out exit strategy in place. She points out that at the top of your to-do list should be selling your business the right way, and that means having a great exit strategy in place. In fact, many experts feel that you should have an exit strategy in place even when you first open your business. Another key variable to keep in mind is that, according to Gibbons, only an estimated 20% to 30% of businesses on the market actually find buyers. This important fact means that business owners, who usually have a large percentage of their … [Read more...]
Dealing with Inexperience Can Ruin the Deal
The 65-year old owner of a multi-location retail operation doing $30 million in annual sales decided to retire. He interviewed a highly recommended intermediary and was impressed. However, he had a nephew who had just received his MBA and who told his uncle that he could handle the sale and save him some money. He would do it for half of what the intermediary said his fee would be – so the uncle decided to use his nephew. Now, his nephew was a nice young man, educated at one of the top business schools, but he had never been involved in a middle market deal. He had read a lot of case studies and was confident that he could “do the deal.” Inexperience # 1 – The owner and the nephew agreed not to bring the CFO into the picture, nor execute a “stay” agreement. The nephew felt he could handle the financial details. Neither one of them realized that a potential purchaser would expect to meet with the CFO when it came to the finances of the business, and certainly would expect the CFO … [Read more...]
The Variables that Drive and Influence Business Valuations
If you’ve never bought or sold a business before, then the factors that drive and influence business valuations likely seem a bit murky. In a recent Divestopedia article from Kevin Ramsier entitled, “A Closer Look at What Drives and Influences Business Valuations,” Ramsier takes a closer look at this important topic. Business brokers and M&A advisors play a key role in helping business owners understand why their business receives the valuation that it does. No doubt, the final assessed value is based on a wide array of variables. But with some effort, clarity is possible. In his article, Ramsier points out that “value means different things to different buyers” and that the “perceived value depends on the circumstances, interpretation and the role that is played in a transition.” It is important to remember that no two businesses are alike. For that reason, what goes into a given valuation will vary, often greatly. Looking to EBITDA Ramier points to several metrics including … [Read more...]
Is Your Business Really Worth Handing Over to the Next Generation?
Before you begin your business, you should be thinking about how you will hand that business over to someone else. No one runs a business forever. Whether you sell your business or let a relative inherit it, at some point you will need to step away. When you finally do separate from your business, it is critical that you are certain that it is worth handing over. In his January 2019 article in Forbes magazine entitled “Make Sure Your Business is Worth Handing Over,” author Francois Botha dives in and explores this very topic. In this article, Botha emphasizes that family businesses should not “fall into the trap of prioritizing job creation for their children.” Instead, that the priority should be to perpetuate the business. Botha cites the co-founder and chairman of The Leadership Pipeline Institute, Stephen Drotter, who feels that the main goal of any business needs to be its suitability. Drotter established five principles designed to assist family businesses as they seek to … [Read more...]
Erase the Stress of Selling Your Business by Finding the Right Buyer
There is no denying the fact that life is much, much easier when one can find the right buyer for his or her business. Buying or selling a business can be a stressful affair, but much of that stress can be eliminated by getting the right support. The Concept of the “Right Buyer” In the recent Inc. article entitled, “How to Find the Right Buyer for Your Business and Avoid Negative Consequences,” Bob House builds his article around a relatively simple and straightforward, but powerful, concept. House’s notion is, “the right buyer is worth more than a big check.” House correctly points out that far too many sellers become fixated on exiting their business and grabbing a big pay day. In their focused interest in the sum they will receive, these sellers ignore a range of other important details. In part, sellers often miss the single greatest variable in the entire process: finding the most qualified buyer. The simple fact is that if sellers want to reduce their long-term stress, then … [Read more...]
Do You Know What Kind of Business Owner You Really Are?
Does your business have real, long-lasting longevity or is your business a temporary entity that will vanish the second you stop working on it? In his insightful article in The Business Journals entitled, “Are You Living for Today as a Business Owner or Building Value?” author Kent Bernhard asks a very important question of readers, “Are you a lifestyle business owner or a value accelerator?” Many business owners have never stopped to ask this very important, yet basic, question regarding their businesses. So, let’s turn our attention to this key question that all business owners must stop and ask at some point. As Bernhard points out the core issue here is how a given business owner defines the idea of success for him or herself. As Chuck Richards, the CEO of CoreValue Software notes, “At the end of the day, a lifestyle business is just a job.” Richards goes on to note that this is fine for many people. But if this is the case, it is a choice that one is making. Therefore, … [Read more...]
How Employees Factor into the Success of Your Business
Quality employees are essential for the long-term success and growth of any business. Many entrepreneurs learn this simple fact far too late. Regardless of what kind of business you own, a handful of key employees can either make or break you. Sadly, businesses have been destroyed by employees that don’t care, or even worse, are actually working to undermine the business that employs them. In short, the more you evaluate your employees, the better off you and your business will be. Forbes’ article “Identifying Key Employees When Buying a Business”, from Richard Parker does a fine job in encouraging entrepreneurs to think more about how their employees impact their businesses and the importance of factoring in employees when considering the purchase of a business. As Parker states, “One of the most important components when evaluating a business for sale is investigating its employees.” This statement does not only apply to buyers. Of course, with this fact in mind, sellers … [Read more...]