As an entrepreneur and business owner, your partnership agreement stands as one of the most important business documents you will sign. Business structures can be as complicated as the people that create those businesses. Quite often, business owners create businesses with friends or loved ones and, as a result, will not have a proper partnership agreement in place.  It’s important to note that not having a partnership agreement in place is a mistake. There are too many unknowns and too many variables not to have this essential document. You need a legal framework to protect your business from the vast array of potential pitfalls that may have an impact.  The Key Elements of a Solid Partnership Agreement At the top of the list of every partnership agreement is a clear outline and understanding of rights and responsibilities. All too often partnerships run into trouble as the rights and responsibilities of the parties aren’t clearly thought through and then outlined in a partnership … [Read more...]

When the time comes to sell a business, any business, confidentiality must be placed at the top of the list. One of the quickest ways to damage any business that is for sale is for confidentiality to be breached. Once confidentiality is breached it can be difficult, or even impossible, to contain or repair the damage. No business in any industry is exempt from this rule. It is no accident that savvy and experienced entrepreneurs, business owners, attorneys, accountants and business brokers are dedicated to maintaining seller confidentiality. A single breach of confidentiality can potentially destroy a business or, at the very least, negatively impact its value. A breach of confidentiality, even if it doesn’t destroy a business, can tarnish its reputation and ultimately deflate its value.  When it becomes public that a business is for sale, there are many potential negative ramifications. Key employees, customers and suppliers may all think that it is time to begin looking elsewhere. … [Read more...]

Business owners are usually too busy running their business to deal with the fact that retirement will arrive one day. Ultimately, every business owner walks away from their business. The sooner you start preparing for that day, the better off you’ll be. Whether it is an established location, relationships with customers and suppliers, or an understanding of a given industry, an established business has much to offer. Prospective buyers also know the benefits of buying a business with a track record. Simply stated, no one is a greater expert on your business than you. That means you are positioned to evaluate your business and help map out a plan so that there is a smooth transition from buyer to seller. Let’s take a look at some tips for getting the best price on your deal and making that transition a little easier. 1. Have a Second-in-Command This first tip is one that shouldn’t be overlooked. Develop and have a competent, dependable, and proven second in command. Any prospective … [Read more...]

The old saying that “timing is everything,” usually applies to selling one’s business. Ultimately, every business owner will have to exit their business, and the sooner one prepares to sell, the better the final results will be.  With each passing year, more and more baby boomers are reaching retirement age. In many cases, this means that they have no choice but to sell their businesses. The time is now upon us where a simply massive number of businesses will be put up for sale.  Statistics and studies back up this claim. Studies show that people born between 1946 and 1964 make up 40% of small business owners, and about 10,000 baby boomers retire every single day. 1 Business owners who get out in front of this pending avalanche stand to benefit considerably. There are many other good reasons to sell. Many business owners find that general burnout, and especially the burnout associated with operating a business during the pandemic, is prompting them to think about selling. Burnout isn’t … [Read more...]

Your employees are the heart and soul of your business. Therefore, if you want a thriving business, you need to put their satisfaction at the top of your list. After all, if your employees are not happy, this level of negativity will eventually spread to your customers and clients. Before you know it, you may see your level of profits and success decrease. Any time you spend thinking about positive changes in your workplace will be well worth your time and energy.  Hiring Processes Be sure to pay careful attention to your hiring processes and the ways that you evaluate candidates. When you hire a new employee, this is the start of a relationship that will ultimately impact your business in a wide variety of ways. It’s worth the time to make the job attractive and be as accurate as possible when it comes to your job descriptions. Make sure that anyone at your company who is involved in the interview or selection process is professional and thoroughly coached on best hiring … [Read more...]

Obviously, serious buyers want to carefully look at the financials of a company under consideration and all of the other major aspects of the company. However, there are a few other areas that the serious buyer will investigate that sellers may overlook. The Industry – The buyer will want to take a serious look at the industry itself, the customers, the suppliers, the competition, etc. This investigation will cover the strengths, weaknesses, threats from competition, and opportunities of the potential acquisition. With the growth of the “big box” retailers, much power has shifted from the manufacturer to the retailer. A manufacturer may want to increase prices, but if Wal-Mart says no, it’s a very powerful no. Discretionary Costs – Some sellers will reduce their expenses in discretionary areas such as advertising, public relations, research and development, thus making for a higher bottom line. However, these cuts will hurt the future bottom line, and smart buyers will take notice of … [Read more...]

Experts recommend considering adding an advisory council to your business. This informal board would provide strategic advice on business management related issues. An advisory council would be in place to provide advice to your business, but unlike a board of directors, they will not actually make the key decisions. Further, while a board of directors often has equity in the business, an advisory council does not. Of course, an advisory council is not right for every business. You will typically see them in businesses that are making between 3 and 25 million.  Consider Your Strengths and Weaknesses There are many fundamental needs of a business and most entrepreneurs are good at one or two, but cannot excel in every area. The advisory council, as well as other outside experts, can be a great way to fill in the gaps in an entrepreneur’s abilities.  Beyond understanding the strengths and weaknesses of a company, it is also important for an advisory council to understand the goals of the … [Read more...]

Your brand is a customer’s perception about your business. It determines how they feel about the services and product that you offer. A consistent brand message over time will shape what clients and customers think about you and what you stand for. As a business owner, you need to be able to answer the following important question: why should customers care about you? Every business owner has to think about the art of branding in order to build a stronger and more robust organization. This should incorporate the art of storytelling and the science of strategy in order to build a dynamic and memorable brand.  Relationships with Your Clients In creating a brand, it is vital to remember that brand creation ultimately takes place in the mind of the consumer. Each individual consumer will create their own version of the brand based on his or her perception.  At the core of the entire process is building trust. The goal, both in the short-term and the long-term, is for customers to feel safe … [Read more...]

If you’re planning on a business agreement to buy or sell a business, you’ll want to know about term sheets. These non-binding agreements will help with progress for both parties. The information covered in the term sheet should include everything from pricing and terms to special considerations. You can expect it to be between one and five pages in length.  What is the Difference Between a Term Sheet and a Contract? When a term sheet is created, it demonstrates that there is an agreement between the buyer and seller and a business transaction is possible. However, neither party is bound to this transaction. On the other hand, a contract is typically a legally binding agreement that would hold up in a court of law.  What are the Pros and Cons of a Term Sheet While it can be beneficial that a term sheet is non-binding when buyers and sellers are exploring the terms of a deal, it’s also important to know that a term sheet can come with risks. Due to the fact that it covers many details … [Read more...]

If you’re selling your business and things are looking positive with your buyer, you might be tempted to start resting easy. If you have a signed letter of intent, you might be even more tempted to think that things are pretty settled. However, the fact of the matter is that much can be uncovered during the due diligence process, and that is often when deals start to fall apart. Due diligence is an essential step that protects buyers, and sellers should be well-prepared to have things in good shape far in advance. Let’s take a closer look at some areas where a deal can potentially go awry.  Products and Equipment  When the sale involves a business that handles manufacturing, equipment is carefully evaluated during due diligence. Buyers will be thinking about any potential environmental issues that could affect the business. If you’re selling a business and have loose ends with your equipment or facility, this should be handled in advance if possible.  Buyers will also be looking at the … [Read more...]