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Business Broker Report 15: Are Market Conditions Right to Sell My Business?

Posted on Mon, Sep 08, 2014

tired business womanYou want to sell your business, but you don't have to sell it today. After all, you've worked hard for many years to build the value of your business. Sure you want to spend more time with family and friends, travel, play golf or do whatever it is you like to do when you're not working. But not at the cost of leaving money on the table. What's the point of working hard for all these years if you can't sell your business for top dollar? You can always stay on a few more years if you have to. As they say, timing is everything.

Is now the right time to sell your business?

We can't answer that question for you from the personal point of view - you and your family have to make that decision. But we can provide some insight into the market for selling businesses. From what we see, current market conditions are extremely favorable to business sellers.

Here are three factors that lead us to conclude that current market conditions have created the perfect time to sell your business:

 

Pent-up Demand
Many business owners who would have liked to have sold over the last few years held off because of the recession. Buyers have had thin pickings. This created a huge backlog of buyers - individuals, equity funds and companies - searching for businesses to buy.

Buyers are competing amongst themselves for the few good businesses available for sale, keeping valuations high. That makes for a real seller's market.

 

Availability of Capital for Acquisition Loans
Buyers - equity funds, companies and individual investors - are flush with cash. And lenders, who need to make loans to stay in business, are actively competing to find good deals to fund.

Additionally the Small Business Administration (SBA) recently increased its ceiling for business purchase loans and streamlined its approval process, making it easier than ever for buyers to be approved.  

Buyers have access to the necessary funds. They're just waiting for the right investment opportunity.

 

Low Interest Rates
Interest rates are still quite low. Low interest rates make it easier for a buyer to afford a strong sales price by lowering monthly debt-service payments. With low interest rates, a buyer can pay a strong price for your business and still stay within the lender's approvable debt-service to revenue ratios. It's a win-win situation. You achieve a high price for your business and the buyer keeps his monthly payments affordable.

But this window of opportunity created by low interest rates won't last forever. As you've probably heard, interest rates are expected to climb as the economic recovery matures. It takes up to a year to sell a business. If you're thinking about selling, you should start the process now.

 

Low interest rates, pent-up buyer demand, and the increased amount of available capital have combined to create an ideal situation for business owners thinking about selling. Is this a good time to sell your business? No . . . it's the perfect time!

 

If you would like to see if the time is right to sell your business, please click here or on the link below or call us at 888 468-1660. We'll be happy to schedule a free intitial consultation and complimentary business appraisal.

There's never an up-front cost or obligation, and all communications will be held in the strictest confidence.

Is This the Right Time to Sell My Business?

 

Prime Investments Business Brokers takes the risk out of selling. For over 25 years, Prime has helped business owners in Florida, Georgia, Virginia, Maryland, Pennsylvania, Delaware, New Jersey and Washington, DC sell their businesses - without charging up-front fees.

 

 

 

 

Tags: business brokers, busines broker, sell your business

Business Broker Report 14: What Do I Do After I Sell My Business?

Posted on Tue, May 27, 2014

man sailing after he sold his businessQuick answer: anything you damn well please!  Sail around the world. Train for a triathlon. Find the perfect trout stream. Play golf every day.

 

Sounds great, but reality is a little more complicated. You can’t just walk out the door the day after you sell your business – and most owners don’t want to. They understand that in order to protect their employees and the legacy of what they have built, they will have to stick around for a bit. That being said, some owners still want to exit as quickly as they can; others would like to continue to work for a few years, although with reduced hours and responsibilities. Some owners might want to retain a piece of the business and cash in on the upside that the buyer creates. The right Business Broker / Advisor can help structure your post-closing arrangements as part of the overall deal and create a situation that works for both you and the buyer.

Although post-closing arrangements are custom-tailored to individual needs, they fall broadly into three categories:

1. Short-Term Transitional Services

Sellers who want to exit quickly should understand that they will need to stay a minimum of 2-3 months after closing to train and familiarize the new owners with all aspects of the business. This includes introducing the buyers to your employees, familiarizing them with your operational procedures and transitioning client relationships. Often in this type of arrangement, your responsibility is full-time for the first month or two, and then reduces to part time. These arrangements typically include a consulting component where you agree to be available for a period of up to one year after closing for occasional telephone, email or in-person consulting. Short-term transitional services are traditionally provided as part of the larger deal, with no additional compensation.

2. Longer-Term Employment

Sellers who would like to stay with their company for more than a few months can have a strong hand in influencing what their post-closing situation will be. Oftentimes we can arrange that the seller limits his duties going forward to the things he likes (sales for example) and avoid the things he dislikes (administration or HR). We can also often arrange for changes in his work schedule to improve his quality of life – shorter work weeks, more vacation time, etc. While these post-closing employment arrangements often have a term of between 6 months and 2 years, we have seen cases where it worked so well that the seller stayed on for 5 years. 

3. Retaining an Equity Position

Buyers can bring more to the table than just the cash needed to consummate a deal. Buyers often bring professional management, additional capital to help the company grow, or other critical elements (such as new distribution channels) needed to take a company to the “next level”. It might be a good business decision in these instances for the seller to retain a minority interest in the company.  The seller would then continue working for a period of time and use the assets the buyer brought to the table to help the buyer grow the business. At some point in the future, the seller elects for the buyer to buy his remaining equity at a pre-determined formula, which, if all goes well, gives him a higher valuation and allows him to participate in the growth that has occurred since he sold his majority interest.

 For more information about issues that relate to selling your business, please visit us at www.primeinvestments.us. There are lots of white papers to download and blog topics of interest to business owners. If you would like to have a confidential discussion about your personal situation, click here or on the link below or call us at 240 290-5000. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

 There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

 Schedule Your No-Fee Initial Consultation

Prime Investments Business Brokers takes the risk out of selling. For over 25 years Prime has been helping business owners in Florida, Georgia, Virginia, Maryland, Pennsylvania, Delaware, New Jersey and Washington, DC sell their businesses – without charging upfront fees.

 

 

 

 

 

 

 

 

 

 

 

 

 

Tags: business brokers, business broker Pennsylvania, business broker Virginia, business broker Delaware, business broker Washington, business broker, business broker Maryland, business broker New Jersey, DC

Business Broker Report 13: Will The New Owner Keep My Employees?

Posted on Tue, Mar 18, 2014
employee getting fired when business broker sold businessYour  employees have stuck with you year after year, working hard to help build your business into a thriving enterprise. You wouldn’t be where you are today without them. So when it comes time to sell your business, it’s not surprising that you are concerned about their future. Will the buyer keep your employees on, or will he just "clean house” and put his own people in.

 

What’s the Buyer Buying Anyway?

Your business may have lots of equipment, vehicles and inventory. Or it may have long-term contracts, intellectual property or other valuable assets. Or it may be a service business with very little in the way of hard assets. In either case, it has one critical component– its employees. Your assets couldn’t generate revenues without them. It’s your employees who have the customer and vendor relationships and the specific knowledge and skills that generate revenues and profits. It’s your employees who make your company valuable.

 As worried as you are that a new owner might let your employees go, the new owner is more worried that your employees might quit! After all, what would happen to the value of your business after the sale if your key people left? Rather than “clearing house”, we find that new owners usually bend over backwards to make sure that the existing employees stay on and feel like they are valuable members of the team. They may offer (or insist on) employment contracts for key people. They will maintain current compensation and benefits. They typically don’t make any major changes for six months to one year after closing. And, oftentimes, they ask that you, the existing owner, stay with the business for a period of time after closing to help smooth the transition.

 So the worry that you may have that your employees will all get fired after the sale is largely unfounded – the new owner needs your employees and wants them to stay. Here’s a brief outline of what to expect with three different types of buyers:

 

1. Entrepreneurial Individual Buyer  

If an individual buys your company, he will likely do his utmost to keep your entire staff intact. He will essentially step into your shoes and, over time, learn the operational details of your business.  He will rely on your employees to keep the operation running smoothly.

2. Equity Fund Buyer

An equity fund buyer may already have an experienced manager to step in and run the company or, as often happens, may promote your second in command to COO and incentivize him or her with the ability to earn an ownership position in the business. In either case, equity fund buyers will typically want all of the existing employees to stay on.

 3. Industry Insider Buyer

If an industry insider buys your company, there may be some positions that the buying company’s existing staff can take over. Sales and production staff are typically safe, as are most lower to mid-level managerial positions; however, some higher-level managerial positions might be eliminated.

 For more information about issues that relate to selling your business, please visit us at www.primeinvestments.us. There are lots of white papers to download and blog topics of interest to business owners. If you would like to have a confidential discussion about your personal situation, click here, click on the link below or call us at 240 290-5000 We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

 There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

Schedule Your No-Fee Initial Consultation

Prime Investments Business Brokers takes the risk out of selling. For over 25 years Prime has been helping business owners in Virginia, Maryland, Pennsylvania, Florida, Georgia, Delaware, New Jersey and Washington, DC sell their businesses – without charging upfront fees.

 

 

 

 

 

 

 

 

 

 

 

 

 

Tags: business brokers, business broker Virginia, business broker Delaware, business brokoer Pennsylvania, business broker, business broker Maryland, business broker New Jersey

Business Broker Report 11: Is Your Competitor Really the Best Buyer?

Posted on Fri, Nov 15, 2013

big fish small fishWhen it comes time to sell their business, many owners sit down with their Business Broker or M&A Advisor and tell them that this is going to be easy – that they already know who the perfect buyer is for their business. “My competitor just down the road,” they often say “would be the perfect buyer – he already knows the business and he could just add my people and accounts. And I also sell X product or service that he doesn’t have, and he could add that to his existing offerings. It’s a perfect fit!”

Well . . . maybe. It might work. But be careful – offering your business to a competitor is fraught with peril. The risk here is that you and the buyer operate in the same marketplace. It’s a small world. You have overlapping suppliers, customers and even workers who know one another. Although your advisor will have all prospective buyers sign Non-Disclosure Agreements prohibiting them from disclosing the fact that you are selling to anyone except direct deal advisors (typically accountants and attorneys), because you are in the same market, even an inadvertent breach of confidentiality could cause you serious harm.

But is the risk worthwhile? Will the competitor pay a strong price or even an above-market price to acquire your company? We find that the answer is typically “no”. We consistently find that equity funds, individual buyers or other outside investors accept higher valuations than industry insiders. While your competition would love to acquire your clients and other assets, they generally don’t like to pay for good will – after all, they already know how to provide the goods or services you provide.

That’s not to say that selling to a competitor is never the right move - sometimes it is. For
example, if your competitor is doing a “roll-up” – aggressively acquiring a number of businesses in same the field to build a much larger company – you may be able to walk away with a good deal in hand.  Or if your business has something that your competitor desperately needs but can’t get, you may be able to leverage a strong price. But even these situations need to be handled with an abundance of caution.

What other types of buyers are there?

  1. Private Equity Funds (PE)
    PE firms are private companies comprised of groups of investors who pool money to buy and manage a portfolio of businesses. Although there are huge PE firms like The Carlyle Group or The Blackstone Group acquiring very large companies, there are also thousands of smaller PE firms that are active in the lower end of the market, buying companies that are worth between $1 million and $25 million. PE firms buy mature companies from owners who are either planning to retire, ready for a new business pursuit or who understand that professional management is needed to take their company to the next level.

    PE firms offer several advantages over traditional buyers:
  • High net worth – PE firms often don’t need to seek outside financing.
  • Experience – PE firms typically have made multiple acquisitions and decide quickly whether they will make an  offer or not.
  • Professional management – PE firms can often provide the
    management expertise the acquired company needs to realize its true potential.
  • Strong price – once a PE firm has decided to make an acquisition, it typically will make a good offer and try to get the deal closed as soon as possible.
  • Hi-net Worth Entrepreneurial Individuals
    These are individuals who have either been in business before or have the experience, skill and capital necessary to acquire and manage a business. Some will have a depth of knowledge and experience in your specific field; others will come with general business training and acumen that they can apply to manage and grow your company. An individual buyer uses his own money and/or borrows money from a lender to make an acquisition. Since he is risking his own assets, oftentimes including his home, he tends to be very careful. While it sometimes takes a bit more patience and “hand holding” to get a deal done with an individual buyer, once he is comfortable that your company represents a safe investment, the entrepreneurial individual is often the perfect buyer.

  • Companies in Related Fields or Different Geographic Markets
    These are companies seeking to grow by acquiring a company with products or service offerings related to their existing core business or by acquiring companies in their core business in new geographic markets. They offer the advantage of having some degree of knowledge of your industry while being removed sufficiently as to not be a direct competitive threat. While perhaps not as aggressive as PE firms in their valuations, these companies often will pay a strong price because the acquisition creates synergistic value above and beyond the intrinsic value of the company they are buying.

    To help choose the right buyer for your business and learn more about the business sales process in general, click on the link below, call us at 240 290-5000 or visit us at www.primeinvestments.us. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

    There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence. 

Find the Best Buyer for Your Business

 

 

 

Tags: business brokers, M&A, business broker

Business Broker Report 10: 3 Tips for Boomers Ready to Sell

Posted on Tue, Sep 17, 2013

retired man sailing

According to many Business Brokers and Mergers and Acquisitions Specialists, we're entering into a perfect storm created by baby boomers reaching retirement age and the country coming out of a recession. Boomer business owners who have wanted to retire, but have held their businesses off the market because of the recession, are now moving forward in increasing numbers.

Early in 2012, with the capital gains tax hike pending, tax considerations were the number one driver of business sales. But, according to a survey by Pepperdine University, the International Business Brokers Association and M&A Source, by the last quarter of 2012, baby boomer retirement had become the number one driver of small business sales.  In fact, according to BizBuySell.com (an online site hosting business buying and selling activity) the sale of small businesses increased 56% in the first quarter of 2013 over the first quarter of 2012.

OK. We get it. There’s going to be a lot of businesses on the market over the next few years. That being so, how do you make your business stand out from the crowd? How do you make it attractive to buyers so you can get the deal you need to get to help secure your retirement?

Here are 3 tips for getting your business in shape to sell:

 

1.     Enhance Your “Curb Appeal”

Studies have shown that a thorough detailing can add as much as 20% to the value of a used car. Whether it’s cleaning old debt off the books, getting rid of obsolete inventory, updating your IT infrastructure, or sprucing up your physical plant – updating and cleaning up your business before it goes on the market pays for itself many times over at the closing table. Buyers don’t want to buy a business that appears to have been neglected.  They don’t want to have to replace the phone system or deal with some uncollectable receivable on their first day of business. They want everything to be in place, bright and shiny and ready to help them realize their dreams.

 

2.     Start Letting Go of the Reins

Some business owners have trouble delegating – they keep their hands tight on the reins, make all the important decisions themselves and are the main point of contact with key customers.  That’s great as long as it works, but it’s not so great when it’s time to sell. Buyers will avoid or discount companies where all decision making and key customer relationships reside with the owner. If you don’t already have one, it’s important to create a strong second level of management before you put your company on the market. Start delegating decision making to your next-in-command. Transition key customer relationships to trusted managers. It may be painful for some owners to give up some control, but it will yield strong dividends at the sales table.

 

3.     Start a Relationship with an Experienced Business Broker or M&A Advisor

Even if you are not ready to sell today, it makes sense to meet with a qualified Business Broker or M&A Advisor. An experienced professional can advise you as to changes you need to make in your business to make it more attractive to buyers, educate you as to what you can expect during the process of selling, package your business to show it off in its best light to command the highest price, and guide you through potential pitfalls.

 

It can take a year or more to sell a business. To discuss your situation and start your personal planning, click on the link below, visit us at www.primeinvestments.us or call us at 240 290-5000. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

 

There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

 

Schedule Your No-Fee Initial Consultation 

 

 

 

Tags: Appraisal, business broker, business brokers, IT, M&A, Mergers and Acquisitions, selling your business

Business Broker Report 8: 3 Ways Owners Can Increase Profits

Posted on Thu, Jun 13, 2013
increasing profits 3

 

Business owners are always looking for ways to maximize profits and increase the value of their business. There’s lots of advice out there, but it’s usually just some variation of “increase your sales and reduce your expenses” – duh – as if you hadn’t thought of that. Here are three ideas that you may not have thought of: 

 

Grow Your Recurring Revenue Base
Any business broker or mergers and acquisitions advisor will tell you that business buyers love recurring revenues. And there’s a reason. Recurring revenues are like magic. You make the initial sale and then do nothing (or next to nothing) and a check just shows up every month. It’s the best. And recurring revenues have additional advantages. First, because the customer is tied to you in some way, recurring revenues are usually quite stable. Second, because no additional sales effort is needed, they tend to be high-margin. And third, recurring revenues keep you connected to your customer so when he’s ready to make a new, large purchase, you’ll likely get the sale. There are lots of ways to build a base of recurring revenues – license or lease your product or technology instead of selling it outright, sell products that need periodic supplies or maintenance, sell service or maintenance agreements, franchise, sell your product through a distributor, etc. It’s well worth concentrating your energies on growing your recurring revenue base – it will pay dividends both in the short-term by increasing your profits and in the long-term by increasing the value of your company.

Fire Your Customers
Most everyone has heard of the 80-20 rule – that 80% of a company’s profits typically come from the top 20% of the company’s customers. But not enough small business owners focus on the effect on their company of the bottom 20% of customers. How many of these customers are marginal or even unprofitable? You probably have no idea. But you should. Marginal or unprofitable customers are often high-maintenance and low volume. They consume more resources than they pay for, bleed you with slow pay, or simply are too small to cover your overhead allocation. They divert attention from your hi-margin customers and use up resources that are better deployed elsewhere. We’ve sold businesses where the seller, content with his profits, never took a hard look at each customer’s profitability. When a new owner took over, however, he found that the business was losing money on each transaction with many of the company’s clients. He “fired” his marginal and losing customers and profits increased dramatically. There’s no reason to wait to get rid of losing accounts – do it now, increase your bottom line and increase the value of your company.

Have a Business Plan
Studies show that most small business owners do not have a business plan. You may not feel like you need one. You know your business, you know your market and you know competition. And you run your business more on gut feel than hard analysis. And it works – for now. But did you know that businesses with defined, current business plans do better than those without? It makes sense. If you have a plan for growth, you tend to grow. If you don’t, you can stagnate or even lose ground. Most business owners are reactive rather than proactive - they react to changes in their market instead of analyzing changes and trends, identifying their strengths and weaknesses and then devising a plan to best position their company to move forward. It’s easy to get caught up in day-to-day operational issues and crises and to lose sight of the big picture. A business plan helps keep you focused on growth.

For more information about issues that may affect the value of your business, please visit us at www.primeinvestments.us. There are lots of white papers to download and blog topics of interest to business owners. Click here or on the link below if you are thinking about selling your business or call us at 888 468-1660. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

Schedule Your No-Fee Initial Consultation

 

 

Tags: business brokers, Mergers and Acquisitions, business broker

Business Broker Report 7: 3 Signals That It's Time To Sell

Posted on Tue, May 14, 2013

Are you “burned out”? Tired of dealing with thefrustrated business owner same problems every day? Don’t have the  passion anymore that it takes to improve your business? Don’t want to risk making the big investment your company needs to grow? Wish you could spend more time with your family? Travel more?

You’re not alone. Most owners who sell their businesses are in their mid-40s to early 60’s. They’re tired of the stress of having it all on their shoulders, the long hours away from home and family. They’re not forced to sell because they’re too old to run their company; rather, they choose to sell because they want a different lifestyle. Click here to listen to stories from entrepreneurs who have chosen to sell their businesses.

Sellers are typically energetic and vigorous entrepreneurs who have built great companies, made good money and are ready to enjoy their lives and families while they are still healthy and able to do so. They want to spend more time with their children or grandchildren (who might have been shortchanged while they were devoted to building the business), travel the world, or even take on a new business challenge.

How do you know when it’s time to go? Here are 3 good indicators: 

  1. You Feel ‘Burned Out’
    It’s hard enough to wear all the hats you wear and keep your business firing on all cylinders when you’re motivated – it’s a nearly Herculean task when you’re not. It’s not that you can’t do it, it’s just that you don’t want to. The same problems day in and day out, the never-ending routine of collections, vendor issues and employee problems. It’s not challenging anymore. It’s not even fun. You’re in a rut. You need a change of pace.
  2. You Aren’t Willing To Make a Necessary Investment In Your Business
    You know what you need to do to take your company to the next level. And if you were younger, you would do it in a heartbeat. But now you’re not so sure. Getting your company to the next level would take a huge additional time commitment just when you were trying to scale back. It would require you to re-invest substantial assets when you were thinking about taking money off the table, reducing your exposure, securing your retirement or seeding a new venture.
  3. You’re Thinking There Must Be More To Life Than Work
    You’ve heard rumors about this and decided to investigate. Maybe you’ve dipped your toe in the water and taken a long trip to an exotic destination. It wasn’t so bad. You could do that again. Or you can take a few weeks to go wilderness camping with your son before he goes away to college. Or sail the Caribbean. Or pick up your old electric guitar and get the band back together. Or finally spend time at your dream vacation home you built ten years ago. Or play more golf.

Business brokers and mergers and acquisitions specialists know that the time to sell your business isn’t after you’ve neglected it, let it run down and its value has decreased -- the time to sell is when you’re at the top of your game and your business is performing well. And when you’re young enough and healthy enough to enjoy the fruits of your labor and do the things that you have always wanted to do.

It can take a year or more to sell a business. To discuss your situation and start your personal planning, click on the link below, visit us at www.primeinvestments.us or call us at 888 468-1660. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

 Schedule Your No-Fee Initial Consultation

Tags: business brokers, Mergers and Acquisitions, selling your business, Appraisal

Business Broker Report 6: How Long Will It Take to Sell My Business?

Posted on Mon, Apr 29, 2013
describe the image

Business owners tend to be “type A” personalities. They make decisions and want to see them executed – not tomorrow, not next week or next month, but NOW.

When they finally decide that it’s time to go (and it usually takes some time to reach that decision) they’re the same way. They want the deal done yesterday. But selling a business takes time. It is a delicate and complicated process that needs to be guided by a hands-on, experienced professional. Your business likely represents the bulk of your estate and the monetary value of your life’s work. You can’t rush it. You need an experienced, professional Business Broker or Mergers and Acquisitions Advisor to help guide you through potential pitfalls, avoid costly mistakes and maximize the value of your business. There aren’t second chances here. Click here to learn more about the process.

It normally takes between six months to one year to sell a business. 

The good news is that during that time, you’ll be running your business and making money. The bad news is that you will have to be patient as the process moves forward to closing.

Here’s a typical timeline of the process of selling a business:

Month 1.  Your Business Broker or M&A Advisor will give you a list of items he needs from you to write the Confidential Business Review (CBR) – the prospectus that tells prospective buyers about your business, shows your business in its best light and is calculated to help achieve the highest possible market price for your company. You will provide the requested items and your Advisor will draft the CBR for your approval. He will make any necessary changes and then finalize the document.

Months 1-2.  Your Broker or Advisor will accumulate a list of potential buyers. Buyers might be private equity funds, hi-net worth entrepreneurial individuals or other companies. He will vet the potential buyers and have them sign Non-Disclosure Agreements (NDAs). NDAs require buyers to keep all of your information confidential, including the fact that you want to sell. He will provide the CBR to potential buyers, answer their questions and follow up with you on requests for additional information.

Months 3-6. Your Broker or Advisor will develop a “pipeline” of serious prospects. These prospects will want to meet you. Your Advisor will arrange in-person or virtual meetings. If the meeting is in-person, it should be held off-site or after hours to maintain confidentiality. Some buyers will move forward; others will drop out. Your Broker will facilitate responses to requests for additional information prospects who remain interested and arrange additional meetings.

Months 4-7. Your Broker or Advisor will solicit offers from interested buyers and help you negotiate terms. Offers will typically be in the form of a Letter of Intent (LOI) – a short, non-binding document outlining the basic terms of the prospective deal. There may be multiple LOIs before you and your Advisor are satisfied that a proposed deal is right for you.

Months 5-12. Once an LOI is accepted and fully signed, it typically takes between three and six months to go to closing. During this time several things need to happen. The buyer will retain legal counsel and draft a Purchase Agreement – the formal document that defines the terms of the deal. Your lawyer will review the document and make changes that help to better protect your interests. There is normally a fair amount of back and forth negotiation before the Agreement is acceptable to both parties. There may other documents to draft and negotiate as well – Covenants Not to Compete, post-closing Employment or Consulting Agreements, Security Agreements, etc. During the early part of this period, the buyer will conduct his due diligence – his examination of the company in more detail to ensure that everything is as it is supposed to be. He may retain accountants and attorneys to help with this task. He will, if necessary, also finalize his funding. When due diligence is completed, all the closing documents are agreed to, funding is finalized and any necessary approvals are received, it is time to go to closing.

Although we have sold businesses as quickly as 90 days, we find that most businesses take 6-12 months to go to closing. Click on the button below and we’ll map out the steps you need to achieve the highest possible market price for your business. There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

Sell Your Business With Confidence

 

Tags: business brokers, M&A, Mergers and Acquisitions, selling your business

Business Broker Report 5: Confidentiality – How Important Is It ?

Posted on Thu, Apr 18, 2013

Confidentiality – How Important Is It When You Sell Your Business?As a business owner, you are likely quite loyal to your employees. They’ve stuck with you through the tough times and helped you build your company into what it is today. You wouldn’t be where you are without them. So when it’s time to sell your business, it’s not surprising that many owners are conflicted – they feel like they are betraying their devoted employees loyalty and trust.

Some owners feel guilty about keeping the sale a secret from a trusted manager or employee, especially those individuals with whom they have close personal or working relationships. But when employees learn their company is for sale, they get nervous. It’s a natural human reaction, a normal response to an event they believe may threaten their well-being. An employee will worry the new owner won’t keep him on, so he may start looking for another job – and perhaps share his fears with other employees. This is the type of news that spreads like wildfire, often distorting or losing the truth in the process.

It’s best for everyone if news of the sale is not revealed until after the closing. This way, you control how and when the details are communicated. After the closing, your employees will have the opportunity to meet with the new management, who will assure them they are valued members of the team – which is true – and that their jobs are secure. 

And if you tell even one employee, you’ve told them all. Even a trusted manager is likely to confide in his co-workers. And then word could get out on the street. Your vendors might put you on COD, your competitors will tell your clients you’re going out of business and your banker will start calling you. Nothing good can happen from breaching confidentiality.

But how do you maintain confidentiality during the sale process? Here are some tips for keeping your deal confidential:

  1. Create a buffer zone. If buyers are communicating directly with you, you’re fielding their calls and emails at work. This may lead to premature disclosure of the sale. Use a Business Broker or M&A Advisor to provide a buffer zone between your company and prospective buyers. A Broker will protect the confidentiality of the sale by shielding you from direct contact with potential buyers. All buyer communications will go through the Broker. The Broker will only contact you using an agreed-upon confidential email or mobile number.

  2. Have all buyers sign non-disclosure agreements. Non-disclosure agreements prohibit the buyer from sharing confidential information, including the fact that you are considering selling, from anyone except his lawyers and accountants involved in the deal. They also prohibit the buyer from speaking with your employees, suppliers, vendors, etc. without your prior written approval.

  3. Conduct all meetings off-site or after hours. Unless its normal for you to have meetings with people your employees don’t know, avoid buyer meetings at your business site during business hours. Schedule meetings at your merger and acquisitions advisors office or at another convenient location such as a coffee shop or hotel lobby. If it becomes important for the buyer to see your operation, schedule the meeting in the evening or on the weekend when your employees are gone.

  4. Don’t Rush To Sell To Your Competitors. When an owner tells us that he believes that a competitor would be the natural acquirer of his business, we strongly urge caution. Buyers from your own industry are not the buyers who are most likely to pay the highest price. We consistently find that equity funds and outside investors accept higher valuations than industry insiders. While your competition would love to acquire your clients and other assets, they generally don’t like to pay for good will – after all, they already know how to provide the goods or services you provide. And selling outside your industry makes it simpler to maintain confidentiality, while even an unintentional slip or breach of confidentiality by a buyer in your industry could cause problems.  That’s not to say that selling to a competitor is never the right move - sometimes it is - but when it is, it needs to be handled with an abundance of caution.

Click here to learn more about maintaining confidentiality during the sales process or click on the button below or call us at 240 290-5000 and we’ll map out the steps you need to achieve the highest possible market price for your business. There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

Sell Your Business With Confidence

Tags: business brokers, M&A, Mergers and Acquisitions, selling your business

Business Broker Report 4: Selling Your Business? Think Like a Buyer!

Posted on Fri, Apr 05, 2013

Selling Your BusinessYou’ve decided that the time has come to exit your company. You’ve worked hard, grown a great business, provided a stable living for your employees. But enough is enough – it’s time to go. You know what you’ve built and know what you want. You’re ready to sell. But just like in your business, it takes two parties to make a sale – a willing seller and a willing buyer.

Experienced Business Brokers and M&A Advisors agree - in order to position your company to achieve the best results when you sell, you need to think like a buyer.

Why do buyers buy businesses? To generate revenues? To own plant and equipment? To have employees? The answer is “no” to all of the above.

Buyers buy businesses in order to make money. Everything else is just a means to that end. Whether the buyer is an equity fund, a private individual or another company in your industry or a related industry, by purchasing your company the buyer is paying for the right to step into your shoes and make as much (and hopefully, more) money as you do.

While some buyers are looking for very specific types of companies to acquire, most are interested in broad categories like service, construction trades, tech or distribution, and then limit their search by geographic and size considerations.

Because buyers buy businesses to make money, it is not surprising to learn that businesses are valued largely by how much money they make.  Other factors that influence the valuation include the type of business, recent trends in the individual business and in its industry, assets and or liabilities included in or excluded from the transaction, geographic desirability and the existence of risk factors that might cause the goodwill of the company to evaporate after the sale.

Buyers avoid businesses where there is a substantial risk that the business’s goodwill - its ability to generate profits – might disappear. This could happen for one or more of the following reasons: unstable customer concentration (one or two big customers whose loss would cripple the business); lack of management structure (where the knowledge and relationships necessary to conduct the business reside exclusively with the owner); or external risk factors, such as increased competition, impending loss of a valuable location, technological obsolescence, etc.

Just like in your business, business sales - mergers and acquisitions - occur in a competitive market. Why should a buyer make a bid on your business as opposed to the many other businesses available for sale?

Here’s what you can do to make sure your business is attractive to buyers:

1. Keep your hand on the wheel. Once you commit to selling your business, it’s crucial that you continue to manage your business as if the sale were not on the horizon. It’s easy to take your hands off the wheel, your foot off the gas, and put your business on autopilot until closing. Big mistake. Nothing spooks a buyer more than getting a current sales report with lots of red numbers and downward arrows. You need to concentrate on maintaining and even growing your business, even as your Business Broker or M&A Advisor is guiding your sale forward to closing.

2. Avoid risky customer concentration. Some business owners make the mistake of structuring their company around a single client or customer who makes up 30-50% or more of overall revenue. Companies in this position face big obstacles when they want to sell. Unstable customer concentration presents a major risk to potential buyers. The buyers will want to deal with the risk of losing such a critical customer by either discounting the price or structuring the deal so that a portion of the purchase price is connected to future revenues from that customer. To protect and enhance the value of your business, it’s best to diversify your customer base so no one client accounts for more than 30% (and better yet, 20%) of total revenue.

3. Structure second-level management. Some business owners have trouble delegating – they keep their hands tight on the reins, make all the important decisions themselves and are the main point of contact with key customers.  That’s great as long as it works, but it’s not so great when it’s time to sell.  Buyers will avoid or discount companies where all decision making and key customer relationships reside with the owner. If you don’t already have one, it’s important to create a strong second level of management before you put your company on the market. Start delegating decision making to your next-in-command. Transition key customer relationships to trusted managers. It may be painful for some owners to give up some control, but it will yield strong dividends at the sales table.

To discuss your situation and to see if your business is positioned well for sale, click here or click on the button below and we’ll map out the steps you need to achieve the highest possible market price for your business. There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

Sell Your Business With Confidence

Tags: business brokers, M&A, Mergers and Acquisitions, selling your business