How to Prepare to Sell Your Business.

Introduction

In a competitive business landscape, business owners have to be strategic and prepared before selling their valued businesses. The truth is that you cannot have an exit strategy without proper planning. When the time comes to sell your company, failure to plan would have an impact on the value of your business.

Oftentimes, businesses owner wonders “how much is my business worth,” and the answer is simpler than most stakeholders realize. When it comes to buying a business in South Florida, there are more than enough investment opportunities in Miami

Keeping that in mind, let’s take a look at basic steps and considerations that would allow you to prepare and sell your business:

Incentive Employees and Build Business Relationships

It is crucial to make sure your most treasured employees and manger are incentivized. This would allow you to avoid basic conflict of interest and last-minute power plays. At the same time, make sure to establish your key business relationship with advisors.

In fact, better relationships with a lawyer, investment agency, and accounting firm will help you accelerate the selling process. You can count on your business advisors for up-to-date insights and an ideal timeframe to sell your business.

Ensure Successful Scale

You’ve probably worked hard for years to build and grow your business and now you should adopt a strategic approach to sell your company. Your first step should be to make sure your business is scalable enough for new buyers.

Review Administrative Items

Before you decide to sell your business, one of your main considerations should be to organize business records and ensure business operations are optimized. Naturally, you don’t want to make an impression that your business operations and administrative affairs are in shambles to potential buyers.

Eliminate Business Expenses

Most private companies operate to cut back on their taxes. Your end-game is to highlight high profitability to make a good first impression in front of potential buyers. Your objective should be to cut down expenses that are no longer critical to your business operations. When it comes to selling your business, make sure to compensate in the form of tax write-offs prior to negotiations.

Create a Suitable Growth Plan

On top of administrative control, optimized operations, and high-profit margin, make sure to create a realistic growth plan before selling your business. The trick is to highlight that your business has many opportunities in the coming years, and you’ll notice an increase in potential buyers. In terms of meaningful growth, make sure to highlight that your business has had market credibility for at least three years.

Final Thoughts

Whether you run a small or mid-size business in Miami, your first objective should be to understand the market value of your entity from the perspective of the buyer. Ordinarily, business owners often have preconceived notions about the specific sales price. Realistically, this is counterintuitive for sellers and often pushes away potential buyers.

So, find out how a potential buyer plans to use your business before official negotiations. On the surface, selling a business in Miami may seem like a daunting task, but you need to focus on essential considerations to ensure thorough preparation.

How To Value A Small Business?

When buying a business in Miami or selling it, it’s critical to put your emotions aside to conduct an accurate business appraisal and determine a reasonable and competitive selling price. You’ll need to complete an objective analysis of the company, research the current market, and consider hiring a professional business appraiser. The sale of your business will demand quite some time, and once the work is done, you’ll need to figure out how to manage the earnings.

Business valuation isn’t easy unless you’re a natural-born business or numbers person (or, say, an accountant). However, here you will learn how to do business valuation before buying or Selling A Business In South Florida.

Do the correct valuation before Selling A Business In Miami

Even if you’ve never heard the word, if you’re aware of the EBITDA concept, you may already know about SDE or seller’s earnings. To refresh your memory, EBITDA stands for earnings before interest, taxes, depreciation, and amortization — in other words, it’s a company’s pure net profit.

Business owners calculate SDE to estimate the actual value of their company for a new owner, similar to EBITDA. SDE will include expenses such as income reported to the IRS, non-cash expenses, and whatever revenue your company truly earns. In contrast to EBITDA, you’ll factor in the owner’s compensation and benefits into your SDE estimate.

Because small-business owners frequently expense personal benefits, large businesses typically use EBITDA estimates to value their businesses, while small businesses commonly use SDE. Therefore, it’s also critical that potential customers comprehend SDE. Most likely, business owners will give you that amount. Therefore it’s crucial to understand how the owner arrived at that figure and what these figures mean for the actual company.

Start with your pretax and pre-interest earnings to calculate your company’s SDE. Then, as company expenses, you’ll bring any items that aren’t vital to operations, such as vehicles or trips. Your SDE can include employee outings, charitable donations, one-time expenditures, and your compensation. (When you provide a buyer your valuation, they may inquire about your discretionary cash flow, so be prepared to mention and value each significant spend or purchase.)

Finally, any current debts or future payments are deducted from net income, referred to as liabilities.

Learn about the concept of SDE multiples

Your SDE shows the genuine monetary value of your company, but it also values it several times based on industry standards. (If you value your company based on EBITDA, you’ll use an EBITDA multiple.) Small firms should use SDE for their business valuations more frequently because small-enterprise owners typically take a substantial percentage of their revenue for their salaries and living expenditures.

For each industry, there is a different SDE multiple. The SDE multiple for your firm will vary depending on market volatility, where it is located, its size, assets, and how much risk is involved in transferring ownership. As you can assume, the greater your SDE multiple, the more valuable your company is.

Conclusion

While selling a business in South Florida may seem like an easy feat, in the beginning, it can turn into a pretty overwhelming task. However, when you know the basic process of evaluating your business, the journey will become less difficult for you.

3 Steps for Achieving Pricing Power

3 Steps for Achieving Pricing Power

3 Steps for Achieving Pricing Power: The simple fact is that most of us want to control our own fate.  This fact is especially true for entrepreneurs and business owners.  However, the truth of the matter is that for most business owners, their fate isn’t completely in their own hands.  For example, a variety of forces can prevent businesses from establishing their own prices. 

Knowing whether or not your company has pricing power is essential and can influence a range of decisions that you may make.  Let’s take a closer look at what steps you can take to control your own pricing.

What is Pricing Power?

This economic term describes the effect of a change in a product price on the demanded quantity of said product.  Your company’s pricing power is linked to the demand for your products or services.  If you have a high level of pricing power, you can raise your prices over time and maintain your customers. 

Who Has the Greatest Pricing Power? 

It is no great secret that the Amazons, Apples, Wal-Marts and auto manufacturers of the world exercise a tremendous amount of power.  Part of this considerable, and seemingly ever growing, power resides in the fact that the size of these companies now rivals and even surpasses many nation states.  This grand level of power is unique in human history in many ways.  Along with it comes the ability to exercise an almost god-like authority over suppliers. 

Today, these ultra-powerful companies commonly dictate to vendors what prices they are willing to pay, and the quasi-monopolistic nature of these companies often leaves vendors with no choice to comply.  In short, these 900-pound gorillas are telling companies both large and small exactly how much they will pay for a given number of bananas. 

Step 1 – Providing a Branded Product or Service

If you discover that your company doesn’t have pricing power, there are steps you can take.  One step is to produce a branded product or service.  In this way, you are able to offer something of greater value than your competitors.  Through having a branded product or service, it is possible to create a higher perceived value in the minds of not just the Amazons of the world, but in the minds of consumers as well.

Step 2 – Innovating 

Another path towards achieving pricing power is through innovation.  A great example of leading the way in innovation is Apple.  While few companies have Apple’s almost ethereal resources, that is not to say that you cannot find ways to innovate within your own sphere or industry.  Small innovations can often have an outsized impact and help a business stand out from a crowded playing field.  Innovation that leads to patent production is an excellent way to gain a degree of pricing power.

Step 3 – Offering Exceptional Service

A third option for achieving a degree of pricing power is to provide what could be called “mind-blowing” service.  By providing service that is truly a cut above what the competitors can match, your company is positioned to achieve pricing power.  Providing your customers with something they simply can’t get elsewhere is a key way to setting a price that is more in line with what you desire.

There are many marketplace variables that your business can’t control.  The trick is to evaluate your business, your business’s potential and the concrete and practical steps you can take starting today to achieve pricing power. 

Copyright: Business Brokerage Press, Inc.

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John Warrilow’s The Art of Selling Your Business

Art of Selling Your Business

 

Art of Selling Your Business: John Warrilow is the founder of The Value Builder System and an accomplished author.  While not a business broker himself, Warrilow has gathered considerable knowledge and expertise in the industry.  His previous book Built to Sell was listed as one of the best business books of 2011.  In this article, we will explore some of the key points in Warrilow’s latest book, which is entitled The Art of Selling Your Business: Winning Strategies and Secret Hacks for Exiting on Top.  This book was released on January 12th, 2021, and is proving to be invaluable for business owners. 

Selling When the Time is Right

One key focal point of the book is that business owners should skip trying to find the perfect “magical time” to sell their business.  Additionally, Warrilow notes, “I make the strong recommendation in the book that the best time to sell your company is not during some mysterious macroeconomic environment.  It is when someone is willing to buy it and you get an offer.  And that is because at that point, you’re in the position of strength.”

The DIY Approach 

This book reinforces the fact that business owners truly need to work with an intermediary if they are to achieve optimal results.  Warrilow even includes his six reasons for why every business owner should hire a business broker or M&A advisor.

Many business owners think that they can simply handle selling their business on their own.  But the simple fact is that business owners usually have no experience in selling a business.  Add this to the fact that selling their business is likely to be the most important financial decision the business owner ever makes, and it quickly becomes clear that business owners are doing themselves a considerable disservice when they opt to handle everything on their own.  

A Business Broker vs. a Lawyer

As Warrilow points out, oftentimes business owners think that rather than working with a business broker or M&A advisor, they can turn to a trusted lawyer who has served them in the past.  But this thinking is flawed when it comes to successfully selling a business.  As Warrilow states, “a lawyer, almost by default, is going to be very conservative as everything exposes a lawyer to risk.  And that is why using a traditional attorney is almost always a mistake.” 

If you are planning to sell your business now or in the future, a book like Warrilow’s The Art of Selling Your Business: Winning Strategies and Secret Hacks for Exiting on Top can serve as a uniquely valuable tool in your toolbox.

Copyright: Business Brokerage Press, Inc.

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Why Businesses Get Into Trouble

Why Businesses Get Into Trouble

 

Why Businesses Get Into Trouble: No two companies are quite alike, and this also means that there are many reasons why companies can fall into trouble.  While the number of variables involved in operating a company are practically endless, there are a handful of reasons why companies can fall on hard times.  Let’s take a closer look.

Lacking Focus

Companies that lack focus can often run into considerable trouble.  Not understanding their customers and what they need or want can lead to endless problems.  It is vital that companies frequently stop and assess who their customers are and whether or not they are properly servicing their needs.

Management Problems

Not too surprisingly, many companies can run into trouble because of poor management.  Management problems are not one-dimensional, but instead take a variety of shapes.  Management that isn’t focused, is incompetent, or simply doesn’t care about the business can translate into a business’s premature death. 

Under the umbrella of “management problems” also falls such missteps as poor financial controls, quality control problems, operational issues, and/or not keeping up with technological advancements.  At the end of the day, many of the problems on our list have at least some management issue missteps at their heart.

Loss of Key Employees or Clients

The loss of a key employee or a key client can spell serious trouble.  Of course, no management team can predict every eventuality.  However, when there is a loss of a key employee or client, and there is no plan for replacement, then management does shoulder at least some of the blame.  The savviest companies take steps to ensure that there are ways to replace the most important employees and clients.

Failure to Compete 

More than one business has been buried by the competition or failure to see a new wave of competition coming.  For example, countless mom and pop video rental stores were absolutely bludgeoned by the introduction of Blockbuster Video a generation ago. 

While it is true that sometimes market forces are so aligned against a business that survival is almost impossible, that is normally not the case for most businesses on a year-to-year basis.  The most effective and competent management can see the competition out on the horizon.  Or at bare minimum, they have an emergency plan in the event that the competition becomes more intense.

All too often by the time a business realizes that it is in trouble, it is already too late.  If the problems can’t be fixed, then it may be time to consider selling the business.  But such decisions must be made quickly in order to prevent additional bloodletting.

Optimally, a business is sold while it is doing well.  Regardless of whether a business is thriving or experiencing difficulties, a business broker or M&A advisor can be an invaluable ally in helping a business reach its full potential.

Copyright: Business Brokerage Press, Inc.

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