How to Optimize Your Chances of Selling Your Business

How to Optimize Your Chances of Selling Your Business: The simple fact is that selling your business is likely to be the single most important financial decision you’ll ever make.  With this important fact in mind, it is essential that you prepare far in advance.  Let’s dive in and take a look at some of the key items you’ll want to check off your list before placing your business on the market.

Think About Legalities

When it comes to selling a business, legal issues should be at the forefront of your thoughts; after all, selling your business does involve the creation and execution of a complex and detailed legal agreement.  There are many times in life where it is possible to cut corners, but hiring a good lawyer or law firm is not one of those times.  Moreover, you’ll want to settle all litigation, environmental issues or other issues that could potentially derail a sale.

Deal with Serious Buyers

Working with a good business broker or M&A advisor is an essential part of the selling process, as these professionals will help you to weed out “window shoppers” as well as prospective buyers who are simply not a good fit for your business.  Any serious buyer should be willing to submit a Letter of Intent.  Everyone should be on the same page as far as price and terms as well as what assets and liabilities are to be assumed.  This second point reinforces the first point.  It is essential to have an experienced lawyer helping you through various aspects of the sales process.

Be Flexible on Price

You should also be prepared to accept a lower price than you might ideally want.  There are many reasons that this may occur, ranging from a lack of management depth and a lack of geographical distribution to a dependence on a limited number of clients.  Reliance on a small number of customers and/or clients can give potential buyers pause, as it could raise concerns regarding the stability of your business.  Addressing these issues years before placing your business on the market can help you best achieve the price point you desire.  This is yet another reason to work with a business broker in advance.

Improving Your Chances for Success

In terms of achieving the price that you want for your business, there are other steps you can take.  Increasing the visibility and profile of your business is always a savvy move.  Consider attending trade shows, boost your online profile via stepping up your social media game and explore creating a coherent public relations program.

Finally, selling a business is often a waiting game.  You have to be psychologically prepared to wait a considerable period of time before your business is sold.  The fact is that most businesses do indeed sit on the shelf for a considerable period of time before they are sold.

Preparation, patience and good organization will dramatically increase your chances of selling your business and achieving an appropriate price.  The sooner you begin organizing your business and working with experienced professionals, the greater the chances of success will be.

Copyright: Business Brokerage Press, Inc.

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Insights from BizBuySell’s 3rd Quarter Insight Report

Insights from BizBuySell’s 3rd Quarter Insight Report: Most business buyers and sellers are wondering what 2021 and beyond will bring.  BizBuySell and BizQuest President Bob House provided a range of insights stemming from BizBuySell’s 3rd Quarter Insight Report and a survey of over 2,300 business owners. 

The simple fact is that the pandemic has most definitely had a major impact on the buying and selling of businesses.  This fact is obvious.  But diving deeper, there are a range of insights that can be gleaned. 

First, owners do understand that COVID is a massive force in business right now.  According to the survey, 68% of owners feel that they would have received a better price for their business in 2019 than in 2020.  Only 37% of respondents felt that they would receive a better price this year.  Of owners who felt that they would receive a lower price in 2020 than in 2019, 71% of these owners said that their assessment was directly tied to the pandemic and its accompanying economic impact.

A question on the survey asked owners if the pandemic had impacted their exit plans.  55% responded that the pandemic had not changed their exit plans.  Additionally, 22% said that they now planned on exiting later, and 12% stated that they planned on exiting earlier.  In short, the majority of business owners were not changing their exit plans.

On the other side of the coin, buyers are acknowledging that the present seems to be a very good time to buy.  A staggering 81% of buyers stated that they felt confident that they would be able to find an acceptable price point.  In terms of their purchasing timeline, 72% of respondents stated that they were planning on buying a business soon.  Survey follow-ups indicated that large numbers of buyers were also planning on buying in 2021.

Generational differences are playing a role as well.  Baby Boomers tend to be more optimistic than non-boomers as far as their overall views on the recovery.  43% of Baby Boomers now expect the economy to recover within the next year as compared to just 30% of non-Boomers.  House pointed out, “Baby Boomers are the generation that did not plan, which makes it harder for them to adjust transition plans if they were preparing to retire, as small businesses don’t have the infrastructure and management teams in place to wait out a bad cycle.”

Based on the information collected by BizBuySell’s 3rd Quarter Insight Report and their survey, it is clear that there is a new wave of buyers on the horizon.  The report supports the notion that the pandemic has made small business ownership an attractive option for new entrepreneurs.  Factors driving new entrepreneurs into the marketplace include everything from being unemployed and wanting more control over their own futures to a desire to capitalize on opportunities. 

Finally, House notes that 2021 could be a “perfect storm for business sales,” as 10,000 Americans will turn 65 each and every day.  This means that the supply of excellent businesses entering the marketplace will likely increase dramatically.

Copyright: Business Brokerage Press, Inc.

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Insights from BizBuySell’s

Insights from BizBuySell’s: Most business buyers and sellers are wondering what 2021 and beyond will bring.  BizBuySell and BizQuest President Bob House provided a range of insights stemming from BizBuySell’s 3rd Quarter Insight Report and a survey of over 2,300 business owners. 

The simple fact is that the pandemic has most definitely had a major impact on the buying and selling of businesses.  This fact is obvious.  But diving deeper, there are a range of insights that can be gleaned. 

First, owners do understand that COVID is a massive force in business right now.  According to the survey, 68% of owners feel that they would have received a better price for their business in 2019 than in 2020.  Only 37% of respondents felt that they would receive a better price this year.  Of owners who felt that they would receive a lower price in 2020 than in 2019, 71% of these owners said that their assessment was directly tied to the pandemic and its accompanying economic impact.

A question on the survey asked owners if the pandemic had impacted their exit plans.  55% responded that the pandemic had not changed their exit plans.  Additionally, 22% said that they now planned on exiting later, and 12% stated that they planned on exiting earlier.  In short, the majority of business owners were not changing their exit plans.

On the other side of the coin, buyers are acknowledging that the present seems to be a very good time to buy.  A staggering 81% of buyers stated that they felt confident that they would be able to find an acceptable price point.  In terms of their purchasing timeline, 72% of respondents stated that they were planning on buying a business soon.  Survey follow-ups indicated that large numbers of buyers were also planning on buying in 2021.

Generational differences are playing a role as well.  Baby Boomers tend to be more optimistic than non-boomers as far as their overall views on the recovery.  43% of Baby Boomers now expect the economy to recover within the next year as compared to just 30% of non-Boomers.  House pointed out, “Baby Boomers are the generation that did not plan, which makes it harder for them to adjust transition plans if they were preparing to retire, as small businesses don’t have the infrastructure and management teams in place to wait out a bad cycle.”

Based on the information collected by BizBuySell’s 3rd Quarter Insight Report and their survey, it is clear that there is a new wave of buyers on the horizon.  The report supports the notion that the pandemic has made small business ownership an attractive option for new entrepreneurs.  Factors driving new entrepreneurs into the marketplace include everything from being unemployed and wanting more control over their own futures to a desire to capitalize on opportunities. 

Finally, House notes that 2021 could be a “perfect storm for business sales,” as 10,000 Americans will turn 65 each and every day.  This means that the supply of excellent businesses entering the marketplace will likely increase dramatically.

Copyright: Business Brokerage Press, Inc.

iqoncept/BigStock.com

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Goodwill is a term that might cause a little confusion for some.  But at its heart, it is a relatively straight-forward concept.  Goodwill is generally viewed as a term that encapsulates everything from a business’s reputation to the goods, services and products it provides.  The key idea is that there is goodwill if the business is viewed as a true and functioning business that has longevity in the marketplace. 

The Importance of Reputation

It is important to point out that many of the aspects that go into defining goodwill are not easily noted on a balance sheet.  One of those elements has already been mentioned in the form of reputation.  A good reputation is an intangible asset that is hard to put an exact dollar amount on.  Imagine that you had a choice between two businesses that were almost identical.  However, one business enjoyed a strong reputation while the other had a reputation for poor customer service and goods and services.  This decision would be an easy one for most prospective buyers.

Going Beyond the Numbers

When a buyer pays more than the recognized value of a business, goodwill usually plays a major role.  There are many variables that can be included into goodwill such as quality and track record of management; strength of the local economy; the loyalty of the customer base; good relationships with suppliers; copyrights; trademarks and patents; name or brand recognition; specialized training and knowhow.  The list goes on.  Business brokers and M&A advisors will be sure to highlight these goodwill factors to prospective buyers.  Factors that impact the longevity of a business, and its long-term potential, should not be overlooked.

The Evolving Meaning of Goodwill

In recent years, the accounting profession has changed how it deals with the concept of goodwill and how it is factored into decisions.  Since the rise of the Industrial Revolution, many large companies were built around the ownership and use of heavy equipment and machinery; however, in the last two decades there has been a shift away from tangible assets and towards intangible assets. 

Assets under the umbrella of intellectual property, including patents, trademarks, brand names and more, are now considered key aspects of goodwill.  In short, in the last twenty-years, goodwill has taken on a more complex and varied meaning.  Today, businesses are not necessarily based around massive factors and huge assembly lines.  Workers and management in the world’s largest companies 50 years ago would be hard pressed to explain the inner workings of some of today’s corporate juggernauts.

Goodwill is more complicated than ever before.  This factor serves to underscore the value, and importance, of working with an experienced, capable and proven business broker or M&A advisors.  The goodwill elements within a business need to be highlighted so that prospective buyers fully understand the business’ real value. 

Copyright: Business Brokerage Press, Inc.

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Zeroing in on Goodwill

Zeroing in on Goodwill: Goodwill is a term that might cause a little confusion for some.  But at its heart, it is a relatively straightforward concept.  Goodwill is generally viewed as a term that encapsulates everything from a business’s reputation to the goods, services, and products it provides.  The key idea is that there is goodwill if the business is viewed as a true and functioning business that has longevity in the marketplace. 

The Importance of Reputation

It is important to point out that many of the aspects that go into defining goodwill are not easily noted on a balance sheet.  One of those elements has already been mentioned in the form of reputation.  A good reputation is an intangible asset that is hard to put an exact dollar amount on.  Imagine that you had a choice between two businesses that were almost identical.  However, one business enjoyed a strong reputation while the other had a reputation for poor customer service and goods and services.  This decision would be an easy one for most prospective buyers.

Going Beyond the Numbers

When a buyer pays more than the recognized value of a business, goodwill usually plays a major role.  There are many variables that can be included in goodwill such as quality and track record of management; strength of the local economy; the loyalty of the customer base; good relationships with suppliers; copyrights; trademarks and patents; name or brand recognition; specialized training and knowhow.  The list goes on.  Business brokers and M&A advisors will be sure to highlight these goodwill factors to prospective buyers.  Factors that impact the longevity of a business, and its long-term potential, should not be overlooked.

The Evolving Meaning of Goodwill

In recent years, the accounting profession has changed how it deals with the concept of goodwill and how it is factored into decisions.  Since the rise of the Industrial Revolution, many large companies were built around the ownership and use of heavy equipment and machinery; however, in the last two decades there has been a shift away from tangible assets and towards intangible assets. 

Assets under the umbrella of intellectual property, including patents, trademarks, brand names, and more, are now considered key aspects of goodwill.  In short, in the last twenty years, goodwill has taken on a more complex and varied meaning.  Today, businesses are not necessarily based around massive factors and huge assembly lines.  Workers and management in the world’s largest companies 50 years ago would be hard-pressed to explain the inner workings of some of today’s corporate juggernauts.

Goodwill is more complicated than ever before.  This factor serves to underscore the value, and importance, of working with an experienced, capable and proven business broker or M&A advisors.  The goodwill elements within a business need to be highlighted so that prospective buyers fully understand the business’ real value. 

Copyright: Business Brokerage Press, Inc.

Rido81/BigStock.com

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Turn to the Professionals for Best Results

Turn to the Professionals for Best Results: There is a direct relationship between the asking price and the amount of cash on the table at the time of the sale.  Buyers and sellers alike should keep one fact in mind.  Most businesses involve some level of seller financing.  It is customary for both buyers and sellers to have concerns regarding this kind of financing; after all, sellers don’t want to take their businesses back from the buyer.  Buyers want to generate enough money to help the business thrive and make a living.  One proven way to ensure the successful sale of a business is to turn to the experts.

Screen out Window Shoppers

The simple and very established fact is that when you choose to work with professionals, it can streamline the entire sales process.  Business owners are typically very busy people.  That means they don’t have time to waste with window shoppers.  They also don’t want to divulge confidential information to parties that don’t possess the means to actually follow through with a successful sale. 

Business brokers and M&A advisors know that most prospective buyers are just dreamers or will ultimately fail to qualify.  When you work with professionals, it means that you have a shield to protect you and your valuable time.  Experienced brokers have a range of techniques that screen out unqualified candidates and match you with buyers who are the best fit. 

Maintain Confidentiality 

Anyone who has ever sold a business, or even contemplated selling a business, knows all too well that confidentiality is of the utmost importance.  Sellers need to know that the information they reveal will not spill out all over the web.  Brokers are experts in maintaining confidentiality and impressing upon prospective buyers the tremendous importance of honoring the agreements they sign. 

It is important to note that leaks regarding the sale of a business can cause a range of often unexpected problems.  Key employees may get nervous about their future prospects and begin looking for a new job, competitors may begin attempting to poach employees, or customers and key suppliers may get nervous and turn to your competitors.  In short, serious buyers and sellers alike benefit from maintaining confidentiality.

Matching the right seller with the right buyer is truly an art and a science. Many factors are involved ranging from financing to psychology. When the right match is made, then it is possible to move through the process of seller financing more quickly and with fewer roadblocks or complications.  Working with a business broker or M&A advisor is the single most important step that any buyer or seller can make to help ensure that seller financing, and in fact, the entire sales process progresses as smoothly as possible.

Copyright: Business Brokerage Press, Inc.

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Successfully Navigating Seller Financing

Successfully Navigating Seller Financing: Only a small percentage of the population is able to go through life without using some form of financing at some point.  Most people have little choice but to finance everything from their home and car purchases to their college education.  Now, with that stated, most business owners would love to receive an all-cash offer for their business.  But the reality of the situation is quite different.  The facts are that owner financing is very common, and it is sometimes the only way to put a deal together.

Sellers have to be ready and willing to entertain the idea that they may, ultimately, be called upon to handle some aspect of financing if they want to sell their business.  It surprises many to learn that if a seller is not willing to finance the sale, then buyers begin to worry and may even see this as something of a “red flag.”  The reason for this is that many buyers feel that if a business is a solid investment, then the business will be profitable, and repaying the seller should be no problem. 

Buyers may worry that if a seller isn’t willing to help with financing there could be a “hidden” problem with the business.  It might occur to them that sellers are “jumping from a sinking ship.”  It is important that sellers keep this important aspect of buyer psychology in mind when addressing whether or not they are willing to finance.

Buyer psychology plays a major role in another aspect of seller financing and that comes in the form of collateral.  Sellers may want to have some form of outside collateral to secure the loan on their business.  While this may seem perfectly understandable to the seller, buyers can have something of a nervous response to this issue as well.  As much as buyers worry that a seller’s refusal to provide financing is a red flag, the same holds true for sellers who seek collateral.  Once again, the concern is that if the business was healthy and thriving there should be no need for collateral.  The buyer is left wondering, “What is going on here?  How worried should I be?  Why do they need collateral if this business is so great?” 

Typically, buyers are “maxed out” when buying a main street business.  They are allocating most of their available funds to the down payment on the business.  That means they will be unlikely to “push all their chips in” and gamble everything by also putting up the home, retirement funds, or other collateral in the process.  Sellers need to see the situation from the buyer’s perspective and remember that a collateral requirement could mean that if the business fails, the buyer could be left with nothing.

Navigating the complex interaction between buyers and sellers is no easy feat.  It requires a careful balancing of several different skills, ranging from understanding finance to psychology.  Working with an experienced business broker can help buyers and sellers connect and find workable agreements so deals can get made.

Copyright: Business Brokerage Press, Inc.

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Four Common Seller Mistakes

Four Common Seller Mistakes: Sellers 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.

2. Neglecting the Business During the Sales Process

Another seller mistake we see is that the seller neglects the business during the sales process.  This can have significant negative long-term consequences.  Sellers must understand that they must maintain the day-to-day operations as though the business is still theirs.  The old saying, “Don’t count your chickens before they’ve hatched,” most definitely applies to selling any business.  Business deals fall apart all the time.  This is true from small deals to corporate acquisitions. 

3. Overall Lack of Preparation 

Any seller who is truly serious about selling his or her business will have all of their documentation available and well organized.  This list would include financial records, environmental studies, business forecasts, and more.  It is important to make a good impression and convey to prospective buyers that a business is well organized and ready to be sold.  Disorganization on any level could make prospective buyers worry that the business isn’t being operated in a professional manner.

4. Holding Misconceptions Around a Business’ Value

Finally, a real “deal killer” can be when sellers don’t understand (or have a mental block) concerning the real value of their business.  This issue can lead many business owners to set a price that is simply too high or even completely unrealistic.  Many sellers have put years of blood, sweat and tears into a business.  Learning that their business isn’t as valuable as they had hoped can be an emotional, psychological and financial blow all in one.  But sellers also have to adjust to the realities of what the market will bear. 

Avoiding seller pitfalls is incredibly important.  Working with a skilled and proven business broker or M&A advisor is a way for buyers and sellers alike to avoid an array of significant problems that could otherwise arise.

Copyright: Business Brokerage Press, Inc.

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