African serious businessman writing notes and using laptop. Matu

It’s Time to Exit. Are you Ready?

Thinking about whether or not you are ready to exit is an important question.  It’s something that every business owner will have to address at some point.  Importantly, you don’t want to wait until the 11th hour to prepare to sell your business.  There are far too many pieces in this particular puzzle to wait until the last minute.  You’ll want to begin the process sooner by asking yourself some key questions. 

Determining Value

First, you’ll need to determine the actual value of your business.  It is a harsh truth, but what you think your business is worth and what the market feels that it is worth may be two very different things. 

This point serves to underscore the importance of working with a business broker or M&A advisor early in the process.  An experienced broker knows how to go about determining a price that will generate interest and seem fair.  Remember that at the end of the day, it will be the marketplace that determines the value of your business, but working with a seasoned professional is an excellent way to match your offering price with what the market will ultimately bear.

Going Within

Secondly, you’ll want to consider whether or not you truly want to sell.  It is not uncommon for business owners to begin the process of selling their business only to realize a few hard facts.  Wanting to sell and the time being right to sell are often two different things. 

Upon placing your business on the market for sale, you may learn that you’re not emotionally or financially ready.  If this happens to you, consider it a learning experience that will serve you well down the line.

Get Your Ducks in a Row

If you have done a financial assessment, a little soul searching and have begun working with a business broker or M&A advisor to determine that now is a good time to sell your business, then there are several steps you’ll need to take.  You can be sure that any serious prospective buyer will want a good deal of information regarding your company. 

At the top of the list of items potential buyers will want to see are three years of profit and loss statements as well as federal income tax returns for the business.  Other important documents ranging from lease and lease related documents, lists of loans against the business and a copy of a franchise agreement, when applicable, are all additional documents that you will need to provide.  You should also have a list of fixtures and equipment, copies of equipment leases, lists of fixtures and equipment, and an approximate amount of inventory on hand.  A failure to not have this information organized and ready to present at a moment’s notice could be a costly mistake.

Working with professionals, such as accountants, lawyers, and brokers, is a savvy move.  Owning and operating a business can be a complex process, and the same holds true for selling a business.  Investing the time to seek out experienced and professional advice is the first step in selling your business.

Copyright: Business Brokerage Press, Inc.

Rido81/BigStock.com

Read More
Blurred Night Architecture - Building With Glass Facade. Modern

What You Need to Know About the Golden Age of Business Acquisitions

Business acquisitions are red hot, and all kinds of businesses are being snapped up.  Some people are under the impression that only large businesses are being acquired, but this is far from the reality of the situation.  It would surprise many to learn that so much of the “action” is, in fact, small businesses buying other small businesses. 

In his Forbes article, “Take Advantage of the Golden Age of Business Acquisitions,” author Christopher Hurn explores the true state of the “acquisitions game.”  His conclusions are quite interesting.  In Hurn’s opinion, there has never been a more active time in the realm of business acquisitions.

If you own a business and are looking to grow, then you may want to consider acquiring a competitor in order to consolidate the market.  As Hurn points out, there are many reasons that you might want to consider acquiring a business in addition to consolidating the market.  These reasons include acquiring a new product or service, acquiring a competitor that has superior technology or even identifying a business that you believe is primed for substantial growth.

Yet, there are other forces at work that are combining to make this moment the “golden age of acquisitions.”  At the top of the list of why now is a good time to investigate acquiring a business is demographics.  According to a 2019 study by Guidant Financial and Lending Club, a whopping 57% of small business owners are over the age of 50.  The California Association of Business Brokers has concluded that over the next 20 years about $10 trillion worth of assets will change hands.  A mind-blowing 12 million businesses could come under new ownership in just the next two decades!  As Hurn phrased it, “The stars are aligning for the Golden Age of business acquisitions.”

This all points to the fact that now is the time to begin understanding what kind of acquisition would best help your business grow.  Hurn believes that turning to the Small Business Administration in this climate of rapid acquisition is a savvy move. 

In particular, he points to the 7(a) program and a host of reasons that the SBA can benefit small businesses.  Since the SBA lowered equity injection requirements, it is now possible to finance a staggering 90% of business acquisition deals with loan terms up to 25 years and lower monthly payments.  Additionally, the SBA 7(a) program can be used for a variety of purposes ranging from expanding or purchasing an existing business to refinancing existing business debt.

Hurn truly does have an important insight.  Baby Boomers will retire by the millions, and most of them will be looking to sell their businesses.  With 12 million businesses scheduled to change hands in just the next 20 years, now is a highly unique time not only in the history of acquisitions but also in the history of business. 

Business brokers understand what is involved in working with the SBA and acquisitions.  A seasoned business broker can point you towards opportunities that you may have never realized existed.

Copyright: Business Brokerage Press, Inc.

Grand Warszawski/BigStock.com

Read More
Business, People, Electronic Gadgets And Modern Technology Conce

Determining the Right Time to Sell

Determining when it’s finally the right time to sell can be a tricky proposition.  If you are thinking about selling your business, one of the best steps you can take is to contact a business broker.  A good business broker will have years, or even decades, of proven experience under his or her belt.  He or she will be able to guide you through the process of determining what you need to do in order to get your business ready to sell.

One major reason you should contact a business broker long before you think you might want to sell is that you never know when the right time to sell may arise.  Market forces may change, unexpected events like a large competitor entering your area, or a range of other factors could all lead you to the conclusion that now, and not later, is the time to sell.

In a recent The Tokenist article, “When is the Best Time to Sell a Business?”, author Tim Fries covers a variety of factors in determining when is the best time to sell.  At the top of Fries’ list is growth.  If your company can demonstrate a consistent history of growth, that is a good thing.  Or as Fries phrases it, “What never varies, however, is the fact that growth is a key component, buyers will look for.”  Growth will be the shield by which you justify your price when you place your business on the market. 

If your business is experiencing significant growth then you have a very strong indicator that now could be the time to sell.  Fries points to a quote from Cerius Executives’, CEO, Pamela Wasley who states, “When your business has grown substantially, it might be time to consider selling it.  Running a business is risky, and the bigger you get, the bigger the risks you have to face.”  Again, growth is at the heart of determining whether or not you should sell.

Knowing the “lay of the land” is certainly a smart move.  For example, have there been a variety of businesses similar to your own that have sold or were acquired recently?  If the answer is “yes,” then that is another good indicator that there is substantial interest in your type of business. 

Reviewing similar businesses to your own that have sold recently can help you determine how much buyers are paying for comparable businesses.  This can help you spot potential trends.  In short, you should be aware of market factors.  As Fries points out, everything from relatively low taxes and low interest rates to strength in the overall economy and an upward trend of sales prices can impact the optimal times for a sale.

Now, as in this exact moment, might not be the right time for you to sell.  Getting your business ready to sell takes time and preparation.  Fries points out that smart sellers “look for a good time, not the perfect time” to sell a business.  Working with a business broker is a great way to determine if now is the right time to sell your business and what steps you have to take in order to be prepared for when the time is right.

Copyright: Business Brokerage Press, Inc.

shurkin_son/Bigstock.com

Read More

2020 Marketing Tips for Business Brokers

Happy New Year! Holiday celebrations have wrapped up and it’s time to set your sights on the year to come. As you make your plans for a successful 2020, consider the following marketing tips for business brokers.

Commit to Consistent Branding – Make sure your brand colors, logo and font styles carry throughout your marketing materials. This includes your website, email marketing, business cards, brochures, CBRs, one page summaries, etc.

Dive in to LinkedIn – LinkedIn is a powerful tool for B2B marketing. Make sure your profile is up to date and complete, including a professional headshot. Connect with professionals who fit your target market such as local business owners or local centers of influence (CPAs, attorneys, etc.). Also post fresh content regularly so that your connections are continuously hearing from you.

Consider Google Ads – The quickest way to appear in search results is with paid Google Ads. You can target keywords (i.e. business broker, how to sell a business, sell my business, exit planning) and a geographic area so that your ad shows up when people in the targeted geographic area search with the targeted keywords. Your ad will have brief text and link to your website.

Be a Networking Pro – Beyond networking on LinkedIn, make time for networking in person. This may include attending chamber of commerce events, state business broker association events or IBBA events. Consider hosting events at your own office such as a networking event or a workshop on exit planning. Also take advantage of opportunities to speak at events, as this is a great way to demonstrate your expertise.

Build an Email List – Email marketing is a powerful tool, and it’s even more powerful with a larger list. Build your email list through activities such as a signup on the home page of your website and offering a free resource (such as a whitepaper with 10 steps to increase the value of your business) in exchange for an email address. Have these signup tools feed directly to your email marketing program so that your list is always up-to-date.

Try Facebook Ads – Facebook ads can be targeted geographically, by age, by interests, etc. You might wish to use Facebook ads to build brand awareness, to promote a workshop, to drive traffic to a landing page with a free resource (building your email list), to promote a listing, etc.

We wish you a prosperous 2020! Feel free to contact Deal Studio anytime with questions about marketing your business brokerage practice.

Read More
Modern Asian Couple Making Best Coffee In Town. Content Confiden

Should You Sell Your Family Business?

When the complicating variable of family is added to the equation of selling a business, the situation can get rather messy.  Family usually complicates everything and businesses are, of course, no exception.  Ken McCracken’s recent article “Family business: to sell or not to sell?” 6 questions to help you make the right decision,” seeks to decode the complexities so often associated with family businesses. 

Consider the Market 

The foundation of determining whether or not now is the right time to sell must begin with market forces.  Determining how much your business is worth is a key variable in any decision to sell. 

The best way to determine the worth of your business is to have an outside party, such as a business broker, evaluate your business.  What you believe your business to be worth and what the market dictates could be very different.  You may discover that your business does not have the value that you hoped for.  If this is the situation, then selling simply may not be an option.

What is Next for You?

Tied to knowing your market value is understanding what you will do next after you sell your business.  For example, do you have a family member who can run the business without you?  What will you and any family members who work for the business do after the sale goes through?  You may discover that the sale could be very disruptive for you personally.  All too often, people fail to recognize the emotional and mental stress that comes along with selling a business.  Many owners begin the selling process only to discover that they are not emotionally ready to do so.  While everyone wants to be unemotional in making their business decisions, this is not always the case.

Due Diligence 

You will also need to deal with the issue of due diligence.  Working with a business broker is an excellent way to handle the due diligence process.  Business brokers usually vet prospective buyers ahead of time, which can save you a great deal of aggravation and wasted time. 

McCracken believes business owners should investigate how the prospective buyer handled previous acquisitions.  Specifically, McCracken believes that business owners should look to how well the prospective buyer honored previous commitments, as doing so is an indicator of how trustworthy a buyer may be. 

Planning for Negotiations

Finally, McCraken believes it is essential to know who will oversee negotiations.  It is key to note that many deals that could have otherwise been successful, fall apart due to poor negotiations.  A business broker can be invaluable in negotiations.  After all, who wouldn’t want someone with dozens, or even hundreds, of successful transactions advising them?

Selling a family business can be emotionally charged and can cause significant life changes for not just you, but for members of your family as well.  Often, family businesses were built up over a lifetime or even over generations, which can make the decision to sell quite emotionally charged.

Copyright: Business Brokerage Press, Inc.

Mangostar/BigStock.com

Read More

Why You Should Focus on Proper Exit Planning

If you are like many business owners, you are primarily focusing on building your business.  Yet, as we’ve covered here many times before, you should start thinking about what you’ll need to do to sell your business before you even officially launch.  Many businesses can take years to sell or even fail to sell all together.  For this and many other reasons, it is important to invest some time and energy into thinking about proper exit planning and strategies. 

Walker Deibel’s recent Forbes article, “How Proper Exit Planning Benefits the Buyer and Seller,” Deibel discusses his interview with Exit Planning: The Definitive Guide, author John H. Brown. Brown and Deibel both agreed that, when properly handled, exit planning can help both the seller and the buyer. 

Exit planning can make a business more transferable.  As Deibel points out, when buyers are evaluating businesses, transferability is a key factor.  A buyer must feel that he or she can walk into a business, take it over, keep it running effectively and even grow the business in the future. 

A key aspect of being able to buy a business and having that business be successful is that all relationships from vendors to customers are transferable.  A good management team, one that can step in and help a new owner thrive, is a must.  Building that team in advance is a savvy move for any business owner looking to sell his or her business.  Concerns on any of these fronts can spell doom for a seller.  If a buyer doesn’t feel that they can operate a business, then they probably shouldn’t be buying it.

Great exit planning most definitely benefits the seller as well.  As Deibel notes, when sellers engage in exit planning, they realize how much money they need in order to exit.  In turn, this forces sellers to become very focused and goal-oriented.  Sellers will take proactive steps to ensure that their business is as appealing to a potential buyer as possible.

Ultimately, proper exit planning is a win-win, one that benefits both buyer and seller.  Exit planning can provide sellers with much-needed clarity while simultaneously lowering the overall risk that sellers face.

Buying or selling a business is a multifaceted, and often quite complex, process.  The sooner you begin working with a professional, like a business broker, the better off you’ll be in finding the right business for you and your particular needs.  For most people, buying or selling a business is the financial decision of a lifetime.  Having a proven trusted partner, one that knows the lay of the land, is simply invaluable.

Copyright: Business Brokerage Press, Inc.

ismagilov/BigStock.com

 

Read More
Close up of business woman's hands typing during meeting

The Top Ways to Create an Attention-Grabbing Sales Ad to Sell Your Business

A major part of selling your business is getting the word out.  After all, the more people that know your business is for sale, the better off you’ll be.  In Bob House’s recent article, “How to Create an Effective Business for Sale Ad and Ensure It Gets the Best Result,” House gives readers an assortment of tips that he believes will help sellers attract higher offers from real buyers.

Getting the Word Out

As House wisely points out, many buyers wait until the last second to dive in and create a good sales ad.  In fact, many buyers fail to grasp the real importance of creating a quality and compelling advertisement.  Imagine creating a good sales ad like you would going fishing with a group of friends.  The more friends you have on your fishing trip, the greater the odds that someone catches a fish.  In much the same way, the more people who know you are selling your business, the greater the chances that you’ll get some serious “bites.”

Tips for Receiving More Attention 

House has five key tips for attracting more attention from prospective buyers via your sales ad.  At the top of the list is to be descriptive.  Your sales ad should give an excellent description of your business and its unique features.  As House notes, you want to “paint a clear picture.”  In other words, now is not the time for mystery.  You want prospective buyers to have a very clear idea of what kind of business they could possibly buy.

Headlines Count

Secondly, you should have a great headline.  People have always skimmed, but the rise of the Internet has taken skimming to a whole new level.  Your sales ad should have a very engaging and interesting headline.  You want to capture people’s attention.  A good place to start is by determining what your business’s best feature is and emphasizing that feature in your headline.

Incorporate Top-Notch Images

Third, the old saying that a picture is worth a thousand words absolutely applies to selling a business.  Just as a great headline will capture people’s attention, the same holds true for a great picture.  Consider having a professional photographer take the photo, as he or she may have tips to make your business look its best that you may simply not know.

Your Financials

Fourth, your ad should definitely include key financials.  Any serious buyer will be very concerned, if not obsessed, with your financials.  Information such as cash flow and income statements are a good idea as may potential buyers focus their business searches around key financial metrics.

Don’t Forget the Final Step

Finally, if there has ever been a time in your life to proofread, this is the time.  In fact, you should consider hiring a proofreader to look over your ad for grammar and spelling mistakes.  As House notes, you want prospective buyers to realize that you are attention oriented and responsible.  A simple grammar or spelling mistake could wreck a potential deal.

Creating a great sales ad is an art form.  One of the best ways to ensure that you have a great sales ad is to work with an experienced business broker.  Business brokers know what buyers are looking for, have great marketing professionals at their disposal, and can help you frame your business in the best light possible.

Copyright: Business Brokerage Press, Inc.

Goodluz/BigStock.com

Read More
Group Of Young Mixed Race Business People Working Together In Th

What Do You Need to Do to Get Your Business Ready to Sell?

In his recent article in Smart Business entitled, “How to get your business, and yourself, ready for sale,” author Adam Burroughs explores the key points of getting your business ready to sell.  Burroughs points to the truism that, at some point, almost every business owner must sell his or her business.  For this reason, it is critical to think about what it takes to get your business ready to sell.  Simply stated, it is best to explore and plan for selling your business long before you actually need to place your business on the market.  Let’s explore some key points for selling your business.

Broadening Your Options

Burroughs interviews Scott McRill at Clark Schaefer Hackett.  McRill notes, “The sooner you think about your exit, the more options you’ll have for yourself and the business when the time comes.”  A savvy business owner will always want to give himself or herself as many options as possible. McRill wisely points out that early planning is key, and a failure to engage in early planning could lead to a lower selling price.  If you want to get the best price for your business, then planning for the eventual sale as far in advance as possible is a good move.

Planning in Advance

According to Burroughs, business owners should start planning to sell their business at least 2 to 3 years before they actually plan to sell.  Part of the reason for this is so that business owners will have enough time to make operational improvements designed to maximize the business’s overall value. 

A Financial Review

At the top of every business owners “preparing to sell” list is to have a third-party review the business’s financial situation.  This is excellent advice for, as frequent readers of this blog know, any serious prospective buyer will look long and hard at your business’s financials.  Getting your business’s financial house in order means that you should turn to an accounting firm for help.  You’ll want to review financial statements for at least the previous 2 to 3 years.

Burroughs points out that when it comes to selling a business, there are many variables that business owners often overlook.  At the top of the list is the management team. 

Your Management Team

Prospective buyers can get very nervous about the stability of the management team once ownership has changed hands.  Often, the new buyer may only sign on the dotted line if the owner agrees to stay on after the sale during a transition period.  Having a competent and proven team in place, one that is dedicated to staying with the company will help you get your business ready to sell.

There are a lot of variables involved in preparing to sell a business.  The sooner that you get experts involved in the process, the better off you will be.  A business broker can serve as a guide – one that can point you in the right direction.  Find a broker with an abundance of experience, and you’ll have an invaluable ally who can help you navigate the process.  It can take a lot of time and effort to sell a business.  Working with a business broker can keep you from reinventing the wheel at every step of the process.

Copyright: Business Brokerage Press, Inc. 

BAZA Production/BigStock.com

Read More
Individual Income Tax Form For Who Have Income According To Unit

Selling Your Business, Taxes & Tax Structures

It is never too early to start thinking about what tax structure you should use when it comes time to sell your business.  A simple, but undeniable, rule of life is that taxes matter and they can’t be overlooked.  Author Tim Fries at The Tokenist has written an excellent and quite detailed overview article on what tax issues business owners need to consider before selling their business.  His article, “What Tax Structure Should You Use When Selling Your Business?” explores many aspects of a topic that many business owners fail to invest enough time in, namely taxes.

As Fries astutely points out, the taxes involving the sale of a business can be complex and are usually unknown to those selling a business for the first time.  Your tax structure can influence how much money you receive at the closing of your deal, so it’s a very good idea to pay attention to all aspects of taxation and your business.  It is key to remember, “When you are selling your business – as far as taxes are concerned – you’re ultimately selling a collection of assets.”

Fries points out that taxes and selling a business are no small matter.  It is possible that up to 50% of the sale of a business can go to taxes. Don’t worry if you are learning this for the first time and feel more than a little shocked.  However, this fact does a good job of illuminating the importance of setting up the right tax structure for your business.  While you might not be able to get around taxes altogether by investing the time and effort to set up the right structure for your business, you can keep from paying more taxes than is necessary.

There are a lot of variables that go into how much you will ultimately have to pay in taxes.  Let’s take a look at some of the key questions Fries raises in his article.

  1. Is your sale considered ordinary income or is the sale considered capital gains?
  2. Are you operating as an LLC, a sole proprietorship, a partnership or are you operating as a corporation?
  3. What portion of the sale price goes to tangible assets as compared to intangible assets?
  4. Is there a difference between your tax basis and the proceeds from your sale?
  5. What does your depreciation look like?
  6. Don’t expect that the buyer will instantly agree to your terms.
  7. Realize that the decisions you make during negotiations with a buyer will have tax implications.
  8. Is an installment sale right for your business?
  9. With C corporations, sellers usually want a stock sale whereas buyers generally prefer an asset sale.
  10. Cashing out immediately, where you receive all your funds at once, will increase your tax liability.
  11. Have you considered switching to an S corporation?
  12. Have you consulted with experts to decide which tax structure is best for you?
  13. Have you consulted with a business broker?

Selling a business is obviously complicated.  Finding a seasoned business broker can help you demystify many aspects of buying and selling a business.  Ultimately, having the best deal structure and finding the right buyer can be a labyrinthian process.  Having the very best professional help in your corner is simply a must.

Copyright: Business Brokerage Press, Inc.

Pra Chid/BigStock.com

Read More
business growth

Tackling Growth Delusions When Buying a Business

There is no doubt about it, it can be exciting to buy a new business.  However, in the process, it is very important that you don’t become unrealistic about future growth.  Keep in mind that in the vast majority of cases, if a business is poised to quickly grow substantially, the seller would be far less interested in selling. 

Richard Parker’s recent article for Forbes entitled “Don’t Be Delusional About Growth When Buying a Business” seeks to instill a smart degree of caution into prospective buyers.  Parker notes that when evaluating a business and talking to the owner, many buyers come away with a sense that enormous growth is just “sitting there” waiting to be seized.  In particular, Parker cautions those buyers who are buying into an industry that they know nothing about; those individuals should be very careful. 

When buying into an industry where one has no familiarity, there can be a range of problems.  The opportunities that you see may not have been tapped into by the existing owner for a range of reasons.  You couldn’t possibly guess what these reasons might be without more of a knowledge base.  Since you are an outsider, you likely lack the proper perspective and understanding.  In turn, this means you may see growth opportunities that may not exist, as the seller may have already tried and failed.  Summed up another way, until you actually own the business and are running it on a day to day basis, you simply can’t make a proper assessment of how best to grow that business.

The seductive lure of growth shouldn’t be the determining factor when you are looking for a business.  A far more important and ultimately reliable factor is stability.  The real question, the foundation of whether or not a business is a good purchase option, is whether or not the business will maintain its revenue and profit levels once you’ve signed on the dotted line and taken over.  You want to be sure that the business doesn’t have to grow to remain viable.

As Parker points out, the majority of small business buyers will buy in a sector where they don’t have much experience, and that is fine.  What is not fine is assuming that you can greatly grow the business.  Of course, if new buyers can achieve that goal, that is great and certainly icing on the cake.  But don’t depend on that growth.

In the end, everyone has some ideas that work and some that don’t.  You may take over a business and, thanks to having a different perspective than the previous owner, are able to find ways to make that business grow.  But realize that many of your ideas for growing the business may fail completely. 

A professional business broker will be able to help you determine what business is best for you.  A business broker will help keep you focused on what matters most and steer you clear of the mistakes that buyers frequently make when buying a business.

Copyright: Business Brokerage Press, Inc.

winnond/BigStock.com

Read More