There is no denying the fact that for most people, the decision to buy or sell a business is one of the most important professional and financial decisions that they will ever make. Let’s turn our attention to some of the key questions you’ll need to ask.

1. What is really for sale?

You’ll need to determine what is, and is not, for sale. If you own machinery or real estate associated with the business, are those items to be included in the sale?

2. What assets bring in revenue? 

One important factor to consider when preparing a business to be sold is what assets are earning money. If you have assets that are not earning money, then it may or may not be prudent to sell those assets.

3. What is proprietary?

Buyers and sellers alike will want to consider what is proprietary. Anything from software and patents to formulations can be extremely valuable. Sellers will want to give substantial thought to how to best frame any proprietary property that they have in the best light. Buyers will want to carefully evaluate proprietary property to try to ascertain an accurate value. Outside experts may be needed to make an accurate assessment.

4. What’s your competitive advantage? 

A business’s competitive advantage should be of importance to buyers and sellers. A seller should focus on understanding their competitive advantage, whether it is a certain niche, a superior manufacturing process or product, better marketing or a range of other factors. Properly framing your competitive advantage can help buyers see the full, and even untapped, value of your business.

5. What is your growth potential?

Buyers will want to consider factors such as whether or not the business has the potential to grow. If the business can’t be grown, then buyers should include this fact in their final decision and/or offer.

6. What agreements do you have in place?

Other factors such as employee agreements, non-competes, and the depth of management are all areas of concern for a prospective buyer. Buyers will want to consider if the seller has secured agreements from key employees and how dependent the business is on an owner/manager. 

7. What relevant financial information will a buyer want to know? 

Understanding how much working capital is needed to run the business and how financial reporting is undertaken are other factors that should not be glossed over.

If you are preparing to sell your business it is worth the time to pause and think about what your business might look like to a buyer. In short, what would you think of your business if you were the buyer and what questions would you ask? 

Buying or selling a business is complex. Every single business is different and that means there is no 100% standardized approach and route towards success. A seasoned, experienced and professional business broker or M&A advisor can help guide buyers and sellers alike towards optimal outcomes.

Copyright: Business Brokerage Press, Inc.

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The closing is a pivotal moment in the history of a business as it marks the formal transfer of a business from one party to the next. Behind every successful closing is months of focus and hard work. Simply stated, a successful closing doesn’t just happen, but is instead the byproduct of extensive negotiations. 

One key document to utilize in the closing process is the Purchase and Sales Agreement. There are four key aspects to this document. 

1. First are the terms of the agreement, which typically cover the price as well as detailed terms on how the business is to be paid. In the Purchase and Sales Agreement, you will find the status of any management that will be staying with the business. 
2. This document also should contain conditions and covenants which include non-competes as well as agreements on what to do and what not to do moving forward. 
3. Any good Purchase and Sales Agreement will, of course, include a description of the transaction. In other words, is the transaction a stock or asset sale? 
4. Finally, the agreement will cover representations and warranties. This is typically negotiated after the Letter of Intent is agreed upon. In short, the warranties will provide that everything is as it has been represented.

Now, let’s look at the four key steps that are a must before the sale of a business can close. 

1. Topping the list, is that the seller must provide satisfactory evidence that they have the full legal right to act on the behalf of the selling company. Additionally, the seller must show evidence that they have full legal authority to sell the business. 
2. Secondly, all representations and warranties must be in place. Importantly, this will also include clearly stated remedies that are available to the buyer in the case of a seller’s breach. 
3. Third, the buyer’s representative should have completed the due diligence process. A key part of the due diligence process is that any claims and representations made by the seller have been clearly substantiated and addressed. 
4. Last, but certainly not least, necessary financing should have been secured. A critical part of the process is that all of the proper paperwork, as well as the appropriate liens, should be in place, as no funds can be released until these conditions have been met.

It is also important to note that there are two significant elements of closing that will take place simultaneously. 

1. The first is the corporate closing which is the actual transfer of the corporate stock or assets. This step is based on the provisions set forth in the Purchase and Sales Agreement. All the paperwork that was carefully laid out in the Purchase and Sales Agreement has been completed. 
2. The second major element is the financial closing. In the financial closing all the paperwork, as well as the legal documents needed to provide funding have successfully been executed.

While there is no doubt that closing is a joyous time, it is also vital to remember that the period leading up to closing is the time to have a laser-like focus. This is the most important time to avoid mistakes. Working with a business broker or M&A advisor can dramatically reduce your chances of experiencing mistakes during the all-important closing process.

Copyright: Business Brokerage Press, Inc.

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Most business owners are experts at running their specific businesses. They are not necessarily experts at selling businesses. This is where working with a seasoned brokerage professional can prove to be invaluable. 

As it turns out, there are endless examples of people trying to save money by simply finding an MBA to handle the sale of their business. Owners often will trust this person despite whether or not they have direct experience selling businesses. Sadly, the results from this decision can be very poor. 

Let’s take the example of a business owner who opted to let his nephew with a freshly minted MBA oversee the sale of his multi-location retail operation. The idea was that his nephew would help him save a great deal of money. Unfortunately, this idea simply didn’t work. His well-intended nephew’s inexperience proved to be a liability. 

Let’s take a look at some of the main problems that this business owner and his nephew faced:

Missing Legal Arrangements

One of the first problems is that neither the business owner nor the nephew realized how important confidentiality agreements were to the process of selling a business. This led to competitors learning that the business was for sale. Likewise, the lack of confidentiality agreements meant that everyone from key employees to clients, customers and suppliers could learn that the business was for sale.

Further, the nephew opted to use the company’s attorney instead of finding an attorney with experience in business transactions. The company attorney had never handled the sale of a large business before.

Incomplete Documentation

Another problem was that the nephew prepared what was supposed to be a Confidential Business Review/Confidential Information Summary – CBR/CIM. The review/summary prepared by the nephew failed to include proper financials, including a large sum taken by the owner. Importantly, there were no projections, ratios and other important information. This lack of information could easily lower the bids or simply cause prospective buyers to lose interest.

The way that the business owner and nephew handled the CFO was also an issue. They failed to bring in the CFO and did not execute a “stay” agreement. The nephew was confident that he could handle the financial details on his own. However, neither the owner nor the nephew realized that prospective buyers expected to meet the CFO as part of the due diligence process.

Failure to Properly Screen Candidates 

Finally, not only did the nephew not understand the importance of confidentiality agreements or the due diligence process, but he also failed to understand the importance of the screening process. The nephew failed to interview prospective buyers to discover whether or not they were serious and had the resources to buy the business. The failure to have a proper screening process served to both waste valuable time and spread the word that the business was for sale.

For most people, selling a business is the single most important financial decision of their lives. For this reason, it is critical to find experienced and competent assistance for the process. An experienced business broker or M&A advisor understands what is involved in selling a business. In other words, your nephew may be a great guy and he may want to help you, but without years of experience selling businesses, he simply isn’t the right person for the job.

Copyright: Business Brokerage Press, Inc.

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No business owner will be able to stay with their business indefinitely. For this reason, you will either have to eventually sell or hand your business off to the next generation. Let’s take a closer look at the concept of handing a business over to a family member and how you can make sure that the business is in optimal shape when the time comes. 

If you want your business to be prepared for succession and the next generation, you’ll want to repair any key problems before handing it over. Some experts advise putting your focus on evolving the business. One key recommendation is to focus on sales, marketing and distribution in the coming years, so that troublesome issues, such as sales plateaus, are properly addressed and hopefully circumvented.

Also, you’ll want to consider boosting communication with key employees so that current management understands where all the employees stand. Skilled and motivated employees are rare commodities, and they are absolutely critical to the future success of any business. For any business owner considering handing over their business to their children, employee skill level, motivation and commitment will be essential to the success of the business during a potential transition period.

Some people see their business as a form of job creation for their children, instead of being what it truly is, a business. For a wide variety of reasons, it may not be feasible for your descendants and relatives to take over the business. They may not be capable of the demands or they may simply have no interest. But if you are able to successfully pass it down, you’ll want to optimize their chances for success. 

Just as buying or selling a business involves preparation, the same holds true for handing the baton to the next generation. There is no replacement for advance planning. The sooner that you begin thinking about, and taking tangible steps to prepare for the next generation taking over the reins, the better off everyone will be.

Copyright: Business Brokerage Press, Inc.

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The last thing that any business owner wants is for a sale to fall through over something that was completely preventable. The good news is that with proper preparation and planning, these mistakes can be minimized or avoided altogether.

Workforce Issues

One of the top mistakes that business owners can make is allowing for an unstable workforce. It should come as no surprise that prospective buyers want to buy a business that produces consistent results. A key part of business stability resides in a stable workforce. Having a great product or service and then knowing that you have good dependable people to deliver those goods and services is essential. Buyers will be looking for this when they make their buying decisions. 

Faulty Recordkeeping

You can be very certain that any serious buyer will want to examine your books for the last several years. It is only prudent to expect that a prospective buyer will look at every part of your financials, including everything from your operating costs to your sales history. Proper recordkeeping will help convey the message that you are a responsible business owner, and this in turn, will increase the perceived value of your business.

Delayed Improvements

Delaying key investments and improvements may sound good for the foreseeable future, but it can be costly in the long run. It also points to a lack of vision and planning on the part of business owners. If you’d like to maintain your business’ value for when it is time to sell, you must constantly invest in your future. This will help your business thrive today and grow in the future. 

Another mistake that business owners can make is to fail to innovate. In a sense, this failure often goes hand-in-hand with a failure to invest in the business. A business that is not innovative is one that may be seen as a business that is not well positioned for the future. 

Of course, every industry is different. For this reason, it is important that business owners evaluate their business, the competition, and what opportunities exist if they embrace a constant stream of innovation. It is key to note that innovation is not always about making grandiose and costly moves. Quite often, innovation is the result of adopting a different mindset and finding small ways to boost customer or client satisfaction and reach new customers.

Failing to Work with Professionals 

Business brokers and M&A advisors understand all of these variables. They understand the mistakes that business owners can make when preparing to sell their business. Just as importantly, they understand the steps necessary to circumvent them. Working with a brokerage professional well before putting your business up for sale will dramatically increase your odds of a successful outcome. You’ll also want a solid team of other professionals including an experienced attorney and accountant.

Copyright: Business Brokerage Press, Inc.

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There are many different strategies that will likely be deployed during the sales process. In this article, we’ll focus on how to utilize the Confidential Business Review CBR and/or CIM. Frequently, the Confidential Business Review is also referred to as a Confidential Information Memorandum. But no matter what name is used, the CBR/CIM provides a pathway for obtaining the highest selling price possible.

It is important to understand that the CBR/CIM must be factual at its core. Yet simultaneously, the CBR/CIM can function as a promotional and sales tool. The CBR/CIM can be integrated with an Executive Summary in the document, which allows prospective buyers a way to learn more about the business.

Through the Executive Summary section of the CBR/CIM, prospective buyers can quickly gain insight into the key highlights of a given company. The outline should include key factors, such as an overview of the ownership and management structure as well as a description of both the business and financial highlights. The company’s products and services should also be covered in detail. Importantly, the CBR/CIM should include why the business is for sale and some information about the market.

A well-constructed Executive Summary helps to both guide and motivate a prospective buyer so that they become motivated to learn more and take action. The Executive Summary should grab hold of anyone who reads the high points and illuminate why your business is valuable.

Many variables can be included in the CBR/CIM. Everything from the history of your company and what it does for the markets it serves and the products it creates can all be found in this document. Other topics such as the current state of competition, your key customers, management, your growth strategies, various financial information and other important variables can all be included in a CBR/CIM.

The creation of a coherent and persuasive CBR/CIM, one that motivates a prospective buyer or their representative to take action, is an artform. Much like it is prudent to invest both time and resources to the creation of an excellent confidentiality agreement, the same holds true for the creation of a CBR/CIM.

Business Brokers and M&A Advisors are experts in the creation of key sales documents, such as the CBR/CIM. One of the quickest and easiest ways to create an excellent CBR/CIM is to work with an experienced Business Broker as they understand exactly what should be in an offering memorandum. This document may very well be the first important contact point with a prospective buyer. For this reason, it should be designed to work to your benefit in a variety of ways.

Copyright: Business Brokerage Press, Inc.

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Great deals can quickly be derailed when confidentiality agreements are not properly used and observed. The number of headaches that can occur due to a failure to follow the requirements of a confidentiality agreement are rather extensive. Whether it is employees discovering the potential sale, to the loss of key customers or even alerting a competitor that your business is for sale, there is no end to the headaches that can arise when a confidentiality agreement is not in place or adhered to. Simply stated, adhering to confidentiality is one of the most important aspects of the entire sales process.

Thanks to a well-constructed confidentiality agreement, sellers can enjoy protection from the disclosure of critical and confidential information during the sales process. While confidential agreements may have originated as a way to safeguard against prospective buyers revealing information about a seller’s business, these agreements have evolved to consider numerous seller concerns. 

A good confidentiality agreement helps to protect all sorts of important details that may be revealed during the sales process including trade secrets and proprietary information. It can also outline the fact that a prospective buyer will not attempt to hire away key employees.

Considering the importance of a confidentiality agreement, it is well worth the time to create an agreement that covers all key areas. Everything from how confidential information should be shared to how breaches in confidentiality should be remedied must be addressed by a confidentiality agreement. It is not prudent to cut corners to save money and time when drafting a confidentiality agreement, as it is likely one of the most important business documents your business will ever create.

Just as no two businesses are the same, this fact holds true for the content of important legal documents. The sale of every business is a unique situation, and for that reason every confidentiality agreement must be tailored to fit the precise circumstances of the business.

Business brokers and M&A advisors are experts in the buying and selling of businesses. Part of that expertise extends to the creation and execution of confidentiality agreements, which are also sometimes referred to as non-disclosure agreements. 

At the end of the day, the last thing any business owner wants is for key information regarding their business to be revealed. Working closely with a brokerage professional is an important way for sellers to safeguard their confidentiality throughout the process.

Copyright: Business Brokerage Press, Inc.

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Buying an international business brings with it considerations and challenges that buying a local business typically does not. The decision as to whether or not to buy an international business is not easy and depends on numerous factors. In this article, we will look at several key tips for those considering buying an international business.

One of the most important steps you should take when considering buying an international business is to research similar businesses. You may understand a given sector of industry or type of business in your area, but operating a similar business in a different country may have more than its fair share of surprises. 

You’ll want to investigate what it takes to make a given business a success in the country in which it is operating. The model you’ve used in your home country may not translate, at least not in every way, to a foreign location. It is only prudent to research other businesses in the international location so that you understand more about what does and doesn’t work. This could be the difference between success and failure.

A second tip to consider is to make the decision between relocating and hiring a business manager. There are some obvious pros and cons to each approach. Relocating to operate and oversee a new business is, of course, a dramatic life change. Such a large life change could help or harm the success of your new business depending on many different personal factors. 

When accessing your situation as a whole, you may decide relocating isn’t the best option. If this is the case, then your best option may be to opt for a manager. Hiring a manager comes with its own set of risks, of course. That’s why investing the time to find a highly capable, experienced and trustworthy manager is of paramount importance.

A third tip to keep in mind is that there will be cultural differences. Many business owners have overlooked or downplayed cultural differences only to learn too late that cultural differences can have a great deal of importance and even wreck a business. Cultural differences won’t end when you officially take control of a business, and they will undoubtedly make an impact on operations. It is a prudent move to work with local lawyers, accountants, and industry specific experts to gain a full understanding of the business and how the local culture will impact it. Remember that not speaking the language, for example, could be a huge impediment to the success of your business.

In terms of impediments to your business, not knowing or understanding the regulations of the country and region in which you are located can also be a recipe for disaster. Once again, having local experts upon which you can rely can prove invaluable. Regulations vary greatly from country to country and region to region with everything from taxes to customs coming into play.

One of the best ways to protect yourself when buying an international business is to work with a business broker or M&A advisor. Brokerage professionals not only have their own personal experiences to draw from to guide you, but can also reach out to a variety of connections and experts around the world. Working with a seasoned business broker can be your first line of defense when buying an international business.

Copyright: Business Brokerage Press, Inc.

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For most entrepreneurs, finding the money to launch their first business stands as a tremendous challenge. The good news is that getting a loan through the Small Business Association (SBA) is turning out to be a viable option for many business owners.

The SBA doesn’t directly provide loans itself, but instead, works to facilitate lending. SBA assistance can even extend into the realm of micro-lending. It is very important for prospective buyers to realize that since SBA loans are government backed, lenders are typically much more willing to offer a prospective buyer a loan. Impressively, the SBA will cover seventy-five percent of a lender’s loss in the event that a loan ultimately goes into default.

Many entrepreneurs find the issue of collateral to be a challenging one. Once again, the SBA can be of assistance. In some cases, an SBA loan may bypass the need for collateral altogether.

Overall, SBA loans do in fact have a good deal in common with other types of loans. Prospective buyers should have all of their financial documentation ready and well organized. In short, prospective buyers should have all their information organized as they would when dealing with a bank without SBA involvement.

Not every prospective buyer will qualify, so the first step that should be taken is for a would-be business owner to check and verify that they do indeed qualify for a loan. The next step for a prospective buyer is to find a lender and complete all necessary SBA forms.

There are several factors that determine eligibility for an SBA loan. Here are the two top factors that are important for qualifying for a loan 

1. The business must be based in the United States, the business must be a for-profit venture. 
2. Prospective buyers should expect that their application will take two to three months to process once it has been submitted.

All too often, people assume that they simply won’t qualify for an SBA loan. The statistical data tells a different story. Every year, thousands of people are approved for SBA loans. It’s important to keep in mind that these loans are not just for those looking to buy a business. The SBA also helps existing businesses that are looking to expand.

For the end of 2023, the SBA Administrator Isabel Casillas Guzman announced that this year, the SBA delivered $50 billion and this included capital, disaster relief and small business support. Guzman stated, “The Biden-Harris Administration remains committed to simplifying and addressing persistent inequities in accessing capital to ensure all small business owners can get the funding needed to grow and create jobs for our economy. In Fiscal Year 2023, the SBA transformed its lending and investment programs and expanded its capital partners to deliver nearly $50 billion in startup, growth, and recovery capital, as well as surety bonds, including more small business lending to people of color, women, and veterans.” ^[1]

Business brokers and M&A advisors are experts in working with the SBA. Entrepreneurs looking to buy a business can benefit enormously from their years of SBA experience. Working with a business broker or M&A advisor can help you streamline the SBA process and dramatically increase your chances of success.

[1] https://finance.yahoo.com/news/sba-announces-biden-harris-administration-154000629.html

Copyright: Business Brokerage Press, Inc.

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There can be no doubt that the quality of your employees will directly impact the quality of your business and its long-term value. Employee quality and the success of your business are intrinsically linked. Unfortunately, far too many entrepreneurs learn this lesson too late, and their businesses suffer as a consequence. Employees who do not feel invested in a business and its long-term growth and success can damage your business on a daily basis. 

The quality of employees stands as one of the most important factors that entrepreneurs should consider before buying a business. With this fact in mind, it is critically important that business owners do everything possible to put together a great team. 

It’s important to keep in mind that your employees can be either an asset or a detriment to the success of your business. A dedicated and knowledgeable team of employees will help boost not only a business’s bottom line, but also its value when it comes time to sell.

Along similar lines, if you’re considering buying a business, you should take a careful look at how much work the current owner is responsible for and how well they are supported by the staff. If the owner is shouldering too much work and not relying on capable employees, then owner burnout can be a real possibility. Remember that the amount of work the current owner is doing could be what you’re facing down the line.

It is also important to consider the loyalty of employees and how likely it is that they may quit and join a competitor. Potential buyers should carefully evaluate employees and how they operate before signing on the dotted line.

At the end of the day, most businesses are only as strong as their employees and management. It should come as no surprise that employees who don’t feel invested and are just doing the “bare minimum” to not get fired are not the kind of employees that help build a successful business. 

A successful business is one with longevity, and the future of a business depends on employees that care about the business. In doing so, they will work to ensure customer or client satisfaction and loyalty. There are many variables that you must consider before deciding to buy a business, but buyers should never overlook the strength of employees.

Copyright: Business Brokerage Press, Inc.

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