Selling a Business

7 Big Questions to Ask Yourself Before Moving Forward

The first step towards successfully selling a business is finding a qualified business broker to work with.  Sellers should also ask themselves an array of important questions.  A recent article, “7 Questions to Answer Before Selling Your Business,” published by Good Men Project, has a great overview of questions sellers should answer before moving forward. Author Troy Lambert believes that at the top of the list is one very simple and powerful question, “Are you ready?”  For example, your financial reports should be ready to show. The second question is, “What’s it worth?”  Determining what a business is worth means you’ll need a professional business valuation.  A great deal can go into evaluating your business and you need an expert to help you determine that value. Third, Lambert believes that prospective sellers should ask themselves, “How’s the health of my industry?”  He emphasizes that honesty is key here for a variety of reasons.  If your industry is in a transition period, … [Read more...]

The Historic Levels of Small Businesses Being Sold Drops Slightly

The number of small business transitions continues to be strong for the first quarter of 2019.  In fact, despite a small decline, small business transitions remain at historically high levels. Looking at the Statistics According to a recent BizBuySell article entitled, “Number of Small Businesses Changing Hands Dips Slightly, But Market Remains Ripe for Buyers and Sellers,” now is still very much the time for both buying and selling a business.  It is true that the number of businesses sold in the first three months of 2019 dropped by 6.5% when compared to 2018.  Yet, it is important to keep in mind that the number of completed transactions remains very strong.  Likewise, inventory is increasing, with a 6.1% increase in listings in Q1 of 2019 when compared to the same period in 2018. While the market is indeed strong, the BizBuySell article did note that some experts feel that there are signs that the market could become more challenging moving forward.  In part, this is due to the … [Read more...]

A Must Read Article on Having Children Take Over the Family Business

In a recent Divestopedia article entitled, “Kids Take Over the Business? 8 Things to Consider,” author Josh Patrick examines what every business owner should know about having their children take over their business.  He points out that there are no modern and accurate numbers on what percentage of businesses will be taken over by the children of their owners.  But clearly the number is substantial. Patrick emphasizes as point number one that allowing a child to take over a business right after finishing his or her education could be a huge mistake.  After all, how can a parent be sure that a child can handle operating the business without some proven experience under his or her belt? Point number two is that businesses frequently create jobs for the children of owners.  The flaw in this logic is pretty easy to see. This job, regardless of its responsibilities, isn’t in fact a real job.  Senior decision-making roles should be earned and not handed out as a birthright. The end … [Read more...]

Embracing Technology to Boost Your Business

Forbes author Keith Gregg’s, February 8, 2019 article, “Using Tech to Enhance and Sell a Business,” has a range of interesting ideas that business owners should explore and embrace.  Gregg looks at three big ways that business owners can use technology to help them get the most out of the sale of the business.  He explains how important it is to address these three areas before placing your business on the market. Upgrading Systems The first tip Gregg explores is to upgrade systems.  Upgrading systems can be particularly important for attracting younger buyers.  It is common for businesses to be successful without proprietary technology or procedures, but that doesn’t mean that technology should be ignored. Important information should be digitized, as this data will be vital for the new owner to grow the business over the long haul.  Incorporating software that can track and analyze data across the business is likewise valuable. Using software, such as customer relationship … [Read more...]

Thinking About Succession Planning

If you haven’t been thinking about succession planning, the bottom line is that you should be. In the February 20, 2019 Divestopia article, “All Companies Need to Look at Succession Planning,” author Brad Cherniak examines the importance of succession planning. Owning and/or operating a business can be a great deal of work, but it is imperative to take the time to develop a succession plan. Succession Planning is for Businesses of All Sizes Author Cherniak wants every business owner to realize that succession planning isn’t just for big businesses. Yet, Cherniak points out that the majority of small-to-medium sized businesses, as well as their senior managers, simply don’t focus much on succession planning at all. Many business owners see succession planning as essentially being the same as exiting a business. Cherniak is quick to point out that while the two can be linked and may, in fact, overlap, they are by no means the same thing. They should not be treated as … [Read more...]

Could the Red-Hot Market for Businesses Be Cooling Down

The economy is red hot, and that fact is translating over to lots of activity in businesses being sold.  However, it is possible that this record-breaking number of sales could cool down in the near future. In a recent article in Inc. entitled, “The Hot Market for Businesses is Likely to Cool, According to This New Survey,” the idea that the market for selling business is cooling down is explored in depth.  Rather dramatically, the article’s sub header states, “Entrepreneurs who are considering selling their companies say they’re worried about the future of the economy.” The recent study conducted by Pepperdine University’s Graziadio School of Business as well as the International Business Brokers Association and the M&A Source surveyed 319 business brokers as well as mergers and acquisitions advisers.  And the results were less than rosy. A whopping 83% of survey participants believed that the strong M&A market will come to end in just two years.  Perhaps more jarring is the … [Read more...]

Are you a “Baby Boomer” Business Owner?

What is so special about “Baby Boomer” business owners?  Well, there are a lot of them.  It is estimated 52 percent of businesses are owned by people between 50 and 88 years of age. This equates to 9 million businesses in the United States. Put it another way, a business owner is turning 65 every 57 seconds. So, why is this important?  Typical of most business owners, the value of their business amounts to 50 to 75 percent of their net worth (if not more); the remainder in personal real estate and financial investments. Ordinarily, the business owner has only one chance to monetize his or her largest asset through the sale of the business. It is estimated that 11,000 people are turning 65 years old every day, with this trend continuing for the next 18 years. Being that many of these Baby Boomers are also business owners, one would suspect that every year for the next two decades more and more business owners will be wanting to sell their businesses to cash out and fund their … [Read more...]

Considering Selling? Some Important Questions

Some years ago, when Ted Kennedy was running for president of the United States, a commentator asked him why he wanted to be president. Senator Kennedy stumbled through his answer, almost ending his presidential run. Business owners, when asked questions by potential buyers, need to be prepared to provide forthright answers without stumbling. Here are three questions that potential buyers will ask: Why do you want to sell the business? What should a new owner do to grow the business? What makes this company different from its competitors? Then, there are two questions that sellers must ask themselves: What is your bottom-line price after taxes and closing costs? What are the best terms you are willing to offer and then accept? You need to be able to answer the questions a prospective buyer will ask without any “puffing” or coming across as overly anxious. In answering the questions you must ask yourself, remember that complete honesty is the only … [Read more...]

Is Your “Normalized” P&L Statement Normal?

Normalized Financial Statements – Statements that have been adjusted for items not representative of the current status of the business. Normalizing statements could include such adjustments as a non-recurring event, such as attorney fees expended in litigation. Another non-recurring event might be a plant closing or adjustments of abnormal depreciation. Sometimes, owner’s compensation and benefits need to be restated to reflect a competitive market value. Privately held companies, when tax time comes around, want to show as little profit as possible. However, when it comes time to borrow money or sell the business, they want to show just the opposite. Lenders and prospective acquirers want to see a strong bottom line. The best way to do this is to normalize, or recast, the profit and loss statement. The figures added back to the profit and loss statement are usually termed “add backs.” They are adjustments added back to the statement to increase the profit of the company. For … [Read more...]

Do You Have an Exit Plan?

"Exit strategies may allow you to get out before the bottom falls out of your industry. Well-planned exits allow you to get a better price for your business." From: Selling Your Business by Russ Robb, published by Adams Media Corporation Whether you plan to sell out in one year, five years, or never, you need an exit strategy. As the term suggests, an exit strategy is a plan for leaving your business, and every business should have one, if not two. The first is useful as a guide to a smooth exit from your business. The second is for emergencies that could come about due to poor health or partnership problems. You may never plan to sell, but you never know! The first step in creating an exit plan is to develop what is basically an exit policy and procedure manual. It may end up being only on a few sheets of paper, but it should outline your thoughts on how to exit the business when the time comes. There are some important questions to wrestle with in creating a basic plan and … [Read more...]