When It’s Time to Sell, Put Your Strengths First
Putting your strengths first will help you sell your business. While this may seem obvious, a surprising number of business owners will either improperly index the strengths of their business or fail to emphasize those strengths adequately. In this article, we will examine five key business strengths that you should focus on when it comes time to sell.
Understand Your Buyer
You know your business, but you don’t necessarily know what buyer is best for it in the long run. If you’ve never sold a business before (and most business owners haven’t), then you may not know how to best position and present your business for sale.
A business broker is immensely valuable in this regard. These professionals are very good at determining which prospective buyers are serious and which ones are not. Additionally, a business broker will use their own databases of prospective and vetted buyers and try to match your business up with the prospective buyers that are most likely to be a good fit. When dealing with a buyer, a seasoned business broker will put emphasis on your strengths whenever possible.
Be Sure to Maintain Normal Operations
Selling a business can be very demanding and underscores, once again, the value of working with a business broker. A business broker will focus on selling your business so that you have more time to focus on the day-to-day of running your business.
The last thing you want is to waste your time on buyers who are not serious. Remember, if your business suffers as a result of the time you spend away from your business in the sale process, then the value of your business to prospective buyers could suffer.
Determining the Best Price
If you incorrectly price your business, you could dramatically reduce the interest. Business brokers are experts at pricing businesses and can help you determine the best possible price. Many business owners have unrealistic valuations and others may even undervalue their businesses or they fail to incorporate all aspects of their business. Working with a professional business broker can help you quickly achieve the best price. The best price possible will work to maximize the strengths of your business.
Getting Your Business Ready for Sale
There is a lot that goes into getting your business ready to sell. The simple fact is that getting your business ready to sell isn’t a one-dimensional process, but instead involves every aspect of your business. Getting your business ready to sell isn’t about making it look presentable and putting a “new coat of paint” on things, although this is a factor.
Instead it is necessary to have every aspect of your business in order. From paperwork such as tax returns, contracts and forms to a business plan and more, it is important to consider every aspect of your business. You should consider what you would want to see if you were the one looking to buy the business. Be sure to do everything possible to build up your strengths.
Confidentiality
If word gets out that your business is up for sale, there could be a range of problems. Employees, including key management, could begin looking for other jobs and suppliers and key buyers could begin to look elsewhere. In short, a breach of confidentiality could lead to chaos.
Getting your business ready for sale means factoring in the strengths and weakness of your business then fixing weaknesses whenever possible and building upon your strengths. Working with a business broker can help you address every point covered in this article and more.
Evaluating Your Company’s Weaknesses
The time you spend evaluating your company’s weaknesses is, as it turns out, one of the single best investments you can hope to make. No one should understand your company better than you. But to fully understand your company, it is essential that you invest the time to understand your company’s various strengths and weakness.
Your company, from the beginning, has been an investment. It’s an investment in your time, your mental energy and, of course, your financial resources. The time and effort you expend to locate, understand and then fix your businesses’ weaknesses is time very well spent. Addressing and remedying your businesses’ weakness will not only pay dividends in the here and now, but will also help get your business ready to sell. Let’s turn our attention to some of the key areas of weakness that can cause some buyers to look elsewhere.
An Industry in Decline
A declining market can serve as a major red flag for buyers. You as a businessowner must be savvy enough to understand market situations and respond accordingly.
If you spot a troubling trend and realize that a major source of your revenue is declining or will decline, then you must branch out in new directions, offer new goods and/or services, find new customers and also find new ways to get your existing customers to buy more. Taking these steps shows that your business is a vibrant and dynamic one.
You Face an Aging Workforce
It has been well publicized that young people, for example, are not entering the trades. Many trades such as tool and die makers will be left with a substantial shortage of skilled workers as a result. No doubt, technology will replace some, but not all, of these workers.
This is an example of how an aging workforce can impact the health and stability of a business. If your business potentially relies upon an aging workforce then it is essential that you find a way to address this issue long before you put your business up for sale.
You Only Have, or Primarily Rely Upon a Single Product
Being a “one-trick pony” is never a good thing, even if that trick is exceptionally good. Diversification increases the chances of stability and can even help you find new customers. Additional goods and services allow you to weather unexpected storms such as a supply chain disruption while at the same time provide access to new customers and thus new revenue.
The Factor of Customer Concentration
Many buyers are concerned about customer concentration. If your business has only one or two customers, then your business is highly vulnerable and almost every prospective buyer will realize this fact. While it is an investment to find new customers, it is well worth the time and money.
A business broker can help you evaluate your company and, in the process, address its weaknesses. Remedying your businesses weakness before you put your business up for sale and you will be rewarded.
What Should You Evaluate When Buying a Business?
Buying a business can be an exciting prospect. For many prospective business owners, owning a business is the fulfillment of a decades long dream. With all of that excitement comes considerable emotion. For this reason, it is essential to step back and carefully evaluate several key factors to help you decide whether or not you are making the best financial and life decision for you. In this article, we’ll examine five key factors you should consider before buying a business.
What is Being Sold?
If you hate the idea of owning a clothing store, then why buy one? The bottom line is that you have to have a degree of enthusiasm about what you are buying otherwise you’ll experience burnout and lose interest in the business.
How Good is the Business Plan?
Before getting too excited about owning a business, you’ll want to take a look at the business plan. You’ll want to know the current business owner’s goals and how they plan on going about achieving those goals. If they’ve not been able to formulate a coherent business plan then that could be a red flag.
You need to see how a business can be grown in the future, and that means you need a business plan. Additionally, a business plan will outline how products and services are marketed and how the business compares to other companies.
How is Overall Performance?
A key question to have answered before signing on the bottom line is “How well is a business performing overall?” Wrapped up in this question are factors such as how many hours the owner has to work, whether or not a manager is used to oversee operations, how many employees are paid overtime, whether or not employees are living up to their potential and other factors. Answering these questions will give you a better idea of what to expect if you buy the business.
What Do the Financials Look Like?
Clearly, it is essential to understand the financials of the business. You’ll want to see everything from profit and loss statements and balance sheets to income tax returns and more. In short, don’t leave any rock unturned. Importantly, if you are not provided accurate financial information don’t hesitate, run the other way!
What are the Demographics?
Understanding your prospective customers is essential to understanding your business. If the current owner doesn’t understand the business, that is a key problem. It should be clear who the customers are, why they keep coming back and how you can potentially add and retain current customers in the future. After all, at the end of the day, the customer is what your business is all about.
Don’t rush into buying a business. Instead, carefully evaluate every aspect of the business and how owning the business will impact both your life and your long-term financial prospects.
The Top Three Major Legal Mistakes to Avoid During a Sale
The business sale process can be complex, which is part of the reason why it makes sense to have expert help in the form of a business broker. Legal mistakes can be very costly mistakes. A legal mistake can also bring the entire sale process to a sudden and complete halt. Let’s take a closer look at what you can do to avoid these kinds of issues when selling your business.
Major Mistake 1 – You Skipped the Non-Disclosure Agreement
Nothing quite invites trouble like skipping the non-disclosure agreement. If a deal falls through, then you have the NDA backing you up. This document ensures that the prospective buyer doesn’t tell the world that your business is up for sale. Never assume that a deal is going through until it actually is 100% complete. Buying or selling a business is a complex process with lots of moving parts. There is plenty of room for things to go wrong, and that is why you always need to have an NDA in place.
Major Mistake 2 – You Don’t Work with an Attorney
Let’s be very blunt here, if you are selling a business, then you need an attorney. Just as there is no replacement for an NDA, the same holds true for working with a lawyer. It is also vital that you properly prep your business for sale, which means getting paperwork organized and making sure that you have legally checked all your boxes. Working with an experienced and proven attorney will help you ensure that your business is ready for sale. If you’re not prepared for the deal, it can make buyers nervous.
Major Mistake 3 – You Failed to Get a Letter of Intent
A letter of intent is a valuable, and necessary, legal document. Some sellers are reluctant to use it, fearing that it will slow down the momentum of the deal. However, since this letter works to protect your interest and outlines expectations, this step should not be skipped. For example, a letter of intent details the termination fee for the buyer, meaning that the buyer can’t walk away without consequences simply because he or she is having a bad day. Importantly, a letter of intent ensures that you are only dealing with serious buyers.
Many things can go wrong while selling a business. The more prepared you are before you begin the process, the greater the chances that you will not only avoid headaches, but also be successful. Long before you put your business on the market, you should begin working with a capable business broker and attorney. Their input and advice will prove to be invaluable and help you avoid a range of costly and time-consuming issues.
Copyright: Business Brokerage Press, Inc.
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Interested in Buying a Business? Check Out These 3 Commonly Overlooked Areas
When it comes to buying a business, nothing is more important than the factor of due diligence. For most people, this investment is the single largest financial decision that they will ever make. And with this important fact in mind, you’ll want to leave absolutely no stone unturned.
Let’s examine the three most commonly overlooked areas when it comes to buying a business: retirement plans, 1099’s and W-2’s, and legal documents.
1. Examine All Legal Documents
While it may sound like a “pain” to investigate all the legal documents relating to a business that you are vetting for purchase, that is exactly what you have to do. The very last thing you want is to buy a business only to have the corporate veil pierced. Everything from trademarks and copyrights to other areas of intellectual property should be carefully examined. You should be quite sure that you receive copies of everything from consulting agreements to documentation on intellectual property.
2. Retirement Plans
Don’t forget about retirement plans when you’re buying a business, as this mistake can quietly translate into disaster. Before signing on the dotted line and taking ownership, be sure that both the business’s qualified and non-qualified retirement plans are 100% up to date with the Department of Labor and ready to go.
3. W-2’s and 1099’s
If 1099 forms were given out instead of W-2’s, you’ll want to know about that and be certain that it was done within the bounds of IRS rules. Imagine for a moment that you fail to do your due diligence, buy a business and then discover that you have problems with the IRS. No one wants IRS problems, but a failure to perform due diligence can quickly result in just that. So do your homework!
Never forget what is at stake when you are buying a business. If there has ever been a time to have laser-like focus, this is that time. There can be many skeletons hiding in a business, and you want to be sure that you protect yourself from any unwanted surprises. Not performing your due diligence can lead to a shockingly large array of problems. One exceptional way to protect yourself is to work with a business broker. A business broker knows what to look for when buying a business and what kinds of documents should be examined. There is no replacement for the expertise and experience that a business broker brings to the table.
Copyright: Business Brokerage Press, Inc.
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