Where your money is concerned, myths can do damage. A recent Divestopedia article from Tammie Miller entitled, Crazy M&A Myths You Need to Stop Believing Now, Miller explores 5 big M&A myths that can get you in trouble. Miller points out that many of these myths are believed by CEOs, but that they have zero basis in reality. Myth 1 The first major myth Miller explores is the idea that the “negotiating is over once you sign the LOI.” The letter of intention is, of course, important. However, this is by no means the end of the negotiations and it is potentially dangerous to think otherwise. The negotiations are not concluded until there is a purchasing agreement in place. As Miller points out, there is a great deal that can go wrong during the due diligence process. For this reason, it is important to not see the LOI as the “end of the road.” Myth 2 Another myth that Miller wants you to be aware of is that you don’t have … [Read more...]
10 Questions Everyone Should Ask Before Signing on the Dotted Line
Before buying any business, a seller must ask questions, lots of questions. If there is ever a time where one should not be shy, it is when buying a business. In a recent article from Entrepreneur magazine entitled, “10 Questions You Must Ask Before Buying a Business”, author Jan Porter explores 10 of the single most important questions prospective buyers should be asking before signing on the dotted line. She points out to remember that “there are no stupid questions.” The first question highlighted in this article is “What are your biggest challenges right now?” The fact is this is one of the single most prudent questions one could ask. If you want to reduce potential surprises, then ask this question. “What would you have done differently?” is another question that can lead to great insights. Every business owner should be an expert regarding his or her own business. It only makes sense … [Read more...]
A Step by Step Overview of the First Time Buyer Process
A recent article on Businessbroker.net entitled, First Time Buyer Processes by business broker Pat Jones explores the process of buying a business in a precise step-by-step fashion. Jones notes that there are many reasons that people buy businesses including the desire to be one’s own boss. However, he is also quick to point out that buyers should refrain from buying a business that they simply don’t like. In the quest for profits, many prospective owners may opt to do this, but it could ultimately lead to failure. Step One – Information Gathering For Jones, there are seven steps in the business buying process. At the top of the list is to gather information on businesses so that one has an idea of what kind of businesses are appealing. Step Two – Your Broker The second key step is to begin working with a business broker. This point makes tremendous sense; after all, those new to the business buying process will benefit greatly … [Read more...]
Goodwill and Its Importance to Your Business
What exactly does the term “goodwill” mean when it comes to buying or selling a business? Usually, the term “goodwill” is a reference to all the effort that a seller puts into a business over the years that he or she operates that business. In a sense, goodwill is the difference between an array of intangible, but important, assets and the total purchase price of the business. It is important not to underestimate the value of goodwill as it relates to both the long-term and short-term success of any given business. According to the M&A Dictionary, an intangible asset can be thought of as asset that is carried on the balance sheet, and it may include a company’s reputation or a recognized name in the market. If a company is purchased for more than its book value, then the odds are excellent that goodwill has played a role. Goodwill most definitely contrasts and should not be confused with “going concern value.” … [Read more...]
Around the Web: A Month in Summary
A recent article from Divestopedia entitled “7 Fundamentals to Due Diligence You Need to Know” explains the due diligence process and what it means regarding sellers and buyers and their roles in the process. Whether a company is being sold or it is merging with another company, it is standard practice to go through the due diligence process. Therefore, they should be aware of all the factors involved with the due diligence process. The fundamentals of due diligence can be broken into 7 categories: Historic and Projected Financial Information Technology Developments and Intellectual Property Customers and Revenue Streams Contract Agreements and Insurance Key Staff and Management Legal and Compliance Tax Issues In each of these 7 critical areas, the buyer and the seller each have to do their part in order to see the deal make it to the finish line. The seller has to be open and honest with the attorneys, their advisory team and the potential buyer; and the buyer has to be … [Read more...]
Positioned to Help the Growing Number of Women-Owned Businesses
According to a study performed by IBM and the National Association of Women Business Owners, between 1997 and 2014 the number of women-owned firms grew at one and a half times the national average. And revenue and employment growth among women-owned firms tops that of all other firms-except the largest, publicly traded corporations. What’s more, as of 2014 it is estimated that there are nearly 9.1 million women-owned businesses in the United States, generating over $1.4 trillion in revenues and employing nearly 7.9 million people. You can read the full IBM and NAWBO report here: LINK As business brokers invested in our clients’ success, we are thrilled to see these numbers continue to climb. We believe women-owned business will continue to succeed in the market place. We want to be part of the support network for women who are in the process of buying, selling, or growing a business. Our wide variety of services for women business owners or potential owners include: Help … [Read more...]
4 Reasons to Buy an Existing Business Rather Than Start a New One
If you’re considering owning your own business, there are generally two points of entry. One is to start your own business from scratch and the other is to buy an existing business. Although the idea of starting your own business is sometimes more appealing, buying an existing business definitely has some advantages. Here are four ways buying an existing business can offer new owners a head start: A Tested Idea Buying an existing business means walking into something with an established, working concept. Compare this to starting a business from scratch with an untested idea and the reduced risk becomes obvious. Business owners that start something from scratch have to ask the big questions like, “Will this idea really work?” When you buy an existing business, it’s obvious that the idea has been tested and the concept with all its variables does work. Predictable Cash Flow An existing business has proven and predictable cash flow. Unlike starting a business from scratch … [Read more...]
What Buyers Are Really Looking For In a Business
One of the key elements to successfully selling your business is understanding what buyers are looking for as part of their due diligence. Typically, buyers will employ accountants and attorneys to look at financial and legal issues. But the savvy buyer will also be looking behind the curtain to uncover any skeletons in the closet. Business owners who anticipate these questions and inquiries will be a step ahead. If you’re getting ready to sell your business, here are four major areas where you can and should anticipate buyers to look very closely: Finances A qualified, savvy buyer is looking for companies that have monthly financial statements and annual financials prepared on a timely basis. They are looking at bank credit lines and if a bank or creditor has issued any kind of credit watch on the company. Timely bill paying and checking the gross margins for the past several years will also give a potential buyer a clearer picture of how the company has handled … [Read more...]
Are You Really Ready to Sell?
Many business owners may logically acknowledge that it’s time to sell. And while they may know it’s time to sell, they may not be emotionally ready for what selling their business means. Selling a business affects every aspect of your life including finances, time, identity, and purpose. Sellers who are not emotionally ready to sell can inadvertently undermine the selling process. In our years of working with business owners, we’ve discovered that even sellers who feel they are not emotionally attached to their business can be caught off guard during the selling process. It’s often wise to step back and examine feelings in three specific areas. Employees Business owners often form long-term, close friendships with employees. While this loyalty is admirable and creates a wonderful company culture, it can allow emotions to interfere during the selling process. Are you overly concerned with future outcomes for your staff members? Are you worried about breaking up your team and … [Read more...]
Avoiding Deal Breakers During a Sale
Selling a business or buying a business can be an extremely stressful, tension filled journey. The last thing anyone wants is to have the deal end up falling through. Fortunately, arming yourself with a competent team of professionals and the right mindset can go a long way to ensuring a deal goes through. The right set of professionals includes a professional business broker/M&A specialist, the right attorney, and an accountant. Both the attorney and accountant should have previous experience in M&A sales and should be deal oriented. All parities should have the end goal of making a deal in mind and should not be constantly looking for reasons why the deal won’t work. No one likes surprises, so it’s essential for buyers and sellers to be up front from the start. Surprises are all but inevitable in a deal so being patient and staying at the table to work things out is key. Novice buyers and sellers often panic when unknown information comes to light, but a professional … [Read more...]