Is Your Deal Really Going to be Successful?

If you’re selling your business and things are looking positive with your buyer, you might be tempted to start resting easy. If you have a signed letter of intent, you might be even more tempted to think that things are pretty settled. However, the fact of the matter is that much can be uncovered during the due diligence process, and that is often when deals start to fall apart. Due diligence is an essential step that protects buyers, and sellers should be well-prepared to have things in good shape far in advance. Let’s take a closer look at some areas where a deal can potentially go awry.  Products and Equipment  When the sale involves a business that handles manufacturing, equipment is carefully evaluated during due diligence. Buyers will be thinking about any potential environmental issues that could affect the business. If you’re selling a business and have loose ends with your equipment or facility, this should be handled in advance if possible.  Buyers will also be looking at the … [Read more...]

When Should Sellers Proceed with Caution?

Selling your business is typically quite an involved process that takes a series of months. Sellers typically experience a variety of ups and downs during that time. This is true even in the case of the most successful deals. That’s why you will want to keep your eyes open during the process so that you will be equipped to vet your potential buyers. This article will take a look at various aspects of the sales transaction that could be concerning and could mean that a deal is less likely to be successful. It’s a good idea to identify these types of situations so you’ll be better prepared to notice them if they were to occur. After all, the last thing you’ll want to do is waste your time and energy dealing with a prospective buyer that is not a good candidate for buying your business.  Signs of Lack of Interest There are countless instances when sellers have been approached by prospective buyers, but the parties controlling the purchase are never involved. If a company expresses … [Read more...]

How Improved Negotiation Tactics Can Benefit Your Deals

There is no underestimating the importance of negotiation when you are buying or selling a business. Let’s take a look at some of the most often used strategies and our recommendations.  The Direct Approach One approach in negotiations is what we often refer to as the “take it or leave it” strategy. In this scenario, the buyer makes an offer, and the seller then counters that offer. There is little negotiation work necessary, as both parties are direct and simple about the numbers and terms they propose. The drawback to this approach, however, is that when it doesn’t work, there is little to no recourse. When this “direct approach” offer isn’t accepted by one of the parties, there is little opportunity for flexibility on either side. Therefore, the direct approach can be somewhat of a risk. Focusing on Influential Details There are typically certain aspects of a deal where a buyer or seller is unwilling to compromise. Sometimes this aspect isn’t even financial in nature. It could be … [Read more...]

Confidentiality Agreements: What are the Most Important Elements?

Every business has to be concerned about maintaining confidentiality.  In fact, it is common for business owners to become somewhat obsessed with confidentiality when they are getting ready to sell their business. It goes without saying that owners don’t want the word that they are selling to spread to the public, employees or most certainly their competitors.  Yet, there is something of a tug of war between the natural desire for confidentiality and the desire to sell a business for the highest amount possible.  At the end of the day, any business owner looking to sell his or her business will have to let prospective buyers “peek behind the curtain.”  Let’s explore some key points that any good confidentiality agreement should cover. At the top of your confidentiality list should be the type of negotiations.  This aspect of the confidentiality agreement is, in fact, quite important as it stipulates whether the negotiations are secret or open.  Importantly, this part of the … [Read more...]

How Can You Identify a Serious Buyer?

No one wants to waste their time and energy trying to sell their business to someone who isn’t actually planning to buy. That’s why it’s so important for you and your business broker or M&A advisor to focus on the most qualified and serious buyers. But how can you really make these kinds of assessments about a buyer’s viability until they sign on the dotted line? Let’s take a look at some signs that will help you figure out your buyer well in advance.  Do they have a history of ownership? When someone has owned a business in the past, they have a firm understanding of what is involved. As a result, they are more likely to be a serious buyer. It also means they are more likely to move forward. You will also find that they have the ability to make a substantial down payment and financing options. While they might want you to help them with financing, you should still be looking to ensure they will put their own capital at risk as well.  Are they seeking information about your cash … [Read more...]

What is a Partnership Agreement?

A partnership agreement is a legal document that provides an outline of how a business will be run. This agreement will often be used by small for-profit businesses when two or more people are involved. It’s an essential document to have, especially in the case when a dispute arises between partners. Even if you have gone into business with a friend or relative, you should have this document in place to make sure everyone is protected. Let’s take a look at some of the key elements that should be in this document.  The Basics It goes without saying that your partnership agreement should include the basics, such as the name of the business and the names of key parties involved.  You’ll also want to outline the goals of your partnership and how long it will last.  Rules and Responsibilities  When you create your partnership agreement, you’ll want to make sure it offers a lot of clarity on different points with an eye to everyone’s responsibilities. Think through what concerns or … [Read more...]

What Are Your Flaws?

As a business owner, your natural inclination is likely to be considering the strengths of your business and how to perform even better in the future. However, the truth is that sitting back and thinking about your flaws can actually benefit you in the long run. When you have a full understanding of where you are lacking, it will empower you to make the best strategic decisions for the future. These changes, in turn, will help you receive top dollar when you go to sell your business.  Here are 4 areas you should be evaluating: 1. Your Products How diverse are your products? If you rely upon the sale of just one product, that puts your business in jeopardy. You should be thinking about additional products you could add. This will also open you up to new opportunities for customers and revenue.   2. Your Workforce There has been much publicity about the current trends in businesses struggling to find staff. Further, there are a variety of trades, such as tool and die, where there is a … [Read more...]

BizBuySell Insight Report for 2022

BizBuySell has issued their latest insight report, which summarizes market growth and trends from last year. In this report, they have several interesting areas to report including a summary of how lower sales prices and rate hikes impacted the value of businesses in recent months. The report can be found at https://www.bizbuysell.com/insight-report/#reportArchive. Overall Trends in 2022 Buyers currently appear to have some leverage when it comes to the prices of businesses on the market. When comparing 2022 with 2021, we see a 4.7% increase in closed transactions. Comparing it to the year prior, there is a 19% gain. Obviously, 2020 sales were negatively impacted by COVID.  While sales grew substantially in the first half of 2022, there was a decrease in momentum in the second half of the year due to inflation and interest rate increases.  The number of transactions recorded by BizBuySell.com in 2022 are actually fairly comparable to 2021, with numbers of 9054 and 8647, respectively. … [Read more...]

Expectations for Business in 2023

BizBuySell just released its latest insight report, which tracked sales and growth in 2022 and compared it to the prior year. Overall, we are seeing a high demand for service-based businesses as well as an increase in restaurant business sales. The insight report also reveals what business brokers across the country are expecting for 2023 and beyond.  Data on Service Business Sales In 2022, 39% of the acquisitions tracked by BizBuySell were service businesses, and their transactions were 7% higher than 2021. The service sector typically includes predominantly financial and healthcare related businesses. These types of companies are usually considered to be low-risk.  Across the map, buyers were willing to pay more for service businesses last year. In fact, the median sales price for service businesses rose 4% over 2021. It’s interesting to note that the sales prices were even higher than the pre-pandemic levels. Also, there is a trend towards buyers seeking out socially responsible and … [Read more...]

5 Ways that Sellers Can Focus on the Positives

When you are looking to sell, always focus on the positive aspects of your business. Many business owners fail to properly make a case for the benefits of their businesses to prospective buyers.  Be sure to make it clear that your business has stability and ample financial health. Let’s take a closer look.  1. Prepare in Advance  Preparing paperwork in advance will help to make sure that everything is in proper order and you’re not scrambling at the last moment. When your records are organized and correct, your prospective buyer will be able to truly see the value of your business. Buyers will also like to know that you have robust accounting processes that they can rely on in the future.  You should also make sure that inventory is in stock and that any necessary upkeep has been done. All of these updates are part of the big picture when it comes to presenting your business in the best light to buyers.  2. Reveal Your Methods of Operations  You’ll also want to demonstrate that you … [Read more...]