It’s Time to Exit. Are you Ready?

Thinking about whether or not you are ready to exit is an important question.  It’s something that every business owner will have to address at some point.  Importantly, you don’t want to wait until the 11th hour to prepare to sell your business.  There are far too many pieces in this particular puzzle to wait until the last minute.  You’ll want to begin the process sooner by asking yourself some key questions.  Determining Value First, you’ll need to determine the actual value of your business.  It is a harsh truth, but what you think your business is worth and what the market feels that it is worth may be two very different things.  This point serves to underscore the importance of working with a business broker or M&A advisor early in the process.  An experienced broker knows how to go about determining a price that will generate interest and seem fair.  Remember that at the end of the day, it will be the … [Read more...]

What You Need to Know About the Golden Age of Business Acquisitions

Business acquisitions are red hot, and all kinds of businesses are being snapped up.  Some people are under the impression that only large businesses are being acquired, but this is far from the reality of the situation.  It would surprise many to learn that so much of the “action” is, in fact, small businesses buying other small businesses.  In his Forbes article, “Take Advantage of the Golden Age of Business Acquisitions,” author Christopher Hurn explores the true state of the “acquisitions game.”  His conclusions are quite interesting.  In Hurn’s opinion, there has never been a more active time in the realm of business acquisitions. If you own a business and are looking to grow, then you may want to consider acquiring a competitor in order to consolidate the market.  As Hurn points out, there are many reasons that you might want to consider acquiring a business in addition to consolidating the market.  … [Read more...]

Determining the Right Time to Sell

Determining when it’s finally the right time to sell can be a tricky proposition.  If you are thinking about selling your business, one of the best steps you can take is to contact a business broker.  A good business broker will have years, or even decades, of proven experience under his or her belt.  He or she will be able to guide you through the process of determining what you need to do in order to get your business ready to sell. One major reason you should contact a business broker long before you think you might want to sell is that you never know when the right time to sell may arise.  Market forces may change, unexpected events like a large competitor entering your area, or a range of other factors could all lead you to the conclusion that now, and not later, is the time to sell. In a recent The Tokenist article, “When is the Best Time to Sell a Business?”, author Tim Fries covers a variety of factors in determining when is the best time … [Read more...]

Selling Your Business, Taxes & Tax Structures

It is never too early to start thinking about what tax structure you should use when it comes time to sell your business.  A simple, but undeniable, rule of life is that taxes matter and they can’t be overlooked.  Author Tim Fries at The Tokenist has written an excellent and quite detailed overview article on what tax issues business owners need to consider before selling their business.  His article, “What Tax Structure Should You Use When Selling Your Business?” explores many aspects of a topic that many business owners fail to invest enough time in, namely taxes. As Fries astutely points out, the taxes involving the sale of a business can be complex and are usually unknown to those selling a business for the first time.  Your tax structure can influence how much money you receive at the closing of your deal, so it’s a very good idea to pay attention to all aspects of taxation and your business.  It is key to remember, “When you … [Read more...]

Understanding M&A Purchasing Agreements

M&A purchasing agreements can have a lot of moving parts.  A recent article from Meghan Daniels entitled, “The Makings of the M&A Purchase Agreement” serves to outline a range of facts including that every M&A deal is different.  The article, which serves as a general overview, raises a range of good points. Components of the Deal It should come as no surprise that M&A purchase agreements have various components.  Everything from definitions and executive provisions to representatives, warranties and schedules, indemnifications and interim and post-closing covenants are all covered in these purchase agreements.  Other key factors included in M&A purchase agreements are closing conditions and break-up fees. Advice for Sellers In her article, Daniels includes a range of tips for sellers.  She correctly points out that negotiating a purchase agreement (as well as the different stages involved in finalizing that agreement) can be … [Read more...]

Why is seller financing so important to the sale of my business?

Surveys have shown that a seller who asks for all cash, receives on average only 70 percent of his or her asking price, while sellers who accept terms receive on average 86 percent of their asking price. That's a difference of 16 percent! In many cases, businesses that are listed for all cash just don't sell. With reasonable terms, however, the chances of selling increase dramatically and the time period from listing to sale greatly decreases. Most sellers are unaware of how much interest they can receive by financing the sale of their business. In some cases it can greatly increase the amount received. And, again, it tells the buyer that the seller has enough confidence that the business can, indeed, pay for itself. … [Read more...]

What happens when there is a buyer for my business?

When a buyer is sufficiently interested in your business, he or she will, or should, submit an offer in writing. This offer or proposal may have one or more contingencies. Usually, the contingencies concern a detailed review of your financial records and may also include a review of your lease arrangements, franchise agreement (if there is one), or other pertinent details of the business. You may accept the terms of the offer or you may make a counter-proposal. You should understand, however, that if you do not accept the buyer's proposal, the buyer can withdraw it at any time. At first review, you may not be pleased with a particular offer; however, it is important to look at it carefully. It may be lacking in some areas, but it might also have some pluses to seriously consider. There is an old adage that says, "The first offer is generally the best one the seller will receive." This does not mean that you should accept the first, or any offer -- just that all offers should be looked … [Read more...]

What can I do to help sell my business?

A buyer will want up-to-date financial information. If you use accountants, you can work with them on making current information available. If you are using an attorney, make sure they are familiar with the business closing process and the laws of your particular state. You might also ask if their schedule will allow them to participate in the closing on very short notice. If you and the buyer want to close the sale quickly, usually within a few weeks, unless there is an alcohol or other license involved that might delay things, you don't want to wait until the attorney can make the time to prepare the documents or attend the closing. Time is of the essence in any business sale transaction. The failure to close on schedule permits the buyer to reconsider or make changes in the original proposal. … [Read more...]

What can business brokers do – and, what can’t they do?

Business brokers are the professionals who will facilitate the successful sale of your business. It is important that you understand just what a professional business broker can do -- as well as what they can't. They can help you decide how to price your business and how to structure the sale so it makes sense for everyone -- you and the buyer. They can find the right buyer for your business, work with you and the buyer in negotiating and along every other step of the way until the transaction is successfully closed. They can also help the buyer in all the details of the business buying process. A business broker is not, however, a magician who can sell an overpriced business. Most businesses are saleable if priced and structured properly. You should understand that only the marketplace can determine what a business will sell for. The amount of the down payment you are willing to accept, along with the terms of the seller financing, can greatly influence not only the ultimate … [Read more...]

How long does it take to sell my business?

It generally takes, on average, between five to eight months to sell most businesses. Keep in mind that an average is just that. Some businesses will take longer to sell, while others will sell in a shorter period of time. The sooner you have all the information needed to begin the marketing process, the shorter the time period should be. It is also important that the business be priced properly right from the start. Some sellers, operating under the premise that they can always come down in price, overprice their business. This theory often "backfires," because buyers often will refuse to look at an overpriced business. It has been shown that the amount of the down payment may be the key ingredient to a quick sale. The lower the down payment, generally 40 percent of the asking price or less, the shorter the time to a successful sale. A reasonable down payment also tells a potential buyer that the seller has confidence in the business's ability to make the payments. … [Read more...]