Options for Family Owned Businesses

If you own a family-owned business, you may feel as though there are more factors to consider when it’s time to sell. In this article, we’ll examine some of the best options that business owners can use. You’ll want to keep in mind that both internal and external strategies are available to you. Let’s take a closer look.  3 Types of Internal Transactions  One of the top options for selling a family-owned business is to simply transition the ownership of the business within the family. This is an often-exercised option for many reasons. For example, one of the benefits to this strategy is that selling a family-owned business to a relative will keep the business in the family. Oftentimes this decision best suits the emotional preferences of the owner. A major risk is that the family member will fail to operate the business successfully, and this point underscores the importance of only transferring ownership to a family member that is ready for the task. A second option is what is known … [Read more...]

Understanding the Modern Buyer

A key part of the American Dream is the notion of being financially independent and controlling one’s own fate. While times have changed, the idea of the American Dream is alive and well. Entrepreneurs have long realized that one of the quickest ways of achieving this dream is to own a successful business.  The majority of today’s buyers are well educated and come from the corporate world; however, they are typically not versed in the business buying process. Since these buyers are coming from the corporate world, they are fact-driven, meaning that they want to see the numbers and will pay attention to details both large and small. You can expect these buyers to want to see all necessary supporting documents. They will want to verify everything themselves. Additionally, you can expect them to employ many outside advisors. Summed up, today’s buyer is not an easy sale. Another key fact about the modern buyer is that they are often what can best be termed as “event driven.” These are … [Read more...]

The Top Four Reasons Why Deals Fall Apart

It takes a lot of work to buy or sell a business. When a once promising deal is not successful, this can be due to a wide array of reasons. However, understanding the reasons why a deal can fall apart in advance can serve to dramatically increase your odds of success. Some of the reasons that deals fall apart are reasonable, while other reasons, to be blunt, are unreasonable. Let’s take a look at four common reasons that are seen in the world of business brokerage.  Reason 1- Financial Issues on the Buyer’s End  One of the most common reasons that deals fall apart is that buyers simply can’t find the needed financing. Working with a business broker or M&A advisor is a way to safeguard against this outcome, as an experienced brokerage professional knows how to pre-screen prospective buyers to increase the odds of success from a financial standpoint. Reason 2 – Lack of Financials on the Seller’s End  A second reason that deals fall apart is that the seller doesn’t have all of their … [Read more...]

6 Critically Important Aspects of Due Diligence

Performing due diligence as a part of your company’s annual review is a smart move and one that can help your business in a range of ways. Through this means, if the day comes that you need or want to sell, then you’re ready to go. There are six key areas of due diligence that you’ll want to consider. These are aspects that most serious buyers will consider when buying a business.  You can expect any savvy buyer to focus on the following during due diligence if they are truly interested in acquiring your business. Problems in any of these areas could spell serious trouble in the sales process. Legal Marketing  Environmental  Operational Management  Employees Legal Issues In terms of legal issues, you’ll want to carefully evaluate whether or not your contracts and agreements are all current. Issues such as copyrights, trademarks and patents should all be examined. Most importantly, if there is any pending litigation it would be best to resolve the matter if possible. Likewise, if … [Read more...]

7 Important Questions to Ask Yourself When Selling a Business

There is no denying the fact that for most people, the decision to buy or sell a business is one of the most important professional and financial decisions that they will ever make. Let’s turn our attention to some of the key questions you’ll need to ask. 1. What is really for sale? You’ll need to determine what is, and is not, for sale. If you own machinery or real estate associated with the business, are those items to be included in the sale? 2. What assets bring in revenue?  One important factor to consider when preparing a business to be sold is what assets are earning money. If you have assets that are not earning money, then it may or may not be prudent to sell those assets. 3. What is proprietary? Buyers and sellers alike will want to consider what is proprietary. Anything from software and patents to formulations can be extremely valuable. Sellers will want to give substantial thought to how to best frame any proprietary property that they have in the best light. Buyers will … [Read more...]

Steps for a Successful Closing

The closing is a pivotal moment in the history of a business as it marks the formal transfer of a business from one party to the next. Behind every successful closing is months of focus and hard work. Simply stated, a successful closing doesn’t just happen, but is instead the byproduct of extensive negotiations.  One key document to utilize in the closing process is the Purchase and Sales Agreement. There are four key aspects to this document.  First are the terms of the agreement, which typically cover the price as well as detailed terms on how the business is to be paid. In the Purchase and Sales Agreement, you will find the status of any management that will be staying with the business.  This document also should contain conditions and covenants which include non-competes as well as agreements on what to do and what not to do moving forward.  Any good Purchase and Sales Agreement will, of course, include a description of the transaction. In other words, is the transaction a stock … [Read more...]

Lack of Experience Can Be a True Deal Killer

Most business owners are experts at running their specific businesses. They are not necessarily experts at selling businesses. This is where working with a seasoned brokerage professional can prove to be invaluable.  As it turns out, there are endless examples of people trying to save money by simply finding an MBA to handle the sale of their business. Owners often will trust this person despite whether or not they have direct experience selling businesses. Sadly, the results from this decision can be very poor.  Let’s take the example of a business owner who opted to let his nephew with a freshly minted MBA oversee the sale of his multi-location retail operation. The idea was that his nephew would help him save a great deal of money. Unfortunately, this idea simply didn’t work. His well-intended nephew’s inexperience proved to be a liability.  Let’s take a look at some of the main problems that this business owner and his nephew faced: Missing Legal Arrangements One of the first … [Read more...]

What to Consider Before Handing Your Business Over to the Next Generation

No business owner will be able to stay with their business indefinitely. For this reason, you will either have to eventually sell or hand your business off to the next generation. Let’s take a closer look at the concept of handing a business over to a family member and how you can make sure that the business is in optimal shape when the time comes.  If you want your business to be prepared for succession and the next generation, you’ll want to repair any key problems before handing it over. Some experts advise putting your focus on evolving the business. One key recommendation is to focus on sales, marketing and distribution in the coming years, so that troublesome issues, such as sales plateaus, are properly addressed and hopefully circumvented. Also, you’ll want to consider boosting communication with key employees so that current management understands where all the employees stand. Skilled and motivated employees are rare commodities, and they are absolutely critical to the future … [Read more...]

What Can Negatively Impact Your Chances of a Sale?

The last thing that any business owner wants is for a sale to fall through over something that was completely preventable. The good news is that with proper preparation and planning, these mistakes can be minimized or avoided altogether. Workforce Issues One of the top mistakes that business owners can make is allowing for an unstable workforce. It should come as no surprise that prospective buyers want to buy a business that produces consistent results. A key part of business stability resides in a stable workforce. Having a great product or service and then knowing that you have good dependable people to deliver those goods and services is essential. Buyers will be looking for this when they make their buying decisions.  Faulty Recordkeeping You can be very certain that any serious buyer will want to examine your books for the last several years. It is only prudent to expect that a prospective buyer will look at every part of your financials, including everything from your operating … [Read more...]

What You Need to Know About the Confidential Business Review

There are many different strategies that will likely be deployed during the sales process. In this article, we’ll focus on how to utilize the Confidential Business Review CBR and/or CIM. Frequently, the Confidential Business Review is also referred to as a Confidential Information Memorandum. But no matter what name is used, the CBR/CIM provides a pathway for obtaining the highest selling price possible. It is important to understand that the CBR/CIM must be factual at its core. Yet simultaneously, the CBR/CIM can function as a promotional and sales tool. The CBR/CIM can be integrated with an Executive Summary in the document, which allows prospective buyers a way to learn more about the business. Through the Executive Summary section of the CBR/CIM, prospective buyers can quickly gain insight into the key highlights of a given company. The outline should include key factors, such as an overview of the ownership and management structure as well as a description of both the business and … [Read more...]

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