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Can You Really Afford to Sell?

November 27, 2014

In many cases, the sale of a small company is “event” driven. That is, the reason for sale is often an event such as a health decline or illness, divorce, partnership issues, or even a decline in business.

A much more difficult reason for selling is one in which the owners simply want to retire and live happily ever after. Here is the problem:

Suppose the owners have a very prosperous distribution business. They each draw about $200,000 annually from the business plus cars and other benefits. If the company sold for $2 million, let’s say after debt, taxes and …

[Read more...]

Filed Under: Seller Articles

Surprises CEOs Face When Selling Their Companies

November 27, 2014

Surprise #1: Substantial Time Commitment

In the real estate business, once the owner engages the broker there is very little for the owner to do until the broker presents the various offers from the potential buyers.  In the M&A business, there is a substantial time commitment required of the CEO/Owner in order to complete the sale properly, professionally and thoroughly. The following examples are worth noting:

Offering Memorandum:

This 30 + page document is the cornerstone of the selling process because most business intermediaries expect the potential acquirers to submit their initial price range based on the information presented in …

[Read more...]

Filed Under: Seller Articles

Company Weaknesses

November 27, 2014

Take two seemingly identical companies with very similar financials, but one of the companies was worth substantially more than the other company.  One company will sell for $10 million “as is” or some changes can be made and the same company can be sold for $15 million. Following is a partial list of potential company weaknesses to consider in order to assess a company’s vulnerability.

Customer Concentration:  First, one has to analyze the situation.  The U.S. Government might be considered one customer but from ten different purchasing agents.  Or, GM might have one purchasing agent but be directed to ten …

[Read more...]

Filed Under: Buyer Articles, Seller Articles

What Would Your Business Sell For?

November 27, 2014

There is the old anecdote about the immigrant who opened his own business in the United States. Like many small business owners, he had his own bookkeeping system. He kept his accounts payable in a cigar box on the left side of his cash register, his daily receipts – cash and credit card receipts – in the cash register, and his invoices and paid bills in a cigar box on the right side of his cash register.

When his youngest son graduated as a CPA, he was appalled by his father’s primitive bookkeeping system. “I don’t know how you can …

[Read more...]

Filed Under: Seller Articles, Valuation

How Long Does It Take to Sell a Business?

November 27, 2014

Recent studies indicate that it now takes, on average, about eight to ten months to sell a small business. This figure seems to increase yearly. Why does it take so long to sell a business?

Price and terms are the biggest reasons!  It is very important not to overprice the business at the beginning of the sales process. A business will also sell more quickly if there is a reasonable down payment with the seller carrying the balance.  Having all of the necessary information right from the beginning can also greatly reduce the time period.  Finally, being prepared for the …

[Read more...]

Filed Under: Seller Articles

When to Create an Exit Strategy

November 27, 2014

There is the old saying that the time to develop an exit strategy is the day you open for business. Sounds good, but it’s not very realistic. Further, it also isn’t very optimistic. On the day you open for business, thoughts about how you get out of it aren’t pleasant, or helpful, thoughts. However, as you get the business to a place where you have a bit of extra time to plan, you will find that the things you need to do to improve your business are some of the very things you will need to work on to plan …

[Read more...]

Filed Under: Seller Articles

Five Kinds of Buyers

November 27, 2014

Buyers are generally categorized as belonging to one of the following groups although, in reality, most buyers fit into more than one.

The Individual Buyer

This is typically an individual with substantial financial resources, and with the type of background or experience necessary for leading a particular operation.

The individual buyer usually seeks a business that is financially healthy, indicating a sound return on the investment of both money and time.

The Strategic Buyer

This buyer is almost always a company with a specific goal in mind — entry into new markets, increasing market share, gaining new technology, or eliminating …

[Read more...]

Filed Under: Buyer Articles, Seller Articles

Why Deals Don’t Close

November 27, 2014

Sellers

  • Don’t have a valid reason for selling.
  • Are testing the waters to check the market and the price. (They are similar to the buyer who is “just shopping.”)
  • Are completely unrealistic about the price and the market for their business.
  • Are not honest about their business or their situation. The reason they want to sell is that the business is not viable, it has environmental problems or some other serious issues that the seller has not revealed, or new competition is entering the market.
  • Don’t disclose that there is more than one owner and they are not all in
… [Read more...]

Filed Under: Buyer Articles, Seller Articles

Buying (or Selling) a Business

November 27, 2014

The following is some basic information for anyone considering purchasing a business. It may also be of interest to anyone thinking of selling their business. The more information and knowledge both sides have about buying and selling a business, the easier the process will become.

A Buyer Profile

Here is a look at the make-up of the average individual buyer looking to replace a lost job or wanting to get out of an uncomfortable job situation. The chances are he is a male (however, more women are going into business for themselves, so this is rapidly changing). Almost 50 percent …

[Read more...]

Filed Under: Buyer Articles, Seller Articles

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