Who Exactly Owns Personal Goodwill and Why Does it Matter?

Personal goodwill can have a profound impact on both small and medium-sized businesses. In fact, it can even impact the sales of larger companies. Ultimately, understanding how personal goodwill is cultivated is of great value for any company.

During the process of building a business, a founder builds one or more of the following: a positive personal reputation, a personal relationship with key players such as large customers and suppliers and the founder’s reputation associated with the creation of products, inventions, designs and more.

What Creates Personal Goodwill?

Personal goodwill can be established in many ways, for example, professionals such as doctors, dentists and lawyers can all build personal goodwill with their clients, especially over extended periods of time. One of the most interesting aspects of building personal goodwill is that it is essentially non-transferable, as it is invariably attached to and associated with, a particular key figure, such as the founder of a company. Simply stated, personal goodwill can be a powerful force, but it does have one substantial drawback. This is as the saying goes, “the goodwill goes home at night.”

How Does It Impact Buying or Selling a Business?

Buying a business where personal goodwill has been a cornerstone of a business’s success and growth presents some obvious risks. Likewise, it can be difficult to sell a business where personal goodwill plays a key role in the business, as a buyer must take this important factor into consideration. Certain businesses such as medical, accounting or legal practices, for example, depend heavily on existing clients. If those clients don’t like the new owner, they simply may go elsewhere.

Now, with all of this stated, it is, of course, possible to sell a business built partially or mostly around personal goodwill. Oftentimes, buyers will want some protection in the event that the business faces serious problems if the seller departs.

Solutions that Work for Both Parties

One approach is to require the seller to stay with the business and remain a key public face for a period of time. An effective transition period can be pivotal for businesses built around personal goodwill. A second approach is to have some form of “earn-out.” In this model, at the end of the year lost business is factored in, and a percentage is then subtracted from monies owed to the seller. Another option is that the funds from the down payment are placed in escrow and adjustments are made to those funds. It is important to note that the courts have decided that a business does not own the goodwill, the owner of the business does.

No doubt, businesses in which personal goodwill plays a major role, present their own unique challenge. Working with an experienced professional, such as a business broker, is an exceptional way to proceed in buying or selling this type of business.

Copyright: Business Brokers Press, Inc.

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Around the Web: A Month in Summary

A recent article posted on PR Newswire entitled “Business owners’ love of work may hinder succession planning” explains the parallels between the number of business owners with no plans to retire and the lack of succession planning. In a recent poll, over 70% of business owners said they are not planning to retire, don’t know when they will retire, or do not plan to retire for at least 11 years. The survey also reported that 2 out of 3 business owners do not have a succession plan or a clear understanding of the importance of one.

Even if there are no immediate plans for retiring, business owners should have a succession plan in place to protect the business, partners, employees and customers. If something were to suddenly happen to the business owner such as serious illness or an untimely death, a succession plan would help make sure everything goes smooth with the transition of the business.

To get started with creating an exit plan, business owners can take 5 simple steps:

  1. Set goals & objectives
  2. Determine the value of your business
  3. Consider options for the business in the case of disability, retirement or death
  4. Develop a plan and documentation with an advisor, attorney and accountant
  5. Fund the plan

You never know when something unexpected could occur, so it’s never too early to start creating a succession plan.

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A recent article posted by Forbes entitled “Baby boomers are selling their businesses to millennial entrepreneurs, and it’s a brilliant idea” highlights the fact that many baby boomers will soon be looking to sell their businesses and this creates excellent business opportunities for millennials. Many of these baby boomer businesses are well established having no debt, loyal customers and proven business models which make them a great opportunity for young entrepreneurs to take over instead of letting the businesses close down.

Here are 7 places to start looking for these baby boomer businesses:

  1. Local chamber of commerce
  2. Local CPAs
  3. Local real estate brokers
  4. Local community bankers
  5. Business brokers
  6. Go directly to the business owner
  7. Craigslist or eBay

Overall, staying connected with local professionals in your area as well as being proactive in searching out businesses for sale will help you to find a great business opportunity. Once you find a legitimate business, find out if it’s making a profit. If so, ask why the owner wants to sell and if not, find out why.

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A recent article from Forbes entitled “Selling your business in 3 to 5 years? Buy another company now” explains how acquiring another company can significantly increase the value of your business before you decide to sell. The first thing to understand is that the multiple of earnings paid for a company increases at an accelerating rate with size. Larger EBITDA means larger multiples, and larger companies are generally less risky so a buyer is willing to pay more.

Acquiring another business may also amount to cost savings and operational improvements when the companies are integrated. Combine these savings with organic revenue growth and a larger multiplier when the companies are combined, and this can add up to a huge increase in your company’s value. So if you’re thinking of selling within 3-5 years, this could be a good strategy to consider.

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A recent article from the Denver Post entitled “Selling your business? Focus on the key business drivers so buyers pay top dollar” explains how focusing on certain key factors of your business can help you get the highest possible price when selling your business. Although many key business drivers vary among industries, there are four drivers that apply across the board:

  1. History of increasing revenues and profits over the past 3-5 years
  2. Strategic business plan that shows strong growth, competitive advantage, and products or services that can be sold across multiple industries
  3. Future cash flow including expected EBITDA performance, expected working capital investment requirements, and expected fixed-asset investment requirements
  4. Strong management team and strong operating systems in place

Business owners should get a detailed business audit and analysis from a business consultant so they can see where their business’s strengths and weaknesses are. This will show the owner what business drivers to focus on improving in order to get the highest price for their business.

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A recent article posted on Divestopedia entitled “What Is Your Company Actually Worth?” explores how buyers and sellers often perceive a company’s worth differently and how business owners misjudge their company’s value. Private company valuation is a complex process and most owners have difficulty staying objective when it comes to a business in which they have put their life’s work into. On the other hand, to a buyer, the company is an asset to be acquired at the lowest possible price, which often leads to a large difference in perception between a buyer and seller.

An experience advisor can help negate these problems and make the sale process better for the owner for the following reasons:

  1. The business owner can focus on factors of the business which will increase the valuation such as EBITDA, sales, gross profit margins, customer growth and employee skills.
  2. The owner will get an extensive look at the financial health of their business from an advisor along with recommendations for improvement.
  3. An advisor will also be an experienced negotiator, helping the owner get the best sale price for the business.

The key to avoiding mistakes in selling a business starts off by getting an accurate valuation of the business and making sure everything is analyzed effectively to prepare for a profitable sale.

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Copyright: Business Brokerage Press, Inc.

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When Selling Your Business, Play to Win

If you are an independent business owner, you are most likely also an independent business seller–if not now, you will be somewhere down the road. The Small Business Administration reports that three to five years is a long enough stretch for many business owners and that one in every three plans to sell, many of them right from the outset. With fewer cases of a business being passed on to future generations, selling has become a fact of independent business life. No matter at what stage your own business life may be, prepare now to stay ahead in the selling game.

Perhaps one of the most important rules of the selling game is learning how not to “sell.” An apt anecdote from Cary Reich’s The Life of Nelson Rockefeller shows a pro at work doing (or not doing) just that:

When the indomitable J.P. Morgan was seeking the Rockefeller’s Mesabi iron ore properties to complete his assemblage of what was to become U.S. Steel, it was Junior [John D. Rockefeller, Jr.] who went head-to-head with the financier. “Well, what’s your price?” Morgan demanded, to which Junior coolly replied, “I think there must be some mistake. I did not come here to sell. I understand you wished to buy.” Morgan ended up with the properties, but at a steep cost.

As this anecdote shows, the best approach to succeeding at the selling game is to be less of a “seller” and more of a “player.” Take a look at these tips for keeping the score in your favor:

Let Others Do the Heavy Pitching

Selling a business is an intense emotional drain; at best, a distraction. Let professional advisors do the yeoman’s duty when selling a business. A business intermediary represents the seller and is experienced in completing the transaction in a timely manner and at a price and terms acceptable to the seller. Your business broker will also present and assess offers, and help in structuring the transaction itself. If you plan to use an attorney, engage one who is seasoned in the business selling process. A former Harvard Business Review associate editor once said, “Inexperienced lawyers are often reluctant to advise their clients to take any risks, whereas lawyers who have been through such negotiations a few times know what’s reasonable.”

Stay in the Game

With the right advisors on your side, you can do the all-important work of tending to the daily life of the business. There is a tendency for sellers to let things slip once the business is officially for sale. Keeping normal operating hours, maintaining inventory at constant levels, and attention to the appearance and general good repair of the premises are ways to make the right impression on prospective buyers. Most important of all, tending to the daily running of the business will help ward off deterioration of sales and earnings.

Keep Pricing and Evaluation in the Ballpark

Like all sellers, you will want the best possible price for your business. You have probably spent years building it and have dreamed about its worth, based on your “sweat equity.” You’ll need to keep in mind that the marketplace will determine the value of the business. Ignoring that standard by asking too high a price will drive prospective buyers away, or will at the least slow the process, and perhaps to a standstill.

Play Fair with Confidentiality

Your business broker will constantly stress confidentiality to the prospects to whom he or she shows your business. They will use nonspecific descriptions of the business, require signatures on strict confidentiality agreements, screen all prospects, and sometimes phase the release of information to match the growing evidence of buyer sincerity. As the seller you must also maintain confidentiality in your day-to-day business activities, never forgetting that a breach of confidentiality can wreck the deal.

Sell Before Striking Out

Don’t wait until you are forced to sell for any reason, whether financial or personal. Instead of selling impulsively, you should plan ahead carefully by cleaning up the balance sheet, settling any litigation, providing a list of loans against the business with amounts and payment schedule, tackling any environmental problems, and by gathering in one place all pertinent paperwork, such as franchise agreement (if applicable), the lease and any lease-related documents, and an approximation of inventory on-hand. In addition, you could increase the value of your business by up to 20 percent by providing audited financial statements for one or two years in advance of selling.

Think Twice Before Retiring Your “Number”

The trend is for sellers to assume they will retire after selling the business. But consider this: agreeing to stay on in some capacity can actually help you get a better price for your business. Many buyers will pay more to have the seller stay aboard, thus helping to reduce their risk.

Keep the Ball Rolling

You need to keep the negotiation ball rolling once an offer has been presented. Even if you don’t get your asking price, the offer may have other points that will offset that disappointment, such as higher payments or interest, a consulting agreement, more cash than you anticipated, or a buyer who seems “just right.” The right buyer may be better than a higher price, especially if there is seller financing involved, and there usually is. In many cases, the structure of the deal is more important than the price. And when the ball is rolling, allow it to pick up speed. Deals that drag are too often deals that fail to close.

By following these tips, and by working closely with your business broker, you can have confidence in being a seller who, like John D. Rockefeller, Jr., doesn’t “come here to sell.” You will play the selling game–and be a winner.

Copyright: Business Brokerage Press, Inc.

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Similar Companies Can Have Huge Value Differences

Can two companies in the same industry have very different valuations? In short, the answer is a resounding, yes. Let’s take an example of two companies that both have an EBITDA of $6 million but with two very different values. In fact, Business One is valued at five times EBITDA, which prices it at $30 million whereas Business Two is valued at seven times EBITDA, meaning it has a value of $42 million.

Value Difference Checklist

  1. Revenue Size
  2. Profitability
  3. The Market
  4. Growth Rate
  5. Regional/Global Distribution
  6. Management & Employees
  7. Capital Equipment Requirements
  8. Systems/Controls
  9. Uniqueness/Proprietary
  10. Intangibles (Intellectual property/patents/brand, etc.)

There are quite a few variables on the above checklist that stand out, with the top one being that of growth rate. Growth rate is a major value driver when buyers are considering value.

Business Two, for example, with its seven times EBITDA has a growth rate of 50%, whereas Business One, with its five times EBITDA has a growth rate of just 12%.

Discovering the real growth rate story means answering some pretty important questions.

  1. Are the company’s projections achievable and believable?
  2. Where is the company’s growth coming from?
  3. Are there long-term contracts currently in place?
  4. Where is the growth originating? In other words, what services or products are driving growth? Will those services or products continue to drive growth in the future?
  5. How is the business obtaining its customers for the projected growth?
  6. How reliable are the contracts/orders?

Ultimately, finding the difference in value between two businesses, that otherwise appear similar, usually resides in growth rate. This is a factor that should not be overlooked. It is essential to know a company’s growth rate as well as the key questions to ask regarding its growth. If you are going to obtain an accurate valuation as well as understanding the valuation between different companies, this part of the process cannot be overlooked.

Copyright: Business Brokerage Press, Inc.

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There’s No Business Quite Like a Family Business

The simple fact is that family businesses are different. After all, a family business means working with family and all the good and bad that comes with it.

While an estimated 80% to 90% of all businesses are family owned, relatively few are properly planning for what happens when it comes time to sell. According to one study, a whopping 72% of family businesses lack a developed succession plan which is, of course, a recipe for confusion and potentially disaster. Additionally, there are many complicating factors, for example, studies indicate that 40% to 60% of owners of family businesses want the business to remain in the family, but only 40% of businesses are passed to a second generation and a mere 10% are passed down to a third generation.

Let’s turn our attention to a few of the key points that family business owners should consider when selling a business.

  1. Confidentiality should be placed at the top of your “to do” list. When it comes to selling a family business, it is vital that confidential is strictly observed.
  2. Remember that it may be necessary to lower your asking price if maintaining the jobs of family members is a key concern for you.
  3. Family members who stay on after the sale of the business must realize that they will no longer be in charge. In other words, after the sale of the business the power dynamic will be radically different, meaning that family members will now have to answer to new management, outside investors and an outside board of directors.
  4. Family members will want to appoint a single family member to speak for them in the negotiation process. A failure to appoint a family member could lead to confusion, poor decision making and ultimately the destruction of deals.
  5. When hiring a team to help you with selling your business, it is critical that your lawyer, accountant and business broker are all experienced and proven.
  6. Don’t hold meetings with potential buyers on-site.
  7. Every family member, regardless of whether they are an employee or an investor, must be in agreement regarding the sale of the company. Again, one of your primary goals is to avoid confusion.
  8. Family employees and family investors must be in agreement regarding the sale price or there could be problems.

Working with an experienced business broker is a savvy move, especially when it comes to selling a family business. Business brokers know what it takes to make deals happen. Being able to point to a business brokers’ past success will help reduce family member resistance to adopting the strategies necessary to successfully sell a business.

Copyright: Business Brokerage Press, Inc.

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Around the Web: A Month in Summary

A recent article posted by The National Law Review entitled “Thinking of Selling? Start Early, Build Your Team” explains the importance of putting together a good team of trusted advisors well in advance of selling your business. Your team should include an attorney, accountant, investment banker, and wealth manager. This team will help you with various aspects of selling your business such as:

  • Setting a realistic valuation on the business
  • Finding potential buyers
  • Handling due diligence and information requests from buyers
  • Structuring a transaction for tax & liability protection
  • Dealing with the sale proceeds and making sure your goals are met

It is a good idea to put this team together as soon as possible if you’re thinking of selling, so everyone has time to prepare. There are so many aspects to a business sale and it is essential to have an experienced team of professionals to guide you in the process.

Click here to read the full article.

A recent article from The San Angelo Standard-Times entitled “Business tips: Don’t neglect due diligence when buying a business” emphasizes the important of due diligence when buying a business, which consists of looking into and understanding the important aspects and fine details of the business before closing.

The first aspect to consider is if the business is right for you and your personal circumstances. Taking over a new business will require some help from the previous owner who has knowledge of the business and the industry. You will also want to take into account how many hours are needed, if the job will involve a lot of physical work, and if your family supports you in the purchase of this type of business.

Reviewing and analyzing the seller’s numbers and documents is also a huge part of due diligence. Consider using the help of a CPA, consultant or business broker to go over the financials of the business. You will also want to look into things such as if there are any claims on the business or if the business owes back taxes. Doing your due diligence now will ensure that there are no surprises later on in the process.

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A recent article posted by the Smart Business Network entitled “Planning an exit when a succession plan isn’t an option” explains that selling your business should be part of your exit strategy when creating a succession plan is not an option. To prepare a business for sale, the business owner should recognize the strengths of the business which would appeal to potential buyers and should also have a good understanding of the business’ financials.

Business owners may also want to work with a bank that is experienced in exit planning. The bank can assist with providing insight into how buyers will view their business and what obstacles may occur while a buyer is trying to finance the acquisition. Banks will also be able to work with the buyer in assisting them with financing.

It’s important for a business owner to work with experienced professionals who have worked with sales, acquisitions and exit strategies to help them prepare for a business sale.

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A recent article posted by Business.com entitled “Why It’s Prime Time to Buy a Business from a Retiring Baby Boomer” gives several good reasons why it is a good idea to consider purchasing an existing business, as a flood of baby boomers will be looking to sell their businesses and retire over the next decade.

There are many benefits to purchasing an existing business:

  1. Minimal upfront costs and you not only purchase the business but also the brand, customer-base, management policies and more.
  2. Low risk because the business is already established and has a proven track record.
  3. Steady cash flow along with employees and equipment.

With the generation of baby boomers looking to sell, there will be ample opportunities available for buyers. It’s important to stay in the loop and keep an eye out on available businesses by staying connected to your professional network, brushing up on local & industry publications, looking at online marketplaces, and working with a business broker.

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A recent article written by Live Oak Bank entitled “6 Business Acquisition Tips from SBA Loan Experts” outlines six factors that lenders review for loans financing mergers and acquisitions.

  1. Stable or Positive Trend – Not only a positive trend but stability in these trends are what lenders look at to make sure that any recent growth or improvement is sustainable. A decrease in revenue is a red flag and a negative trend should be stabilized or reversed.
  2. Business Plan – Buyers need to have a business and transition plan for the business they are acquiring so lenders can see they have a good understanding of the business and plans for improvement.
  3. Key Employees – Lenders like to see that key employees will stay on with the new owner, which helps lower the risk and make the transition easier.
  4. Seller Transition Period – Make sure you have a transition plan in place where the seller is able to help train and assist the new owner.
  5. Seller Financing – The seller financing a portion of the deal shows the lender that they are confident in the new owner and lowers the risk factors.
  6. Working Capital – M&A lenders will review the financials of the business to see what working capital is needed. The buyer should demonstrate a clear understanding of how much and what type of working capital is needed for the business transition.

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Copyright: Business Brokerage Press, Inc.

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The Difficult Issues Often Attached to Valuing a Business

There is little doubt that valuing a business is often complex. In part, this complexity is due to the fact that business evaluation is subjective. The simple fact is that the value of a business is often left to the mercy of the person conducting the evaluation. Adding yet another level of complexity is the fact that the person conducting the valuation has no choice but to assume that all the information provided is, in fact, correct and accurate.

In this article, we will explore the six key issues that must be considered when determining the value of a business. As you will see, determining the value of a business involves taking in several factors.

Factor #1 – Intangible Assets

Intangible assets can make determining the value of a business quite tricky. Intellectual property ranging from patents to trademarks and copyrights can impact the value of a business. These intangible assets are notoriously difficult to value.

Factor #2 – Product Diversity

One of the truisms of valuing a business is that businesses with only one product or service are at much greater risk than a business that has multiple products or services. Product or service diversity will play a role in most valuations.

Factor #3 – ESOP Ownership

A company that is owned by its employees can present evaluators with a real challenge. Whether partially or completely owned by employees, this situation can restrict marketability and in turn impact value.

Factor #4 – Critical Supply Sources

If a business is particularly vulnerable to supply disruptions, for example, using a single supplier in order to achieve a low-cost competitive advance, then expect the evaluator to take notice. The reason is that a supply disruption could mean that a business’ competitive edge is subject to change and thus vulnerable. When supply is at risk then there could be a disruption of delivery and evaluators will notice this factor.

Factor #5 – Customer Concentration

If a company has just one or two key customers, which is often the situation with many small businesses, this can be seen as a serious problem.

Factor #6 – Company or Industry Life Cycle

A business, who by its very nature, may be reaching the end of an industry life cycle, for example, typewriter repair, will also face challenges during the evaluation process. A business that is facing obsolescence usually has bleak prospects.

There are other issues that can also impact the valuation of a company. Some factors can include out of date inventory, as well as reliance on short contracts and factors such as third-party or franchise approvals being necessary for selling a company. The list of factors that can negatively impact the value of a company are indeed long. Working with a business broker is one way to address these potential problems before placing a business up for sale.

Copyright: Business Brokerage Press, Inc.

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What Do Buyers Want in a Company?

Selling your business doesn’t have to feel like online dating, but for many sellers this is exactly what it can feel like. Many sellers are left wondering, “What exactly do buyers want to see in order to buy my company?” Working with a business broker is an excellent way to take some of the mystery out of this often elusive equation. In general, there are three areas that buyers should give particular attention to in order to make their businesses more attractive to sellers.

Area #1 – The Quality of Earnings

The bottom line, no pun intended, is that many accountants and intermediaries can be rather aggressive when it comes to adding back one-time or non-recurring expenses. Obviously, this can cause headaches for sellers. Here are a few examples of non-recurring expenses: a building undergoing foundation repairs, expenses related to meeting new government guidelines or legal fees involving a lawsuit or actually paying for a major lawsuit.

Buyers will want to emphasize that a non-recurring expense is just that, a one-time expense that will not recur, and are not in fact, a drain on the actual, real earnings of a company. The simple fact is that virtually every business has some level of non-recurring expenses each and every year; this is just the nature of business. However, by adding back these one-time expenses, an accountant or business appraiser can greatly complicate a deal as he or she is not allowing for extraordinary expenses that occur almost every year. Add-backs can work to inflate the earnings and lead to a failure to reflect the real earning power of the business.

Area #2 – Buyers Want to See Sustainability of Earnings

It is only understandable that any new owner will be concerned that the business in question will have sustainable earnings after the purchase. No one wants to buy a business only to see it fail due to a lack of earnings a short time later or buy a business that is at the height of its earnings or buy a business whose earnings are the result of a one-time contract. Sellers can expect that buyers will carefully examine whether or not a business will grow in the same rate, or a faster rate, than it has in the past.

Area #3 – Buyers Will Verify Information

Finally, sellers can expect that buyers will want to verify that all information provided is accurate. No buyer wants an unexpected surprise after they have purchased a business. Sellers should expect buyers to dig deep in an effort to ensure that there are no skeletons hiding in the closet. Whether its potential litigation issues or potential product returns or a range of other potential issues, you can be certain that serious buyers will carefully evaluate your business and verify all the information you’ve provided.

By stepping back and putting yourself in the shoes of a prospective buyer, you can go a long way towards helping ensure that the deal is finalized. Further, working with an experienced business broker is another way to help ensure that you anticipate what a buyer will want to see well in advance.

Copyright: Business Brokerage Press, Inc.

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A Short Story All Family-Owned Businesses Should Read

When it comes to selling a family-owned business there are no shortage of complicating factors, but one in particular pops up quite often. This article contains a true story about a popular family business that was built up from the ground up only to later meet a very sad ending. While this is just one story, there are countless similar situations all across the country.

Once upon a time, there was a family-owned pizza dough company that had millions in sales. They sold their pizza dough to a range of businesses including restaurants and supermarkets. The founder had five children and split the business equally amongst them. Complicating matters was the fact that the children didn’t feel compelled to work in the family business. As a result, they turned the operation of the business over to two members of the third generation.

Once the founder’s children reached retirement age, they decided that they wanted to sell. So, they hired a business broker. The business broker began the search for an appropriate buyer, however, there was little interest. After considerable effort, the business broker found a successful businessman who offered to buy the pizza dough business for 50% of the sales, which was a good price. The business broker took the offer to the five owners and that is when the problems began.

A huge family argument was unleashed and the business broker was cut out of the loop. Later the offer was turned down flat and worst of all there was no counter-proposal, no attempt to negotiate price, terms, conditions or anything else. In short, the offer was finished and done. In the end, the business broker had lost several months of hard work.

Wondering what had happened, the business broker learned that two of the third-generation members who had been operating the business didn’t want to sell out of fear of losing their jobs. Over two decades later, the business has experienced almost no growth and is essentially breaking even. The owners, now in their 70s will likely never receive anything for their equity.

What you have just read is a true story, although the specific business type has been changed. This story serves to outline the problems that can arise when it comes time to sell a family business, especially if there is no agreement in place. Passing on this deal meant that the five children lost a considerable amount of money; this would have of course been money that could have made their retirement much more pleasant.

The story is both tragic and cautionary, in that this great business built from scratch by its founder was, in the end, left to flounder.

There is a moral to this story. Family-owned businesses need to have strict guidelines in place concerning issues such as salaries, benefits, what happens when one member wants to cash out and more. Such issues should be worked out with professionals, such as business brokers, years in advance.

Around the Web: A Month in Summary

A recent article from Divestopedia entitled “To Sell Your Business, Start with the End in Mind” explains the importance of planning your exit strategy in the early stages of your business. The article points out that emotion plays a big part in humans’ decision making process, and when a potential buyer perceives that the owner has not prepared a company for sale, they associate this with uncertainty, effort and stress that will accompany rebuilding the business.

Focusing on building your company’s culture is also very important for exit planning because a well-established company culture will continue to endure after you’re gone. Creating a self-sustaining culture that involves talented employees, succession plans for key people, talent acquisition and talent retention can help your business be seen as more valuable in the future.

Click here to read the full article.

A recent article posted on BizJournals.com entitled “How to know when the ride is over and it’s time to get off” gives an overview of how to know when to exit your business and how to be prepared when the time is right. Here are 4 signs that it might be time to sell your business:

  1. Your health is declining or your business is negatively affecting your health
  2. You’ve lost your passion for the business
  3. Your priorities have changed and the business is no longer your top priority
  4. You are hesitant or unable to invest money in the growth of your business

Business owners should periodically review these factors and ask themselves if they are still the right person for the job. It’s also good to consult with a trusted advisor to start planning an exit strategy now so you’re prepared when the time comes to sell all or part of your business.

Click here to read the full article.

A recent article posted on Forbes.com entitled “Business Value And Lottery Tickets” explains how you have to be realistic about your goals for your business especially in how they relate to your exit plan in the future. Take a look at how your business is doing and then quantify your goals for your business by asking yourself questions such as “How much money do I need to have when I leave my business?”

Next, you need to figure out a plan for your business to grow enough to reach those goals. The article states three common problems that owners have in this situation:

  1. Relying on assumptions instead of consulting with an exit-planning advisor
  2. Trying to do everything instead of delegating
  3. Remaining stagnant instead of taking on new roles to ignite change in the business

It is also important to have a good management team in place to help you achieve your goals. It’s not luck, and you have to look at the numbers and facts to get your business where you need it to be for a successful exit.

Click here to read the full article.

A recent article from the Axial Forum entitled “How to Handle Risky Customer Concentration in an M&A Target” explains the best practices to follow if a potential acquisition has a lot of customer concentration. In many companies, it’s common for 20% of customers to account for 80% of the company’s revenue. In this case, it is vital to talk to multiple people within these important accounts and ask a variety of questions to make sure you find out how their relationship with the company is really structured.

Most importantly, you want to ask the contact how likely they would be to recommend the target company to another colleague, which in turn will help you determine the Net Promoter Score (NPS) rating of the company. The NPS is very useful because it has statistically shown that higher rated companies are more profitable, outpace their competitors, and have stronger cross-selling opportunities.

It’s a good practice to look deeper into a company’s relationships with its customers when acquiring a business that you’ll want to eventually grow.

Click here to read the full article.

A recent article posted on The Standard entitled “Do you have a business you are eyeing? Consider these tips before taking the leap” explores a variety of factors to take into consideration before buying a business. Here are some things to think about when making the decision to buy:

  1. Evaluate yourself and make sure you have the skills to take on the specific type of business
  2. Find out why the business is being sold
  3. Carry out due diligence in screening the business so there’s no surprises along the way
  4. Obtain a professional valuation of the business
  5. Close the deal and consider using a legal officer for the final process

Always be sure to find out the good and the bad before you decide to purchase a business.

Click here to read the full article.

Copyright: Business Brokerage Press, Inc.

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Around the Web: A Month in Summary

A recent article posted on BizJournals.com entitled “Top 5 rules on preparing your company for sale” explains how the best time to begin preparing your business for sale is right now. The article highlights these main rules to follow:

  1. Start auditing your financial statements now as these will be required by the purchaser.
  2. Keep appropriate, complete corporate books and records so everything is ready to be presented to a buyer when the time comes.
  3. Obtain a professional valuation of your company so you can use this as a roadmap for growing your company and ultimately maximizing the exit price.
  4. Use the valuation of your company to determine what assets are superfluous and will not be valued. This can also help you make future decisions with your business strategy.
  5. Start the process now for finding a second in command who could easily replace the founder of the company. This will be very valuable to the future buyer after the sale is made.

Starting to prepare your business for sale now will help make the sale process much easier when you decide it’s time to sell.

Click here to read the full article.

A recent article from The Axial Forum entitled “Maximizing Your Business Value Before a Sale” gives insight into how to get the most out of a business sale. According to the article, the key to a successful sale comes in driving business value before selling the business. This can be done in a wide variety of areas of the business, from aiming to increase sales growth to product innovation, improvement of backend systems, and more.

Many of the methods and value-driving factors can take many months, if not several years, to implement and improve, so proper thought and planning is necessary to get the most out of the process. In the ideal situation, maximizing business value ahead of and in preparation for a sale will make a business much more attractive to a potential buyer.

Click here to read the full article.

A recent article from Divestopedia.com entitled “5 Essential Steps to Ensure Due Diligence in Private Company Acquisitions” explains the necessity of due-diligence during the acquisition process. Due diligence cannot be stressed enough and the fact that it is always popping up just shows its importance and relevance to a successful deal process. The following steps outline critical components of completing due diligence for an acquiring company:

  1. Construct an Investment Thesis
  2. Analyze Your Competitive Position
  3. Measure the Strength and Stability of the Acquired Company
  4. Revenue Synergy
  5. Integration

While this is not an exhaustive list, the aforementioned steps outline an important process necessary for any acquirer to ensure they are best prepared for a successful acquisition.

Click here to read the full article.

A recent article posted on The Axial Forum entitled “Capital Superabundance is Transforming Middle-Market M&A” explores the effect that the abundance of cheap capital is having on middle-market transactions. This “capital superabundance” is having effects across the middle-market sector among private equity firms, corporate buyers, investment bankers, and middle market companies alike. Brand value is more important than ever in the eyes of private equity companies and corporate buyers, investment bankers are using data and advanced technological systems to find clients, and for sellers, there has never been a better time to sell a business.

The fact of the matter is the market is hot right now. Though capital superabundance is just one of many varying parts of this market change, it is a driving factor behind much of the success we’re seeing.

Click here to read the full article.

A recent article posted on Divestopedia.com entitled “Know Your Buyer” outlines the importance of knowing and understanding potential buyers in the market when putting a business up for sale. This is important because knowing the different types of potential buyers will give an owner insight into how to approach and appeal to the types of buyers they want to take over their company.

Different types of buyers will likely have different motivations and therefore produce different outcomes for a business transaction, so knowing and understanding them will help to give an owner better control over the future of their company and ideally help make the right decision on who to sell to.

Click here to read the full article.

Copyright: Business Brokerage Press, Inc.

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When Two Million Dollars is Just Not Enough

Not everyone wants to sell when they feel as though they have to sell. Life changes, such as divorce or illness, can trigger the sale of a business. Everything from declining business revenue to partnership problems and more can send business owners scrambling for the exit sign. However, selling isn’t always an option, especially for small businesses. In this article, we will take a closer look at just such a situation.

The business under consideration is a successful distribution business, which is also a classic example of a value-enhanced business. The two owners each draw several hundred thousand from the business each year to go along with a range of other benefits. If hypothetically, the business was to sell for $2 million dollars, each of the owners would receive approximately $1 million. Of course, this sounds like a sizable amount. So, what is the problem?

When one stops to factor in such variables as taxes, closing expenses and debt, that $1 million-dollar number has shrunk dramatically, leaving each owner with much less, perhaps as little as just two years of income. In such a situation, selling isn’t a great idea. Many owners of small companies want to “cash in” and retire only to discover that their business isn’t worth enough to do so.

Owners who want to retire but can’t afford to do so are in a difficult position. Such owners may have already “checked out” mentally and in the process, have lost their focus resulting in a failure to both invest financially and creatively in the business. In turn, this decreases the value of the business even more, as competitors may likely move in to fill the void.

So, what does all of this mean for business owners? Business owners don’t want to get stuck in the position we discussed thus far. Instead, business owners want to sell at the optimal moment, when a business is at its high point and the owners are not considering retiring and feel as though they have to sell.

Determining when is the best time to sell can be one of the single smartest business decisions that a business owner ever makes. Working with a professional and experienced business broker is a fast and simple way to determine if the time is right to sell your business or if you should wait. Waiting until the optimal moment to sell has passed you by could be a painful experience.

Copyright: Business Brokerage Press, Inc.

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Three Common Errors Caused by Inexperience

The old saying that “there is no replacement for experience” is a truism that has stood the test of time. The simple fact is that a lack of experience can dismantle your deal.

Consider the following scenario – a business owner nearing retirement owns a multi-location retail operation that is doing several million in annual sales. He interviews a well-respected and experienced intermediary and is impressed.

However, the business owner’s niece has recently received her MBA and has told her uncle that she can handle the sale of his business and in the process, save him a bundle. On paper, everything sounds fine, but as it turns out the lack of experience gives this business owner less than optimal results.

Let’s take a look at a few problems that recently arose with our nameless, but successful, business owner and his well-meaning and smart, but inexperienced niece.

Error #1 No Confidentiality Agreements

One problem is that the business owner and his niece don’t use confidentiality agreements with prospective buyers. As a result, competitors, suppliers, employees and customers all learn that the business is available for sale. Of course, learning that the business is for sale could cause a range of problems, as both employees and suppliers get nervous about what the sale could mean. Ultimately, this could undermine the sale of the business.

Error #2 Incorrect Financials

Another problem is that the inexperienced MBA was supposed to prepare an offering memorandum. In the process, she compiled some financials together that had not been audited. While on paper this seemed like a small mistake, it failed to include several hundred thousand dollars the owner took. He simply forgot to mention this piece of information to his niece. Clearly this mishap dramatically impacted the numbers. Additionally, this lack of information would likely result in lower offers as well as lower bids, or even decrease overall prospective buyer interest.

Error #3 Failing to Include the CFO

A third key mistake in this unfortunate story was a failure to bring in the CFO. The niece felt that she could handle the financial details, but in the end, her assumption was incorrect. The owner and the niece failed to realize that prospective buyers would want to meet with their CFO, and that he would be involved in the due diligence process. In short, not bringing the CFO on board early in the process was a blunder that greatly complicated the process.

The problem is clear. Selling a business, any business, is far too important for an amateur. When it comes time to sell your business, you want an experienced business broker with a great track record. Again, there is no replacing experience.

Copyright: Business Brokerage Press, Inc.

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Around the Web: A Month in Summary

A recent article posted on Forbes.com entitled “Small Business Owners Are Retiring, And Millennials May Not Fill The Gap On America’s Main Street” uses the closing of a 235-year-old hardware store to prove a startling fact: the Millennial generation may not be suited to take over small business ownership like the generations before them. In the case of Elwood Adams Hardware, which has seen a multitude of owners over the last almost two and a half centuries, the current owner simply couldn’t find a buyer.

While student loan debt and an inclination to pursue work in the gig economy may be factors in this unwillingness to take on small business ownership, their age may actually be the driving factor. The article mentions that the sweet spot for entrepreneurship is typically the 40’s, so it may take some time to truly see if millennials are suited for small business ownership.

Click here to read the full article.

A recent article from the Axial Forum entitled “Five Due Diligence Pitfalls and How to Avoid Them” outlines some common mistakes and pitfalls that are made during the due diligence process and gives tips on how to navigate the due diligence waters. The pitfalls include:

  1. Missed Opportunities
  2. Pointless Provisions
  3. Red Flags at the 11th Hour
  4. Poor Communication
  5. Leaving Money on the Table

Avoiding these five things won’t guarantee success, but doing so can definitely help give an owner the best chance at success. Buying a business is not an easy process, but knowing what to expect, what to avoid, and how to maximize the value of a dollar can go a long way.

Click here to read the full article.

A recent article posted on Divestopedia.com entitled “The Investment Banking Landscape: Different Types of M&A Firms” gives an overview of the different types of M&A firms as well as how they can be useful in different situations. Owners interested in selling should know how each type of firm works and how each could be of use to them during the sale of their business. The following represent these different types of firm:

  1. Boutique Investment Firms
  2. Regional Investment Banks
  3. Bulge Bracket Investment Banks
  4. M&A Advisory Firms
  5. Business Brokerage

Each of these types of M&A firms has its own benefits and drawbacks, so it is very important for an owner to understand and explore the options available to them before settling on one.

Click here to read the full article.

A recent article posted on BizBuySell.com entitled “Small Business Transactions Reach Record High As Buyers Shrug Off Amazon Effect” explores business transaction data from the third quarter of 2017. As outlined by the report, closed transactions numbered 2,589 in the third quarter, up 24% from the same time period last year. This quarter continues the overall trend of quarter-over-quarter growth in reported transactions going back two years.

Increases in median revenue and cash flow of sold businesses as well as a decrease in the median time to sell a business show a strengthening small business sector and an improving overall market. Although retail has taken a hit from the “Amazon Effect,” retail transactions are actually up 23% since this time last year. Read the full report by clicking the link below.

Click here to read the full article.

A recent article posted on BizJournals.com entitled “Closely-held Businesses Head Toward a Slippery Slope” explores a startling truth about small businesses in the United States: around 60 percent of owners will likely retire within the next 10 years. On the surface, this may sound unimportant or irrelevant to the small business world. But just beyond the surface lies the fact that almost 70 percent of successions fail. But still, what does this mean for the small business sector?

Finding a suitable well-trained successor will be of absolute necessity within the next 10 years for these 60 percent of retiring owners. Failure is inherently more common than success post-transition, so finding qualified individuals to take over will be paramount to continued small business success in the United States.

Click here to read the full article.

Copyright: Business Brokerage Press, Inc.

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It’s Time To Embrace CSR (Corporate Social Responsibility)

If you are unfamiliar with CSR or corporate social responsibility, you are certainly not alone. In the coming years, you’ll be hearing a lot about CSR. In this article, we’ll look at CSR and how, when implemented with sincerity, it can positively impact your company and its operation.

Building Your CSR Locally

One of the key ways that you can build your CSR is to think about ways to help your community. Contributing to local community programs, for example, is a great place to start. Everything from personal involvement to direct financial support can help build your company’s reputation within your community.

Your Connection to the Environment

A second way to build your CSR is to show that your company is thinking about its impact on the environment. Recycling is important but so is using eco-friendly packaging and containers. Additionally, embracing low-emission and high mileage vehicles is another good step as this lowers your company’s carbon footprint.

Advertising and Good PR

A third area to consider is how your company interacts with the marketplace. Using responsible advertising, business conduct and public relations is a savvy move. Likewise, providing fair treatment of your shareholders, suppliers and vendors and contractors will all help to improve your CSR.

Yet, one of the single most important areas of corporate social responsibility occurs in the workplace. The advent of social media has helped fuel the dispersal of information. If your business isn’t treating its employees in a fair manner and/or has unsafe work conditions or unfair employment practices, the word will eventually get out. There has never been a more important time to treat your employees well.

Embracing CSR serves to increase shareholder and investor interest. In short, it is expected. Socially-conscious companies are considered smart and stable investments. A company that has fully embraced CSR will find greater buyer interest and even a higher selling price when the time comes to sell. Most buyers want excellent customer loyalty with no skeletons hiding in a company’s closet. They also are seeking happy and loyal employees, low employee turnover and for a company to have a good reputation within a community. CSR helps achieve all of these goals and more.

Ultimately, corporate social responsibility works to create additional value. When you invest in CSR, you are investing in achieving a higher selling price and making your business more attractive to sellers. Summed up another way, you can’t afford not to think about this topic.

Copyright: Business Brokerage Press, Inc.

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You Know the Old Saying About Loose Lips? How Does It Impact You?

The saying “loose lips sink ships,” doesn’t have ancient origins. While it sounds like one of those sayings that has been around forever, the saying was actually invented during World War II. It was taken quite literally. The idea was that a lack of secrecy could lead to the loses of actual ships or other wartime deaths. So in other words, this saying was serious business. It should come as no surprise that this saying is alive and well in the business world.


Few things are more important than safeguarding your business from leaks. Leaks can, simply stated, spell disaster for your business. Leaks can be particularly damaging if you are looking to or are in the process of selling business. A leak that you are planning on selling your business can have a range of consequences. Everyone from employees to customers, suppliers and, of course, prospective buyers and competitors could all take notice and this could have ramifications.

Yet, confidentiality stands as a bit of a Catch-22 situation. Sellers want to get to the best price possible for their business and that means letting prospective buyers know that the business is for sale. The greater the number of potential buyers contacted, the greater the chances of receiving top dollar. However, the more potential buyers that know you are interested in selling, the greater the risk of a leak. Clearly, this situation represents a considerable dilemma.

As a buyer, you may discover that owners can be overly, perhaps even irrationally concerned, about leaks. It is important to remember that for most owners, the business represents their largest asset and often their greatest professional accomplishment in life. In other words, they have a lot riding on their business. It is important to remind sellers that the less time a business is on the market the lower the risk of a leak. Also, the longer the negotiations go on, the greater the risk of a leak.

Sellers should always remember to keep all important documents related to the potential sale or sale literally under lock and key. Everything should be considered confidential and only transferred to buyers in a highly secure fashion. Confidential information shouldn’t be emailed or faxed, as this makes a leak much easier. Sellers and buyers alike should remember that they shouldn’t discuss the sale or potential sale with anyone. Confidentiality should be stressed at all times.

Working with a business broker is one way to dramatically reduce the risk of a leak occurring. For business brokers, confidentiality is a cornerstone of their operations. Business intermediaries require buyers to sign very strict non-disclosure agreements. While loose lips may sink “ships,” there is no reason that your business, or the one you are interested in buying, has to be one of those ships.

Copyright: Business Brokerage Press, Inc.

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Top Four Statistics You Need to Know About Ownership Transition

If you own a business, then ownership transition should definitely be a central topic in your planning. A few years ago, MassMutual Life Insurance Company conducted a very interesting and thought-provoking survey of family-owned businesses. Obviously, family-owned businesses have their own unique needs and challenges. The MassMutual Life Insurance Company survey certainly underscored this fact. While the survey was conducted a few years ago, the information it contained is more relevant and actionable than ever. Let’s take a closer look at some of the key conclusions and discoveries.

Founder Control

One of the most important findings of the survey was that a full 80% of family-owned businesses are still controlled by the founders. The survey also discovered that 90% of family-run businesses intend to stay family-owned in the future.

Lack of Leadership Plans

Leadership is another area of great interest. Strikingly, approximately 30% of family-owned businesses will in fact change leadership within just the next five years. Moreover, 55% of CEOs are 61 or older and have not chosen a successor. When a successor has been chosen that successor is a family member 85% of the time. Succession is often a murky area for family-owned businesses. A whopping 13% of CEOs stated that they will never retire.

Failure of Proper Valuations

According to the survey, valuation is another surprise area. 55% of companies fail to conduct regular evaluations, meaning that they are essentially flying blind in regards to the true value of their company. Adding to the potential confusion is the fact that 20% of family owned businesses have not completed any estate planning and 55% of family-owned businesses currently have no formal company valuation for estate tax estimates.

Lack of Proper Strategic Plans

The financials for family-owned businesses are often just murky as their succession issues. The MassMutual Life Insurance Company survey also discovered that 60% of family-owned businesses failed to have a written strategic plan and a whopping 48% of family-owned businesses were planning on using life insurance to cover estate taxes.

Simply stated, many family-owned businesses are not organized properly and are, in the process, not fully taking advantage of their opportunities. In short, family-owned businesses are frequently insular in their approach to a wide range of vital topics ranging from succession and leadership to valuation, planning and more. In the long term, these vulnerabilities may serve to undermine the business making it harder to sell when the time comes or opening it up to other problems and issues. Family-owned businesses are strongly advised to work with professionals, such as experienced accountants and business brokers, to ensure the long term profitability and continuity of their businesses.

Copyright: Business Brokerage Press, Inc.

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Reasons for Sale

The reasons for selling a business can be divided into two main categories. The first is a sale that is planned almost from the beginning or by an owner who knows that selling is or should be a planned event. The second is exactly the opposite – unplanned; the sale is motivated by a specific event such as health, divorce, business crises, etc. However, in between the two major reasons, are a host of unpredictable ones.

A seller may not even be thinking of selling when he or she is approached by an individual, group or another company, and an attractive offer is made. The owner of a business may die, and the heirs have no interest in operating it. A company may bring in new management who decides to sell off a division or two; or maybe even decides that selling the entire business is in the best interests of everyone.

A major competitor may enter the market, forcing an owner to elect to sell. And the competition may not just be another company. The owner of a business may realize that an external threat is such that the company will lose a competitive advantage. New technology by a competitor may outdate the way a company produces its products. Two competitors may merge, placing new pressures on a company. The growth of franchising and big box stores can promote themselves on a much larger scale than a single business, no matter how good it is. National advertising can create the perception that a large business’s pricing, inventory or service is better than the smaller competitor, even if it isn’t.

Although these issues may not push a business owner or company management to consider selling, they are certainly causes for consideration. Unfortunately, most sellers fail to create an exit strategy until they are forced to. Professional athletes want to go out on top of their game, and business owners should do the same.

Copyright: Business Brokerage Press, Inc.

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You’re Experiencing Burnout, Now What?

A large percentage of business owners are not just owners, but also operators. Owning a business can be exciting and rewarding, but it is also a tremendous amount of unending work. In the end, the “buck” stops with you. With that realization comes a significant amount of stress. It goes without saying that stress can lead to burnout.

A business with a burnt-out owner can spell doom. Even if you are lucky and have invested the time to surround yourself with an amazing team, you will only have so much time before you have to jump back in and be very proactive. Otherwise your business will begin to suffer.

Let’s face it, as the owner, you can take a vacation. But your burnout might not let you even enjoy said vacation. This is even more true if you are stuck checking your texts and your computer all day long, trying to manage things from out of town.

The First Step is Acceptance

When dealing with burnout the first, and most important step, is to admit that you are in fact, burnt out. This condition may be the result of mental and physical fatigue. While most people might not immediately connect issues, such as health and diet, with burnout, there is often a connection.

Start Taking Care of Yourself

Owning a business means work and lots of it. That may mean that you are not taking enough time or thinking enough about your own health and well-being. Consider improving your diet to include more fresh foods and reduce or even eliminate fast food, which has been proven to negatively impact health. You should also consider investing in air and water purification systems. A recent medical study showed that indoor air pollution can harm not just the lungs but even the kidneys as well.

In the end, you are the key element in the success or failure of your business. If you are suffering from aches and pains, headaches and fatigue, then you, as the heart of the business, are ultimately harming the business. Putting your health first is a way for you to safeguard the health of your business.

Consider Putting a #2 Person in Place

Many business owners have a great “right hand person” that can take over if the owner becomes sick, but that is not always the case. Keep in mind that when it comes to selling your business, having that key team member will be essential to your potential buyer. If it’s possible to start cultivating that person now, by all means do so.

You may be saying, “But I’m a health nut and I still feel burnt out.” Again, owning a business is demanding, and the years can weigh heavily. It is important, especially before burnout sets in, to step back and look for ways to streamline your operations and delegate responsibilities. Small changes can have a big long-term impact. Additionally, streamlining your operations will make your business more attractive when it comes time to sell.

In the end, if taking a vacation, streamlining your operations, and improving your health regime doesn’t yield big results, it might be time to consider selling your business. There is no rule that states that you must operate your business until retirement. Don’t be afraid to walk away if necessary.

Copyright: Business Brokerage Press, Inc.

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Invest in Creating Happy Employees & You’ll Be Rewarded

The time, effort and money you invest in keeping your employees happy is well worth it for your bottom line. Oftentimes business owners fail to consider the fact that unhappy employees can, and do, negatively impact every aspect of their operation.

Your employees are your front line in dealing with your customers. If your employees are not pleased, don’t kid yourself, it shows. Unhappy employees not only negatively impact the overall experience of your clients but can also make customers worry that something is wrong with your business. Whether fair or not, many customers may believe that a lack of employee happiness reflects on you as a business owner.

Some owners believe that their employees should share their dedication to the business; this is the wrong approach. At the end of the day, the business belongs to the owner(s) and not the employees. Business owners should refrain from becoming irritated or angry because employees do not match their own levels of enthusiasm. Instead, business owners should strive to help employees become as invested as possible. But at the same time, they need to always remember that employees realize that they don’t own the business.

Every business is different, and what it takes to create happy employees, of course, varies. Determining the best way to facilitate employee happiness is a prudent step. Take the time to evaluate your business and the role of your employees in it. At first, this may sound like quite the challenge, but determining what can help foster employee happiness is as easy as placing yourself in the shoes of your employees.

What would make you happier if you were an employee? Massive pay increases may not be in the cards. But still there are low cost or even free “upgrades” that you can implement. Periodically rewarding employees for a job well done with gift certificates or half-days off can go a very long way in building employee morale. When it comes time for you to potentially sell your business, you want a prospective buyer to see a lot of happy and enthusiastic employees. After all, isn’t this what you would want to see if you were buying a business?

Also consider requesting anonymous employee feedback. If you are having trouble figuring out how to solicit this feedback, you can hire a third-party company to assist you. When you read feedback from your staff, you will most likely be shocked and surprised what you learn.

Ultimately, there is no replacement for respect and kindness. Many business owners worry about employees taking advantage of them and may take an overly harsh attitude towards employees as a result. As long as employees realize that you have high standards and expect employees to uphold those standards if they want to keep their jobs, you shouldn’t have any significant problems. Employees know when they are valued and appreciated. They will, in turn, pass on this feeling of appreciation and value to your customers.

Copyright: Business Brokerage Press, Inc.

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Keys to Improving the Value of Your Company

The first key is to have your accountant take a look at your accounting procedures and make recommendations on how to improve them. He or she may also help in preparing financial projections for the coming year(s). Getting your company’s financial house in order is very important in establishing the value of your firm.

The second key is to review the reputation, image, and marketing materials of your company. Certainly, the quality of your product or service is paramount, but how your firm presents itself to customers, clients, suppliers, etc. – and the outside world – is also very important. The appearance of your facilities and customer services – beginning with how people are treated on the telephone or in the waiting/reception area – are the kind of first impressions that are critical in dealing with your customers or clients. Don’t forget about the company’s Web site; in many cases, it is the initial introduction to your company. Now may also be the time to update your marketing materials. The image of a company can help create a happy workforce, improve customer service, and impress those that you deal with – all of which can increase the value.

A third key is to get rid of outdated inventory – sell off any extra assets such as unused or outmoded equipment. The proceeds can be used in the business. If there are any assets that should not be included in the value of the company, such as personal vehicles or real estate, you might want to separate them from the assets of the company. This is especially important if you are considering placing the company on the market. A prospective purchaser expects everything they see to be included in the sale. If a portrait of your grandfather is your personal property, delete it from any list of company furniture, fixtures, and equipment; and if the business is for sale, remove it entirely.

Another important key is to resolve any pending items. For example, if the company has a trademark on any of the important products, and the paperwork for registering is sitting on someone’s desk, now is the time to complete the filing. Trademarks, patents, copyrights, etc., can be very valuable, but only if they have been properly recorded and/or filed.

Contracts, agreements, leases, franchise agreements, and the like should be reviewed. If they need to be extended, take the appropriate action. A contract with a customer has value and if it is scheduled to expire soon, why not get it renewed now? The same is true for leases. Favorable leases for a long period of time can be a valuable asset. Do your key employees have employee agreements?

The key factors outlined above not only build value, but they also increase the bottom line. If you are considering selling your company at some point, these key issues will come back many-fold in the selling price. A professional business intermediary can help with other factors that can influence the value of the business.

One other hidden benefit of building the value of your company is that you never know when the Fortune 500 Company will come “knocking at your door” with an offer that you can’t refuse. At that point, it’s probably too late to work on some of the issues mentioned above.

Copyright: Business Brokerage Press, Inc.

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Keys to Improving the Value of Your Company

The first key is to have your accountant take a look at your accounting procedures and make recommendations on how to improve them. He or she may also help in preparing financial projections for the coming year(s). Getting your company’s financial house in order is very important in establishing the value of your firm.

The second key is to review the reputation, image, and marketing materials of your company. Certainly, the quality of your product or service is paramount, but how your firm presents itself to customers, clients, suppliers, etc. – and the outside world – is also very important. The appearance of your facilities and customer services – beginning with how people are treated on the telephone or in the waiting/reception area – are the kind of first impressions that are critical in dealing with your customers or clients. Don’t forget about the company’s Web site; in many cases, it is the initial introduction to your company. Now may also be the time to update your marketing materials. The image of a company can help create a happy workforce, improve customer service, and impress those that you deal with – all of which can increase the value.

A third key is to get rid of outdated inventory – sell off any extra assets such as unused or outmoded equipment. The proceeds can be used in the business. If there are any assets that should not be included in the value of the company, such as personal vehicles or real estate, you might want to separate them from the assets of the company. This is especially important if you are considering placing the company on the market. A prospective purchaser expects everything they see to be included in the sale. If a portrait of your grandfather is your personal property, delete it from any list of company furniture, fixtures, and equipment; and if the business is for sale, remove it entirely.

Another important key is to resolve any pending items. For example, if the company has a trademark on any of the important products, and the paperwork for registering is sitting on someone’s desk, now is the time to complete the filing. Trademarks, patents, copyrights, etc., can be very valuable, but only if they have been properly recorded and/or filed.

Contracts, agreements, leases, franchise agreements, and the like should be reviewed. If they need to be extended, take the appropriate action. A contract with a customer has value and if it is scheduled to expire soon, why not get it renewed now? The same is true for leases. Favorable leases for a long period of time can be a valuable asset. Do your key employees have employee agreements?

The key factors outlined above not only build value, but they also increase the bottom line. If you are considering selling your company at some point, these key issues will come back many-fold in the selling price. A professional business intermediary can help with other factors that can influence the value of the business.

One other hidden benefit of building the value of your company is that you never know when the Fortune 500 Company will come “knocking at your door” with an offer that you can’t refuse. At that point, it’s probably too late to work on some of the issues mentioned above.

Copyright: Business Brokerage Press, Inc.

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Around the Web: A Month in Summary

A recent article posted on Business2Community.com entitled “How to Close the Deal and When to Walk Away When Buying or Selling a Business” explains the business sale process and how to differentiate between a good deal and a bad deal during the process. Closing a deal involves quite a bit of legwork, including producing a letter of intent, doing due diligence, acquiring financing, signing a purchase agreement, and actually closing the deal. These items can be easier with the help of a business advisor, broker, or attorney, but emphasis should be placed on the due diligence aspect: knowing the business inside and out is vital to a successful sale.

Walking away from a deal can be difficult for a motivated buyer, but is sometimes necessary to avoid emotional and financial disaster. The following red flags help to signify that it’s time to walk away:

  1. Inconsistencies
  2. Neglect
  3. Undisclosed Problems
  4. Poor Credit Rating
  5. The Industry is in Decline

Being prepared is one of the best things that a buyer can do in the business sale process. Whether preparation proves a business deal is worth it or uncovers red flags, it will be worth the effort.

Click here to read the full article.

A recent Axial Forum article entitled “3 Reasons an M&A Advisor is Worth the Cost” presents impressive statistics regarding the utilization of M&A advisors in the sale process. 100% of owners that used an advisor when selling their business stated that the advisor had a positive impact on the sale, with 84% of these sellers achieving a sale price equal to or higher than the advisor’s initial estimate.

While these types of statistics are expected among industry insiders, many business owners will still hesitate to hire an advisor for the sale of their businesses. As the article outlines, advisors can help to identify weak links in a business’ management team, find quick ways to increase cash flow, and whip financials into shape, among many other things.

Click here to read the full article.

A recent Forbes article entitled “The Question Every Owner Should Ask: Is Now The Right Time To Sell The Business?” explains why choosing to sell sooner is actually better in a lot of ways than putting off a business sale for a few years. The author goes on to explain how when exits are planned for some arbitrary point in the future, owners often never seem to make it there, ending up wanting to sell but never actually selling. The article goes on to explain five important reasons to consider selling now:

  1. You May Be Choking Your Business
  2. Money is Cheap
  3. Timing Your Sale is a Fool’s Errand
  4. Cyber Crime
  5. There is No Corporate Ladder

Being an owner gives so much power over the path a business takes, whether it’s a sale or acquisition or even the owner staying on to work on the business for an extended period. The beauty of this is that the owner has the choice over whether or not to sell, but also the choice on what to do after. Starting another business is a common route to take for successful first-time entrepreneurs after an exit, so the sooner a sale occurs, the sooner they can get started on another business.

Click here to read the full article.

A recent article posted on the Axial Forum entitled “7 Reasons to Perform Sell-Side Due Diligence” talks about why sell-side due diligence can be a useful and productive technique within the M&A process. While buy-side due diligence is much more common, sellers can take advantage of this practice to maximize the value presented to potential sellers so that they can ultimately get more out of the sale.

Sell-side due diligence can help to uncover and improve:

  1. Weak financial and operational data systems
  2. Overextended employee resources
  3. Unclear financial narrative
  4. Unhelpful “tax guy”
  5. Multiple entities and no consolidation
  6. Likely purchase price reductions
  7. Ineffective tax structuring

In the end, due diligence is part of any M&A process. But with so many things factoring into a successful sale, both buyers and sellers have a responsibility to know the business inside and out if they want to get the most out of a transaction.

Click here to read the full article.

Copyright: Business Brokerage Press, Inc.

peshkov/BigStock.com

Around the Web: A Month in Summary

A recent article posted on Business2Community.com entitled “How to Close the Deal and When to Walk Away When Buying or Selling a Business” explains the business sale process and how to differentiate between a good deal and a bad deal during the process. Closing a deal involves quite a bit of legwork, including producing a letter of intent, doing due diligence, acquiring financing, signing a purchase agreement, and actually closing the deal. These items can be easier with the help of a business advisor, broker, or attorney, but emphasis should be placed on the due diligence aspect: knowing the business inside and out is vital to a successful sale.

Walking away from a deal can be difficult for a motivated buyer, but is sometimes necessary to avoid emotional and financial disaster. The following red flags help to signify that it’s time to walk away:

  1. Inconsistencies
  2. Neglect
  3. Undisclosed Problems
  4. Poor Credit Rating
  5. The Industry is in Decline

Being prepared is one of the best things that a buyer can do in the business sale process. Whether preparation proves a business deal is worth it or uncovers red flags, it will be worth the effort.

Click here to read the full article.

A recent Axial Forum article entitled “3 Reasons an M&A Advisor is Worth the Cost” presents impressive statistics regarding the utilization of M&A advisors in the sale process. 100% of owners that used an advisor when selling their business stated that the advisor had a positive impact on the sale, with 84% of these sellers achieving a sale price equal to or higher than the advisor’s initial estimate.

While these types of statistics are expected among industry insiders, many business owners will still hesitate to hire an advisor for the sale of their businesses. As the article outlines, advisors can help to identify weak links in a business’ management team, find quick ways to increase cash flow, and whip financials into shape, among many other things.

Click here to read the full article.

A recent Forbes article entitled “The Question Every Owner Should Ask: Is Now The Right Time To Sell The Business?” explains why choosing to sell sooner is actually better in a lot of ways than putting off a business sale for a few years. The author goes on to explain how when exits are planned for some arbitrary point in the future, owners often never seem to make it there, ending up wanting to sell but never actually selling. The article goes on to explain five important reasons to consider selling now:

  1. You May Be Choking Your Business
  2. Money is Cheap
  3. Timing Your Sale is a Fool’s Errand
  4. Cyber Crime
  5. There is No Corporate Ladder

Being an owner gives so much power over the path a business takes, whether it’s a sale or acquisition or even the owner staying on to work on the business for an extended period. The beauty of this is that the owner has the choice over whether or not to sell, but also the choice on what to do after. Starting another business is a common route to take for successful first-time entrepreneurs after an exit, so the sooner a sale occurs, the sooner they can get started on another business.

Click here to read the full article.

A recent article posted on the Axial Forum entitled “7 Reasons to Perform Sell-Side Due Diligence” talks about why sell-side due diligence can be a useful and productive technique within the M&A process. While buy-side due diligence is much more common, sellers can take advantage of this practice to maximize the value presented to potential sellers so that they can ultimately get more out of the sale.

Sell-side due diligence can help to uncover and improve:

  1. Weak financial and operational data systems
  2. Overextended employee resources
  3. Unclear financial narrative
  4. Unhelpful “tax guy”
  5. Multiple entities and no consolidation
  6. Likely purchase price reductions
  7. Ineffective tax structuring

In the end, due diligence is part of any M&A process. But with so many things factoring into a successful sale, both buyers and sellers have a responsibility to know the business inside and out if they want to get the most out of a transaction.

Click here to read the full article.

Copyright: Business Brokerage Press, Inc.

peshkov/BigStock.com

The Rise of Women Business Owners

The National Foundation for Women Business Owners (NFWBO) identifies trends relating to the small business climate for women. New studies examining the role of female entrepreneurs by the NFWBO have yielded some surprising and eye-opening results.

A joint IBM, NFWBO study of the top fifty women business owners as well as 10 additional “up-and-coming” business owners reached several interesting conclusions. The women in the study covered a diverse array of industry categories including 27% in manufacturing, 25% in retail and 10% in real estate. 46% of the women inherited a business and over 50% started their own businesses, with 34% starting businesses themselves and another 17% starting businesses with others.

A Preference for Flexibility

One key part of the study centered on the fact that women business owners, in general, appear to prefer smaller operations. Among the 8 million women-owned businesses in the U.S., a full 75% are one person operations. Through ownership of these businesses women achieve a high level of flexibility in their work schedules. It is believed that this flexibility improves the odds of women keeping their home lives satisfying and rewarding.

Overall, millions of women are ignoring the notion that small businesses do not equate with success. While NFWBO research indicates that fewer than 1% of small women owned businesses generate over a $1 million in sales, there is no doubt that women are showing their strength in numbers.

Tackling Loan Issues

One major obstacle women business owners have faced comes in the form of bank loan inequities. Recently, for the first-time women owned business are experiencing access to business loans on par with male owners; this may be due in part to the increasing number of women in high bank positions as well as banks now seeing the previously untapped potential of women-owned businesses. The NFWBO has also discovered that women tend to direct loans towards business growth.

Internationally Owned Businesses

On an international scale, the NFWBO studies have shown that women business owners often come from similar backgrounds and express the same concerns regarding business issues. Today, female business owners represent between one-quarter and one-third of the world’s independent business owners and have become increasingly vocal as evidenced by female participation at an international conference in Paris sponsored by the Organization for Economic Cooperation and Development (OECD).

A Trend Towards Progress

To date, many obstacles have been overcome. Simply stated, the future looks very bright for women-owned businesses around the globe.

Copyright: Business Brokerage Press, Inc.

pressmaster/BigStock.com

The Rise of Women Business Owners

The National Foundation for Women Business Owners (NFWBO) identifies trends relating to the small business climate for women. New studies examining the role of female entrepreneurs by the NFWBO have yielded some surprising and eye-opening results.

A joint IBM, NFWBO study of the top fifty women business owners as well as 10 additional “up-and-coming” business owners reached several interesting conclusions. The women in the study covered a diverse array of industry categories including 27% in manufacturing, 25% in retail and 10% in real estate. 46% of the women inherited a business and over 50% started their own businesses, with 34% starting businesses themselves and another 17% starting businesses with others.

A Preference for Flexibility

One key part of the study centered on the fact that women business owners, in general, appear to prefer smaller operations. Among the 8 million women-owned businesses in the U.S., a full 75% are one person operations. Through ownership of these businesses women achieve a high level of flexibility in their work schedules. It is believed that this flexibility improves the odds of women keeping their home lives satisfying and rewarding.

Overall, millions of women are ignoring the notion that small businesses do not equate with success. While NFWBO research indicates that fewer than 1% of small women owned businesses generate over a $1 million in sales, there is no doubt that women are showing their strength in numbers.

Tackling Loan Issues

One major obstacle women business owners have faced comes in the form of bank loan inequities. Recently, for the first-time women owned business are experiencing access to business loans on par with male owners; this may be due in part to the increasing number of women in high bank positions as well as banks now seeing the previously untapped potential of women-owned businesses. The NFWBO has also discovered that women tend to direct loans towards business growth.

Internationally Owned Businesses

On an international scale, the NFWBO studies have shown that women business owners often come from similar backgrounds and express the same concerns regarding business issues. Today, female business owners represent between one-quarter and one-third of the world’s independent business owners and have become increasingly vocal as evidenced by female participation at an international conference in Paris sponsored by the Organization for Economic Cooperation and Development (OECD).

A Trend Towards Progress

To date, many obstacles have been overcome. Simply stated, the future looks very bright for women-owned businesses around the globe.

Copyright: Business Brokerage Press, Inc.

pressmaster/BigStock.com

The Tremendous Importance of Simply Saying, “Hello!”

Far too many customers have grown to expect poor customer service. Whether its rude employees and customer support or impersonal robotic phone system responses, customers are often shocked when they receive pleasant customer service. In such a climate, it is clear that businesses that simply treat customers well are taking advantage of a huge opportunity.

If you’ve ever personally called a credit card or cable company looking for help, then you already know that it can be something of a depressing and even Kafkaesque experience, leaving you feeling drained. More than likely you don’t feel too positive about any automated experience that bounces you around from one hold menu to the next. Summed up another way, hold music is never a fun or rewarding experience.

Communication is Always Changing

In the “old days” a telephone call was often a customer’s first experience with a business. Now, the game has, of course, changed, with most customers first experience being via the business’s website. While we can’t predict with 100% accuracy how businesses with be communicating with their customers in the future, we do know one fact for certain. The human touch will likely be valued for a long time to come.

Your Website is a Valuable Tool

The initial point of communication with a client, whether it is via telephone or your website, is of critical importance. If a customer has trouble finding key information about your business, such as your location, hours of operation or an easy to understand menu of what goods or services are offered, then they will take their business elsewhere. Consumers don’t generally wait for businesses to get their “act together.” They simply move on.

Simply stated, you want your business’s website to be very user-friendly, streamlined and intuitive as possible. Keep in mind that you understand your business and what it offers, which means you may not be the best judge in spotting flaws in your website presentation. For this reason, it is best to test your website designs with many different potential users who have little or no information about your business and what goods and services you provide.

In the end, every single client is valuable. For every client you lose represents both a potential loss of revenue and revenue being placed in the pocket of your competitor. Don’t let customers slip away simply because there wasn’t a friendly voice answering the phone or your website lacked clarity.

Copyright: Business Brokerage Press, Inc.

michaeljung/BigStock.com

The Tremendous Importance of Simply Saying, “Hello!”

Far too many customers have grown to expect poor customer service. Whether its rude employees and customer support or impersonal robotic phone system responses, customers are often shocked when they receive pleasant customer service. In such a climate, it is clear that businesses that simply treat customers well are taking advantage of a huge opportunity.

If you’ve ever personally called a credit card or cable company looking for help, then you already know that it can be something of a depressing and even Kafkaesque experience, leaving you feeling drained. More than likely you don’t feel too positive about any automated experience that bounces you around from one hold menu to the next. Summed up another way, hold music is never a fun or rewarding experience.

Communication is Always Changing

In the “old days” a telephone call was often a customer’s first experience with a business. Now, the game has, of course, changed, with most customers first experience being via the business’s website. While we can’t predict with 100% accuracy how businesses with be communicating with their customers in the future, we do know one fact for certain. The human touch will likely be valued for a long time to come.

Your Website is a Valuable Tool

The initial point of communication with a client, whether it is via telephone or your website, is of critical importance. If a customer has trouble finding key information about your business, such as your location, hours of operation or an easy to understand menu of what goods or services are offered, then they will take their business elsewhere. Consumers don’t generally wait for businesses to get their “act together.” They simply move on.

Simply stated, you want your business’s website to be very user-friendly, streamlined and intuitive as possible. Keep in mind that you understand your business and what it offers, which means you may not be the best judge in spotting flaws in your website presentation. For this reason, it is best to test your website designs with many different potential users who have little or no information about your business and what goods and services you provide.

In the end, every single client is valuable. For every client you lose represents both a potential loss of revenue and revenue being placed in the pocket of your competitor. Don’t let customers slip away simply because there wasn’t a friendly voice answering the phone or your website lacked clarity.

Copyright: Business Brokerage Press, Inc.

michaeljung/BigStock.com

Three Signs You May Be Experiencing Burnout

Burnout is a strange phenomenon in that often a business owner doesn’t know that he or she is experiencing it until it is too late. Owners who feel beleaguered and over stressed frequently want to sell their business and move on. However, buyers are not so eager to accept burnout as a believable reason for why an owner wants to sell.

It is the responsibility of every business owner to be on guard against potential burnout. After all, it is better to “cash in” than to burnout. In this article, we will examine a few of the key warning signs that you may be on the verge of burning out.

Sign 1: There is No Joy in Owning Your Business

Once upon a time, you were likely excited about your business. But if those days are long gone, then it might be time to move on. Owning a business is hard work and eventually it can take a toll. If you find each day to be boring, then it is probably time to sell, move on and start a new chapter in your life.

Sign 2: You Feel Exhausted

Just as feeling no joy is a potential sign of burnout, the same holds true for feeling exhausted. If you feel exhausted all the time, then it is unlikely that you can run your business effectively over the long haul. In short, it may be time to consider selling.

Keep in mind that if your business is doing well, growing and expanding, then there will be more demands on your time, not less. If you feel exhausted a large percentage of the time and your business is expanding and seems poised to expand even more rapidly in the future, then cashing in may be your best bet.

Sign 3: You Feel Overwhelmed Almost on a Daily Basis

Business owners who frequently feel overwhelmed are likely teetering on the edge of burnout; this can be particularly true for business owners who are operating a “one-man show.” Operating a small business, especially one where you are doing most of the work, can be both mentally and physically exhausting.

There is certainly something to be said for being proactive and tackling burn out before it tackles you. In this way, you’ll be able to sell your business on your own terms. The last thing you want is to try and sell your business after you no longer have the energy to keep sales going in the right direction.

Working with an experienced business broker is one of the easiest and quickest ways to get your business ready to sell. Don’t let burnout put the fate of your business in a vulnerable position.

Copyright: Business Brokerage Press, Inc.

Jurate/BigStock.com

Three Signs You May Be Experiencing Burnout

Burnout is a strange phenomenon in that often a business owner doesn’t know that he or she is experiencing it until it is too late. Owners who feel beleaguered and over stressed frequently want to sell their business and move on. However, buyers are not so eager to accept burnout as a believable reason for why an owner wants to sell.

It is the responsibility of every business owner to be on guard against potential burnout. After all, it is better to “cash in” than to burnout. In this article, we will examine a few of the key warning signs that you may be on the verge of burning out.

Sign 1: There is No Joy in Owning Your Business

Once upon a time, you were likely excited about your business. But if those days are long gone, then it might be time to move on. Owning a business is hard work and eventually it can take a toll. If you find each day to be boring, then it is probably time to sell, move on and start a new chapter in your life.

Sign 2: You Feel Exhausted

Just as feeling no joy is a potential sign of burnout, the same holds true for feeling exhausted. If you feel exhausted all the time, then it is unlikely that you can run your business effectively over the long haul. In short, it may be time to consider selling.

Keep in mind that if your business is doing well, growing and expanding, then there will be more demands on your time, not less. If you feel exhausted a large percentage of the time and your business is expanding and seems poised to expand even more rapidly in the future, then cashing in may be your best bet.

Sign 3: You Feel Overwhelmed Almost on a Daily Basis

Business owners who frequently feel overwhelmed are likely teetering on the edge of burnout; this can be particularly true for business owners who are operating a “one-man show.” Operating a small business, especially one where you are doing most of the work, can be both mentally and physically exhausting.

There is certainly something to be said for being proactive and tackling burn out before it tackles you. In this way, you’ll be able to sell your business on your own terms. The last thing you want is to try and sell your business after you no longer have the energy to keep sales going in the right direction.

Working with an experienced business broker is one of the easiest and quickest ways to get your business ready to sell. Don’t let burnout put the fate of your business in a vulnerable position.

Copyright: Business Brokerage Press, Inc.

Jurate/BigStock.com