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The Importance of Selecting the Right Buyer When Selling a Business

When a seller decides to list a business, they are hoping to attract a lot of interest. If this occurs, the question will then be how to determine the best buyer from the pack. After going through the valuation process with a reputable source, the owner should have a clear idea of the company’s worth. Buyers may be willing to pay more or less than the valuation depending on what they are seeking. Finding the perfect match could lead to a larger sale price, more agreeable terms, and usually a quicker closing. For this reason, finding the right buyer is critical and should be a defined process from the outset.

Strategic Vs. Financial Buyers

Buyers come from a variety of places and generally consist of two types; financial and strategic. A financial buyer is usually more of an investor than an operator and tends to be focused on using investor capital and debt to fund the purchase. Similar to flipping a home, the goal of the financial buyer would be to get in as low as possible and then sell it after 5 to 10 years hoping to increase the value along the way. It is common that financial buyers will structure part of the consideration as a seller note. This will help to ensure the previous owner will keep an interest in the company’s success and potentially add to future growth.

A strategic buyer is a bit different in that they usually are larger competitors in the same or similar industry looking to improve on their existing business. Strategic buyers are looking specifically for synergies where they believe they can either increase profitability with added volume or add to their offering with a similar or related product or service. Whatever the tactic, the strategic buyer may determine a much higher  [Read more…]

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When is it Time to Sell Your Business?

As a business owner, there will often come a time when the decision is made to sell the business you have worked so hard to create. For owners that have had a predetermined exit strategy in place and have met the target goals they set for themselves, this can be the final step in what has been a successful venture. Other times the sale may be out of a desire to pursue more exciting or rewarding interests when the current business is no longer providing this result. While other reasons could be more negative and out of necessity to try to salvage what they can from a business that may be in trouble or in an industry that has evolved to a point where the product or service they provide is no longer relevant. This can be a very difficult decision for most however, regardless of the cause there comes a time when it is common for many owners to decide it is time to sell. Below are some common reasons behind the owner’s decision to sell their business.

1. Burned Out.

Just like any other career choice, business owners may reach a point where they have simply become burned out in running their business. Many owners are entrepreneurs that are driven by the initial steps of starting the business which can include searching for the perfect location, analyzing target demographics, and finding [Read more…]

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Maximizing the Value When Selling a Business

Many factors go into the valuation of a business. From industry type, to revenue and EBITDA totals, to longevity of the company. As a result, it can be an arduous process to get to the final number where both buyer and seller will be satisfied. Below are a few steps to consider that would help the cause:

1. Reduce Risk Through Semi Absentee Operation

Many businesses rely heavily on the owner’s skill set for their success and require full time hours from the owner to operate. Buyers may consider this situation more of buying a job than a business. Companies that do not need an owner to run the day to day operations will demand a higher price since they already have management in place.

2.  Aligning the Financials

Consider having the financials completed by a professional CPA. This will clean up the statements and provide  [Read more…]

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Five Important Steps to Consider When Selling a Business

Selling a business can be a daunting and time-consuming task, particularly when planning has not occurred ahead of time as part of an exit strategy. When deciding to sell your business, some critical steps should be taken that can help to ensure the deal will go smoothly and that a strong value is obtained for the company. Often owners are not prepared until the time they are ready to sell and as a result will rush through some important steps that could end up costing time and money. Planning for the sale early on, even years before the owner is ready is a good practice and will prove valuable when the time comes to sell the business.

To maximize the value of the company it is important to begin as soon as possible, regardless of whether you are ready to sell or not. While there are many facets to the sale of a business below are five important things to consider: [Read more…]

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The Importance of Confidentiality When Selling a Business

One principal concern a business owner has when deciding to sell a business is confidentiality, and rightly so. Selling a business is a time-consuming process that can take months depending on the level of preparedness the owner has put into their exit strategy. During this process, it is important that the company maintains discretion when getting the message out to prospective buyers or going through initial due diligence. Word getting out prior to the sale can spark undesirable reactions not only from employees but also from clients, vendors, and competitors.

Once an employee finds out about a potential sale, the word can spread throughout the operation which can reduce workforce leading to the reduction in capacity. Employees will question their future which eventually triggers poor performance and early attrition. This could have a domino effect on the rest of the company and lead to poor quality and customer service. Not to mention a damaged company culture.

Word can also spread to clients who may begin to question why the business is for sale in the first place. For example, could the company  [Read more…]

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