Seller Articles

How Our Approach Differs

1. Selective

There are several reasons why a business owner has an interest in selling their business. We have found it important to work with those clients who are truly motivated to sell their business rather than follow the philosophy “anything is for sell at the right price”. Unfortunately, the right price is often not one which is in line with the market. We are not adding value for our clients or ourselves by marketing a company that is priced well above the market. We do company and industry research, provide an opinion of value for all our clients and have a good understanding of what the market will bear. We are also selective in the sense that if we believe a business is not prepared to go to market in the near term or there is not enough earnings being generated, we will make recommendations for areas of improvement to better prepare the company for sale in the future as well as make introductions to key resources which can help improve business performance.

2. Comprehensive Marketing Program

The KeyStone marketing program is designed to reach the maximum number of potential buyers without compromising your identity.

Confidential Business Review. The marketing program starts us creating an in-depth 10 to 20 page Confidential Business Review (CBR) which is the marketing package we present to prospective buyers after they have been pre-qualified. The CBR provides a thorough overview of the key aspects of your business including; description of the business and the industry it serves, history of your business, description of product and/or services, operational overview, roles and responsibilities of the management team and/or key employees, customer and market overview, summary of financial information and sustainability of earnings. We have found that you only have one time to make a first impression, and an effective marketing package will help do just that.

Maximize Market Exposure. A key value we have been able to add for our clients is our ability to market your business to a broad spectrum of buyers, confidentially. Quite simply, the wider the net, the bigger the fish we can catch. We typically take recommend the following three prong approach for most of our clients which include:

Confidential Online Advertising. We are not unique in marketing your business online as this is a common industry practice. However, we do have strict internet marketing standards which include the following:

• • All online advertising is discrete and to maintain confidentiality.
  • All marketing copy is tailored for your specific business/industry.
  • We pay for premium posting placement to help your business stand out from the rest.
  • We advertise on up to 10 different websites depending on the size and type of your business. Sites may differ depending is buyer is a financial, strategic or private equity buyer.

Broad Buyer Database. We have developed a database of thousands of buyers which we categorize by industry and size of business. It is not uncommon for us to introduce your business to someone we have meet with or spoken with over the past 10 years. We have developed relationships with financial, strategic, private equity groups and search funds, all of which we maintain in our proprietary database.

Strategic Buyer Search. One of our key differentiators is that we actively target strategic buyers and not just rely on internet advertising. Our strategic buyer search is tailored for your specific business depending on the type, size and other circumstances for your business. We utilize a third party database which provides us access important information such as annual gross sales, number of employees, contact information for the business owner, all of which we can search by industry segment. We often start by sending prospective buyers a letter which provides a high level overview teaser of your business and follow up with a call directly to the business owner or sometimes the business development representative for our targeted acquisition candidates.

3. Upfront Due Diligence

When keystone was founded in 2004, it was built based on the philosophy that the extra time we spend on the front end to ensure that our clients business is presented honestly and in the best possible manner will ensure a smoother transition process and yield better results for all on the back end. This requires that we conduct upfront interviews with you to better understand your business, its key value drivers as well as its challenges. We conduct industry research and provide an opinion of value report for all our clients to ensure that the business is not over or underpriced. We work with you and/or your advisors to recast the last three years of financial statements to account for all discretionary expenses which could add profit to the bottom line which results in a greater value for your business.

4. Hands On Approach

Starting with our initial face to face meeting, through presale planning, valuation and pricing, creation of marketing package and program, buyer qualification, offer preparation and negotiation, due diligence, transition planning and post-closing follow up, KeyStone offers a hands on approach to keep things moving forward in an orderly manner to ensure that sensitive information is protected, uncertainty is avoided and the best price is achieved.

Selling a Business in Newbury Park

Top Reasons Business Sales Transactions Fall Through

Often with a small to midsize company the owner has put a great deal of time and energy into the success of the business. The owners may see the company as an extension of themselves that they worked hard to build and as a result may be looking at it from an emotional or egotistical perspective. Some owners may know the ins and outs of the business like the back of their hand but may not take the time to evaluate how the business may look to a potential buyer. This lack of awareness and preparation can lead to potential reasons for termination of the sale including poor accounting and bookkeeping, inaccurate sales or performance data, unrealistic valuation, or longer than expected transition times to name a few.

According to a sample polling of IBBA business advisors the top reason that half of the deals fell through in Q1/2018 was unrealistic seller expectations at 12% (tied with buyer cold feet).  When valuing the business prior to sale it is not surprising that many owners will have a higher than expected price in mind.  This is reasonable knowing how much effort has been put into to getting the company where it is today. Owners will also have strong emotional ties with the business that simply are not quantifiable. This perspective can further be explained by what is called the endowment effect. Simply put the endowment effect is the tendency for people who own a good, or business in this case, to value it more than people who do not. The endowment effect causes many sellers to have an inflated idea of the sales price due to their unique perspective. Buyers on the other hand are looking more at the bottom line and are concerned with cash flow and potential risks. A buyer is usually concerned with specific questions such as: (more…)

Can Baby Boomers Reduce Financial Risk by Selling their Small Business?

Imagine your financial advisor telling you to invest 80% of your net worth into one stock.  This may sound crazy, but small business owners are doing this every day.

It is well known that investment diversification is one of the more important ways to reduce financial risk to an investment portfolio.  According to Investopedia, “diversification is a technique that reduces risk by allocating investments among various financial instruments, industries and other categories”.

For better or worse, the majority of net worth of a successful small business owner is most likely held within their own company. 

According to the FPA/CNBC Business Owner Succession Planning Survey released earlier this year, an estimated 10 million small-business owners plan to sell their businesses over the next ten years.  Most of these business owners are baby boomers.  According to the study almost 80% of small business owners are relying on the proceeds for retirement.  The scary fact is that the average small business owner is anticipating between 60% to 100% of their retirement needs will come from the sale of their small business.

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When is the Right Time to Sell My Business?

A key question many business owners struggle with is…when is the right time to sell my business for its maximum value?  This is often a very personal decision with several aspects to consider.  There are 5 key questions to ask yourself.

1. Is my business growing, remaining flat or declining?

For business with sales and profitability that are growing at rates of 10% or greater, they provide an outstanding opportunity to capture a premium.  The business trends over the last 3 to 5 years is a key factor prospective buyers look for and greatly influence what they are willing to pay.  Businesses which have remained relatively flat do not necessarily generate the same level of interest as high growth businesses.  However, they are generally good businesses for a buyer to consider if they provide market potential and represent an opportunity for a new buyer who is willing to explore new avenues to grow the business.  Businesses which are trending down are often passed on by most buyers due to the risks involved unless the problems are easily identified and the path for turning things around is clear.  If this is the case, you should either spend the time and energy to get things back on track or be prepared to accept less for your business.

2. Am I still motivated to operate my business?

I have represented many business owners who own a strong business and have developed a reliable business model, but lack the energy or motivation to continue to operate at maximum (more…)