Best business opportunities in Canada Tag

Where your money is concerned, myths can do damage.  A recent Divestopedia article from Tammie Miller entitled, Crazy M&A Myths You Need to Stop Believing Now, Miller explores 5 big M&A myths that can get you in trouble.  Miller points out that many of these myths are believed by CEOs, but that they have zero basis in reality.

Myth 1

The first major myth Miller explores is the idea that the “negotiating is over once you sign the LOI.”  The letter of intention is, of course, important. However, this is by no means the end of the negotiations and it is potentially dangerous to think otherwise.  The negotiations are not concluded until there is a purchasing agreement in place. As Miller points out, there is a great deal that can go wrong during the due diligence process.  For this reason, it is important to not see the LOI as the “end of the road.”

Myth 2

Another myth that Miller wants you to be aware of is that you don’t have to take a company’s debt as part of the purchase price.  Many business brokers, such as Miller, recommend that buyers don’t take seller paper.

Myth 3

A third myth that Miller explorers is a particularly dangerous one.  The idea that everyone who makes an offer has the money to follow through is, unfortunately, simply not true.  Oftentimes, people will make offers without securing the money to actually buy the business.  No doubt, this wastes everyone’s time.  As the business owner, it can derail your progress.  If you are not careful, it could actually prevent you from finding a qualified buyer.

Myth 4

Another myth is built around the notion that sellers don’t need a deal team in order to sell their business.  Again, this is another myth that has no real foundation in reality.  While it may be possible to sell your business without the assistance of an experienced M&A attorney or business broker, the odds are excellent that doing so will come at a price.  According to Miller, those working with an investment banker or business broker can expect, on average, 20% more transaction value!

Additionally, there are other dangers in not having a deal team in place.  A business broker can handle many of the time-consuming aspects of selling a business, so that you can keep running your business.  It is not uncommon for business owners to get stretched too thin while trying to both run and sell a business and this can ultimately harm its value.

Myth 5

Miller’s final myth to consider is that you must sell your entire business.  It is true that most buyers will want to buy 100% of a business, but a minority ownership position is still an option.  There are many reasons to consider selling a minority stake, so don’t assume that selling your business is an “all or nothing” affair.

Ultimately, Miller lays out an exceptional case for the importance of working with business brokers when selling or buying a business.  Business brokers can help you avoid myths.  In the end, they know the lay of the land.

Copyright: Business Brokerage Press, Inc.

viczast/BigStock.com

A recent article on Businessbroker.net entitled, First Time Buyer Processes by business broker Pat Jones explores the process of buying a business in a precise step-by-step fashion.  Jones notes that there are many reasons that people buy businesses including the desire to be one’s own boss.  However, he is also quick to point out that buyers should refrain from buying a business that they simply don’t like.  In the quest for profits, many prospective owners may opt to do this, but it could ultimately lead to failure.

Step One – Information Gathering

For Jones, there are seven steps in the business buying process.  At the top of the list is to gather information on businesses so that one has an idea of what kind of businesses are appealing.

Step Two – Your Broker

The second key step is to begin working with a business broker.  This point makes tremendous sense; after all, those new to the business buying process will benefit greatly from working with a guide with so much experience.  Business brokers can gain access to information that prospective business owners simply cannot.

Step Three – Confidentiality and Questions

The third step in the process is to sign a confidentiality agreement so that you can learn more about a business that you find interesting.  Once you have the businesses marketing package, you’ll want to have your broker schedule an appointment with the seller. It is vitally important that you prepare a list of questions on a range of topics.  There is much more to buying a business than the final price tag.  By asking the right questions, you’ll be able to learn more about the business and its long-term potential.

Step Four – Evaluation

In the fourth step of the business buying process, you’ll want to evaluate all the information that you have received from the seller.  Once again, a business broker can be simply invaluable, thanks to years of hands-on experience, he or she will know how to evaluate a seller’s information.

Step Five – The Decision

In the fifth step, you’ll need to decide whether or not you are making an offer.  If you are making an offer, you will, of course, want it to be written and include contingencies.

If your offer is accepted, then the process of due diligence begins.  During due diligence, you and your business broker will look at everything from financial statements to tax returns.  You will evaluate the company’s assets.  Again business brokers are experts at the due diligence process.

Buying a business is an enormous commitment.  Making certain that you’ve selected the right business for you is one of the most critical decisions of your life.  Having as much competent and experienced help as possible is of paramount importance.

Copyright: Business Brokerage Press, Inc.

monkeybusinessimages/BigStock.com

If you haven’t been thinking about succession planning, the bottom line is that you should be. In the February 20, 2019 Divestopia article, “All Companies Need to Look at Succession Planning,” author Brad Cherniak examines the importance of succession planning. Owning and/or operating a business can be a great deal of work, but it is imperative to take the time to develop a succession plan.

Succession Planning is for Businesses of All Sizes

Author Cherniak wants every business owner to realize that succession planning isn’t just for big businesses. Yet, Cherniak points out that the majority of small-to-medium sized businesses, as well as their senior managers, simply don’t focus much on succession planning at all.

Many business owners see succession planning as essentially being the same as exiting a business. Cherniak is quick to point out that while the two can be linked and may, in fact, overlap, they are by no means the same thing. They should not be treated as such.

Following an Arc Pattern

Importantly, Cherniak notes, “Succession planning should also be linked to your strategic planning.” He feels that both entrepreneurs and businesses managers follow an arc pattern where their “creativity, energy and effectiveness” are all concerned. As circumstances change, entrepreneurs and business managers can become exhausted and even a liability.

The arc can also change due to a company’s changing circumstances. All of these factors point to “coordinating the arcs of business,” which includes “startup, ramp-up, growth, consolidation, renewed growth and maturity,” with whomever is running the business at the time. In this way, succession planning is not one-dimensional. Instead it should be viewed as quite a dynamic process.

Evaluating Each Company Individually

Cherniak highlights the importance of making sure that the team matches the needs of a company as well as its stages of development. Who is running a company and setting its direction? Answering these questions is important. It also is of paramount importance to make sure that the right person is in charge at the optimal time.

Companies and their circumstances can change. This change can often occur without much notice. As Cherniak points out, few small-to-medium sized businesses focus on succession planning, and this is potentially to their detriment.

Copyright: Business Brokerage Press, Inc.

Chaay_Tee/BigStock.com

What exactly does the term “goodwill” mean when it comes to buying or selling a business?  Usually, the term “goodwill” is a reference to all the effort that a seller puts into a business over the years that he or she operates that business.  In a sense, goodwill is the difference between an array of intangible, but important, assets and the total purchase price of the business.  It is important not to underestimate the value of goodwill as it relates to both the long-term and short-term success of any given business.

According to the M&A Dictionary, an intangible asset can be thought of as asset that is carried on the balance sheet, and it may include a company’s reputation or a recognized name in the market.  If a company is purchased for more than its book value, then the odds are excellent that goodwill has played a role.

Goodwill most definitely contrasts and should not be confused with “going concern value.”  Going concern value is usually defined as the fact that a business will continue to operate in a fashion that is consistent with its original intended purpose instead of failing and closing down.

Examples of goodwill can be quite varied.  Listed below are some of the more common and interesting examples:

• A strong reputation
• Name recognition
• A good location
• Proprietary designs
• Trademarks
• Copyrights
• Trade secrets
• Specialized know-how
• Existing contracts
• Skilled employees
• Customized advertising materials
• Technologically advanced equipment
• Custom-built factory
• Specialized tooling
• A loyal customer base
• Mailing list
• Supplier list
• Royalty agreements

In short, goodwill in the business realm isn’t exactly easy to define.  The simple fact, is that goodwill can, and usually does, encompass a wide and diverse array of factors.  There are, however, many other important elements to consider when evaluating and considering goodwill.  For example, standards require that companies which have intangible assets, including goodwill, be valued by an outside expert on an annual basis.  Essentially, a business owner simply can’t claim anything under the sun as an intangible asset.

Whether you are buying or selling a business, you should leverage the know how of seasoned experts.  An experienced business broker will be able to help guide you through the buying and selling process.  Understanding what is a real and valuable intangible asset or example of goodwill can be a key factor in the buying and selling process.  A business broker can act as your guide in both understanding and presenting goodwill variables.

Copyright: Business Brokerage Press, Inc.

mangostock/BigStock.com

The process of selling a business can be very complex. Whether you’ve sold a business in the past or are selling a business for the very first time, it is imperative that you work with an expert. A seasoned business broker can help you navigate through what can be some pretty rough waters. Let’s take a closer look at four issues any seller needs to keep in mind why selling a business.

Number One – Overreaching

If you are both simultaneously the founder, owner and operator of a business, then there is a good chance that you are involved in every single decision. And that can be a significant mistake. Business owners typically want to be involved in every aspect of selling their business, but handling the sale of your business while operating can lead to problems or even disaster.

The bottom line is that you can’t handle it all. You’ll need to delegate the day-to-day operation of your business to a sales manager. Additionally, you’ll want to consider bringing on an experienced business broker to assist with the sale of your business. Simultaneously, running a business and trying to sell has gone awry for even the most seasoned multitaskers.

Number Two – Money Related Issues

It is quite common that once a seller has decided on a price, he or she has trouble settling for anything less. The emotional ties that business owners have to their businesses are understandable, but they can also be irrational and serve as an impediment to a sale. A business broker is an essential intermediary that can keep deals on track and emotions at a minimum.

Number Three – Time

When you are selling a business, the last thing you want is to waste time. Working with a business broker ensures that you avoid “window shoppers” and instead only deal with real, vetted prospects who are serious about buying. Your time is precious, and most sellers are unaware of just how much time selling a business can entail.

Number Four – Don’t Forget the Stockholders

Stockholders simply must be included in the process whatever their shares may be. A business owner needs to obtain the approval of stock holders. Two of the best ways to achieve this is to get an attractive sales price and secondly, to achieve the best terms possible. Once again, a business broker serves as an invaluable ally in both regards.

Selling a business isn’t just complicated; it can also be stressful, confusing and overwhelming. This is especially true if you have never sold a business before. Business brokers “know the ropes” and they know what it takes to both get a deal on the table and then push that deal to the finish line.

Copyright: Business Brokerage Press, Inc.

wutzkoh/BigStock.com