Selling Your Business Like a Pro
Having a player mindset when selling a business can be a real gamechanger. The goal with this approach is to steer clear from coming across as desperate or highly motivated to sell. Instead, a seller who embraces a player mindset operates from a position of strength. It’s all about realizing you have something of value and then realistically taking steps to move forward.
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Keep Operations in Check
It is vital that you, as a seller, realize that your number one responsibility is to your business. You must keep normal hours of operation and activities should proceed as normal. This will ensure that everything at your business is operating at peak levels. Inventories must be maintained, team members must stay on board, and you should continue moving forward as though there is no sale on the horizon. After all, business deals fall apart every single day.
Stay Realistic
Being a player doesn’t mean being unrealistic or greedy when it comes to pricing. While you, and your business broker or M&A advisor, will want the very best price for your business, it is essential that you remain realistic about the value of your business. Remember that like any asset, your business is not worth what you think it is worth. Instead, it is worth what someone is willing to pay for it. If you are like most business owners, you have a great deal of sweat equity built up in your business, and that means your emotions are likely involved. Having an impartial expert evaluate your business and reach a realistic price is in your best interests.
Maintain Confidentiality
A key part of achieving a successful sale is to maintain confidentiality. Experienced brokerage professionals always use confidentiality agreements because they work to protect their clients. One slip up in the realm of confidentiality can destroy a potentially great deal and even damage your business. Don’t work with any business broker that doesn’t utilize the powerful tool that is the confidentiality agreement.
Get the Upper Hand
Being a player instead of a seller means that you act from a position of strength. Circumstances often dictate whether or not a seller is in a position to act from a position of strength. For this reason, you’ll want to sell when you are not forced to do so for personal or financial reasons. You’ll want to prepare your business for sale when you are not under any pressing stress to sell. Investing the time to clean up your balance sheet, address any environmental or leasing issues, assemble key documents, settle litigation, and other key steps, should be done long before you wish to sell. In short, you want to be ready to sell whenever you feel like doing so.
Selling a business is a complicated process with many moving parts. Quite often, it is the structure of the deal that is more important than the price. Maintaining momentum is often the most important part of achieving a successful sale, for deals that drag on for an extended period are more likely to fall apart.
As a player selling from a position of strength and not a seller who is in reactivity mode and must sell immediately, you set yourself up to be firm but also utilize flexible thinking. Being flexible and realizing when to bend can make all the difference between a deal happening and a deal falling apart.
Copyright: Business Brokerage Press, Inc.
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Strategic Negotiation: Essential Tactics for Deal Success
Negotiation can evoke a range of feelings: some people thrive on it, others dread it, and many fall somewhere in between. Regardless of your stance, the ultimate goal remains the same: to emerge successfully from the negotiation. Mastering effective negotiation methods and tactics can give you an edge where others might falter. The objective is to close deals effectively. Here are three negotiation strategies that have been proven to close more deals.
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Leverage the Experts
One common belief is that you should never negotiate your own deal. Business owners are often too emotionally invested in their businesses, which can cloud their judgment. Buyers can also become overly emotionally attached. Engaging a professional business broker or M&A advisor can be a strategic move toward achieving a favorable outcome. A professional broker not only knows what constitutes a fair price but also understands the many factors that influence the negotiation.
Take it or Leave it
Another strategy to consider is the “take it or leave it” approach. In this method, the buyer presents their offer, the seller makes a counter-offer, and then the negotiation ends. The seller maintains their position and hopes for the best. This approach carries risks, as showing some flexibility can often lead to a successful deal. While the “take it or leave it” strategy can be high-risk, it also has the potential for high rewards. An experienced brokerage professional can assess whether this strategy is appropriate based on factors such as the business’s appeal to future buyers.
Addressing Variables
A third approach involves focusing on the most important variables for both the buyer and the seller. Understanding what matters most to both parties can be crucial in crafting a successful deal. It’s important to remember that key issues aren’t always financial; they might include commitments to retaining key employees or allowing a relative to remain involved with the business. Recognizing the complexity of buying a business and addressing these variables can facilitate a smoother negotiation process.
Reaching A Compromise
Finally, consider the strategy of splitting the difference. Both buyers and sellers need to avoid letting ego derail the deal. Quibbling over minor differences in a multi-million-dollar transaction is usually counterproductive.
Offering to meet halfway between the seller’s asking price and the buyer’s offer—provided the disparity isn’t too large—demonstrates goodwill and flexibility. By proposing to split the difference, you reduce emotional tension and show that you value reaching an agreement.
In dealmaking, don’t be afraid to think creatively. Every business, buyer, and seller is unique, and each deal presents its challenges. A skilled business broker or M&A advisor will evaluate each situation on its own merits, rather than adhering to a rigid formula.
Copyright: Business Brokerage Press, Inc.
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Unlocking Business Potential with Strong Recurring Revenue
Everyone loves recurring revenue and for good reason. When buyers see recurring revenue, they instantly know that a business is stable, has positive cash flow, and, importantly, has room for potential future growth.
There is no way around the fact that buyers want a business to be predictable. In short, buyers want to see consistency and stability at every level. Recurring revenue means that a prospective buyer can be confident that they will see income from the first day they take over the business. There is a powerful psychological aspect to recurring revenue that sellers should keep in mind, as they put themselves in the buyer’s shoes.
When a buyer sees that there is recurring revenue, they know that even if they are unable to develop the business as soon as they take over, there will be positive cash flow. Buying a business is a big decision, and recurring revenue can take some of the fear out of the equation.
Recurring revenue also serves to strongly indicate to buyers that your business offers goods and services that are consistently in demand. Any seller that wants to convince a buyer that their business is worth the asking price should focus on cultivating recurring revenue opportunities. There is nothing quite like recurring revenue to calm nerves and convince buyers that a business is worth a serious look.
Sellers should strive to have a business that has strong annual recurring revenue (ARR). ARR is a metric that measures the money coming in annually. Once your business has a strong ARR, don’t be shy about emphasizing that fact to buyers. A healthy number serves as a truly powerful indicator of your company’s current and future health and potential.
When your business displays strong recurring revenue, it points to the fact that your business is doing many things correctly. It shows that your business is able to consistently serve its customers well enough that they return again and again. This fact indicates that both your goods and services and your management and team members are performing optimally.
Summed up another way, recurring revenue is a quick and easy way for potential buyers to gain insight into the value of your company. Any seller looking to optimally showcase their ARR, or looking for ways to boost their recurring revenue, should consider working with a business broker or M&A advisor. Brokerage professionals understand all the different variables involved in helping prepare a business to be sold.
Copyright: Business Brokerage Press, Inc.
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Strategies for Maximizing Market Dominance: Key Steps to Boosting Business Value
At some point, you will need to sell your business. When the time comes to put your business on the market, it is in your best interest if your business has a dominant position in the market. Potential buyers will be far less excited about your business if you are playing catch-up to one or more competitors. In the end, maintaining a dominant market position will help you receive both maximum interest and top dollar for your business.
Table of Contents:
- Take Steps in Advance
- Boost Your Customer Base
- Have A Growth Mindset
- Gain a Realistic Understanding of Your Business
Take Steps in Advance
Preparing your business to be sold isn’t something that you do overnight. Instead, preparing your business for sale is a process that can take years of meticulous planning. Operating your business as though you will need to sell it soon is always a smart strategy.
Boost Your Customer Base
A key part of maintaining a dominant position in your market is to have a large number of customers. The logic is simple: if you have a large number of customers, then it only makes sense that your competitors have fewer customers.
A prospective buyer will find your business more interesting when you have a wide and varied customer base. Conversely, a business that depends on just a few large customers may make buyers nervous. The built-in vulnerability of having a handful of key customers will send many prospective buyers looking for the exit ramp.
Have A Growth Mindset
Achieving a dominant position in the market means that you are always thinking about growth. You must consider how to expand your business in both the short term and the long term. Additionally, it is important to realize that different strategies are needed for both short-term and long-term growth. You should always have a growth plan ready to implement.
Gain a Realistic Understanding of Your Business
Whether you have achieved a dominant position in your market or are striving to do so, you must understand your business’s strengths and weaknesses.
Far too many business owners turn a blind eye to the weaknesses of their business or overplay its strengths. One way to better understand these aspects of your business is to work with a business broker or M&A advisor who can evaluate your business from an outside perspective.
You want prospective buyers to be excited about your business and its potential for the future. Demonstrating that you have a dominant position in your market and that your business has room for potential growth will dramatically increase buyer interest and enthusiasm. Business owners looking to achieve top dollar will want to take the necessary steps to achieve a dominant position in the market.
Copyright: Business Brokerage Press, Inc.
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What Should You Expect from Your Business Intermediary?
Eventually every business owner needs to sell or think about who will take over their business when they retire. Working with an intermediary is an easy and streamlined way to jumpstart the process and learn what mistakes to avoid. A business broker or M&A advisor can help you to understand what steps to take to achieve optimal results.
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Teamwork Makes the Dream Work
First, it is simply critical to understand that selling a business is a team effort. No seller should begin working with an intermediary with the idea that the intermediary will do “all the work.” The reality is that in order to achieve a successful sale, it is necessary for the seller and the intermediary to work closely and engage in a good deal of communication.
Other key people such as executives and advisors will also have to work closely with your business broker or M&A advisor. Without a doubt, selling a business is a group effort that will need cooperation from many parties. For example, you’ll also need the cooperation of key management and team members when a prospective buyer visits the business.
Prepare for an Extended Process
Another essential point to remember is that selling a business can take time. It is common for the sales process to take between six months to a year, but it can also take even longer than that. Sellers should enter the sales process realizing that they will be working closely with their chosen intermediary for a considerable period of time. That means that you’ll want to be sure to keep your intermediary well informed regarding any developments with your business for an extended period of time.
Be Open to Ideas
Third, remember that your intermediary has invaluable experience and that you hired them to guide you through the process. It is not necessary that you blindly follow all their advice; however, it is essential that you be receptive to all their suggestions.
Your intermediary may have years, if not decades, of proven experience selling businesses just like yours. It only makes sense to take advantage of that experience as much as possible. Your intermediary may have suggestions about what type of buyer you should be targeting or they may even have ideas as to how you can change your business to make it more attractive to prospective buyers. When intermediaries know that they have a receptive audience with a given buyer, they will feel more comfortable providing valuable suggestions.
The time to contact an intermediary about selling your business is now. Getting a business ready to sell takes time, effort and preparation. The sooner you begin working with a business broker or M&A advisor, the sooner you can begin charting a path to eventual success.
Copyright: Business Brokerage Press, Inc.
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How to Save a Deal
Few business owners truly understand the complex dynamics of making a deal. Having never participated in selling a business before, the majority of business owners are blissfully unaware of what it takes to turn the dream of selling a business into a reality. Having a brokerage professional by their side is an easy way for a business owner to avoid the dangers that can easily torpedo a deal.
Table of Contents:
- Keep Your Eye on the Ball
- Keep Confidentiality a Top Priority
- Seek Out Another Perspective
- Prepare Early
- Keep Your Pricing Realistic
Keep Your Eye on the Ball
One of the most common reasons that businesses will fail to sell is that the business owner becomes obsessed with the pending transaction, and in the process, fails to keep up with the day-to-day operations of the business. The sales process can take months, or even years, and that means that the owner needs to pay attention to every aspect of their business or a prospective buyer could become very concerned.
Keep Confidentiality a Top Priority
Another mistake that business owners can make, one that will quickly kill a deal, is a breach of confidentiality. If the sales process involves too many parties, then confidentiality often falls apart. Often the owner will call off the deal in frustration. A business broker or M&A advisor understands the tremendous importance of maintaining confidentiality and will prevent leaks from occurring.
Seek Out Another Perspective
Being the boss for years, or even decades, means that a business owner may become rather set in their ways. Commonly, business owners may become rigid where compromises are concerned, especially when it comes to their business. As a result, a business owner may wish to negotiate every single item and detail which can send buyers running for the door. Some fights make sense and others should be avoided. Everyone can benefit from this essential third-party perspective, and this is another of the important ways that business brokers can help sellers.
Prepare Early
It can take years to properly get a business ready for sale. All too often, business owners will not prepare for the sale of their business until the 11th hour. Some business owners may even decide to sell on a whim or because of burnout. Unless a business owner prepares for the sale of their business well in advance, the business is unlikely to be ready to be sold.
A business broker or M&A advisor knows precisely what it takes to get a business ready. For example, some areas that are particularly important for business owners considering selling a business are buying out minority stockholders, dealing with any pending lawsuits and cleaning up their balance sheet.
Keep Your Pricing Realistic
A fifth deal killer comes in the form of placing too high a price on a business. Understandably, a business owner wants to receive top dollar as a business usually represents an owner’s life work. However, an unrealistic asking price can quickly destroy any chances a business has of being sold. A business broker can work with or without an appraiser to achieve a fair and realistic price and in the process dramatically increase the chances of a successful deal.
Buying or selling a business can have many twists and turns. Working with a brokerage professional stands as one of the simplest and most effective ways to avoid problems before they arise and, in the process, save the deal.
Copyright: Business Brokerage Press, Inc.
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The Top 4 Reasons Why Deals Fall Apart
It takes a lot of work to buy or sell a business. When a once-promising deal is not successful, this can be due to a wide array of reasons. However, understanding why a deal can fall apart in advance can dramatically increase your odds of success.
Some of the reasons that deals fall apart are reasonable, while other reasons, to be blunt, are unreasonable. Let’s take a look at four common reasons that are seen in the world of business brokerage.
Table of Contents:
- Financial Issues on the Buyer’s End
- Lack of Financials on the Seller’s End
- Last Minute Surprises
- Business Issues Left Unaddressed
Reason 1- Financial Issues on the Buyer’s End
One of the most common reasons that deals fall apart is that buyers simply can’t find the needed financing. Working with a business broker or M&A advisor is a way to safeguard against this outcome, as an experienced brokerage professional knows how to pre-screen prospective buyers to increase the odds of success from a financial standpoint.
Reason 2 – Lack of Financials on the Seller’s End
A second reason that deals fall apart is that the seller doesn’t have all of their financials in an up-to-date form. Sellers must constantly strive to put themselves in the shoes of a prospective buyer. Virtually no serious buyer would move forward with a deal without having a clear picture of the finances of the business. This is an issue that can be circumvented with the right level of planning and preparation.
Reason 3 – Last Minute Surprises
A third common reason that deals fall apart occurs when a surprise happens at the last minute. It is almost impossible to safeguard against every possible surprise, however, an experienced business broker knows how to navigate the due diligence process so as to dramatically reduce the chances of unexpected problems. Again, brokerage professionals have tried and tested techniques which help reduce the chances of these unwanted surprises.
Reason 4 –Business Issues Left Unaddressed
Preparing a business to be sold isn’t something that happens overnight. Sellers should expect that any serious buyer will do more than “kick the tires,” but will instead have their experts go over every aspect of the business. Administrative, environmental, or legal issues that have not been properly addressed can serve to raise many red flags. Needless to say, this can scare prospective buyers away from a business. There is no replacement for proper preparation and meticulous due diligence months or preferably years in advance.
At the end of the day, there are many reasons that a deal can fall apart. Buyers and sellers simply can’t safeguard against them all. However, an experienced business broker or M&A advisor can often see problems on the horizon. Plus, when you work with an experienced professional, it can help keep emotions in check. It’s important to keep all parties involved focused on success. With the right team in place, it is possible to dramatically decrease the chances of surprise events ruining what would otherwise be a good deal.
Copyright: Business Brokerage Press, Inc.
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7 Important Questions to Ask Yourself When Selling A Business
There is no denying the fact that for most people, the decision to buy or sell a business is one of the most important professional and financial decisions that they will ever make. Let’s turn our attention to some of the key questions you’ll need to ask.
Table of Contents:
1. What Is Really for Sale?
You’ll need to determine what is, and is not, for sale. If you own machinery or real estate associated with the business, are those items to be included in the sale?
2. What Assets Bring in Revenue?
One important factor to consider when preparing a business to be sold is what assets are earning money. If you have assets that are not earning money, then it may or may not be prudent to sell those assets.
3. What Is Proprietary?
Buyers and sellers alike will want to consider what is proprietary. Anything from software and patents to formulations can be extremely valuable. Sellers will want to give substantial thought to how to best frame any proprietary property that they have in the best light. Buyers will want to carefully evaluate proprietary property to try to ascertain an accurate value. Outside experts may be needed to make an accurate assessment.
4. What’s Your Competitive Advantage?
A business’s competitive advantage should be of importance to buyers and sellers. A seller should focus on understanding their competitive advantage, whether it is a certain niche, a superior manufacturing process or product, better marketing or a range of other factors. Properly framing your competitive advantage can help buyers see the full, and even untapped, value of your business.
5. What Is Your Growth Potential?
Buyers will want to consider factors such as whether or not the business has the potential to grow. If the business can’t be grown, then buyers should include this fact in their final decision and/or offer.
6. What Agreements Do You Have in Place?
Other factors such as employee agreements, non-competes, and the depth of management are all areas of concern for a prospective buyer. Buyers will want to consider if the seller has secured agreements from key employees and how dependent the business is on an owner/manager.
7. What Relevant Financial Information Will a Buyer Want to Know?
Understanding how much working capital is needed to run the business and how financial reporting is undertaken are other factors that should not be glossed over.
If you are preparing to sell your business it is worth the time to pause and think about what your business might look like to a buyer. In short, what would you think of your business if you were the buyer and what questions would you ask?
Buying or selling a business is complex. Every single business is different and that means there is no 100% standardized approach and route towards success. A seasoned, experienced and professional business broker or M&A advisor can help guide buyers and sellers alike towards optimal outcomes.
Copyright: Business Brokerage Press, Inc.
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Lack of Experience Can Be a True Deal Killer
Most business owners are experts at running their specific businesses. They are not necessarily experts at selling businesses. This is where working with a seasoned brokerage professional can prove to be invaluable.
As it turns out, there are endless examples of people trying to save money by simply finding an MBA to handle the sale of their business. Owners often will trust this person despite whether or not they have direct experience selling businesses. Sadly, the results from this decision can be very poor.
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Let’s take the example of a business owner who opted to let his nephew with a freshly minted MBA oversee the sale of his multi-location retail operation. The idea was that his nephew would help him save a great deal of money. Unfortunately, this idea simply didn’t work. His well-intended nephew’s inexperience proved to be a liability.
Let’s take a look at some of the main problems that this business owner and his nephew faced:
Missing Legal Arrangements
One of the first problems is that neither the business owner nor the nephew realized how important confidentiality agreements were to the process of selling a business. This led to competitors learning that the business was for sale. Likewise, the lack of confidentiality agreements meant that everyone from key employees to clients, customers and suppliers could learn that the business was for sale.
Further, the nephew opted to use the company’s attorney instead of finding an attorney with experience in business transactions. The company attorney had never handled the sale of a large business before.
Incomplete Documentation
Another problem was that the nephew prepared what was supposed to be a Confidential Business Review/Confidential Information Summary – CBR/CIM. The review/summary prepared by the nephew failed to include proper financials, including a large sum taken by the owner. Importantly, there were no projections, ratios and other important information. This lack of information could easily lower the bids or simply cause prospective buyers to lose interest.
The way that the business owner and nephew handled the CFO was also an issue. They failed to bring in the CFO and did not execute a “stay” agreement. The nephew was confident that he could handle the financial details on his own. However, neither the owner nor the nephew realized that prospective buyers expected to meet the CFO as part of the due diligence process.
Failure to Properly Screen Candidates
Finally, not only did the nephew not understand the importance of confidentiality agreements or the due diligence process, but he also failed to understand the importance of the screening process. The nephew failed to interview prospective buyers to discover whether or not they were serious and had the resources to buy the business. The failure to have a proper screening process served to both waste valuable time and spread the word that the business was for sale.
For most people, selling a business is the single most important financial decision of their lives. For this reason, it is critical to find experienced and competent assistance for the process. An experienced business broker or M&A advisor understands what is involved in selling a business. In other words, your nephew may be a great guy and he may want to help you, but without years of experience selling businesses, he simply isn’t the right person for the job.
Copyright: Business Brokerage Press, Inc.
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How Can You Find the Ideal Buyer for Your Business?
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In the day-to-day routine of running your business, it is easy to forget that eventually the day will come when you need to sell. The last thing that any business owner wishes to discover is that they are ready to exit, but they are hopelessly underprepared. One of the key ways to prevent this from happening is to prepare for the sale of your business as far in the future as possible.
1. Always Look Ahead to the Future
Many experts consider not having an exit strategy to be a risky endeavor.
So, what are some of the most important steps that business owners need in preparation for selling their business? The first step is thinking about your exit strategy on the day you found your company.
If you build your business while keeping an eye on the fact that you will one day be seeking to be acquired, then you will adjust your plans and strategies accordingly. All of this means understanding the market and knowing exactly what prospective buyers want from a business. In other words, the sale of your business should be built into its very foundation.
2. Think About Prospective Buyers
There are a variety of reasons why acquisitions occur. For example, sometimes it is an entrepreneur looking for opportunities, and sometimes it is a business in the same industry that is looking to expand. The more you can learn about the motivating factors that cause individuals and entities to buy businesses, the better positioned you will be.
3. Constantly Network
Another good idea is to constantly network and make connections. The more people you know, the better off you will be. You may be running and developing your business for decades. During this time, get to know as many people in the industry as possible.
While it may be necessary to modify the exit strategy in the future, having one in place serves to create an invaluable framework for when the time comes to sell. A savvy business owner will have a well thought out exit strategy in place at the very beginning.
When you work with a business broker or M&A advisor, you will also benefit from their professional connections and years of networking with buyers. Selling a business is all about preparation, making connections, and finding the right advisors and partners.
Copyright: Business Brokerage Press, Inc.
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