Ownership Transition Survey Results

Mass Mutual Life Insurance produced an ownership transition survey back about a decade ago.  The survey results were based on feedback and answers from family-owned businesses.  It produced some very interesting results, and is worth examining even today.  While the survey at this point is quite outdated in terms of the timeline, there are still many valuable nuggets of information to be gleaned from it.  Let’s dive in and take a closer look at the numbers and what they can tell us for 2021 and beyond. While the Mass Mutual Life Insurance ownership transition survey had a range of important points, the one that leaps right off the page is the fact that a whopping 80% of family-owned businesses are still being controlled by their founders.  A large percentage of those founders are Baby Boomers who will have little choice but to retire in the next few years. The survey indicated that 55% of CEOs over the age of 61 or older have yet to choose a successor.  This fact serves to emphasize … [Read more...]

The Importance of Owner Flexibility

Don’t expect to sell your company overnight.  For every company that sells quickly, there are a hundred that take many months or even years to sell.  Having the correct mindset and understanding of what you must do ahead of time to prepare for the sale of your company will help you avoid a range of headaches and dramatically increase your overall chances of success. Perhaps most importantly, you must have the right attidude.  Flexibility is a key attribute for any business owner looking to sell his or her business.  There are many variables involved in selling a business, and that means much can go wrong.  An inflexible owner can even irritate prospective buyers and inadvertently sabotage what could have otherwise been a workable deal. Be Flexible on Price A key part of being flexible is to be ready and willing to accept a lower price.  There are many reasons why business owners may fail to achieve the price they want for their business.  These factors range from lack of … [Read more...]

Getting the Most Out of Confidentiality Agreements

When it comes to buying or selling a business, there is no replacement for a solid confidentiality agreement.  One key way that business brokers and M&A advisors are able to help buyers and sellers alike is through their extensive knowledge of confidentiality agreements and how best to implement them.  In this article, we provide you with an overview of what you should expect out of your confidentiality agreements. A confidentiality agreement is a legal agreement that essentially forbids both buyers and sellers, as well as related parties such as agents, from disclosing information regarding the transition.  It is a best practice to have a confidentiality agreement in place before discussing the business in any way and especially before divulging key information on the operation of the business or trade secrets.  While a confidentiality agreement can be used to keep the fact that a business is for sale private, that is only a small aspect of what modern confidentiality … [Read more...]

How to Optimize Your Chances of Selling Your Business

Selling your business is likely to be one of the most important decisions you’ll ever make - financially and personally.  With this important fact in mind, it is essential that you prepare far in advance.  Let’s look at some of the key items you’ll want to check off your list before placing your business on the market. Think About Legalities When it comes to selling a business, legal issues should be at the forefront of your thoughts; after all, selling your business involves the creation and execution of a complex and detailed legal agreement.  There are many times in life where it is possible to cut corners, but hiring a good lawyer or law firm is not one of those times.  Moreover, you’ll want to settle all litigation, environmental issues or other issues that could potentially derail a sale. Deal with Serious Buyers Working with a good business broker or M&A advisor is an essential part of the selling process, as these professionals will help you to weed out “window … [Read more...]

Insights from BizBuySell’s 3rd Quarter Insight Report

Wondering what 2021 and beyond will bring?   Insights from BizBuySell’s 3rd Quarter Insight Report and a survey of over 2,300 business owners can help. First, the pandemic.  The simple fact is that it has, unavoidably, had a major impact on the buying and selling of businesses.  Diving deeper than this obvious observation, there are a range of insights to be gleaned from the report. First, owners naturally understand that COVID is a massive force in business right now.  68% of owners surveyed feel that they would have received a better price for their business in 2019 than in 2020.  Only 37% of respondents felt that they would receive a better price this year.  Of owners who felt that they would receive a lower price in 2020 than in 2019, 71% of these owners said that their assessment was directly tied to the pandemic and its accompanying economic impact. Second is the impact of the pandemic on exit plans.  55% of owners responded that the pandemic had not changed their exit … [Read more...]

Zeroing in on Goodwill

Goodwill is a relatively straight-forward concept, although it may be a confusing term for some.  It is generally viewed as a term to include everything from a business’s reputation to the goods, services and products it provides.  The key idea is that there is goodwill if the business is viewed as a true and functioning business that has longevity in the marketplace.  The Importance of Reputation It is important to know that many of the aspects of goodwill are not easily noted on a balance sheet.  One of those elements is reputation.  A good reputation is an intangible asset that is hard to put an exact dollar amount on.  Imagine that you had a choice between two businesses that were almost identical.  However, one business enjoyed a strong reputation while the other had a reputation for poor customer service and goods and services.  This decision is an easy one for most prospective buyers. Going Beyond the Numbers When a buyer pays more than the "recognized" value of a … [Read more...]

What Makes a Deal Close?

What goes into successfully closing a sale of a business?  A sale may not close for various reasons, often beyond anyone's control. For example, a fire, the death of the principal, or a natural disaster such as a hurricane or a tornado.  There could be an environmental flaw that the seller was unaware of when he decided to sell.  Apart from these unplanned catastrophes, deals fail because of the people involved.  Here are a few scenarios where a sale closes successfully: The Buyer and Seller Are in Agreement From the Beginning If an offer to purchase is too vague or has too many loose ends, the sale can unravel somewhere along the line.  However, if those loose ends are taken care of and the agreement specifically spells out the details of the sale, it has a much better chance to close.  This necessitates that an extensive amount of information and answers are supplied before the offer and that many of the seller's questions are answered before the offer.  If a seller has … [Read more...]

Let Professionals Take Care of It for You

The amount of cash on the table and the asking price are directly related.  Businesses involve some level of seller financing. It is typical for both sellers and buyers to have doubts about this kind of financing; after all, sellers do not want to take the business back from the buyer. The buyer wants to make enough money to help the business flourish and prosper.The best way to ensure the profitable sale of a business is to look to the experts. Screen out Window Shoppers Choosing to work with professionals can streamline the entire sales process. Many business owners are quite busy and don’t wish to waste time with people who aren’t serious about buying. They also do not want to tell their trade secrets to people who can’t afford to buy. Business brokers and M&A advisors know that most prospective buyers are just dreamers or will ultimately fail to qualify.  When you work with experienced  brokers you have a shield to protect you and your valuable time.  Experienced  brokers … [Read more...]

Successfully Navigating Seller Financing

Only a small percentage of the population is able to go through life without using some form of financing at some point.  Most people have little choice but to finance everything from their home and car purchases to their college education.  Now, with that stated, most business owners would love to receive an all-cash offer for their business.  But the reality of the situation is quite different.  The facts are that owner financing is very common, and it is sometimes the only way to put a deal together. Sellers have to be ready and willing to entertain the idea that they may, ultimately, be called upon to handle some aspect of financing if they want to sell their business.  It surprises many to learn that if a seller is not willing to finance the sale, then buyers begin to worry and may even see this as something of a “red flag.”  The reason for this is that many buyers feel that if a business is a solid investment, then the business will be profitable and repaying the seller should be … [Read more...]

Four Common Seller Mistakes

Sellers can make mistakes, just like everyone else.  This article explores some of the most common ones that brokers see, along with some of the repercussions.  1. Not Seeing the Buyer’s Point of View The first major mistake that sellers make is that they simply fail to look at the situation from the buyer’s perspective.  One of the smartest moves any seller can make is to step back and ask themselves two key questions.   “What information would I expect to see if I was thinking about buying this business?  “Would I trust the information being presented to me if I was the buyer?”  These two simple questions help a seller understand a buyer’s perspective.  Additionally, taking the time to appreciate a buyer’s position can help avoid a range of problems and help smooth out the negotiation process. 2. Neglecting the Business During the Sales Process Another seller mistake we see is that the seller neglects the business during the sales process.  This can have … [Read more...]

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