How to Circumvent Three Legal Mistakes Sellers Make

After decades of hard work, selling your business can be an exciting and rewarding time. Yet, many business owners overlook the importance of focusing on the legal matters associated with sales. In this article, we’ll explore three of the most significant mistakes sellers make.  1. Use an NDA The first critical mistake that business owners should be guarding against is skipping the use of a non-disclosure agreement. Simply stated, a business owner should always make sure that a non-disclosure agreement is in place before disclosing to any buyers that a business is on the market. NDA’s stand as an invaluable way to restrict who does and does not know your business is for sale. After all, the last thing any business owner looking to sell his or her business wants is for competitors or employees to learn confidential information.  2. Hire an Attorney The second critical mistake that many business owners make is they skip working with an attorney. There is no way around the fact that if … [Read more...]

Put Your Strengths First When Selling Your Business

You understand the finer points and potential of your business better than anyone; however, that doesn’t mean that prospective buyers will instantly see your business’s various strengths. When you are looking to sell your business, you have two very important jobs. The first is to get your business ready to be sold. A second essential job is to showcase your business’s greatest strengths. At the end of the day, you must be the one to articulate why your business is worth buying. This effort, of course, will be supported by your Business Broker or M&A Advisor.  Understand Who Will Buy Your Business  Most people have never sold a business before and don’t fully understand what is involved in positioning one’s business for sale. The bottom line is that not every business is a good fit for every buyer. Finding the right buyer for your business will greatly expedite the process. This is yet another reason why it is critically important to work with experienced professionals. Business … [Read more...]

The Often-Overlooked Importance of Leases

When buying or selling a business, it is critically important that you evaluate the lease. It is a strange phenomenon that otherwise savvy business people will treat leases as a secondary concern. However, problematic terms in a lease can literally force you to pack up a business and move. This would not only be a jarring experience, but a very costly one as well.  Finding a good location is of paramount importance to both the profile and profitability of your business. You may feel that there are more important issues when buying or selling a business. But by the end of this article, you’ll see the wisdom in placing a lease near the top of your “to evaluate” list. There are three different kinds and types of leases: a new lease, an assignment lease and the sublease. All three of these options are most definitely different from one another and can potentially impact your business in different ways. The New Lease A new lease, as the name indicates, is the result of a lease that has … [Read more...]

Buying/Selling a Business: The External View

There is the oft-told story about Ray Kroc, the founder of McDonalds. Before he approached the McDonald brothers at their California hamburger restaurant, he spent quite a few days sitting in his car watching the business. Only when he was convinced that the business and the concept worked, did he make an offer that the brothers could not refuse. The rest, as they say, is history. The point, however, for both buyer and seller, is that it is important for both to sit across the proverbial street and watch the business. Buyers will get a lot of important information. For example, the buyer will learn about the customer base. How many customers does the business serve? How often? When are customers served? What is the make-up of the customer base? What are the busy days and times? The owner, as well, can sometimes gain new insights on his or her business by taking a look at the business from the perspective of a potential seller, by taking an “across the street look.” Both owners and … [Read more...]

What Makes Your Company Unique in the Marketplace?

There are unique attributes of a company that make it more attractive to a possible acquirer and/or more valuable. Certainly, the numbers are important, but potential buyers will also look beyond them. Factors that make your company special or unique can often not only make the difference in a possible sale or merger, but also can dramatically increase value. Review the following to see if any of them apply to your company and if they are transferable to new ownership. Brand name or identity Do any of your products have a well recognizable name? It doesn’t have to be Kleenex or Coke, but a name that might be well known in a specific geographic region, or a name that is identified with a specific product. A product with a unique appearance, taste, or image is also a big plus. For example, Cape Cod Potato Chips have a unique regional identity, and also a distinctive taste. Both factors are big pluses when it comes time to sell. Dominant market position A company doesn’t have to be a … [Read more...]

The Advantage of Buying an Existing Business

Most people think of starting a business as developing an idea, requiring starting from scratch and building a company from the ground up. This, however, has many disadvantages including developing a customer base, marketing the business, hiring employees and creating cash flow … without any history or reputation to rely on. Buying an existing business may prove to be the better solution.  The many advantages of this approach include: The Business Is Established. An existing business is a known entity. It has an established and historical track record. It has a customer or client base, established vendors, and suppliers.  It has a physical location with furniture, fixtures, and equipment in place. The term “turnkey operation” may be overused, but an existing business is just that, and more. New franchises may offer a so-called turnkey business opportunity but, while some elements are established, they retain many disadvantages of a start-up. The Business Has Existing … [Read more...]

12 Ways to Increase the Value of Your Company

1. Build a solid management team. A business with sales of $5 million and up needs a full complement of officers and directors. Such a team should include: a COO, a CFO, a sales manager and, likely, an IT director. It is also beneficial to create a Board of Directors with at least two outside members. This professionalization of management reduces the burden and stigma of “the one man band.” Not only does this build a stronger company, it increases the value to a possible acquirer. Smaller firms too should build a strong management team, and creating an outside advisor group is also a good idea. 2. Loyal employees.  Happy and loyal employees make for a strong company. Top management should have non-compete and/or confidentiality agreements.  Solid benefits plans for all employees should be in place. A company’s greatest asset is its employees and perhaps its biggest value-increaser. 3. Growth. Some smaller companies are kept small to maximize the owner’s benefits – the proverbial … [Read more...]

How Understanding Psychology Can Benefit Your Deals

We work closely with our clients to preserve the integrity of deals so that they have the best chance of a successful closing. In this article, we explore some of the most common ways that psychology plays into this process. The Element of Time It is critical that both buyers and sellers feel well prepared at every stage of the process. It is also essential that a certain momentum is established through every stage of the deal. When too many delays happen, this can start to derail deals.  Think about the Buyer and the Seller  For both parties, the buying or selling of a business is a life-changing event. For this reason, it is important that you invest the time to think about the point of view of the other people involved. No doubt, buying and selling can be stressful, so it’s important to take other people’s thoughts and feelings into account. You are not the only one who may be experiencing a little stress.  The Issue of Non-Active Partners In some deals, non-active … [Read more...]

How to Achieve High Buyer Success Rates

Both buyers and sellers have a lot of emotion wrapped up in their respective decisions. It’s completely natural to feel that way. Business Brokers and M&A Advisors can assist clients with their concerns and fears by giving them more information about how the sales process works and also discussing common pitfalls to avoid. In this article, we’ll go over some of the various issues impacting buyers. If you are able to anticipate potential issues that could interfere with the deal, you’ll be more likely to be able to overcome those issues.  The Initial Intake Process  Buyers should understand that they will need to sign an NDA and treat the non-disclosure process seriously. Brokers representing a seller will be requiring a good deal of information, including financial details, and often even your resume. So don’t be surprised when you’re asked for this information. It’s all a normal part of the process.  The Lending Process It’s important to realize ahead of time that the lending … [Read more...]

10 Mistakes that Sellers Make

1. Not knowing what the business should sell for One of the most costly errors a business owner can make is not knowing the approximate price of his or her business prior to entering the selling process. Although the marketplace ultimately determines the final price, an owner needs to know what the approximate price his or her business is prior to placing the business on the market. Before making the decision to sell, owners should work with someone qualified to place a price on their company. An experienced business broker has both the technical ability and the market experience to produce the most realistic pricing opinion. The business broker will also be the only alternative for supporting his or her opinion by selling the business. Fair Market Value Asking Price is what the seller wants Selling Price is what the seller gets Fair Market Value is the highest price the buyer is willing to pay and the lowest price the seller is willing to accept. 2. Not preparing the business for … [Read more...]

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