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...]

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...]

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...]

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...]

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...]

Selling a business is about much more than the price.  It's not like selling a house where the most important factor is, generally speaking, the highest offer.  In the end, for the seller to achieve the most optimal results, other variables should be considered.  The idea of selling to a competitor is one that seems attractive to many business owners.  A competitor has the built-in advantage of understanding the business and can theoretically understand the value of the business better than an outsider.  However, selling to a competitor comes with its own problems.  Selling means disclosing a great deal of confidential information, and that could prove to be very risky if the deal were to fall apart. A second avenue that sellers will often explore is selling to a financial buyer.  A financial buyer is likely not to be a competitor.  But on the downside, a financial buyer may be unwilling to pay the seller’s price.  It is important to remember that a financial buyer is considering … [Read more...]