Ownership Transition Survey Results

The ownership transition survey by Mass Mutual Life Insurance, though done about a decade ago, is worth examining even today.  These interesting survey results were based on feedback and answers from family-owned businesses.  Let’s dive in and take a closer look at the numbers and what they can tell us for 2021 and beyond. The one important point that leaps right off the page is the fact that a whopping 80% of family-owned businesses are still 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 the fact that a “retirement wave” will hit family-owned businesses, and will lead to some interesting shifts and opportunities.  While the survey indicated that 13% of CEOs state they will never retire, the reality of the situation is that ownership will eventually … [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...]

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...]

Buying a Distressed Business 

Howard Brownstein, it is safe to say, is a true expert in providing turnaround management and advisory services to companies, as well as their stakeholders.  Brownstein serves as an independent corporate board member for both publicly held as well as privately-owned companies and nonprofits and is considered to be one of the world’s top experts in distressed businesses.  He believes it is essential to remember that not all distressed businesses are, in fact, the same.  There is simply no way to know how bad things are for a given distressed business until one begins to “look under the hood,” and get a full view of what problems may lurk underneath.  Brownstein firmly believes that distressed businesses can represent a real and often overlooked opportunity for buyers.  Sadly, the recent economic downturn brought about by COVID-19 means that there will likely be a great deal more distressed businesses on the market in the coming months or even in the next couple of years.  Why is a … [Read more...]

Considering Generational Strategies

              When you are buying or selling a business, chances are high that you might end up making a deal with someone from another generation.  Therefore it makes sense to take the time to understand that individual’s background and how that might cause behavioral differences.  It is important to understand and reflect upon where many of them are coming from and the collective experiences and trends that shaped their identities and perspectives.  At the same time, you can identify your own biases, strengths and weaknesses that may be caused by your own upbringing. The strategies in this article originated from Chuck Underwood who is considered a leading expert in the diversity of communication styles between generations.   Generational Sensitivity  Underwood’s perspective is that people of each generation were molded by their unique formative years.  The decisions that buyers and sellers make will be impacted by … [Read more...]

Essential Meeting Tips for Buyers & Sellers

The buyer-seller meeting is quite often a “make or break” meeting.  Your business broker or M&A Advisor will do everything possible to ensure that this meeting goes as well as possible.  It is vitally important to realize that rarely is there an offer before buyers and sellers actually meet.  The all-important offer usually comes directly after this all-important meeting.  As a result, you want to ensure that meetings are as positive and productive as possible. Buyers need to understand how the process of selling a business works and what is expected of them from the process.  Buyers also need to understand that following their broker’s advice will increase the chances of a successful outcome.  Sellers should be ready to be honest and forthcoming during the meeting.  They also want to be sure to not say or do anything that could come across as a strong-armed sales tactic.  Asking the Right Questions If you are a buyer … [Read more...]

Negotiating the Price Gap Between Buyers and Sellers

Sellers generally prefer all-cash transactions; however, partial seller financing is often necessary in typical middle market company transactions.  Additionally, sellers who demand all-cash deals typically receive a lower purchase price than they do when providing some financing. Although buyers may be able to pay all-cash at closing, they often want to structure a deal where the seller has left some portion of the price on the table, either in the form of a note or an earnout.  Buyers view deferring some of the purchase price as providing leverage in the event that the owner has misrepresented the business.  An earnout is a mechanism to provide payment based on future performance.  Acquirers think there should be no problem with this type of payout if the business is as it is represented but the seller, who knows the business is sound under his or her management, will be concerned with the risk that the buyer will not be as successful in operating the business. Moreover, the … [Read more...]

6 Tips and 90 Days to Protect Your Business

The April 2020 COVID-19 centered article, by Inc. contributor Brian Hamilton, “6 Actions to Take in the Next 90 Days to Save Your Business,” isn’t pulling any punches.  Hamilton believes that the next 90-days could be make or break days for business owners looking to navigate the choppy waters of the COVID-19 pandemic.  His article provides readers with 6 actions they should take now to survive the economic fallout of the pandemic.  Tip #1 Vigorously Control What You Can Hamilton’s first tip is to “Vigorously control what you can.  Vigorously ignore what you can’t control.”  As Hamilton points out, you can’t control the economy; instead, you need to focus on what you can control.  His view is that there has never been a more important time to focus, “More than ever, you’ll need to go to war with things within your control.”  Now is the time to exercise control. Tip #2 Guard Morale During tough economic times, employee morale can be a real issue.  This brings us to … [Read more...]

Tips for Telework

Rajshree Agarwal, Professor of Strategy and Entrepreneurship at the University of Maryland, explores how to get the most out of telework in her April 20th, 2020 Forbes article “Three Keys to Engaged, Productive Telework Teams”.  This timely article covers some very important territory for many companies dealing with the COVID-19 pandemic.  We explore Agarwal’s key points so that you can help your team get the most out of telework. Agarwal notes that people may shy away from sharing personal information and feelings while in the office.  But via video conferencing, the story can be different.  This is one reasons it is necessary for employers to keep in mind that the dynamic between you and your employees is often different when using video conferencing.  This will also be the case when your employees speak with one another.  She prudently cautions business owners against taking a “business-as-usual” approach to the COVID-19 situation, as it can make them look both unnecessarily … [Read more...]

The Benefit of Failure – How to Learn from It Instead of Fearing It

Failure is rarely fun.  But it is also a key ingredient in success.  While failure can be painful, there is no doubt that the lessons that come from failure can be powerful teachers that provide life-long lessons and even life-trajectory altering results.  Summed up another way, failure hurts.  But on occasion, not failing could hurt more, especially in the long run. In her Inc. article, “Why Tons of Failure Is the Key to Success, According to Seth Godin,” author Sonia Thompson points out that most people “avoid failure like the plague.”  Instead, they spend their time trying to achieve perfection.  When adopting this approach, people miss all kinds of opportunities because they are afraid of damaging their egos.  Embracing failure is a way to experience many “transformational benefits,” which would never be experienced without the lessons of failure. Thompson points to the work of 18-time best-selling author Seth Godin who has written about how entrepreneurs who fail more often … [Read more...]