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...]
Questions Business Buyers Want Answers To
If you are even thinking about selling your business, it’s important to know the questions that buyers generally want answers to. For example, the first question almost always asked by buyers is: If this is such a good business why is it for sale? How you answer this question can make or break a sale. A vague answer can discourage buyers from further consideration of your business, as they may assume the worst. If you say you are “burned out” or just ready to try something new – that’s fine. If you’ve owned and operated the business for 10 to 15 years, buyers will most likely accept your reason for sale and continue their investigation. However, if you’ve only owned and operated the business for two years or less, a prospective buyer may find it concerning that you are already burned out or ready for something new. If you’re sick, be open about what the problem is; otherwise buyers will think you are just sick of the business. The worst thing a seller can do is to fudge an answer or … [Read more...]
Selling Your Business? Do-It-Yourself is Risky Business!
When the owner of a business makes the decision to sell, he or she is taking a giant step that involves the emotions as well as the marketplace, each with its own set of complexities. Those sellers who are tempted to undertake the transaction on their own should understand both the process and the emotional environment that this process is set against. The steps outlined below are just some of the items for a successful sale. While these might seem daunting to the do-it-yourselfer, by engaging the help of a business intermediary, the seller can feel confident about what is often one of the major decisions of a lifetime. 1. Set the stage. What kind of impression will the business make on prospective buyers? The seller may be happy with a weathered sign (the rustic look) or weeds poking up through the pavement (the natural look), but the buyer might only think, “What a mess!” Equally problematic can be improvements planned by the seller that appeal to his or her sense of aesthetics but … [Read more...]
What a Buyer May Really Be Looking At
Buyers, as part of their due diligence, usually employ accountants to check the numbers and attorneys to both look at legal issues and draft or review documents. Buyers may also bring in other professionals to look at the business’ operations. The prudent buyer is also looking behind the scenes to make sure there are not any “skeletons in the closet.” It makes sense for a seller to be just as prudent. Knowing what the prudent buyer may be checking can be a big help. A business intermediary professional is a good person to help a seller look at these issues. They are very familiar with what buyers are looking for when considering a company to purchase. Here are some examples of things that a prudent buyer will be checking: Finance Is the business taking all of the trade discounts available or is it late in paying its bills? This could indicate poor cash management policies. Checking the gross margins for the past several years might indicate a lack of control, price erosion or several … [Read more...]
Do You Have What It Takes to Find Success in the 21st Century?
The times they are a-changin'. The COVID-19 pandemic has given new meaning to Bob Dylan's almost 60-year old line, as it has caused shifts across many industries and made clear that many industries will never return to the old normal. Success in the 21st century will require a good deal of adaptation and the ability to evaluate where you stand today and where you need to be tomorrow. Flexible Thinking One of the cornerstones of being successful in both life and business is to think flexibly. A flexible approach to problem solving can lead to finding new and highly effective ways of tackling them. Success in the 21st century is much more than simply riding the next technological wave or trend. Instead, it is about being amongst the first to use creative thinking to spot trends and developments ahead of the competition and exploit them first. A Solid Plan Having a plan is essential for success. This aspect holds true today, as it did last century and those before it. As … [Read more...]
Selling Your Business? What You Should Know.
No doubt selling your business is one of the most complex and important decisions you’ll ever make. Your business likely represents decades, or even a lifetime, of dedicated work. Here, we examine some key steps you should take when it comes time to sell. One of the most important steps is to begin the sales process well in advance of the date that you plan to put the business on the market. Working with an experienced business broker or M&A advisor is one of the best ways to ensure that you’ll be ready to sell your business when the time comes. It will also help you to avoid the numerous pitfalls that await. A good brokerage professional can also help identify weaknesses in your business and help you address those issues. Your broker can help you with everything from strategy and negotiations, maintaining confidentiality and establishing the market value of your business, to connecting you with other seasoned professionals, such as accountants and lawyers. Be flexible. … [Read more...]
6 Basic Tips for Handling Customer Complaints
Customer complaints should always be treated seriously and dealt with in a timely manner. Serious ones are usually obvious, but even those that appear trivial may be backed by considerable emotion. Appreciate that you are hearing from the customer because you now have the opportunity to correct the problem. A dissatisfied customer who doesn't complain is (monopolies excepted) usually a lost customer. Customer complaints that are not appropriately addressed can fester and become larger problems. Offering decent customer service should be neither costly nor complicated. At its core, good customer service can be reduced to listening - letting the customer know that their complaint has been acknowledged and cataloged, and then working to remedy the situation if possible. A good positive attitude and calm manner when dealing with irritated or dissatisfied customers can go a long way towards keeping a customer happy and halting them from expressing their feelings in an online … [Read more...]