Many business owners are emotionally attached to their businesses, and it is easy to understand why. Typically, business owners invest not only a considerable amount of time and money into their business, but a good bit of themselves as well. Owning and operating a business often becomes part of one’s identity. However, the fact is that no one will work forever, as retirement eventually comes for almost every business owner. With this in mind, it is important to prepare for selling your business well in advance.
Brokerage professionals can take your knowledge regarding your business, and use it to help you frame your business in the best possible light. Your expertise in your business can also help a broker find ways to improve your business so that it is more attractive to potential buyers. With all of this in mind, let’s turn our attention to the key steps you should take when preparing to sell your business and transition into retirement.
Select Your Second-in-Command
Any savvy buyer will want to know that the business is well supported by a capable team. Buyers rightfully worry about having a smooth transition period, and nothing helps dispel those fears like having a proven and capable second-in-command standing by. When selecting this important individual, it is important that you pick someone that understands how your business works and is a proven asset to its operation.
Automate, Automate and Automate
Buyers can be intimidated by taking control of a business. Having a proven second-in-command ready to assist is one smart step. Automating as much as possible is yet another prudent move. In short, you want your prospective new buyer to feel more confident about buying and operating your business.
Make a “Smooth Transition” List
As the seller, you have the critically important job of removing buyers’ fears. When you boost their confidence that they can successfully run your business, you increase the odds that your sale will go smoothly. Making a smooth transition list, which includes all the steps that you can take to improve the odds of a buyer being successful, is a smart investment of your time and effort.
A good transition list will include information about how to work with key customers, employees and vendors. You want to ensure that your customers, employees, and vendors understand that a sale will take place, but also understand that the process will be smooth and trouble-free. Whether large or small, take any steps that you can to show buyers that the transition will be well-received.
The average business owner has, in fact, never sold a business before, and is unprepared for this very complex process. Since the process of buying or selling a business is a very complicated one, they should strongly consider working with an experienced Business Broker or M&A Advisor who can help guide them through the process. Brokerage professionals are experts at buying and selling businesses. They understand what both buyers and sellers want and need. As a result, they can help you take the necessary steps to get your business ready to be sold.
The post How to Sell and Successfully Launch Your Retirement appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
There is a considerable difference between determining the value of a privately-held company and a publicly-held company. Topping the list of considerable differences is the fact that privately-held companies do not have audited financial statements. Let’s look at how the owners of privately held companies should proceed in establishing a reasonable price for their company.
An audited financial statement is a costly endeavor. In order to avoid the cost, many companies simply don’t go public. Of course, it should be noted that publicly held companies, as the name indicates, reveal much more about their finances than their privately held counterparts do. Privately held companies are often seen as being more mysterious whereas publicly held companies are considered more “open.”
Business owners looking to sell their business will, of course, want to address the fact that their company lacks the public information associated with publicly held companies. Providing prospective buyers with as much verified information about your business as possible is one of the fastest and easiest ways to overcome buyers’ concerns. A smart move for any business owner is to work closely with their accountant to go over the numbers and create an easy-to-understand presentation for prospective buyers. This should serve to allay many of their concerns.
Working with your accountant is only the first step in providing prospective buyers with the information they need to feel comfortable. The second step is to work with an outside appraiser or other expert who can determine the value of your business. After that, you’ll want to decide on what your market price will be, as well as your “wish price,” or the price that you would ideally want. Third, you must know your “rock bottom” lowest price. You, as the owner, need to have this information as it will greatly facilitate and streamline all negotiations.
When buyers are reviewing materials and working to determine what price they are willing to pay, they will look at a wide range of factors including:
- Product diversity
- The size of your customer base
- Potential competitors in the area
- Competitors on the horizon
- Potential disruptions to your business, such as supplier problems
- The stability of your earnings
- The stability of the market
- Need for capital
Different buyers may place differing levels of emphasis on certain areas, but you can be certain that the aforementioned areas will be examined with care. The process is undoubtedly rather complex. This complexity underscores the need for professional assistance.
Ultimately, the market will determine the sale price of your business. For business owners, the first and most important step is to work closely with professionals such as accountants, appraisers, Business Brokers and M&A Advisors to establish the price of your privately held business. You can count on brokerage professionals to properly organize the facts and numbers that support that price.
BizBuySell’s Insight Report is filled with key statistics and information on a range of topics, including the labor shortage and hiring problems that many businesses currently face. Visit BizBuySell for more information about the findings that they recently reported for the third quarter of 2021. This website also offers an archive of past quarterly reports dating back to 2013.
The pandemic has “reshuffled the deck,” causing many to reassess their positions in corporate America. At this point in 2021, businesses are recovering, but the pandemic continues to play a role in business operations. 71% of business owners surveyed noted that they are facing higher costs than before the pandemic. Most respondents indicated that labor shortages have been having a significant impact on their businesses. There are issues both in hiring and retaining employees.
As the report explains, “According to the U.S. Census Bureau, retail spending in September increased 13.9% over the previous year. However, many businesses still struggle to attract or retain employees. In fact, 49% of owners say the labor shortage is impacting their business, while Business Brokers see it as the number one concern facing small businesses.”
Some of the problems related to the issue of labor shortage are not immediately obvious. As it has become common knowledge that employers are having trouble filling positions and are having to increase pay in order to attract new employees, existing employees are taking note. Since existing employees realize that new hires are being hired at higher wages, they are themselves often expecting raises. In turn, operational costs are going up for many businesses.
The fact is that the business owners are still selling and for a variety of reasons. BizBuySell’s statistics also indicate that of buyers who are planning to sell, 20% cite retirement as their main reason for selling, whereas 38% cite burnout as the primary reason.
According to the data collected by BizBuySell, transactions are up 17% over the last quarter, but are still 7% below pre-pandemic levels. However, it is expected that the number of transactions will grow to be well above their pre-pandemic levels in 2022.
Buyers and sellers alike should remember that the pandemic has changed business and will continue to do so in the near future. In short, the business landscape continues to evolve.
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Many prospective business owners believe that it is impossible to purchase a business without collateral. The simple fact is that banks do expect collateral when making a loan. Since this is the core reality of the business world, it means that many who are eager to own a business will ultimately not be able to acquire one. However, while it is true that banks want collateral for loans, there are some ways that would-be business owners can still progress towards their goal of owning a business. In this article, we will explore a couple of the ways that a prospective business owner can still succeed.
First, we must make a key distinction: there is a difference between not having collateral and having no funds whatsoever. It is key to note that the larger the business you plan to buy, the more money you will ultimately need.
A great place to begin the process of buying a business without collateral is to talk to the SBA. The SBA’s 7 (a) program offers up incentives to banks to make loans to potential buyers. The SBA’s 7 (a) program is a simply fantastic program for those without collateral, as the program will cover a whopping seventy-five percent of the loan amount; this means that you, as the business owner, only need to have twenty-five percent of the price of the business. As though this program was exciting enough, the SBA’s 7 (a) program also allows prospective buyers to use money from investors or gifts towards the needed funds. Thanks to this great SBA program, you may qualify for a collateral free loan option.
A second option is seller financing. Seller financing is actually quite common in various forms. If you can find a motivated seller, such as one who is eager to retire, then seller financing becomes a potentially viable option. It may even be possible to combine seller financing with the SBA’s 7 (a) program for a powerful one-two punch. In this situation, a key part of the process is to find the right business and the right seller.
Working with a Business Broker or M&A Advisor can serve as a massive shortcut towards finding just such a business and seller. Brokerage professionals have databases of businesses for sale along with unique insights. A Business Broker or M&A Advisor may instantly know of a business that is a good fit for buyers without collateral.
Ultimately, prospective business owners shouldn’t be dissuaded by the challenges that a lack of collateral represents. It’s true that a lack of collateral is an obstacle, but it doesn’t have to be an insurmountable problem. By teaming with an experienced brokerage professional, it is possible to find a path towards owning a business even without having collateral.
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Every business has an array of important legal documents. However, the partnership agreement holds a unique and important place in your business and its future.
The facts are that many people choose to go into business with close friends or family members, and often these personal relationships lead to a forgoing of the partnership agreement. Don’t go this route, as it would be a major mistake. As a business owner, you have a responsibility to protect, maintain, and grow your business.
A well-written partnership agreement can greatly reduce the number of potential problems that your business can face down the road. Establishing a legal framework for the operation of your business is a must.
A good partnership agreement is one in which every major aspect of how the partnership should run is outlined and spelled out in detail. At the end of the day, your partnership agreement should be viewed as a legal document that serves as a key guidepost for the operation of your business. Since a partnership agreement is a legal document, it is essential that you work with a lawyer to create a contract that is specific to your company.
This type of agreement is often a more complex agreement than many business owners would initially expect, and for good reason. Due to the wide scope that a partnership can entail, the partnership agreement can address many different points.
It is important to remember that partnership agreements are designed to minimize misunderstandings and outline how the business should function. Issues such as how money is distributed, what percentage each partner will receive, and which partners are to receive a draw, should all be covered.
However, a partnership agreement does more than simply address how money is to be distributed. It should also outline key operational factors such as what happens in the event of the death of a partner. If that were to occur, for example, who will be in charge of managerial work? Issues such as how business decisions should be made, and how conflicts are to be resolved, are additional important issues that should be addressed.
A good partnership agreement, one that strives to foresee as many problems as possible, serves to protect your business against future disruptions. Every successful operation or enterprise has rules by which it operates, and your business should be no exception.