Archives for March 2025

7 Big Questions to Ask Yourself Before Moving Forward

March 20, 2025 By

The first step towards successfully selling a business is finding a qualified business broker to work with.  Sellers should also ask themselves an array of important questions.  A recent article, “7 Questions to Answer Before Selling Your Business,” published by Good Men Project, has a great overview of questions sellers should answer before moving forward.

Author Troy Lambert believes that at the top of the list is one very simple and powerful question, “Are you ready?”  For example, your financial reports should be ready to show.

The second question is, “What’s it worth?”  Determining what a business is worth means you’ll need a professional business valuation.  A great deal can go into evaluating your business and you need an expert to help you determine that value.

Third, Lambert believes that prospective sellers should ask themselves, “How’s the health of my industry?”  He emphasizes that honesty is key here for a variety of reasons.  If your industry is in a transition period, for example, then it might be better to wait until a better time to sell.

The fourth question on Lambert’s list is, “How long will it take?”  In short, you need to remember that selling a business can take a long time.  Successfully selling your business may even mean that you have to stay on and work with the new owner during a transition period.

The fifth key question is, “Who is my buyer?”  You don’t want to waste a lot of time with potential buyers who are simply not a good fit.  Finding the right buyer for your business helps to ensure that a deal will be finalized.

Sixth, Lambert wants sellers to think about how they will get paid.  Are you willing to finance part of the deal?  What about balloon payments over time?  Understanding, before you put your business on the market how you want to be paid and how flexible you can be in terms of payment is essential.

For most sellers, selling a business will stand as the largest financial decision of their lives.  With this realization comes more than a little pressure.

Considering the enormity of the decision, having good advice is simply a must.  A seasoned and experienced business broker understands what it takes to buy and sell a business.  Working with a business broker is an easy and efficient way to begin the process of selling your business.  Brokers know what it takes to successfully sell a business and can help you answer these questions and many more.

Copyright: Business Brokerage Press, Inc.

dolgachov/BigStock.com

Filed Under: Seller Articles, Seller FAQ, Selling a Business

IBBA and M&A Source Market Pulse Survey Report Predicts Major Changes

March 20, 2025 By

The IBBA and M&A Source Market Pulse Survey Report for the fourth quarter of 2018 has a range of interesting insights.  The survey’s purpose is to provide an “accurate understanding of market conditions for businesses being sold in Main Street (values $0-$2MM) and the Lower Middle Market (values $2MM-$50MM).  This national survey was designed as a tool for business owners and their advisors and has the support of both the Pepperdine Private Capital Markets Projects and the Pepperdine Graziadio Business School.

One of the most striking facts to leap out of the report is the fact that a full one-third of advisors fully expect the strong market to end this year.  Overall, advisors are not optimistic that the current climate will continue through 2020.  In fact, advisors are encouraging sellers to consider placing their businesses on the market now, while the market is still strong.  This is according to Craig Everett, PhD and Assistant Professor of Finance and Director of the Pepperdine Private Capital Markets Project.

One fact from the report that could be overlooked is that only a mere 8% of advisors expect the current climate to last for 48 months or more.  Additionally, only 9% believe that the current climate will last between 24 to 48 months.  Perhaps most striking of all is the fact that 60% of advisors feel that the current climate will end within the next two years.

Business owners who are considering selling should be advised that almost two-thirds of advisors now feel that there will be a significant shift in the next two years.  Considering that it can take a year or more to sell a business, business owners would be wise to consider this important fact.

The report sites Neal Isaacs, Owner of VR Business Brokers of the Triangle who states, “Deals are taking longer in due diligence as buyers work hard to validate their investment and make sure that what they’re buying is worth the premium price today’s sellers are commanding.”

So, is now the time to sell?  Many experts feel that it is possible to lose a sizable amount of value if one waits too long to sell.  Even just a few months can make a huge difference in terms of perceived value and the ultimate sales price.  Working with a proven business broker is a key way to ensure that you are selling at the right time and secure the best possible price.

Copyright: Business Brokerage Press, Inc.

Rido/BigStock.com

Filed Under: Blog, Seller Articles, Seller FAQ

Thinking About Succession Planning

March 20, 2025 By

If you haven’t been thinking about succession planning, the bottom line is that you should be. In the February 20, 2019 Divestopia article, “All Companies Need to Look at Succession Planning,” author Brad Cherniak examines the importance of succession planning. Owning and/or operating a business can be a great deal of work, but it is imperative to take the time to develop a succession plan.

Succession Planning is for Businesses of All Sizes

Author Cherniak wants every business owner to realize that succession planning isn’t just for big businesses. Yet, Cherniak points out that the majority of small-to-medium sized businesses, as well as their senior managers, simply don’t focus much on succession planning at all.

Many business owners see succession planning as essentially being the same as exiting a business. Cherniak is quick to point out that while the two can be linked and may, in fact, overlap, they are by no means the same thing. They should not be treated as such.

Following an Arc Pattern

Importantly, Cherniak notes, “Succession planning should also be linked to your strategic planning.” He feels that both entrepreneurs and businesses managers follow an arc pattern where their “creativity, energy and effectiveness” are all concerned. As circumstances change, entrepreneurs and business managers can become exhausted and even a liability.

The arc can also change due to a company’s changing circumstances. All of these factors point to “coordinating the arcs of business,” which includes “startup, ramp-up, growth, consolidation, renewed growth and maturity,” with whomever is running the business at the time. In this way, succession planning is not one-dimensional. Instead it should be viewed as quite a dynamic process.

Evaluating Each Company Individually

Cherniak highlights the importance of making sure that the team matches the needs of a company as well as its stages of development. Who is running a company and setting its direction? Answering these questions is important. It also is of paramount importance to make sure that the right person is in charge at the optimal time.

Companies and their circumstances can change. This change can often occur without much notice. As Cherniak points out, few small-to-medium sized businesses focus on succession planning, and this is potentially to their detriment.

Copyright: Business Brokerage Press, Inc.

Chaay_Tee/BigStock.com

Filed Under: Seller Articles, Seller FAQ, Selling a Business

A Must Read Article on Having Children Take Over the Family Business

March 20, 2025 By

In a recent Divestopedia article entitled, “Kids Take Over the Business? 8 Things to Consider,” author Josh Patrick examines what every business owner should know about having their children take over their business.  He points out that there are no modern and accurate numbers on what percentage of businesses will be taken over by the children of their owners.  But clearly the number is substantial.

Patrick emphasizes as point number one that allowing a child to take over a business right after finishing his or her education could be a huge mistake.  After all, how can a parent be sure that a child can handle operating the business without some proven experience under his or her belt?

Point number two is that businesses frequently create jobs for the children of owners.  The flaw in this logic is pretty easy to see. This job, regardless of its responsibilities, isn’t in fact a real job.  Senior decision-making roles should be earned and not handed out as a birthright. The end result of this approach could create a range of diverse problems.

The third point Patrick addresses is that pay should be competitive and fair when having children take over a business.  Quite often, the pay is either far too high or far too low. This factor in and of itself is likely to lead to yet more problems.

Business growth must always be kept in mind.  When having your children take over a business, it is essential that they have the ability to not just maintain the business but grow it as well.  If they can’t handle the job then, as Patrick highlights, you are not doing them any favors. Perhaps it is time to sell.

Another issue Patrick covers is whether or not children should own stock.  If there are several children involved, then he feels it is important that all children own stock.  Otherwise, some children will feel invested in the business and others will not. In turn, this issue can become a significant problem once you, as the business owner, either retire or pass away.

In his sixth point, Patrick recommends that a business should only be sold to children and not given outright.  If a child is simply given a business, then that business may not have any perceived value. Additionally, if a child or children buy the business, then estate planning becomes much more straightforward.

In point seven, Patrick astutely recommends that once a parent has sold their business to their child, the parent must “let go.”  At some point, you will have to retire. Regardless of the outcome, you’ll ultimately have to step back and let your children take charge.

Finally, it is important to remember that your children will change how things are done.  This fact is simply unavoidable and should be embraced.

Working with an experienced business broker is a great way to ensure that selling a business to your child or children is a successful venture.  The experience that a business broker can bring to this kind of business transfer is quite invaluable.

Copyright: Business Brokerage Press, Inc.

World Image/BigStock.com

Filed Under: Seller Articles, Selling a Business

Key Elements for Every Partnership Agreement

March 20, 2025 By

You should never forget that your partnership agreement is, in fact, one of the most important business documents you will ever sign.  Many people go into business with loved ones, relatives or lifelong friends only to discover (once it’s too late) that they should have had a partnership agreement.  A partnership agreement protects everyone involved and can help reduce problems that may arise.  Outlining what will happen during different potential situations and events in a legal framework can help your business keep running smoothly.

What Should Be in a Partnership Agreement?

Every business is, of course, different; however, with that stated, any partnership should outline, with as much clarity as possible, the rights and responsibilities of all involved.  A well written and carefully considered partnership agreement will keep small problems and disagreements from evolving into more elaborate and serious concerns.

There are times to take a DIY approach and then there are times when you should always opt for a professional.  When it comes to partnership agreements, it is best to opt for working with a lawyer.  Finding competent legal help for drafting your partnership agreement is simply a must.

What is Typically Addressed in a Partnership Agreement?

In theory, a partnership agreement can cover a wide-array of factors.  Here are a few points typically addressed in partnership agreements.

What Questions Will a Good Partnership Agreement Address?

  1. Which partner(s) are to receive a draw?
  2. How is money to be distributed?
  3. Who is contributing funds to get the business operational?
  4. What percentage will each partner receive?
  5. Who will be in charge of managerial work?
  6. What must be done in order to bring in new partners?
  7. What happens in the event of the death of a partner?
  8. How are business decisions made? Are decisions made by a unanimous vote or a majority vote?
  9. If a conflict cannot be resolved when must the conflict be resolved in court?

Thanks to partnership agreements, all partners involved can proceed and start a new business with fewer areas of concern.  The simple fact is that without a partnership agreement, your business can face a range of disruptions; these would be disruptions that could ultimately spell doom for your business.

Copyright: Business Brokerage Press, Inc.

Freedom TumZ/BigStock.com

Filed Under: Buyer Articles, Buyer FAQ, Buying a Business

Four Significant Issues You Need to Consider When Selling Your Business

March 20, 2025 By

The process of selling a business can be very complex. Whether you’ve sold a business in the past or are selling a business for the very first time, it is imperative that you work with an expert. A seasoned business broker can help you navigate through what can be some pretty rough waters. Let’s take a closer look at four issues any seller needs to keep in mind why selling a business.

Number One – Overreaching

If you are both simultaneously the founder, owner and operator of a business, then there is a good chance that you are involved in every single decision. And that can be a significant mistake. Business owners typically want to be involved in every aspect of selling their business, but handling the sale of your business while operating can lead to problems or even disaster.

The bottom line is that you can’t handle it all. You’ll need to delegate the day-to-day operation of your business to a sales manager. Additionally, you’ll want to consider bringing on an experienced business broker to assist with the sale of your business. Simultaneously, running a business and trying to sell has gone awry for even the most seasoned multitaskers.

Number Two – Money Related Issues

It is quite common that once a seller has decided on a price, he or she has trouble settling for anything less. The emotional ties that business owners have to their businesses are understandable, but they can also be irrational and serve as an impediment to a sale. A business broker is an essential intermediary that can keep deals on track and emotions at a minimum.

Number Three – Time

When you are selling a business, the last thing you want is to waste time. Working with a business broker ensures that you avoid “window shoppers” and instead only deal with real, vetted prospects who are serious about buying. Your time is precious, and most sellers are unaware of just how much time selling a business can entail.

Number Four – Don’t Forget the Stockholders

Stockholders simply must be included in the process whatever their shares may be. A business owner needs to obtain the approval of stock holders. Two of the best ways to achieve this is to get an attractive sales price and secondly, to achieve the best terms possible. Once again, a business broker serves as an invaluable ally in both regards.

Selling a business isn’t just complicated; it can also be stressful, confusing and overwhelming. This is especially true if you have never sold a business before. Business brokers “know the ropes” and they know what it takes to both get a deal on the table and then push that deal to the finish line.

Copyright: Business Brokerage Press, Inc.

wutzkoh/BigStock.com

Filed Under: Seller Articles, Seller FAQ, Selling a Business

A Look at Divestopedia’s Article, “The Myth of Fair Business Valuation”

March 20, 2025 By

In Divestopedia’s article, “The Myth of Fair Business Valuation: What Professional Valuations Don’t Tell You,” author Chak Reddy is quick to point out that the “type of buyer and method of sale are two important (yet often overlooked) value determinants when finding a starting price for your business.”

Reddy brings up some excellent points.  One notion in particular that every business owner should be aware of is that there is “NO fair value for illiquid assets.”  He points to the fact that between January 2007 and March 2008, the historic Bear Stearns went from a value of $20 billion dollars to just $238 million.  In a mere 14 months, Bear Stearns lost most of its value.

Additionally, the article points to the fact that business owners often suffer enormously from “dramatic valuation compression.”  In Reddy’s view, this compression is the direct result of poor planning and a failure on the part of business owners to select the right advisory teams.

Reddy believes that professional valuations can be quite lacking.  He feels that they are “contingent on multiple assumptions,” and that the valuations are only as good as the assumptions upon which they are based.  In other words, professional valuations can be limited and flawed.  In particular, he points to the fact that two of the most important factors in valuations, future growth rate and operational synergies are “highly subjective and no two views on these topics are likely to be identical.”  Summed up another way, valuations are inherently a matter of opinion and perspective.  Reddy feels that a seller will be “lucky” if the real sales price comes within 10% to 20% of the professional valuation.

In the end, as always, it is the market that determines value. It is the acquirer who will determine the value more than any other factor.  The perception of the buyer will play a key role in the process and, further to the point, no two buyers will perceive the business exactly the same way.  In other words, valuations can be tricky and certainly do involve a personal element of the individual who is appraising the business’ value.  Adding to this point, Reddy states, “From our experience, the type of buyer and the type of sale skew the valuation to such an extent that it is unwise for a business owner to not be familiar with these variables and their impact before the beginning of the sales process.”

Ultimately, finding the right buyer is essential and this is where a business broker can prove simply invaluable.  And finding that right buyer may take time.

Copyright: Business Brokerage Press, Inc.

Successphoto/BigStock.com

Filed Under: Seller Articles, Selling a Business

The Top Two Ways to Purchase a Business without Collateral

March 20, 2025 By

Banks love collateral and for a very simple reason.  If you have collateral, then the bank has something it can take if you fail to repay your loan.  At its heart, collateral is a remarkably simple concept.  However, unfortunately, many people who want to start a business lack it.  All of this leads us to the simple question, “Can I start a business without a collateral.

1. Try the SBA

There are ways that you can start a business without collateral, but you will need some amount of money.  The larger the business, obviously the more money you’ll need.  Those interested in the zero collateral route will want to take a look at the SBA’s 7 (a) program.  This program incentivizes banks to make loans to prospective buyers.  Through this program, the SBA guarantees an impressive 75% of the loan amount.

Of course, the buyer still has to put up 25% of the money in order to buy the business, but for those looking to own a business without having to put up collateral, the SBA’s 7 (a) program is an impressive option.  Perhaps best of all, the cash buyers used can come from investors or even a gift, helping to make this program a potentially great one for first time business owners.

2. Think about Seller Financing

Another option is seller financing.  Sellers frequently get involved in financing.  When a seller is motivated to sell, due to retirement or some other factor, things can get interesting.  Most sellers do agree to offer some degree of financing, so asking for selling financing is not unheard of or insulting to a business owner.  Prospective business owners may even be able to combine seller financing with the SBA’s 7 (a) program.  Correctly used, this path could provide a powerful and useful option.

Speaking of retiring, according to The International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project, 33% of deals now take place when owners are retiring.  This clearly demonstrates how it is in the best interest of many sellers to consider seller financing.

While the SBA’s 7 (a) program is potentially very useful to buyers, it is important to note that under the program, the seller cannot receive any payments for two years.  Working around this potential problem may very well require some creativity and effort on the part of the prospective buyer.  In the end, it may be necessary to offer the business owner some incentive in order to justify waiting two years for his or her money.

Attempting to buy a business without collateral may, at first, sound like too large of an obstacle to overcome.  However, these kinds of purchases really do happen all the time.  By staying focused, persistent and understanding your options, you will increase your odds of success.  Finally, get as much professional help as possible.  Prospective business owners should consult with S.C.O.R.E., experienced business brokers and others to learn the best way to buy a business without collateral.

Copyright: Business Brokerage Press, Inc.

Khatuna/BigStock.com

Filed Under: Buyer Articles, Buying a Business, Seller Articles, Selling a Business

Great Tips for Helping You Find a Buyer for Your Business

March 20, 2025 By

No one keeps a business forever.  At some point, you’ll either want to sell your business or have to retire.  When the time comes to sell, it is important to streamline the process, experience as little stress as possible and also receive top dollar.  In Alejandro Cremades’s recent Forbes magazine article, “How to Find a Buyer for Your Business,” Cremades explores the most important steps business owners should take when looking to sell. 

Like so many things in life, finding a buyer for your business is about preparation.  As Cremades notes, you should think about selling your business on the day you found your company.  Creating a business but having no exit strategy is simply not a good idea, and it’s certainly not a safe strategy either.  Instead you should “build and plan to be acquired.” 

For Cremades, it is vital to decide in the beginning if your preferred exit strategy is to be acquired.  If you know from the beginning that you wish to be acquired, then you should build your business accordingly from day one.  That means it’s essential to understand your market and know what prospective buyers would be looking for.  

According to the Leadership Development Program, Kauffman Fellows, acquirers buy businesses for a range of reasons including: 

  • Driving their own growth
  • Expanding their market
  • Accelerating time to market 
  • Consolidating the market

Some of the more potentially interesting reasons that acquirers buy a business include to reinvent their own business and even to respond to a disruption.  At the end of the day, there is no one monolithic reason why a given party decides to buy a business.  But there are indeed some general factors that acquirers are known to commonly seek out.

Additionally, Cremades believes that for those serious about finding a buyer, it is critical to make connections.  Or as Cremades states, “strategic acquisitions are about who you know, and who knows you.  Start making those connections early.”  He also points out that buyers are not always who one expects in the beginning of the process.  Keeping this fact in mind, it is important to stay open and always look to build solid relationships and keep those relationships up to date regarding your status.  Getting your company acquired won’t happen overnight.  Instead, it is a process that can take years.  Therefore, networking years in advance is a must.

Like many seasoned business professionals, Cremades realizes how important it is to work with a business broker.  If you have failed to network properly over the years, then a broker is an amazingly valuable ally.  They are about more than offering sage advice, as business brokers can also make potentially invaluable introductions and help you navigate every stage of the acquisition process.

Copyright: Business Brokerage Press, Inc.

4 PM production/BigStock.com

 

Filed Under: Seller Articles, Seller FAQ, Selling a Business

The Variety of Variables Involved in Selling Your Business

March 20, 2025 By

Selling a business is more than a big decision, as it is also quite complex.  Finding the right buyer for a business is at the heart of the matter.  In the recent Forbes article, “Ready to Sell Your Business? Follow These 3 Tips to Find the Best Buyer,” author Serenity Gibbons outlines that selling a business is a multifaceted process with a lot of moving parts.

A central variable for those looking to sell a business is to have a coherent and well thought out exit strategy in place.  She points out that at the top of your to-do list should be selling your business the right way, and that means having a great exit strategy in place.  In fact, many experts feel that you should have an exit strategy in place even when you first open your business.

Another key variable to keep in mind is that, according to Gibbons, only an estimated 20% to 30% of businesses on the market actually find buyers.  This important fact means that business owners, who usually have a large percentage of their wealth tied up in their businesses, are vulnerable if they can’t sell.  It is vital for business owners to make their businesses as attractive as possible to buyers for when the time comes to sell.

This article points to author Michael Lefkowitz’s book “Where’s the Exit.”  This book outlines what business owners need to do to get their business ready for their exit.  Updating your books, ensuring that a good team is in place and ready to go and taking steps to “polish the appeal of your brand” are some of the important topics covered. 

Gibbons notes that “not every buyer with cash in hand is the right buyer for your company.”  Mentioned are three key variables that must be addressed when looking to find the right buyer: consider your successor, explore your broker options and find a pre-qualified buyer.

In the end, working with a business broker is the fastest and easiest way to check off all three boxes.  An experienced professional knows the importance of working exclusively with serious, pre-qualified buyers.  Since a good business broker only works with serious buyers, that means business brokers can greatly expedite the process of selling your business. 

In her article, Gibbons supports the fact that working with a business broker is a smart move.  Those looking to get their business sold and reduce an array of potential headaches along the way, will find that there is no replacement for a good business broker.

Copyright: Business Brokerage Press, Inc.

FreedomTumZ/BigStock.com

Filed Under: Seller Articles, Seller FAQ, Selling a Business
« Previous Page
Next Page »