Archives for March 2025

Most business owners are experts at running their specific businesses. They are not necessarily experts at selling businesses. This is where working with a seasoned brokerage professional can prove to be invaluable. 

As it turns out, there are endless examples of people trying to save money by simply finding an MBA to handle the sale of their business. Owners often will trust this person despite whether or not they have direct experience selling businesses. Sadly, the results from this decision can be very poor. 

Let’s take the example of a business owner who opted to let his nephew with a freshly minted MBA oversee the sale of his multi-location retail operation. The idea was that his nephew would help him save a great deal of money. Unfortunately, this idea simply didn’t work. His well-intended nephew’s inexperience proved to be a liability. 

Let’s take a look at some of the main problems that this business owner and his nephew faced:

Missing Legal Arrangements

One of the first problems is that neither the business owner nor the nephew realized how important confidentiality agreements were to the process of selling a business. This led to competitors learning that the business was for sale. Likewise, the lack of confidentiality agreements meant that everyone from key employees to clients, customers and suppliers could learn that the business was for sale.

Further, the nephew opted to use the company’s attorney instead of finding an attorney with experience in business transactions. The company attorney had never handled the sale of a large business before.

Incomplete Documentation

Another problem was that the nephew prepared what was supposed to be a Confidential Business Review/Confidential Information Summary – CBR/CIM. The review/summary prepared by the nephew failed to include proper financials, including a large sum taken by the owner. Importantly, there were no projections, ratios and other important information. This lack of information could easily lower the bids or simply cause prospective buyers to lose interest.

The way that the business owner and nephew handled the CFO was also an issue. They failed to bring in the CFO and did not execute a “stay” agreement. The nephew was confident that he could handle the financial details on his own. However, neither the owner nor the nephew realized that prospective buyers expected to meet the CFO as part of the due diligence process.

Failure to Properly Screen Candidates 

Finally, not only did the nephew not understand the importance of confidentiality agreements or the due diligence process, but he also failed to understand the importance of the screening process. The nephew failed to interview prospective buyers to discover whether or not they were serious and had the resources to buy the business. The failure to have a proper screening process served to both waste valuable time and spread the word that the business was for sale.

For most people, selling a business is the single most important financial decision of their lives. For this reason, it is critical to find experienced and competent assistance for the process. An experienced business broker or M&A advisor understands what is involved in selling a business. In other words, your nephew may be a great guy and he may want to help you, but without years of experience selling businesses, he simply isn’t the right person for the job.

Copyright: Business Brokerage Press, Inc.

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No business owner will be able to stay with their business indefinitely. For this reason, you will either have to eventually sell or hand your business off to the next generation. Let’s take a closer look at the concept of handing a business over to a family member and how you can make sure that the business is in optimal shape when the time comes. 

If you want your business to be prepared for succession and the next generation, you’ll want to repair any key problems before handing it over. Some experts advise putting your focus on evolving the business. One key recommendation is to focus on sales, marketing and distribution in the coming years, so that troublesome issues, such as sales plateaus, are properly addressed and hopefully circumvented.

Also, you’ll want to consider boosting communication with key employees so that current management understands where all the employees stand. Skilled and motivated employees are rare commodities, and they are absolutely critical to the future success of any business. For any business owner considering handing over their business to their children, employee skill level, motivation and commitment will be essential to the success of the business during a potential transition period.

Some people see their business as a form of job creation for their children, instead of being what it truly is, a business. For a wide variety of reasons, it may not be feasible for your descendants and relatives to take over the business. They may not be capable of the demands or they may simply have no interest. But if you are able to successfully pass it down, you’ll want to optimize their chances for success. 

Just as buying or selling a business involves preparation, the same holds true for handing the baton to the next generation. There is no replacement for advance planning. The sooner that you begin thinking about, and taking tangible steps to prepare for the next generation taking over the reins, the better off everyone will be.

Copyright: Business Brokerage Press, Inc.

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The last thing that any business owner wants is for a sale to fall through over something that was completely preventable. The good news is that with proper preparation and planning, these mistakes can be minimized or avoided altogether.

Workforce Issues

One of the top mistakes that business owners can make is allowing for an unstable workforce. It should come as no surprise that prospective buyers want to buy a business that produces consistent results. A key part of business stability resides in a stable workforce. Having a great product or service and then knowing that you have good dependable people to deliver those goods and services is essential. Buyers will be looking for this when they make their buying decisions. 

Faulty Recordkeeping

You can be very certain that any serious buyer will want to examine your books for the last several years. It is only prudent to expect that a prospective buyer will look at every part of your financials, including everything from your operating costs to your sales history. Proper recordkeeping will help convey the message that you are a responsible business owner, and this in turn, will increase the perceived value of your business.

Delayed Improvements

Delaying key investments and improvements may sound good for the foreseeable future, but it can be costly in the long run. It also points to a lack of vision and planning on the part of business owners. If you’d like to maintain your business’ value for when it is time to sell, you must constantly invest in your future. This will help your business thrive today and grow in the future. 

Another mistake that business owners can make is to fail to innovate. In a sense, this failure often goes hand-in-hand with a failure to invest in the business. A business that is not innovative is one that may be seen as a business that is not well positioned for the future. 

Of course, every industry is different. For this reason, it is important that business owners evaluate their business, the competition, and what opportunities exist if they embrace a constant stream of innovation. It is key to note that innovation is not always about making grandiose and costly moves. Quite often, innovation is the result of adopting a different mindset and finding small ways to boost customer or client satisfaction and reach new customers.

Failing to Work with Professionals 

Business brokers and M&A advisors understand all of these variables. They understand the mistakes that business owners can make when preparing to sell their business. Just as importantly, they understand the steps necessary to circumvent them. Working with a brokerage professional well before putting your business up for sale will dramatically increase your odds of a successful outcome. You’ll also want a solid team of other professionals including an experienced attorney and accountant.

Copyright: Business Brokerage Press, Inc.

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Great deals can quickly be derailed when confidentiality agreements are not properly used and observed. The number of headaches that can occur due to a failure to follow the requirements of a confidentiality agreement are rather extensive. Whether it is employees discovering the potential sale, to the loss of key customers or even alerting a competitor that your business is for sale, there is no end to the headaches that can arise when a confidentiality agreement is not in place or adhered to. Simply stated, adhering to confidentiality is one of the most important aspects of the entire sales process.

Thanks to a well-constructed confidentiality agreement, sellers can enjoy protection from the disclosure of critical and confidential information during the sales process. While confidential agreements may have originated as a way to safeguard against prospective buyers revealing information about a seller’s business, these agreements have evolved to consider numerous seller concerns. 

A good confidentiality agreement helps to protect all sorts of important details that may be revealed during the sales process including trade secrets and proprietary information. It can also outline the fact that a prospective buyer will not attempt to hire away key employees.

Considering the importance of a confidentiality agreement, it is well worth the time to create an agreement that covers all key areas. Everything from how confidential information should be shared to how breaches in confidentiality should be remedied must be addressed by a confidentiality agreement. It is not prudent to cut corners to save money and time when drafting a confidentiality agreement, as it is likely one of the most important business documents your business will ever create.

Just as no two businesses are the same, this fact holds true for the content of important legal documents. The sale of every business is a unique situation, and for that reason every confidentiality agreement must be tailored to fit the precise circumstances of the business.

Business brokers and M&A advisors are experts in the buying and selling of businesses. Part of that expertise extends to the creation and execution of confidentiality agreements, which are also sometimes referred to as non-disclosure agreements. 

At the end of the day, the last thing any business owner wants is for key information regarding their business to be revealed. Working closely with a brokerage professional is an important way for sellers to safeguard their confidentiality throughout the process.

Copyright: Business Brokerage Press, Inc.

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There can be no doubt that the quality of your employees will directly impact the quality of your business and its long-term value. Employee quality and the success of your business are intrinsically linked. Unfortunately, far too many entrepreneurs learn this lesson too late, and their businesses suffer as a consequence. Employees who do not feel invested in a business and its long-term growth and success can damage your business on a daily basis. 

The quality of employees stands as one of the most important factors that entrepreneurs should consider before buying a business. With this fact in mind, it is critically important that business owners do everything possible to put together a great team. 

It’s important to keep in mind that your employees can be either an asset or a detriment to the success of your business. A dedicated and knowledgeable team of employees will help boost not only a business’s bottom line, but also its value when it comes time to sell.

Along similar lines, if you’re considering buying a business, you should take a careful look at how much work the current owner is responsible for and how well they are supported by the staff. If the owner is shouldering too much work and not relying on capable employees, then owner burnout can be a real possibility. Remember that the amount of work the current owner is doing could be what you’re facing down the line.

It is also important to consider the loyalty of employees and how likely it is that they may quit and join a competitor. Potential buyers should carefully evaluate employees and how they operate before signing on the dotted line.

At the end of the day, most businesses are only as strong as their employees and management. It should come as no surprise that employees who don’t feel invested and are just doing the “bare minimum” to not get fired are not the kind of employees that help build a successful business. 

A successful business is one with longevity, and the future of a business depends on employees that care about the business. In doing so, they will work to ensure customer or client satisfaction and loyalty. There are many variables that you must consider before deciding to buy a business, but buyers should never overlook the strength of employees.

Copyright: Business Brokerage Press, Inc.

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Deciding how the purchase of a business should be structured is no small task. If you are planning to help finance the sale of your business, you’ll want to tackle this issue very early in the sale process. When it comes to small business sales, a high percentage of deals include some seller financing. Here are some of the most important things you’ll want to think about beforehand.

Interest Rates

The simple fact is that interest rates cannot be overlooked. In an era where interest rates continue to climb, the future rates are far from certain. That’s why it is critically important to factor in interest rates to your buying decision. In the event that you find a buyer, you’ll need to decide what is the acceptable interest rate for a seller financed sale.

The Buyer and Debt

It is also quite important to know whether or not a buyer will assume any long-term debt or secured debt. Early in the process, you’ll want to address this topic and come to a conclusion regarding the optimal path forward. If there are favorable terms, this usually means a higher sales price.

Taxes

There will, of course, be tax implications to the sale. It is only prudent to work well in advance with a tax professional, to understand every tax implication. You should gain an understanding of how the taxes will work long before a sale takes place. You’ll also want to talk to an experienced attorney to understand the legal implications of seller financing.

Without a doubt, there will be tax implications that affect your sale. That’s why you’ll need to understand what those implications are and what it will mean for you.

Additional Costs

Just as taxes can throw a curveball into the mix, this fact holds true for additional costs. You’ll want to consider if there are any unsecured creditors that still need to be paid in full. Closing costs are another commonly overlooked issue. It is prudent to determine whether or not the seller plans on paying for part of the closing costs. Closing costs, just like taxes, can be sizable and should not be overlooked.

Knowing Your Lowest Price

Before walking into any negotiation, you need to know what is your lowest price. It can take months or even years for a business to sell. You need to know what your lowest price is for when the day comes that an offer is made. 

Working with a business broker or M&A advisor is a savvy way to address all of these issues well in advance. There are many factors that go into the sale of a business and having an experienced professional by your side is simply invaluable.

Copyright: Business Brokerage Press, Inc.

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You’ll often hear business brokers and M&A advisors say that the right time to prepare for your exit is when you first launch. By that they mean that it’s important to always be thinking about how to optimize your business so that it is streamlined for an eventual sale.  Some of the savviest entrepreneurs and business owners are also thinking about partnering with those who will ultimately want to buy their businesses, even if the prospective sale of their business is many years away. It is easy to see why so many top-level entrepreneurs feel this way, as it is prudent to plan for the outcome you want from the very beginning.

It Pays to Think Ahead

The simple fact is that in most endeavors in life, it pays to think ahead. Selling a business is no exception. The rate of businesses that are being acquired is rising significantly. In a recent study at the University of Maryland, researchers found that in the last three decades the rate of venture capital-backed startups that have been acquired has soared from 10% to 90%.^[1]

Anyone building a business should build that company in such a way that it will be appealing for acquisition down the line. Thinking about who the ideal buyer might be will help you to properly shape your business operations.  

Many owners have an eye on businesses that work to serve similar markets. You may also want to think about how your product and your business model work to address an overlooked need within the existing customer base of that larger entity. If you can clearly show that acquiring your company will instantly lead to new business, then much of the battle is already won. By finding customers that a business is overlooking, you have positioned your business to be an attractive target for acquisition. 

Have a Success Oriented Strategy from Day One

In short, company founders must understand their customer, their product, and why a customer will want and need what they offer. Being able to attract the right talent is also important. If a successful staff is firmly in place, your business will be far more attractive to potential buyers.

Understanding from day one the path of your startup and where you want to go will make all the difference in your success. It is important to remember that it is much easier to build an acquisition friendly company from day one than it is to retrofit your existing company years down the road.  

1. The Great Startup Sellout and the Rise of Oligopoly

Copyright: Business Brokerage Press, Inc.

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If you’re selling a business for the first time, you might have a preconceived notion of the type of buyer that’s most likely to purchase your business. However, the truth is that sellers often get competitive and attractive offers from buyers that they were not expecting to have an interest in their business. Let’s take a look at some of the variety of buyers you might encounter on the path to selling your business.

Your Family Members

One common buyer would be a member or members of your family. One of the advantages to selling to family members is they already may have a deep understanding of what it means to own and operate your business. As a result, they may feel more prepared. 

On the other hand, just because someone is your family member does not mean they have the chops to actually run your business. Further, if you sell to a family member, you may end up dealing with someone who has less cash available to buy.

Competitors and Synergistic Buyers

You may not have warm fuzzy feelings towards your competitors, but the truth is that you need to be open to the idea of receiving offers from them. In fact, many competitors immediately look to their competition first when they decide they are going to expand their business. Your competitors make a lot of sense as good candidates because they understand your industry. Purchasing your business represents a viable way to rapidly expand their own offering with products and/or geographical reach.

Along similar lines, synergistic buyers acquire new companies in order to leverage their existing operations. You will find these buyers are typically larger entities in the same or related industries. In buying your business, their goal is to support and quickly add value to their current organization.

Individual Owner Operators

Many sellers end up with a deal on the table from an individual buyer. There are definite advantages associated with this type of buyer including the fact that it can streamline the sales process when you are dealing with one person rather than a group. Individual buyers oftentimes have corporate experience that helps them to effectively take over and manage a business. Another advantage to the individual buyer is that he or she oftentimes has a personal interest in the business and plans to successfully operate and improve it. 

Financial Buyers

A financial buyer is most interested in their ROI. They will zero in on finding out about the cash flow and long-term exit strategies. These investors are typically only interested in very solid companies that are generating solid revenue. They will be less likely to want to take the time to make changes and improvements, so they will expect healthy returns on their investment on day one. 

Your business broker or M&A advisor will help you understand the pros and cons of various buyers when it comes to your unique situation. Ultimately, you’ll find the type of buyer that is best suited to buy your business and that fulfills your needs and goals simultaneously. 

Copyright: Business Brokerage Press, Inc.

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