Selling your business doesn’t have to feel like online dating, but for many sellers this is exactly what it can feel like. Many sellers are left wondering, “What exactly do buyers want to see in order to buy my company?” Working with a business broker is an excellent way to take some of the mystery out of this often elusive equation. In general, there are three areas that buyers should give particular attention to in order to make their businesses more attractive to sellers.

Area #1 – The Quality of Earnings

The bottom line, no pun intended, is that many accountants and intermediaries can be rather aggressive when it comes to adding back one-time or non-recurring expenses. Obviously, this can cause headaches for sellers. Here are a few examples of non-recurring expenses: a building undergoing foundation repairs, expenses related to meeting new government guidelines or legal fees involving a lawsuit or actually paying for a major lawsuit.

Buyers will want to emphasize that a non-recurring expense is just that, a one-time expense that will not recur, and are not in fact, a drain on the actual, real earnings of a company. The simple fact is that virtually every business has some level of non-recurring expenses each and every year; this is just the nature of business. However, by adding back these one-time expenses, an accountant or business appraiser can greatly complicate a deal as he or she is not allowing for extraordinary expenses that occur almost every year. Add-backs can work to inflate the earnings and lead to a failure to reflect the real earning power of the business.

Area #2 – Buyers Want to See Sustainability of Earnings

It is only understandable that any new owner will be concerned that the business in question will have sustainable earnings after the purchase. No one wants to buy a business only to see it fail due to a lack of earnings a short time later or buy a business that is at the height of its earnings or buy a business whose earnings are the result of a one-time contract. Sellers can expect that buyers will carefully examine whether or not a business will grow in the same rate, or a faster rate, than it has in the past.

Area #3 – Buyers Will Verify Information

Finally, sellers can expect that buyers will want to verify that all information provided is accurate. No buyer wants an unexpected surprise after they have purchased a business. Sellers should expect buyers to dig deep in an effort to ensure that there are no skeletons hiding in the closet. Whether its potential litigation issues or potential product returns or a range of other potential issues, you can be certain that serious buyers will carefully evaluate your business and verify all the information you’ve provided.

By stepping back and putting yourself in the shoes of a prospective buyer, you can go a long way towards helping ensure that the deal is finalized. Further, working with an experienced business broker is another way to help ensure that you anticipate what a buyer will want to see well in advance.

Copyright: Business Brokerage Press, Inc.

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When it comes to selling a business, sellers simply must pay attention to red flags. Problems can always pop up, and that’s why they need to keep their eyes open.

Rarely does a “white knight” ride in and rescue a business with no questions asked. And if this were to happen, you should be asking, “Why?” Until a deal is officially inked, sellers need to evaluate every aspect of a transaction to make sure something isn’t happening that could wreck the deal.

Common Red Flags to Watch For

One example would be having a company express interest in your business but you are never able to directly contact key players, such as the President or CEO. The reason that this is a red flag is that it indicates that the interest level may not be as great as you initially hoped.

A second red flag example would be an individual buyer, with no experience in acquisitions or experience in your industry, looking to buy your business. The reason that this second example could prove problematic, is that even if the inexperienced buyer is enthusiastic as the deal progresses, he or she may become nervous upon learning what a deal would actually entail. In other words, the specifics and the reality of owning a business, or owning a business in your industry, could come as a shock to an inexperienced buyer.

Both of these examples above are examples of early-stage red flags. But what about issues that pop up at later stages? The simple fact is that red flags can come at any stage of the selling process.

A good example of a middle-stage red flag is when a seller is denied access to the buyer’s financial statements, which is of course essential to verify that the seller is able to actually make the acquisition. A final-stage red flag example is an apparent loss of momentum, as the buying and selling process can be a long one.

Business Sellers Need to Protect Their Assets

Sellers are usually very busy and don’t have time to waste; this is doubly true for owner/operators of businesses, as the time they invest with a prospective buyer is time that could be spent doing something else.

All too often, businesses begin to run into trouble when they place their business on the market. If this trouble negatively impacts the bottom line, then the business can become more difficult to sell and the final sale price will likely be lower.

That’s why it is so essential that sellers protect themselves from buyers that are not truly interested or are simply not a good fit. Working with a business broker is an easy and highly effective way for sellers to protect themselves from buyers that are simply not the right fit. A broker helps to “weed out” unfit candidates.

While red flags are never good, that doesn’t mean that a red flag means a deal is a definitely at an end. Especially with the guidance of an experienced business broker, many of these issues can be overcome.

In the end, if you, either as a buyer or seller, suspect that there is a problem, then you should take action. The problem will not simply go away. The single best way to deal with a red flag is to tackle it head on as soon as you recognize it.

Copyright: Business Brokerage Press, Inc.

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The simple fact is that family businesses are different. After all, a family business means working with family and all the good and bad that comes with it.

While an estimated 80% to 90% of all businesses are family owned, relatively few are properly planning for what happens when it comes time to sell. According to one study, a whopping 72% of family businesses lack a developed succession plan which is, of course, a recipe for confusion and potentially disaster. Additionally, there are many complicating factors, for example, studies indicate that 40% to 60% of owners of family businesses want the business to remain in the family, but only 40% of businesses are passed to a second generation and a mere 10% are passed down to a third generation.

Let’s turn our attention to a few of the key points that family business owners should consider when selling a business.

1. Confidentiality should be placed at the top of your “to do” list. When it comes to selling a family business, it is vital that confidential is strictly observed.
2. Remember that it may be necessary to lower your asking price if maintaining the jobs of family members is a key concern for you.
3. Family members who stay on after the sale of the business must realize that they will no longer be in charge. In other words, after the sale of the business the power dynamic will be radically different, meaning that family members will now have to answer to new management, outside investors and an outside board of directors.
4. Family members will want to appoint a single family member to speak for them in the negotiation process. A failure to appoint a family member could lead to confusion, poor decision making and ultimately the destruction of deals.
5. When hiring a team to help you with selling your business, it is critical that your lawyer, accountant and business broker are all experienced and proven.
6. Don’t hold meetings with potential buyers on-site.
7. Every family member, regardless of whether they are an employee or an investor, must be in agreement regarding the sale of the company. Again, one of your primary goals is to avoid confusion.
8. Family employees and family investors must be in agreement regarding the sale price or there could be problems.

Working with an experienced business broker is a savvy move, especially when it comes to selling a family business. Business brokers know what it takes to make deals happen. Being able to point to a business brokers’ past success will help reduce family member resistance to adopting the strategies necessary to successfully sell a business.

Copyright: Business Brokerage Press, Inc.

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Far too many prospective business buyers and sellers overlook just how important negotiations can be. But they can also be tricky. In general, there are three approaches to negotiations. Thinking through your negotiation strategies well before the time to buy or sell is a savvy and prudent move.

Negotiation Tactic #1 Take It or Just Leave It

In this negotiating tactic, the buyer makes an offer and the seller makes a counter-offer, then both sides leave it there. If the deal works fine. If it doesn’t work, that’s fine too.

It is usually smart to step back and ask yourself if you are comfortable with this approach. Sometimes a small degree of flexibility can go a long way towards turning a proposed deal into a reality.

Negotiation Tactic #2 Maybe Consider Splitting the Difference

Another negotiating tactic is to simply offer to split the difference. This tactic is pretty straightforward and it demonstrates a good deal of flexibility; however, the financials may not always make sense for both sides.

As always, it is important to think about all the factors involved in allowing a deal to fall apart, such as how much time will it take to find another buyer or another business to buy? Showing a willingness to split the difference is often seen as a goodwill offer that can facilitate further negotiations within an environment of lower emotional intensity.

Remember, as long as the two sides are talking, a deal may be reached. But when communication ceases, then the deal is definitely finished and not in a good way.

Negotiation Tactic #3 Negotiation from What is Most Important to Each Party

Understanding what is most important to both parties is usually critical for a successful deal. Important areas can range from allowing a relative to stay with the business to moving the business to a new location. Not all key points are directly linked to money, and it is vital to understand this all-important negotiating fact.

Negotiation Tactic #4 Bring in a Pro

In negotiations there is an old adage, “Never negotiate your own deal.” Emotions can run high when it comes to buying or selling a business and then there is the problem of perspective. Buyers and sellers are often lack the perspective that an outsider can bring.

Opting for help and guidance from someone who buys and sells businesses for a living, can be a huge step in the right direction. Through a professional business broker, it is possible to not only establish a fair price but also address the array of intangibles that can go into buying and selling a business.

At the end of the day, deals are put together piece by piece, and skill is involved in the process. Working with others is at the heart of successful negotiation, and that means taking into consideration what the other side wants and what the other side needs.

Copyright: Business Brokerage Press, Inc.

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