There are unique attributes of a company that make it more attractive to a possible acquirer and/or more valuable. Certainly, the numbers are important, but potential buyers will also look beyond them. Factors that make your company special or unique can often not only make the difference in a possible sale or merger, but also can dramatically increase value. Review the following to see if any of them apply to your company and if they are transferable to new ownership.

Brand name or identity

Do any of your products have a well recognizable name? It doesn’t have to be Kleenex or Coke, but a name that might be well known in a specific geographic region, or a name that is identified with a specific product. A product with a unique appearance, taste, or image is also a big plus. For example, Cape Cod Potato Chips have a unique regional identity, and also a distinctive taste. Both factors are big pluses when it comes time to sell.

Dominant market position

A company doesn’t have to be a Fortune 500 firm to have a dominant position in the market place. Being the major player in a niche market is a dominant position. Possible purchasers and acquirers, such as buy-out groups, look to the major players in a particular industry regardless of how small it is.

Customer lists

Newsletters and other publications have, over the years, built mailing lists and subscriber lists that create a unique loyalty base. Just as many personal services have created this base, a number of other factors have contributed to the building of it. The resulting loyalty may allow the company to charge a higher price for its product or service.

Intangible assets

A long and favorable lease (assuming it can be transferred to a new owner) can be a big plus for a retail business. A recognizable franchise name can also be a big plus. Other examples of intangible assets that can create value are: customer lists, proprietary software, an effective advertising program, etc.

Price Advantage

The ability to charge less for similar products is a unique factor. For example, Wal-Mart has built an empire on the ability to provide products at a very low price. Some companies do this by building alliances with designers or manufacturers. In some cases, these alliances develop into partnerships so that a lower price can be offered. Most companies are not in Wal-Mart’s category, but the same relationships can be built to create low costs and subsequent price advantages.

Difficulty of replication

A company that produces a product or service that cannot be easily replicated has an advantage over other firms. We all know that CPA and law firms have unique licensing attributes that prevent just anyone off of the street from creating competition. Some firms have government licensing or agreements that are granted on a very limited basis. Others provide tie-ins that limit others from competing. For example, a coffee company that provides free coffee makers with the use of their coffee.

Proprietary technology

Technology, trade secrets, specialized applications, confidentiality agreements protecting proprietary information – all of these can add value to a company. These factors may not be copyrighted or patented, but if a chain of confidentiality is built – then these items can be unique to the company.

There are certainly other unique factors that give a company a special appeal to a prospective purchaser and, at the same time, increase value. Many business owners have to go beyond the numbers and take an objective look at the factors that make their company unique.

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You understand the finer points and potential of your business better than anyone; however, that doesn’t mean that prospective buyers will instantly see your business’s various strengths. When you are looking to sell your business, you have two very important jobs. The first is to get your business ready to be sold. A second essential job is to showcase your business’s greatest strengths. At the end of the day, you must be the one to articulate why your business is worth buying. This effort, of course, will be supported by your Business Broker or M&A Advisor. 

Understand Who Will Buy Your Business 

Most people have never sold a business before and don’t fully understand what is involved in positioning one’s business for sale. The bottom line is that not every business is a good fit for every buyer. Finding the right buyer for your business will greatly expedite the process. This is yet another reason why it is critically important to work with experienced professionals. Business Brokers and M&A Advisors not only know what buyers are looking for, but also what sellers need to do to get their business ready to sell.

How to Navigate Roadblocks 

Selling a business, especially if you attempt to do so without professional help, is a very time-consuming and often draining process. Successfully running a business requires attention to detail and focus. Unfortunately, these can both suffer when owners attempt to put on yet another hat and handle the sale of their business. 

While you are attempting to sell your business, it is critically important that you maintain normal operations. The last thing you want is to weaken the finances of your business while you are waiting to find a buyer. Remember that it takes months, a year, or even longer to find a buyer for the typical business. Don’t let your business suffer damage in the interim. 

Think Like a Buyer

Preparing your business to be sold isn’t as simple as making a few cosmetic changes and calling it day. Instead, you’ll want to think like a buyer. 

What would you want to see if you were buying a business? You would want to know a great deal about that business and how it operates, who its key employees are, how likely those key employees are to stay, who the main customers and suppliers are, and the strength of the business location and competitors. Of course, you would also want a very detailed picture of the business’s financial situation. 

In short, you would want to clearly understand what the business does and what it’s really worth, how financially healthy it has been in the past, what the business’ prospects are moving forward and, in general, how much effort the business will take to operate. These are exactly the kind of key facts that any serious buyer will want to know. It’s only to be expected that a buyer would expect to learn this information before making a decision. 

At the end of the day, working with a Business Broker or M&A Advisor is one of the easiest ways to streamline the sales process. Thanks to years of experience, they already understand the pitfalls that you may experience as well as what is needed to position your business so that you can find the right buyer quickly and receive the best price possible. 

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When it comes time to sell your business and sign on the dotted line, you only have one opportunity to get it right. In many cases, business owners have made critical mistakes while attempting to sell their business. This kind of scenario can often occur when an owner trusts a friend or relative to help navigate the process. In some cases, business owners have even been known to try to broker their deals on their own. Let’s take a look at some common errors that have occurred during the process when experienced professionals were not brought in to assist.

Not Prioritizing Confidentiality 

We cannot understate the importance of confidentiality. When business owners try to go it alone, they often share valuable information with the wrong people, such as competitors. Or accidentally alert employees, suppliers and customers that the business is up for sale. When confidentiality is breached, unexpected and unfortunate consequences can result, such as employees looking for new work or customers switching over to work with different businesses. If any of these scenarios occur, it can devalue the business or even interfere with a sale going through properly.

Mistakes in Financial Information

If the party assisting you to sell your business lacks experience, he or she may accidentally omit preparing critical paperwork. Additionally, if the financial records are not properly audited, it could negatively impact the numbers. This could lead to lower offers and less interest from prospective buyers.

Failing to Involve Key Parties

Another error that could be caused by inexperience is neglecting to bring key parties into the deal. For example, when a business owner is guided by a layperson or trying to handle everything on his or her own, important people, such as the CFO, might accidentally not be brought into the due diligence process. While an error like this one might not necessarily kill the deal, it could lead to delays and complications. 

The bottom line is that when it comes to a large transaction like selling your business, it is time to rely upon trustworthy professionals. There is a long list of protocols and steps that lead to a deal going smoothly. Experienced business brokers and M&A advisors will make sure that all the best practices are followed and that you come out ahead in the end. 

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Many business owners don’t understand the concept of goodwill or how to calculate it. When a buyer is willing to pay a premium price for a business, far more than the company’s assets would typically dictate, that is considered goodwill.  Any company can benefit from understanding how goodwill is cultivated and increasing it within their operations. 

What is Goodwill? 

Goodwill can be as simple as your company having an exceptional reputation and a very loyal base of customers. Often highly sought-after technology can be a part of goodwill.  In other cases, goodwill can be in the form of IP or desirable domain names. However, as you can imagine, it is difficult to put a specific price on these kinds of benefits. 

When a business involving goodwill is sold, it can be very challenging to determine a fair amount for a business, since subjective values are involved.  In some cases, it can even be overvalued by the buyer. Your Business Broker or M&A Advisor will take goodwill into account when determining a fair and reasonable company’s valuation. 

The Case of Personal Goodwill

In some cases, a company’s goodwill is personal. This is often due to a professional building personal goodwill with customers or clients. Oftentimes this is a relationship built over a period of time. In these cases, the goodwill is not necessarily transferable. The business is associated with a person who is often the founder of the company. You will typically see this kind of situation with dental and doctor’s practices and law offices.   

So how does personal goodwill impact the sale of the business? When you sell it might be natural that the buyer will want protection in case the business faces a downturn when the current management departs. 

What can work for the buyers and sellers is for the business owner to agree to stay onboard for a designated period of time.  This can help ease the transition to the new business owner.  In other cases, the buyer and seller arrange an “earn out.” Any lost business is factored at the end of the year, and then this percentage is subtracted from the amount owed to the seller. In some cases, funds are placed in escrow and adjustments are made depending on the performance of the business. 

If you are buying or selling a business that involves personal goodwill, your situation may be different from that of the majority of businesses. However, a Business Broker or M&A Advisor can guide you through the process and ensure that all parties are satisfied. 

Copyright: Business Brokerage Press, Inc.

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You may have heard the advice, “the best time to prepare to sell is when you start your business.” While this statement is far from realistic for most business owners and may even sound humorous, it does contain a certain amount of wisdom. When it comes to getting the best outcomes selling your business, preparation cannot be undervalued. 

No matter where you are in the journey of running your business, we encourage you to prepare as much as you can. With that in mind, let’s take a look at some considerations and decisions that you’ll need to make when you do get ready to sell. It’s never too early to begin pondering the answers to these questions. 

If you are involved in the day-to-day running of your business, logic would dictate that you’re quite busy and don’t have time to dedicate a lot of time towards the process of selling your business. The good news is that is one area where a Business Broker or M&A Advisor will make all of the difference. 

Brokerage professionals will perform a variety of tasks from start to finish, including negotiating and interacting with prospective buyers on your behalf.  These professionals will be able to work on many things independently and, if it is your preference, they can notify you only about the most relevant details of the transaction. On the other hand, you may want to be very involved in the process of selling. If that is the case, let your brokerage professional know. 

Regardless of how involved you are with the business and the sales process, you will want to ensure that things stay as consistent as possible when you are in the sales phase. The reason for this is that buyers will want to see consistency. Any change in operations or revenue earned could turn out to be a red flag for a buyer. 

Another item that is worth thinking about ahead of time is confidentiality. Professional Business Brokers and M&A Advisors will put utmost importance on confidentiality. When confidentiality isn’t taken seriously, leaks are very common. These could quickly interfere with the sale, whether it is due to a client/staff looking elsewhere or competitors taking advantage of the situation. Your brokerage professional will advise you of the policies and precautions that work best when it comes to preventing leaks and only revealing details about your business to prospective buyers who have been carefully vetted.

If you have partners in your business, it makes sense to bring up the discussion of a future sale well in advance. This will allow you to get on the same page about your plans for how things will be handled when the time comes. In the case that the date of the sale ends up being before you expect it to be, it will be very helpful to have already addressed these issues. 

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Everyone knows that good employees are important for a thriving business. That’s why there has been so much emphasis on keeping employees happy. When your employees are feeling not only satisfied, but also valued, they will be more likely to keep your clients satisfied too. Your business will be more likely to thrive and grow. Of course, this works in the opposite direction as well. When your staff is frustrated and angry, their actions can drive away your customers and clients. If you are looking to sell your business for maximum revenues, it is a good idea to also maximize employee satisfaction levels.

Research from Oxford University found a link between happiness and productivity. According to their study, workers are 13% more productive when they are happy. It goes without saying that employees will be more likely to feel satisfied when they feel that their salary and benefits are fair for the work they do. If they are resentful about the compensation they are receiving for their work, this will ultimately impact their performance. 

When you think about some of the most successful companies, you realize that many of them invest substantially in supporting their employees to cultivate higher levels of employee satisfaction. For example, Google is well-known for offering a wide range of perks ranging from parental leave and paid time off to free lunches and fitness facilities. 

When it is feasible for employees to work remotely, many employers are finding that it makes sense to offer them this possibility. Not only will it help staff members to manage childcare, but also it can end lengthy and stressful commutes to work that could result in stress and anxiety. 

Research in the journal Frontiers in Psychology showed helpful interventions that are proven to increase employee happiness levels. These included training in resiliency, mindfulness, and cognitive-behavioral techniques. 

When you exhibit good leadership and act as a positive role model, your employees will likely follow suit. Employees should be acknowledged and rewarded for a job well done. In some cases, this may be a financial bonus, but in other cases it could simply be patting that employee on the back. Cultivating a positive company culture will prove to boost overall morale. This will increase success for your entire company. 

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If you are like most business owners, you have never sold a business before and might not have a clear idea of what the process is like. We recommend preparing your business in a way that makes the sale and transition process as easy for your buyer as possible. It should come as no surprise that buyers will like the idea of an easy transition. 

It will be very beneficial if you take the time in advance to evaluate the steps and think about what you can do on your end to benefit your buyer. Since you’re the expert on your business, you have unique insights into what would make the transition the most seamless for the other party. When you prepare for the sale with your buyer’s experience in mind, you will likely not only speed up the sales process, but also increase the selling price. 

1. Automate Processes

Just like you may have never sold a business before, your buyer may have never bought a business before. If you can figure out how to automate as many processes as you can, it will help with their workflow and reduce the level of intimidation your buyer may be feeling about taking over. 

2. Establish a Second in Command

One thing you can do is have a second in command on your staff. If there is a competent employee that your buyer can depend upon for assistance and support, that fact alone will be tremendously attractive. If you do not yet have that person in place, you might have an eye on choosing a person and preparing them for this role. Speaking of staff, you will want to make sure your entire staff is well-trained and any HR issues are resolved in advance. 

3. Keep Things Consistent 

As you get closer to the time you will put your business up for sale, you will want to begin to work with vendors and key customers. You will want to ensure that the supply chain and significant customers are consistent. Otherwise, this could cause major disruptions for your buyer and impede his or her success.  Of course, it goes without saying that you’ll want to keep the potential sale of your business completely confidential. If customers, vendors, and even employees learn about an upcoming sale, this fact alone can lead to a chain reaction of disruptions and problems. 

A business broker or M&A advisor can help in a wide variety of ways when you are getting ready to sell. They are experts in maintaining confidentiality while taking you through the sales process from start to finish. Brokerage professionals will also assess your business and inform you of any areas that could be improved to make your business more attractive to buyers. 

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