It is always important to try and put yourself “in the other person’s shoes.” This fact is of paramount importance when dealing with prospective buyers. Thinking like a prospective buyer could, in fact, be the difference between selling your business and not selling your business. Yet, it is important to continue to put yourself in your buyer’s shoes during the entire sales process.

It is easy to think that because everything is going smoothly with the sale of your business that the tough part is behind you. That may be true, but then again there could still be problems ahead. Issues can come up at a moment’s notice when either your prospective buyer or his or her advisor raises a red flag. Additionally, the larger the business, the greater the complexity. This translates to the greater the risk of problems arising.

The “Little Things” that Could End Up Quite Big

Financial statements are of considerable importance. Quite often you’ll see contingencies regarding financial statements and/or business tax returns, so be ready and be organized. Lease issues is another common category for contingencies. Falling under the lease issue umbrella are topics such as whether or not the seller has agreed to stay on, or issues regarding the property or needs associated with the property if it is a rental.

Other common contingencies can include issues arising from equipment and fixtures that are being included with the sale. These are areas that could be easy to overlook, but they can serve to throw a major wrench into the workings of a deal. The so-called “little things” can cause a deal to fall apart.

3 Key Steps for Preventing Disruptions from Contingencies

Step One – Create a Comprehensive List

One easy move you can make to prevent disruptions from contingencies is to make a list of all FF&E or furniture as well as fixtures, equipment or any other items that could be included with the sale. If an item is not included be sure to remove it entirely.

Likewise, if an item is inoperable then repair it ahead of time. Or at the bare minimum, you could make a list of items that are currently inoperable and include those items in your list. Remember, you don’t want a last-minute surprise or misunderstanding to jeopardize your sale.

Step Two – Check Your Leases

Problems with leases can send deals spiraling out of control. It is a prudent investment of your time to look at things like your leases. You’ll want to make certain that there are no issues that could be viewed as problematic. If there are issues, then it is in the best interest of the deal that you disclose this information at the start of any deal. After all, you don’t want to waste anyone’s time, including your own.

Step Three – Predict Questions and Have Answers Ready

The time you invest in predicting potential questions and having the answers to those questions ready is time very well spent. You’ll look prepared and that helps build trust.

Be ready to answer questions that are likely to arise such as are you going to stay on with the business for a given period of time and what will be the cost, if any, of you doing so? What about employees staying on? Are there legal issues that should be considered? Being able to answer these kinds of questions is a prudent step.

Considering the needs of your prospective buyer will help you make a sale. In selling a business, there is no replacement for being organized and prepared.

Copyright: Business Brokerage Press, Inc.

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A large percentage of business owners are not just owners, but also operators. Owning a business can be exciting and rewarding, but it is also a tremendous amount of unending work. In the end, the “buck” stops with you. With that realization comes a significant amount of stress. It goes without saying that stress can lead to burnout.

A business with a burnt-out owner can spell doom. Even if you are lucky and have invested the time to surround yourself with an amazing team, you will only have so much time before you have to jump back in and be very proactive. Otherwise your business will begin to suffer.

Let’s face it, as the owner, you can take a vacation. But your burnout might not let you even enjoy said vacation. This is even more true if you are stuck checking your texts and your computer all day long, trying to manage things from out of town.

The First Step is Acceptance

When dealing with burnout the first, and most important step, is to admit that you are in fact, burnt out. This condition may be the result of mental and physical fatigue. While most people might not immediately connect issues, such as health and diet, with burnout, there is often a connection.

Start Taking Care of Yourself

Owning a business means work and lots of it. That may mean that you are not taking enough time or thinking enough about your own health and well-being. Consider improving your diet to include more fresh foods and reduce or even eliminate fast food, which has been proven to negatively impact health. You should also consider investing in air and water purification systems. A recent medical study showed that indoor air pollution can harm not just the lungs but even the kidneys as well.

In the end, you are the key element in the success or failure of your business. If you are suffering from aches and pains, headaches and fatigue, then you, as the heart of the business, are ultimately harming the business. Putting your health first is a way for you to safeguard the health of your business.

Consider Putting a #2 Person in Place

Many business owners have a great “right hand person” that can take over if the owner becomes sick, but that is not always the case. Keep in mind that when it comes to selling your business, having that key team member will be essential to your potential buyer. If it’s possible to start cultivating that person now, by all means do so.

You may be saying, “But I’m a health nut and I still feel burnt out.” Again, owning a business is demanding, and the years can weigh heavily. It is important, especially before burnout sets in, to step back and look for ways to streamline your operations and delegate responsibilities. Small changes can have a big long-term impact. Additionally, streamlining your operations will make your business more attractive when it comes time to sell.

In the end, if taking a vacation, streamlining your operations, and improving your health regime doesn’t yield big results, it might be time to consider selling your business. There is no rule that states that you must operate your business until retirement. Don’t be afraid to walk away if necessary.

Copyright: Business Brokerage Press, Inc.

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When it comes to selling a family-owned business there are no shortage of complicating factors, but one in particular pops up quite often. This article contains a true story about a popular family business that was built up from the ground up only to later meet a very sad ending. While this is just one story, there are countless similar situations all across the country.

Once upon a time, there was a family-owned pizza dough company that had millions in sales. They sold their pizza dough to a range of businesses including restaurants and supermarkets. The founder had five children and split the business equally amongst them. Complicating matters was the fact that the children didn’t feel compelled to work in the family business. As a result, they turned the operation of the business over to two members of the third generation.

Once the founder’s children reached retirement age, they decided that they wanted to sell. So, they hired a business broker. The business broker began the search for an appropriate buyer, however, there was little interest. After considerable effort, the business broker found a successful businessman who offered to buy the pizza dough business for 50% of the sales, which was a good price. The business broker took the offer to the five owners and that is when the problems began.

A huge family argument was unleashed and the business broker was cut out of the loop. Later the offer was turned down flat and worst of all there was no counter-proposal, no attempt to negotiate price, terms, conditions or anything else. In short, the offer was finished and done. In the end, the business broker had lost several months of hard work.

Wondering what had happened, the business broker learned that two of the third-generation members who had been operating the business didn’t want to sell out of fear of losing their jobs. Over two decades later, the business has experienced almost no growth and is essentially breaking even. The owners, now in their 70s will likely never receive anything for their equity.

What you have just read is a true story, although the specific business type has been changed. This story serves to outline the problems that can arise when it comes time to sell a family business, especially if there is no agreement in place. Passing on this deal meant that the five children lost a considerable amount of money; this would have of course been money that could have made their retirement much more pleasant.

The story is both tragic and cautionary, in that this great business built from scratch by its founder was, in the end, left to flounder.

There is a moral to this story. Family-owned businesses need to have strict guidelines in place concerning issues such as salaries, benefits, what happens when one member wants to cash out and more. Such issues should be worked out with professionals, such as business brokers, years in advance.

A recent article posted on Forbes.com entitled “Small Business Owners Are Retiring, And Millennials May Not Fill The Gap On America’s Main Street” uses the closing of a 235-year-old hardware store to prove a startling fact: the Millennial generation may not be suited to take over small business ownership like the generations before them. In the case of Elwood Adams Hardware, which has seen a multitude of owners over the last almost two and a half centuries, the current owner simply couldn’t find a buyer.

While student loan debt and an inclination to pursue work in the gig economy may be factors in this unwillingness to take on small business ownership, their age may actually be the driving factor. The article mentions that the sweet spot for entrepreneurship is typically the 40’s, so it may take some time to truly see if millennials are suited for small business ownership.

Click here to read the full article.

A recent article from the Axial Forum entitled “Five Due Diligence Pitfalls and How to Avoid Them” outlines some common mistakes and pitfalls that are made during the due diligence process and gives tips on how to navigate the due diligence waters. The pitfalls include:

1. Missed Opportunities
2. Pointless Provisions
3. Red Flags at the 11^th Hour
4. Poor Communication
5. Leaving Money on the Table

Avoiding these five things won’t guarantee success, but doing so can definitely help give an owner the best chance at success. Buying a business is not an easy process, but knowing what to expect, what to avoid, and how to maximize the value of a dollar can go a long way.

Click here to read the full article.

A recent article posted on Divestopedia.com entitled “The Investment Banking Landscape: Different Types of M&A Firms” gives an overview of the different types of M&A firms as well as how they can be useful in different situations. Owners interested in selling should know how each type of firm works and how each could be of use to them during the sale of their business. The following represent these different types of firm:

1. Boutique Investment Firms
2. Regional Investment Banks
3. Bulge Bracket Investment Banks
4. M&A Advisory Firms
5. Business Brokerage

Each of these types of M&A firms has its own benefits and drawbacks, so it is very important for an owner to understand and explore the options available to them before settling on one.

Click here to read the full article.

A recent article posted on BizBuySell.com entitled “Small Business Transactions Reach Record High As Buyers Shrug Off Amazon Effect” explores business transaction data from the third quarter of 2017. As outlined by the report, closed transactions numbered 2,589 in the third quarter, up 24% from the same time period last year. This quarter continues the overall trend of quarter-over-quarter growth in reported transactions going back two years.

Increases in median revenue and cash flow of sold businesses as well as a decrease in the median time to sell a business show a strengthening small business sector and an improving overall market. Although retail has taken a hit from the “Amazon Effect,” retail transactions are actually up 23% since this time last year. Read the full report by clicking the link below.

Click here to read the full article.

A recent article posted on BizJournals.com entitled “Closely-held Businesses Head Toward a Slippery Slope” explores a startling truth about small businesses in the United States: around 60 percent of owners will likely retire within the next 10 years. On the surface, this may sound unimportant or irrelevant to the small business world. But just beyond the surface lies the fact that almost 70 percent of successions fail. But still, what does this mean for the small business sector?

Finding a suitable well-trained successor will be of absolute necessity within the next 10 years for these 60 percent of retiring owners. Failure is inherently more common than success post-transition, so finding qualified individuals to take over will be paramount to continued small business success in the United States.

Click here to read the full article.

Copyright: Business Brokerage Press, Inc.

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The old saying that “there is no replacement for experience” is a truism that has stood the test of time. The simple fact is that a lack of experience can dismantle your deal.

Consider the following scenario – a business owner nearing retirement owns a multi-location retail operation that is doing several million in annual sales. He interviews a well-respected and experienced intermediary and is impressed.

However, the business owner’s niece has recently received her MBA and has told her uncle that she can handle the sale of his business and in the process, save him a bundle. On paper, everything sounds fine, but as it turns out the lack of experience gives this business owner less than optimal results.

Let’s take a look at a few problems that recently arose with our nameless, but successful, business owner and his well-meaning and smart, but inexperienced niece.

Error #1 No Confidentiality Agreements

One problem is that the business owner and his niece don’t use confidentiality agreements with prospective buyers. As a result, competitors, suppliers, employees and customers all learn that the business is available for sale. Of course, learning that the business is for sale could cause a range of problems, as both employees and suppliers get nervous about what the sale could mean. Ultimately, this could undermine the sale of the business.

Error #2 Incorrect Financials

Another problem is that the inexperienced MBA was supposed to prepare an offering memorandum. In the process, she compiled some financials together that had not been audited. While on paper this seemed like a small mistake, it failed to include several hundred thousand dollars the owner took. He simply forgot to mention this piece of information to his niece. Clearly this mishap dramatically impacted the numbers. Additionally, this lack of information would likely result in lower offers as well as lower bids, or even decrease overall prospective buyer interest.

Error #3 Failing to Include the CFO

A third key mistake in this unfortunate story was a failure to bring in the CFO. The niece felt that she could handle the financial details, but in the end, her assumption was incorrect. The owner and the niece failed to realize that prospective buyers would want to meet with their CFO, and that he would be involved in the due diligence process. In short, not bringing the CFO on board early in the process was a blunder that greatly complicated the process.

The problem is clear. Selling a business, any business, is far too important for an amateur. When it comes time to sell your business, you want an experienced business broker with a great track record. Again, there is no replacing experience.

Copyright: Business Brokerage Press, Inc.

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The saying “loose lips sink ships,” doesn’t have ancient origins. While it sounds like one of those sayings that has been around forever, the saying was actually invented during World War II. It was taken quite literally. The idea was that a lack of secrecy could lead to the loses of actual ships or other wartime deaths. So in other words, this saying was serious business. It should come as no surprise that this saying is alive and well in the business world.

Few things are more important than safeguarding your business from leaks. Leaks can, simply stated, spell disaster for your business. Leaks can be particularly damaging if you are looking to or are in the process of selling business. A leak that you are planning on selling your business can have a range of consequences. Everyone from employees to customers, suppliers and, of course, prospective buyers and competitors could all take notice and this could have ramifications.

Yet, confidentiality stands as a bit of a Catch-22 situation. Sellers want to get to the best price possible for their business and that means letting prospective buyers know that the business is for sale. The greater the number of potential buyers contacted, the greater the chances of receiving top dollar. However, the more potential buyers that know you are interested in selling, the greater the risk of a leak. Clearly, this situation represents a considerable dilemma.

As a buyer, you may discover that owners can be overly, perhaps even irrationally concerned, about leaks. It is important to remember that for most owners, the business represents their largest asset and often their greatest professional accomplishment in life. In other words, they have a lot riding on their business. It is important to remind sellers that the less time a business is on the market the lower the risk of a leak. Also, the longer the negotiations go on, the greater the risk of a leak.

Sellers should always remember to keep all important documents related to the potential sale or sale literally under lock and key. Everything should be considered confidential and only transferred to buyers in a highly secure fashion. Confidential information shouldn’t be emailed or faxed, as this makes a leak much easier. Sellers and buyers alike should remember that they shouldn’t discuss the sale or potential sale with anyone. Confidentiality should be stressed at all times.

Working with a business broker is one way to dramatically reduce the risk of a leak occurring. For business brokers, confidentiality is a cornerstone of their operations. Business intermediaries require buyers to sign very strict non-disclosure agreements. While loose lips may sink “ships,” there is no reason that your business, or the one you are interested in buying, has to be one of those ships.

Copyright: Business Brokerage Press, Inc.

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If you are unfamiliar with CSR or corporate social responsibility, you are certainly not alone. In the coming years, you’ll be hearing a lot about CSR. In this article, we’ll look at CSR and how, when implemented with sincerity, it can positively impact your company and its operation.

Building Your CSR Locally

One of the key ways that you can build your CSR is to think about ways to help your community. Contributing to local community programs, for example, is a great place to start. Everything from personal involvement to direct financial support can help build your company’s reputation within your community.

Your Connection to the Environment

A second way to build your CSR is to show that your company is thinking about its impact on the environment. Recycling is important but so is using eco-friendly packaging and containers. Additionally, embracing low-emission and high mileage vehicles is another good step as this lowers your company’s carbon footprint.

Advertising and Good PR

A third area to consider is how your company interacts with the marketplace. Using responsible advertising, business conduct and public relations is a savvy move. Likewise, providing fair treatment of your shareholders, suppliers and vendors and contractors will all help to improve your CSR.

Yet, one of the single most important areas of corporate social responsibility occurs in the workplace. The advent of social media has helped fuel the dispersal of information. If your business isn’t treating its employees in a fair manner and/or has unsafe work conditions or unfair employment practices, the word will eventually get out. There has never been a more important time to treat your employees well.

Embracing CSR serves to increase shareholder and investor interest. In short, it is expected. Socially-conscious companies are considered smart and stable investments. A company that has fully embraced CSR will find greater buyer interest and even a higher selling price when the time comes to sell. Most buyers want excellent customer loyalty with no skeletons hiding in a company’s closet. They also are seeking happy and loyal employees, low employee turnover and for a company to have a good reputation within a community. CSR helps achieve all of these goals and more.

Ultimately, corporate social responsibility works to create additional value. When you invest in CSR, you are investing in achieving a higher selling price and making your business more attractive to sellers. Summed up another way, you can’t afford not to think about this topic.

Copyright: Business Brokerage Press, Inc.

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