Business owners are usually too busy running their business to deal with the fact that retirement will arrive one day. Ultimately, every business owner walks away from their business. The sooner you start preparing for that day, the better off you’ll be.

Whether it is an established location, relationships with customers and suppliers, or an understanding of a given industry, an established business has much to offer. Prospective buyers also know the benefits of buying a business with a track record.

Simply stated, no one is a greater expert on your business than you. That means you are positioned to evaluate your business and help map out a plan so that there is a smooth transition from buyer to seller. Let’s take a look at some tips for getting the best price on your deal and making that transition a little easier.

1. Have a Second-in-Command

This first tip is one that shouldn’t be overlooked. Develop and have a competent, dependable, and proven second in command. Any prospective buyer evaluating your business will feel much more confident with the idea of taking over if they know there is a responsible and experienced professional waiting in the wings to support the transition and beyond.

Buying a new business can be an intimidating prospect, especially if the buyer has never owned a business before. Acquiring a business with a competent second in command in place will serve to ease a prospective buyer’s many apprehensions while boosting their confidence that their plan to buy and operate your business will be successful.

2. Streamline Operations

A second key tip for business owners looking for ways to ensure an easy transition is to streamline operations. A lot goes into operating a successful business and the more you can streamline that process, the more attractive your business will be to any prospective buyer. This could be everything from creating operations manuals to improving training for staff members.

3. Be Transparent Wherever and Whenever Possible

Everybody wants to be loved…but when it comes to business it’s best as a business owner for your employees, customers and vendors to be more in love with your business than you.  Communicating with key employees, customers and vendors early on in the process can help ensure a smooth transition.  Deciding how and when to have these communications can be tricky however, and seeking outside counsel may be your best course of action in this regard.

Any prospective buyer who is considering buying a business will feel much more comfortable after learning that key employees, customers and vendors will all be motivated and ready to work with the new owner. One of the top fears of any prospective buyer is that they will buy the business only to see critical team members quit, key customers take their business elsewhere, or have to deal with supply disruptions. No one expects you to work forever so, the earlier transparent communications can take place about “one day…”, the easier the ultimate reality of a transition will be.

Finally, any business owner considering selling their business should explore working with a business broker or M&A advisor. Business brokers understand what it takes to ease the diverse fears that buyers have when it comes to buying a business. A business broker or M&A advisor’s expertise and knowledge base can prove invaluable for helping business owners chart the best path forward and get their businesses sold.

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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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Many sellers are surprised to learn that seller financing is very common. In fact, sellers should realize that there is a good chance that in order to sell their business, they will have to consider offering seller financing. 

What is Seller Financing?

Seller financing essentially occurs when the seller provides a loan to cover some part of the purchase price. It is common for the rest of the purchase price to be covered by a combination of a down payment and additional financing sources. 

Benefits of This Approach

At the end of the day, seller financing means that the seller serves as sort of a bank for the buyer. While many sellers may not like this prospect, seller financing can offer many benefits. Two key benefits are that potential difficulties of working with a real bank are bypassed, and sellers often enjoy a higher final sale price.

Most business brokers strongly encourage sellers to consider seller financing. One reason brokerage professionals favor the seller financing option is that it helps stimulate buyer interest. A seller who believes in their business enough to offer seller financing can expect buyers to take notice and respond. Sellers with confidence in their business can expect buyers to be eager to learn more.

Due Diligence is Essential

Sellers who choose to offer seller financing will still have to perform all necessary due diligence. Working with a bank does have its benefits; for example, a bank will check a potential buyer’s financial statements as well as their credit reports and more. 

Without the involvement of a bank, the seller is responsible for performing due diligence and checking that the buyer has a low risk of default. While seller financing opens up many possibilities for sellers, it is important that sellers also realize that this route comes with additional responsibilities.

Safeguards to Utilize

There are a variety of safeguards that sellers can use to help protect themselves when offering seller financing, and once again, brokerage professionals can be invaluable guides in this regard. Contracts often allow for the seller to take back the business within a 30-to-60-day window if financing fails. Another helpful clause for businesses centered on inventory is that the new owners are required to maintain a predetermined level of inventory during the payment period.

Thanks to seller financing, both buyers and sellers can benefit in a range of ways. Sellers who opt for seller financing usually discover that they receive a good deal of attention from buyers. Buyers enjoy greater financing flexibility and have a very clear indicator that the seller has confidence in the business. While seller financing does come with a good deal of paperwork, it is an option that buyers and sellers alike should consider.

Copyright: Business Brokerage Press, Inc.

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When the time comes to sell a business, any business, confidentiality must be placed at the top of the list. One of the quickest ways to damage any business that is for sale is for confidentiality to be breached. Once confidentiality is breached it can be difficult, or even impossible, to contain or repair the damage. No business in any industry is exempt from this rule.

It is no accident that savvy and experienced entrepreneurs, business owners, attorneys, accountants and business brokers are dedicated to maintaining seller confidentiality. A single breach of confidentiality can potentially destroy a business or, at the very least, negatively impact its value. A breach of confidentiality, even if it doesn’t destroy a business, can tarnish its reputation and ultimately deflate its value. 

When it becomes public that a business is for sale, there are many potential negative ramifications. Key employees, customers and suppliers may all think that it is time to begin looking elsewhere. The loss of even one key employee, customer or supplier could have significant ramifications for your business. Employees may worry about the stability of their position and begin looking for employment elsewhere. Worst of all, employees may take their knowledge and expertise to a competitor and, in the process, weaken your business. 

Employees in management positions may leave and, in the process, create a massive hole in your organization that will be difficult to fill, especially in a timely manner. Key customers and suppliers, worried about disruptions, may take their business elsewhere. All of these variables can combine to negatively impact your bottom line and potentially decrease the value of your business overnight. 

As if all of this wasn’t bad enough, there is the very real problem of the competition. If the competition discovers that your business is for sale, they may share this information with your key suppliers and customers. Your competitors may become very aggressive in their quest to steal your customers and take advantage of the situation.

A breach of confidentiality can severely hamper your ability to sell your business. Business brokers and M&A advisors are experts at maintaining confidentiality through all stages of the sales process. We do more than simply have prospective buyers sign confidentiality agreements. Experienced business brokerage professionals will vet potential buyers to ensure that they are not just window shopping or gathering information, but are instead, truly serious about buying your business. 

Working on your behalf to ensure that a prospective buyer is a serious buyer is one of the best ways that we can protect confidentiality. The process of selling a business is a complex one, and at its foundation is taking steps to maintain confidentiality.

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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.

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Negotiations can often be both perplexing and delicate. A simple misstep can jeopardize what could have been a great deal. One key but often overlooked tool in any negotiation is to pause and consider the wants, needs, and desires of the other party. Contemplating the ideal outcome for them can work wonders.

Understanding what motivates a buyer is crucial for a successful outcome. At the beginning of the sales process, it’s unlikely that you’ll know what your buyer really wants. This lack of knowledge about their desires, values, and standards presents a challenge, especially in the initial stages. Essentially, you’re operating with limited key information at the negotiation’s onset, necessitating caution.

One effective approach is to emphasize the strong financials of the business. Emphasizing a business’s sound financial footing is generally well-received. Whether a buyer is a former corporate executive or from another background, highlighting a strong return on investment (ROI) is prudent. Additionally, most buyers prefer a business that won’t disrupt their current lifestyle.

Understanding what a buyer expects from you post-sale is crucial. Some may want the previous owner available to assist during the transition period, while others, particularly those familiar with your industry, may require less post-sale involvement. Knowing their expectations can help you adapt your approach accordingly. Some buyers may seek your expertise, while others have their own ideas for running the business. Understanding their direction can aid negotiations.

Emotions play a significant role in business transactions. Buyers are often excited about the prospect of purchasing a business, especially in the initial stages. However, it’s essential to maintain a realistic and grounded presentation and approach. Overselling the business can backfire, as it can lead to later disillusionment from the buyer.

Sellers should consistently consider what buyers want. While all buyers seek a successful business, their motivations and perspectives can vary widely. Tailoring your approach to each buyer and understanding their motivations can lead to positive outcomes. With their extensive experience, business brokers and M&A advisors can provide valuable insights into buyer motivation.

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As an entrepreneur and business owner, your partnership agreement stands as one of the most important business documents you will sign. Business structures can be as complicated as the people that create those businesses. Quite often, business owners create businesses with friends or loved ones and, as a result, will not have a proper partnership agreement in place. 

It’s important to note that not having a partnership agreement in place is a mistake. There are too many unknowns and too many variables not to have this essential document. You need a legal framework to protect your business from the vast array of potential pitfalls that may have an impact. 

The Key Elements of a Solid Partnership Agreement

At the top of the list of every partnership agreement is a clear outline and understanding of rights and responsibilities. All too often partnerships run into trouble as the rights and responsibilities of the parties aren’t clearly thought through and then outlined in a partnership agreement. 

Mapping out rights and responsibilities will help eliminate problems in the future. A partnership agreement should be seen as a serious legal document. As such, it is prudent to work with an experienced lawyer in the area of partnership agreements.

What Every Partnership Agreement Should Address

At the top of the list, every partnership agreement should address how money is to be distributed and which partner(s) will receive a draw. The issue of who will contribute funds so that the business becomes operational should be very plainly spelled out in the partnership agreement. A failure to address this issue could end the business before it even gets off the ground. 

Issues such as what percentage each partner will receive and who will be in charge are two additional key areas that should never be overlooked. In terms of issues that are frequently overlooked by those forming a partnership, it is common for those forming a partnership to overlook long-term issues such as what is to happen in the event of the death of a partner, what steps are to be taken to bring in a new partner, and how business decisions are made.

Without a solid partnership agreement in place, business owners may find themselves in the last place they want to be, namely, court. A lengthy court battle can weaken your business in a very wide range of ways including a hit to company morale as well as the loss of key customers and employees. A legal battle between business partners can destroy what would otherwise be a healthy and thriving business. 

The time you invest in the creation of a business agreement is time and money well spent. In fact, it is safe to state that a business agreement might just turn out to be one of the greatest investments you ever make.

Copyright: Business Brokerage Press, Inc.

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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.

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Maintaining confidentiality should be placed at the top of your “to-do” list when selling a business. The tremendous importance of maintaining confidentiality is difficult to overstate and stands as one of the key reasons that any seller should opt to work with a business broker or M&A advisor. Every seller should remember that a breach in confidentiality can quickly kill a deal, and for many different reasons.

To be blunt, a breach in confidentiality is dangerous for your business. Such a breach can cause suppliers, vendors, key customers or clients, as well as employees and management, to become concerned or even alarmed. A change in the ownership of a business can translate into major changes in how it operates. 

Vendors and suppliers can worry about disruptions, and employees and management may become concerned for their jobs or positions. In turn, disruptions may take place, such as key team members finding new positions, which could make a prospective buyer nervous. These disruptions could make it more challenging to successfully sell your business.

While a breach of confidentiality may lead to a loss of confidence or concern among vendors, suppliers, employees, and management, that is only the beginning of the problems that a breach may cause. A breach in confidentiality could mean that your competition learns that your business is going to be sold. Your competitors may seize on this opportunity and try to steal your clients or customers. The end result is that your business could experience a sudden and sharp decrease in revenue as key customers go elsewhere. The loss of revenue and customers will make your business less attractive to any potential buyer. In this way, a breach of confidentiality could dramatically help your competitors grab market share and do so at your expense.

Even if all of your employees and management stay and all of your vendors, suppliers, and key customers move forward with business as usual, there is still another issue. Prospective buyers who learn that there was a breach of confidentiality may simply walk away from the deal as they are worried about potential negative outcomes due to the breach in the future.

It can be challenging to maintain confidentiality, and yet, it is remarkably important. Brokerage professionals are experts in maintaining confidentiality. Any owner looking to sell their business will be well-served by taking advantage of all that a business broker has to offer.

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