Tuesday, September 18, 2012

Tips on Selling a Business

Tips on Selling a Business, Buying a Business or Franchise Article | Inc.com:

Tips on Selling a Business

If you're thinking about selling your business, it pays to be prepared. Here are some strategies that can help you make the deal:

Keep financial reports and tax filings current. Although there may be nothing wrong with your company, you'll scare off bidders with tax-reporting extensions or excessively delayed financial statements. If you've had trouble staying current in the past, upgrade your accounting software or consider switching accounting firms.
Strive for accuracy. Serious bidders will demand a high level of comfort, especially about the accuracy of cash-flow statements, accounts-receivable lists, and the assessed value of fixtures, equipment, and inventory. This is a time when it may really pay off to invest in audited financial statements.
Time your deal right. Although it always makes sense to try to sell during a hot market, it's even more important to pay attention to what's going on within your company and industry. The bottom line: Don't try to sell during a significant downturn (unless you absolutely don't have any other options and are prepared to accept a rock-bottom price).
Keep things simple. Anything unusual is bad news when it comes time to sell your company. So look at your business the way a stranger would, and eliminate complications before you try to sell.
Accept reality. If you're operating in a highly competitive market, there's no doubt that your buyer will insist on a noncompete agreement (and perhaps even a clause in the sales contract that states that you will not try to hire key staffers for any new business operation at all). If you're not prepared to make such concessions, your company probably won't sell.
Put a realistic price tag on your company. A good rule of thumb is that only on the rarest of occasions do companies sell for a price that's as high as one times revenues. If you're trying to sell for more than that, be prepared for your financials to be examined under a microscope.

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call at 888-925-5055 ext.206. Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Increase the Chances of Selling Your Business - Tips from a Valuation Expert

Want to Sell Your Business? Tips from a Valuation Expert

After you have built up your business, you might decide -- at some point -- that it's time to sell. Indeed, if you are getting close to a major life transition, selling can seem attractive.
If you believe that you are ready to sell your business, however, you should be prepared to protect yourself and be ready for what's next.
Recently, I spoke with Allan Siposs, Managing Director and Head of FMV Capital Markets. Among the services offered by FMV is business valuation. Siposs knows what it takes to get an equitable deal when you sell your company, and he shared some of his tips.

Deals Are Still Getting Done

"First of all, there is this belief that there are no deals getting done right now," Siposs said. "This isn't true. There is a tremendous amount of interest from private equity investors and strategic investors and other buyers. You need to prepare, though, if you want to attract buyers."
One of the ways to prepare is to think about what might be a concern for a buyer. "Look at what might be a problem from a buyer standpoint," Siposs suggested. "If most of your revenue is tied up with one customer, you might have a problem when going up against someone with diverse revenue. What about transition management? Is your company too tied up with you? Look at accounting issues, and also look for issues with OSHA or the EPA."
After identifying these issues, it is up to you to address them, and make changes. Look for these issues well in advance, so that you can have them in hand before buyers start looking into your operation.
Siposs also pointed out that you need to make sure you have a competitive process. "You should be entertaining more than one buyer. Consider retaining someone to represent you, and help you identify buyers that might have an interest in your business. You want to make sure that you have someone knowledgeable in your corner, helping you get the best possible deal."

It's Not Just About the Numbers

Sometimes, the best possible deal isn't about the number. "You need to look at the structure of the deal as well. Business owners can get so hung up on a number, that they forget to look at the structure of the agreement, which can include contingencies, payment structure, and other compensation," Siposs said. "Many business owners end up surprised that the structure of the agreement means that, even though they got the amount they wanted, their actual payout is somewhat low."
In addition to actual pay, Siposs said that business owners also need to pay attention to who will control the company after it is sold. If you want to remain involved, this is especially important. "You need to know how you will get paid, who will be in control, and how you can get your company back if you don't like how things are going," he said.
Finally, make sure there is a very good confidentiality and non-solicitation agreement in place. "You don't want potential buyers to be able to use anything against you," Siposs pointed out. "Before you reveal anything about your financials, or any other details about your business, make sure that you have the right protective agreements in place."
It is possible to sell your company now -- and get a good price. However, you shouldn't just put it out there. Plan ahead so that you can make your business attractive, and so that you can protect yourself. Otherwise, you might end up getting the short end of the stick.

Source: Want to Sell Your Business? Tips From A Valuation Expert

10 Things You Can Do To Increase The Value of Your Business

Don't wake up one morning and decide to sell your business. Wake up and decide to plan for your exit. Because if you have a year or two to plan, you can tangibly increase the value and the selling price of your business. How?

1. High Earnings = High Selling Price. Pretend nothing else matters, because, well, nothing does. At least not enough that if you had one thing to focus on to increase the value of your business, this is it.

2. Depreciate. Earnings (both discretionary earnings for small companies and EBITDA for larger ones) don’t include depreciation expense. For tax reasons business owners tend to expense rather than capitalize and depreciate, but in the year or two before a sale? Depreciate.

3. Reduce Working Capital Needs. A midsize company is sold with enough working capital (current assets minus current liabilities) to continue to operate the business. Think of it as having to sell your car with gas in the tank. Prove you can reduce this amount now (e.g. lower AR, lower inventory, increase payables, etc.) and you can take more cash home in the deal later.

4. Nix the C-Corp. If you think it will be a number of years before you close a deal, see if you can take an S-Corp election. Most buyers will want to do an asset sale (more on this later) and the double tax created by a C-Corp can be extremely painful.

5. Concentration Is a Bad Word. Businesses with high customer concentration or supplier concentration (or knowledge concentration, etc.) attract fewer buyers and this lowers the price. What’s too high? Having a customer with 25 percent or more of your business, or having a supplier with 40 percent of your business is too high. Diversify if at all possible.

6. Make Yourself Unimportant. What business would you rather buy? The one where the owner takes frequent trips and takes every Friday off, or one where the owner has to come in even when he is sick because the place will fall apart without him. A company that relies on the owner gets far less cash up front and often less overall.

7. Pay Some Taxes. Yes, everyone plays the tax avoidance game, but only to a degree. A broker/advisor can only adjust earnings only so much, so it is far better to just pay your taxes for a few years before a sale than the complications that can arise otherwise.

8. Understand What “Adjusted Earnings” Means. Well before a sale is the time to understand what adjusted seller’s discretionary earnings and/or EBITDA means. For example, some expenses will be valid adjustments, so there would be no need to work on reducing that expense, while other areas may need some real focus.

9. A Risky Business Is a Cheap Business. A legal issue dragging on? Environmental problem lurking? Buyers hate risks and risks tangibly lower the price. Identify and attack these areas before a sale.

10. Pick That Low-Hanging Fruit. We hear many business owners say things like, “Pay me X, because you can easily grow this company by doing Y, but I didn’t want to do that because of Z”. For example, “All you have to do is hire a sales manager but I didn’t because I don’t manage people well”. If you have an easy way to boost sales, do it, because you are not going to get X otherwise.

Source: 10 Things You Can Do To Increase The Value of Your Business

Are There Upfront Fees For Selling Your Business - Business Brokers and M&A Firms

If you are small business with earnings under $300K then you would probably approach a “main street” business broker to sell your business. It is industry standard practice for business brokers to not charge an upfront fee. Actually, in most states it is even more than that – it’s the law. In many states in which business brokerage is regulated under the department of real estate, brokers are not allowed to collect upfront fees that are a part of the sales commission. If they do charge an upfront fee, it has to be for a tangible product or service such as a formal valuation (not a 5 or 10 page “broker’s opinion of value”).

If your business need a M&A firm, read on for some excellent advice.

Source: The Upfront Fee For M&A Firms and Business Brokers

What Questions to Ask When Buying a Business

Questions to Ask When Buying a Business

Buying an existing business can be a great way to become your own boss without going through the headaches of startup. However, there are also some risks to be aware of. To improve your chances of success, look for a business in an industry you're familiar with and where you have some past management or operational experience.

To begin, you'll want a business broker on your team. A good broker can help you pinpoint promising companies that are up for sale and that meet your criteria. They can even find companies that aren't advertised for sale but whose owners may be willing to sell.

Once you and your broker have found some companies that look interesting, here are some key questions you'll need to ask and issues you'll need to research.

What is the state of the industry in which the business operates? Is the industry in growth mode, or is it mature or in decline?
What is the state of the business's target market? Is its target market growing or shrinking? Are its target customers undergoing demographic changes, such as aging, loss of disposable income, or other transitions that could put the business at risk?
Is the business's customer base growing? Is the business adequately diversified, or is it overly dependent on one or two big customers?
How does this business compare to competitors in its industry? How many competitors are there? What are their strengths and weaknesses?
What is the state of the region where the business is located? Are people moving into the area or are they moving out? What about businesses? Is the local economy growing or shrinking?
What kind of staff does the business have? Do employees have skills that are difficult to find elsewhere? Are their wages average, above average, or below average for the industry? What benefits does the company offer?
Is there a lot of turnover at the company? How long have key employees been with the company? Are key personnel likely to stay with the company after a change in ownership?
What is the company's reputation in the industry and the community? Businesses are often up for sale because of problems the owner may try to hide. Go online and ask around in the community to learn as much as you can about the reputation the company has among customers, vendors, and prospects.

Options For Dealing With Employees When Selling Your Business

Business owners and experts are divided on the best approach to take. Some assert that you should be completely transparent from the outset. Others contend that knowing a sale is imminent may adversely affect morale and productivity. Here’s a look at two options (I prefer option # 2).

Getting Ready to Sell Your Small Business - This Is What You Can Expect

The decision to sell can be a difficult one whether you’re doing so because the work is no longer enjoyable or because you need more time outside of work, the desired end result is often the same: You want to ensure that you’re adequately compensated for the time and sweat you invested into making the business what it is today.

Getting ready to sell? The below infographic takes you through the four main stages of a business sale and provides tips to help you get the most out of the process.

Biz Broker Florida

Tuesday, September 18, 2012