In a recent Divestopedia article entitled, “Kids Take Over the Business? 8 Things to Consider,” author Josh Patrick examines what every business owner should know about having their children take over their business. He points out that there are no modern and accurate numbers on what percentage of businesses will be taken over by the children of their owners. But clearly the number is substantial. Patrick emphasizes as point number one that allowing a child to take over a business right after finishing his or her education could be a huge mistake. After all, how can a parent be sure that a child can handle operating the business without some proven experience under his or her belt? Point number two is that businesses frequently create jobs for the children of owners. The flaw in this logic is pretty easy to see. This job, regardless of its responsibilities, isn’t in fact a real job. Senior decision-making roles should be earned and not handed out as a birthright. The end … [Read more...]
Embracing Technology to Boost Your Business
Forbes author Keith Gregg’s, February 8, 2019 article, “Using Tech to Enhance and Sell a Business,” has a range of interesting ideas that business owners should explore and embrace. Gregg looks at three big ways that business owners can use technology to help them get the most out of the sale of the business. He explains how important it is to address these three areas before placing your business on the market. Upgrading Systems The first tip Gregg explores is to upgrade systems. Upgrading systems can be particularly important for attracting younger buyers. It is common for businesses to be successful without proprietary technology or procedures, but that doesn’t mean that technology should be ignored. Important information should be digitized, as this data will be vital for the new owner to grow the business over the long haul. Incorporating software that can track and analyze data across the business is likewise valuable. Using software, such as customer relationship … [Read more...]
Thinking About Succession Planning
If you haven’t been thinking about succession planning, the bottom line is that you should be. In the February 20, 2019 Divestopia article, “All Companies Need to Look at Succession Planning,” author Brad Cherniak examines the importance of succession planning. Owning and/or operating a business can be a great deal of work, but it is imperative to take the time to develop a succession plan. Succession Planning is for Businesses of All Sizes Author Cherniak wants every business owner to realize that succession planning isn’t just for big businesses. Yet, Cherniak points out that the majority of small-to-medium sized businesses, as well as their senior managers, simply don’t focus much on succession planning at all. Many business owners see succession planning as essentially being the same as exiting a business. Cherniak is quick to point out that while the two can be linked and may, in fact, overlap, they are by no means the same thing. They should not be treated as … [Read more...]
Could the Red-Hot Market for Businesses Be Cooling Down
The economy is red hot, and that fact is translating over to lots of activity in businesses being sold. However, it is possible that this record-breaking number of sales could cool down in the near future. In a recent article in Inc. entitled, “The Hot Market for Businesses is Likely to Cool, According to This New Survey,” the idea that the market for selling business is cooling down is explored in depth. Rather dramatically, the article’s sub header states, “Entrepreneurs who are considering selling their companies say they’re worried about the future of the economy.” The recent study conducted by Pepperdine University’s Graziadio School of Business as well as the International Business Brokers Association and the M&A Source surveyed 319 business brokers as well as mergers and acquisitions advisers. And the results were less than rosy. A whopping 83% of survey participants believed that the strong M&A market will come to end in just two years. Perhaps more jarring is the … [Read more...]
What Kind of Buyers are You Most Likely to Meet?
Selling a business can be an exciting and rather lucrative time. But going through the sales process means embracing the notion that you’ll have to be very prepared for whatever might be thrown your way. A key aspect of preparing to sell your business is to know what types of buyers you’re likely to encounter. It is only logical to anticipate the types of buyers you may be dealing with in advance. That will allow you to plan how you might potentially work with them. Remember that each buyer comes with his or her own unique desires and objectives. The Business Competitor Competitors buy each other all the time. Frequently, when a business is looking to sell, the owner or owners quickly turn to their competitors. Turning to one’s competitors when it comes time to sell makes a good deal of sense; after all, they are in the same business, understand the industry and are more likely to understand the value of what you are offering. With these prospective buyers, a great … [Read more...]
New Year’s Resolutions & Selling Your Business
Most people fail to keep their New Year’s Resolutions. But where buying and selling a business is concerned, failing to keep those resolutions could mean an abundance of lost opportunity. Todd Ganos at Forbes recently penned a thought-provoking article entitled The 8 New Year’s Resolutions for the Sale of Your Business. In this article, he compares selling a business to getting in shape in the months preceding your visit to the beach. It is necessary to do a great deal of planning and hard work if you want to be in good shape for the big “beach body reveal.” When it comes to selling a company, Ganos believes that there are eight factors that must be taken into consideration. Listed below are those factors he feels are a must for business owners looking to get their business ready for “the beach.” These are the eight factors that Ganos believes are most essential and should be on your New Years’ Resolution list for your … [Read more...]
Confidentiality Agreements: What are the Most Important Elements?
Every business has to be concerned about maintaining confidentiality. In fact, it is common for business owners to become somewhat obsessed with confidentiality when they are getting ready to sell their business. It goes without saying that owners don’t want the word that they are selling to spread to the public, employees or most certainly their competitors. Yet, there is something of a tug of war between the natural desire for confidentiality and the desire to sell a business for the highest amount possible. At the end of the day, any business owner looking to sell his or her business will have to let prospective buyers “peek behind the curtain.” Let’s explore some key points that any good confidentiality agreement should cover. At the top of your confidentiality list should be the type of negotiations. This aspect of the confidentiality agreement is, in fact, quite important as it stipulates whether the negotiations are secret or open. Importantly, this part of the … [Read more...]
Goodwill and Its Importance to Your Business
What exactly does the term “goodwill” mean when it comes to buying or selling a business? Usually, the term “goodwill” is a reference to all the effort that a seller puts into a business over the years that he or she operates that business. In a sense, goodwill is the difference between an array of intangible, but important, assets and the total purchase price of the business. It is important not to underestimate the value of goodwill as it relates to both the long-term and short-term success of any given business. According to the M&A Dictionary, an intangible asset can be thought of as asset that is carried on the balance sheet, and it may include a company’s reputation or a recognized name in the market. If a company is purchased for more than its book value, then the odds are excellent that goodwill has played a role. Goodwill most definitely contrasts and should not be confused with “going concern value.” Going concern value is usually defined as the fact that a business will … [Read more...]
The Sale of a Business May Actually Excite Employees
Many sellers worry that employees might “hit the panic button” when they learn that a business is up for sale. Yet, in a recent article from mergers and acquisitions specialist Barbara Taylor entitled, “Selling Your Business? 3 Reasons Why Your Employees Will Be Thrilled,” Taylor brings up some thought-provoking points on why employees might actually be glad to hear this news. Let’s take a closer look at the three reasons that Taylor believes employees might actually be pretty excited by the prospect of a sale. Taylor is 100% correct in her assertion that employees may indeed get nervous when they hear that a business is up for sale. She recounts her own experience selling a business in which she was concerned that her employees might “pack up their bags and leave once we (the owners) had permanently left the building.” As it turns out, this wasn’t the case, as the employees did in fact stay on after the sale. Interestingly, Taylor points to something of a paradox. While … [Read more...]
A Look at Divestopedia’s Article, “The Myth of Fair Business Valuation”
In Divestopedia’s article, “The Myth of Fair Business Valuation: What Professional Valuations Don’t Tell You,” author Chak Reddy is quick to point out that the “type of buyer and method of sale are two important (yet often overlooked) value determinants when finding a starting price for your business.” Reddy brings up some excellent points. One notion in particular that every business owner should be aware of is that there is “NO fair value for illiquid assets.” He points to the fact that between January 2007 and March 2008, the historic Bear Stearns went from a value of $20 billion dollars to just $238 million. In a mere 14 months, Bear Stearns lost most of its value. Additionally, the article points to the fact that business owners often suffer enormously from “dramatic valuation compression.” In Reddy’s view, this compression is the direct result of poor planning and a failure on the part of business owners to select the right advisory teams. Reddy believes that professional … [Read more...]
