Selling any business can be complicated. Finding the right buyer is one hurdle that must be overcome. However, even once the right buyer has been found, there are still many reasons why a deal can collapse.
It is important to realize that you can do everything perfectly and “acts of fate” can still intervene and impede the success of your deal. For example, one issue is that you might not be able to satisfy the buyer in regards to demonstrating the earnings of the business.
A second issue is that during the sales process problems may arise with federal, state and/or local government bodies and agencies. Many of these problems may be quite difficult to predict in advance. A third issue is that the buyer’s investigation ultimately reveals some problem regarding the business that was previously unknown.
Simply stated, a seller cannot guard against every single possible unforeseen act of fate. The best any seller can do is look for potential problems and try to remedy them in advance. Working with a business broker or M&A advisor can be an excellent way to identify all types of business problems and adjust accordingly.
Another major reason that deals can fall through are issues with the buyer. Many sellers are just “testing the waters” or lack the commitment and resolve to see the sales process through, which is often much more complicated than many sellers realize. This issue marks the importance of working with an experienced business broker or M&A advisor who hopefully can weed out these uncommitted buyers in the beginning.
Often buyers will fail to be honest about their situation or how capable they are of buying the business. Business brokers are experts at assessing the potential of interested buyers, and that means they can typically save sellers a great deal of time and aggravation. But even with the best brokerage professionals on your side, it’s important to realize that buyers can still be unpredictable.
A particular source of deal killing frustration can be that buyers are influenced by third-parties who are opposed to the purchasing of the business, for a variety of reasons, and will work to kill the deal regardless of its merits. Everyone from landlords who may not want to transfer a lease or grant a new one to outside business consultants, such as attorneys, may all intentionally or unintentionally create a range of problems that interfere with the success of the sale.
There are many pitfalls that can derail the successful sale of a business. Identifying those kinds of issues far in advance is one way to dramatically boost your chances of a successful sale. Working with an experienced business broker or M&A advisor can help to dramatically increase the odds of finding the right buyer for your business.
No business is perfect, but when you are preparing your business to be sold, it is imperative that you lead with your strengths. That’s why it is important to work with a business broker or M&A advisor to identify, catalog and work to remedy any weaknesses. When presenting your business to prospective buyers, focus on your key selling points first and what makes you really stand out from the crowd. You want to sell a prospective buyer on the value of your business and its long-term potential before addressing any shortcomings or areas that need to be improved.
Most business owners who are selling a business are doing so for the first time. If you’ve never sold a business before then there are many mistakes and traps that can befall you. Selling a business is typically not a fast and easy process, but can instead take many months or even years.
Working with a business broker is one way to ensure that the process goes smoothly, but there are other steps that you can take to help ensure that your business sells. At the top of the list of steps business owners can take to help their business sell is to maintain normal operations. Again, it is very unlikely that your business will sell as soon as it hits the market. To protect the value of your business and to avoid financial trouble, you have to maintain normal business operations throughout the sales process.
The next key step to take is to get your business ready. It likely took years, or even decades, to get your business to where it is today. You shouldn’t expect that preparing your business to be placed on the market should be an overnight process. One of the best ways to properly present your business is to inspect every aspect of your business and its operations. In this way, you’ll discover what areas need work and what strengths are best to promote.
Brokerage professionals know where the competitive advantages of businesses reside and have an understanding of what buyers really want. An incorrectly priced business can scare away otherwise excellent potential buyers. The same holds true for poorly organized paperwork and financial records. In short, the preparation you make now to sell your business later can be invaluable for achieving the results you seek.
At the end of the day, you must remember that selling your business is a financial transaction. Like all kinds of sales, you must understand not only what the buyer needs but what they want as well. Not every business is right for every buyer.
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If you’re buying a business, you might be feeling overwhelmed about all the details that are involved, especially if it’s your first business. Buying a business is certainly no small task, and that’s why you’ll want to dive into the process headfirst and make sure that you’ve carefully examined the business.
Here are some of the most important elements to consider. While some of these aspects don’t immediately come to buyer’s minds, they should be high on your list of considerations.
Reviewing legal documents might not seem like the most enjoyable task, but this activity should be one of the first things you will want to do before buying a business. Most worthwhile businesses will have a long list of legal documents to show, ranging from documents showing trademarks and copyrights to consulting agreements.
When it comes to paperwork, tax documents are obviously also a necessary element to review. Some things that you should be watching for are forms that do not adhere to the IRS rules. It goes without saying that you don’t want to be the one taking responsibility for a previous owner’s error.
Business & Retirement Documents
The list of documents you’ll want to review doesn’t end there, as you’ll also want to check into retirement documents such as balance sheets, investment statements, and income statements. You’ll want to ensure that all of the qualified and non-qualified retirement programs run by the business are up to date. You might need to check the parameters of the Department of Labor’s rules.
Work with a Business Brokerage Professional
Your business broker or M&A advisor will take you through the due diligence process to help you make sure that all aspects of the business have been reviewed thoroughly before you sign on the dotted line. Be sure to work with an experienced individual who is proactive when it comes to making sure all of your questions have been answered to your satisfaction.
The items on your to-do list might seem overwhelming at first, but remember that a lot of focus and effort now will save you a ton of hassles and issues later. And you might end up dodging a bullet by spotting a serious issue that causes you to change your mind about a business. Always be sure to protect yourself and your best interests.
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By spotting your company’s weaknesses you can take steps to remedy them and improve operations, however, this is only the beginning of the benefits derived from spotting these types of issues. You should be the world’s foremost expert on your company and the investment that it represents. Identifying and repairing any negative issues will pay dividends both today and potentially for the life of your company.
There are many areas of weakness that companies may experience. In this article, we’ll look at a few of the key areas that many share
An area of business weakness that is receiving a good deal of well-deserved attention in recent years are problems related to the workforce. Workforce headaches are varying between industries and sectors. It has been well documented that young people are not entering trades in the numbers needed to replace retiring workers. This is a fact that is causing significant headaches for many businesses. An aging workforce will impact some businesses more significantly than others. Understanding the labor situation as it pertains to your business is a critical move for any business owner.
Being overly reliant on any one supplier, customer, product line or even employee or group of employees, may have an impact on your business in a number of ways. Supply chain interruptions, disruption to income and cash flows, labor shortages and a diminishment in the perceived value of your business by future buyers are just a few of the issues you may encounter. Diversification isn’t just a smart way to handle one’s portfolio, but is also a smart way to address your business plan. If your business is overly reliant in any one area, it is a good idea to measure the risk vs. reward and seek out ways to diversify if necessary. Your business will be stronger and worth more in the end.
General Industry Decline
Nothing lasts forever. Once upon a time, the country’s landscape was littered with Blockbuster Videos, but today Blockbuster Video has joined the vast and great technological dinosaurs of the past.
There is no escaping the fact that industries change. Being on the tail end of that change without a transition plan to meet new and potentially more profitable opportunities is not a good place to be. One of your key jobs as a business owner is to identify issues and problems within your industry and adapt, ideally ahead of the competition. Part of this adaptation may ultimately include knowing when it is time to exit your business entirely.
Business brokers and M&A advisors specialize in helping business owners spot weaknesses and then strategize to make significant improvements. The world of business is changing and evolving faster than ever before. Engaging with experienced advisors who can help you navigate this flurry of ongoing change could spell the difference between success and failure; while greatly improving the value of your business, rewarding you handsomely in your retirement.
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.
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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.