Selling The Family Company
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It may seem like just yesterday, but in reality its many years ago and you started your company. At that time the goals for you and/or your family were closely aligned with that of your business.
Time has marched on, the family has grown up, homes have been paid for, and you are once again considering what the future holds. But, rather than thinking about company growth, you are starting to consider if this is the time to sell.
There are numerous reasons for selling your business. Children who you thought would once take over the business have graciously declined. You may be thinking that retirement should be the time to enjoy assets you have accumulated. It could be the itch to travel without responsibility, or even the challenge of starting something new in the business world.
Whatever the reasons, tread lightly. The sale of your business is a significant one-time event with no “mulligans” (do-overs).
There are certainly advantages to sell, such as:
- Structuring a deal that transfers your business that generates liquidity, but at the same time allows you to stay involved if you choose.
- The timing is such that your business will fetch the highest possible price in years. It could be the overall economy or trends in your industry that increases demand and pushes up the value.
- Serving as an advisor to the company after sale could have a tax benefit, an economic benefit, and maybe even a mental benefit.
- If a lot of your net worth is tied to the business, a sale gives you the opportunity for diversity and safe harbors
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The Advantages of Self-Educating Whether Buying or Selling
By JoAnn Lombardi, VR Business Brokers/Mergers & Acquisitions, President
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As any VR business intermediary will tell you, buying a business gives you a greater chance of success than starting one from scratch. 80% of new businesses fail in the first three years due to factors such as poor location, low product quality, under-capitalization and lack of management skills. Buying an established business will provide you with a stable location and an existing customer base and product.
As A Prospective Buyer
When you decide to look for an existing business, you have to find one with the potential to grow. By acquiring an ongoing concern, you have the opportunity to increase your profits; therefore, increase the value of what you have bought. Most business owners will be willing to train you in the daily operations of the business. This will increase your chances of long-term success over starting a business from scratch.
The process of buying a business can be surprisingly simple when you use a VR Business Sales Intermediary. We can help reduce the time it normally takes to complete a transaction as well as the risk for all parties involved.
How VR Business Sales Can Help
In order to pursue your dream of owning a business, you need to understand the process involved in buying one. Our VR Business Intermediaries can assist you to help obtain a complete understanding of the process. Here at VR Business Sales, we will match you with a business per your interests, needs and goals. We will find the business for sale within your selected price range. We assist you in every aspect of the purchasing process – gross sales, rent, terms of purchase, etc. Your VR Intermediary will arrange a meeting between you and the Seller to discuss how the business operates.
Negotiating an Offer
If you like the business, the next step involves writing and presenting the offer by your VR Business Intermediary. This will be the stage your VR Business Intermediary will share your background information and pertinent financial history with the Seller – your industry experience and how you arrived at the offering price, terms and conditions. The Seller will either accept the offer or submit a counter offer to the VR Business Intermediary to present to you. Once you’ve agreed to terms with the Seller, you will be allowed to inspect the financial records of the business to determine if everything is in order. If all of your questions have been answered per the contingencies in the offer, you can close the deal.
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Private Equity Firms Move Down Market
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Independent sponsors are emerging as uniquely positioned participants in the low to middle market, according to industry experts.
The term independent sponsor typically refers to an individual with industry experience who partners with a traditional PE or other capital provider to invest. They raise capital on a deal-by-deal basis. Not only are they helping dry powder find a home, independent sponsors also diffuse the risk of having to find equity for transactions by establishing relationships with capital providers.
Ballooning valuations are forcing firms to hunt for deals in the lower end of the market, a phenomenon that has opened the door for independent sponsors to ferret out creatively-sourced, proprietary acquisitions, said experts at the McGuireWoods Independent Sponsor Conference in Dallas.
“The cannon of equity capital pointing toward the lower middle market and middle market isn’t pointed anywhere else,” said Nick Russell, a partner at Tuckerman Capital, which partners with independent sponsors to invest in industrial companies.
Michael Arguelles, a managing director at private equity firm Stonehenge Partners, said independent sponsors “bring us deals we would never see otherwise.”
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Why To Sell Your Business After Your Best Year Ever
By: Neal Isaacs, Owner VR Office in Raleigh, NC
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When considering to sell a privately held small business, consider the following:
It Takes A Long Time To Recover From A Bad Year
Following a best year ever means the stakes are high to raise the bar for next year… Following your best year ever with even a “normal” year is a downward trend. A common “look back” period is three years. And in our recasting exercises with owners we put 60-70% of the weight on the cash flow of the most recent year. Buyers are extremely suspect of firms that are trending downwards; it’s considered risk and risk is always expressed in a lower multiple of earnings/revenue or less favorable terms such as an earn out or seller financing. Furthermore, banks are very conservative and have similar concerns about down years. Limited financing options sends a signal that a business isn’t “worth it” and further weakens the owners position for getting an aggressive purchase price.
Last Year Could Have Been Your Best Year Ever Due To Factors You Can’t Control
Even if you just had your best year ever, and you’ve executing a long term strategy to take your business to the next level in the next years to come, you can’t control all factors such as changes in technology (seen any movie rental stores lately?), or macro-economic factors. You could have your margins eroded by tariffs if you’re relying on overseas product due to a political fight in the white house… Business ownership is all about predicting and protecting, but some threats are unavoidable and unforeseeable.
Motivating Factors Tend To Get Stronger
When an owner comes to my office there is a mitigating factor which drove them to book an appointment, and carve out the time to learn what their options are. The ones with the most options start early, and the ones with the super motivating reasons for sale may not have planned ahead far enough. But for the vast majority of those with a need to sell, that reason doesn’t go away.
Whether it’s family pressure, illness, burnout, or the death of a critical business owner, those reasons for sale tend to get worse, not better. Sooner or later, the “pain” that drives them to consider selling the business outweighs the desire to get more money for the business. Imagining that business will keep getting better as life’s demands also get more distracting is an illogical frame of mind.
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Upscale gift shop with outstanding reputation and a very loyal customer base, for sale for an asking price of $195,000. Experienced staff in place to handle day-to-day operations and to allow the new owner to focus on the overall operation of the business!
The business generated Revenue of $361k and Seller's Discretionary Earnings of $73k.
For more information:
Bruce Johnson
bjohnson@vrgreenville.com.
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The business was a multi-location restaurant chain that is seasoned, cash-flowing, and had a deep labor force with upper management at each location. The business provided high-quality, fast-casual food, with operations within a 30-mile radius that operate out of unique, stand-alone buildings.
This business was NOT a franchise; however, it is perfectly positioned to capitalize on growth opportunities that include offering franchise opportunities. Established brand, great staff, stable earnings, low owner dependency, and several other positive attributes, this was the perfect platform for a seasoned restaurant entrepreneur!
Congratulations to Joe Braier.on this successful transaction!
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Thinking of selling your business or looking for an established
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Have You Ever Considered Selling Businesses?
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