VR Has Sold More Businesses In The World Than Anyone.®
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Determining Risk When Buying a Business
By Peter C. King, VR Business Brokers/Mergers & Acquisitions, CEO
Risk can be influenced by the stage of the venture, the competitive advantage, proprietary technology, the expertise and experience of management and many other factors that can determine whether a venture succeeds or fails.
It is possible for a venture to fail and lenders to get their money back. This is the strategy used by asset-based lenders. Banks want businesses to have sufficient cash flow to be able to repay their loan and interest. They also insist on a secondary source of repayment, whether in the form of collateral that they can liquidate or guarantees from sources who could repay.
Asset-based lenders may lend money to a business even when it does not have cash flow. They rely on their security in the form of collateral, and closely monitor the loan.
Below is a list of some financial instruments that are sorted by ascending order of risk:
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Why an Exit Plan is Crucial When the Time Comes to Sell
By JoAnn Lombardi, VR Business Brokers/Mergers & Acquisitions, President
Every business owner should have an exit plan in place. If you currently own a business, you know as every other successful entrepreneur knows that you won’t be doing this forever. You want the value of the business to stay high so you can attract qualified buyers to take over ownership and expand whenever you decide it’s time to sell. In order to ensure this happens, have an exit plan in place so you will be able to sell your business for the price you desire.
Understanding an Exit Plan
An exit plan is a series of continually evolving and interrelated plans to help ensure your business will continue to sustain and grow. When you are first putting together your exit plan, you must answer at least the following questions:
- What are your preferred options and timing for exiting the business? For example, sale to outsider, sale or gift to family or employees, merger with competitor, buyout by a partner, etc.
- What family members are involved in the business and what are their objectives?
- What are your financial objectives and retirement plans?
- What is the value of your business now?
- What key actions are necessary to increase business value and position it for sale?
- What actions are necessary to manage estate, trust and tax issues you will face through retirement and beyond?
- What changes in the business and what is your role needed now to preserve your quality of life and your passion for the business?
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Here's to the New Year: 4 Trends for 2019
What will be on dealmakers’ mind in 2019? Overall, we expect the trends that started during the bull market to continue. In general, sellers are looking for more flexibility when it comes to terms and buyers are listening as they create funds to do more growth equity investing and other things that allow sellers more choice.
Middle market buyouts remain a top strategy
In 2017 fundraising reached a new peak before dropping notably in the first nine months of 2018. The reason: fewer mega buyout funds have closed in 2018 and those that have, are smaller than funds of years past.
According to Probitas Partners’ annual institutional survey, which received responses from 90 limited partners, for 2019 it will be more of the same with most LPs looking to invest in middle market funds. Seventy three percent of institutional investors will focus on U.S. middle market buyouts while 52 percent will focus on U.S. small-market buyouts. This is a shift from 2007 when only 49 percent of LPs would focus on U.S. middle market buyouts and small market buyouts wasn’t even registering as a big enough category to include. By contrast, only 25 percent of LPs plan to invest in U.S. large buyouts in 2019. It’s important to note that European respondents to the Probitas Survey also plan to allocate most of their capital to U.S. middle market buyouts as well. Eighty percent of European respondents plan to focus on U.S. middle market buyouts while 28 percent plan to focus on U.S. small market buyouts.
“The biggest trends this year is that everything that’s been happening is intensified,” says Kelly DePonte, a managing partner with Probitas Partners. “That said, globally investors are looking at the U.S. middle market buyout industry as a very attractive place to invest. Growth equity has also become a more attractive strategy.”
The irony is that while everyone wants in on middle market buyouts, at the same time the biggest complaint is that pricing is too high. “As the focus intensifies so does the fear of pricing,” says DePonte. “That said, when investors look at other areas to invest they are less happy with risk profile of investing in the middle market. When you look at the middle market, those on the smaller side tend to have top quartile returns and outperform. That said, when the returns are more stable you won’t make a ton, because you are rewarded for risk but you're less likely to lose so it’s a popular strategy.”
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Always Work on Your Pipeline
Continual Generation of Leads Ensures New Business
The constant turnover of customers means that generating new leads are essential to continue growth in your business. There are many ways to do this based on the product and customer demographics involved. Remember that new leads provide critical data on potential customers to follow up with and make a sale.
Lead Generation Means Building Your Business
Lead generation is vital to the development of new and continued success of established businesses. Current customers can stop buying, or move on to a competitor. Therefore, you have to continually bring in new customers to increase your sales. To do this, you must have a constant lead flow.
Quantity of Leads Doesn’t Always Mean Quality
The source to draw your leads from has to be one that not only gives you a solid number of leads but are also high quality and qualified. The worst kinds of lead sources are those that produce large numbers of leads but are all poor. Direct mail programs or an event specifically targeting a demographic will give you the most effective results for good leads.
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Auto and Truck Towing Company | $2,800,000 | Naples, FL
Cleaning Operations Company | $550,000 | Aspen, CO
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VR Located in Waukesha, WI is assisting in the sale of a Contractor Services Business
This is a family-owned business that has been operating for over 50 years. They specialize in sales, rentals, service of heavy construction and agriculture equipment such as excavators, crawler dozers, wheel loaders, boom lifts, tele-handlers, skid steers, forklifts, backhoes, attachments, compactors, and lots more. All the equipment has been through their shop, tested and fully inspected by their qualified service department mechanics to provide only the highest quality equipment. This is a highly profitable, attractive business enterprise for the astute buyer to make significant positive cash flow, and have ample opportunities available for growth and expansion for even more revenue going forward.
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Understanding Transaction Costs for Your Business
To understand transaction costs for your business, you must first ask yourself why your business exists. Why doesn’t market pricing regulate all economic activity? Why isn’t each person at every step of production and delivery an independent profit center?
In 1937, Nobel laureate Ronald Coase asked these questions, in which he blamed transaction costs for the contradiction between market agility and a business’ stubborn durability. Businesses, in general, incur transaction costs when, instead of using their internal resources, they go to the market for products or services. Transaction costs have three parts, which together, even individually, can be prohibitive.
1. Search costs.
Finding what you need takes time, resources and money. Determining whether to trust a supplier adds more costs. Intermediaries who catalog products and product information could historically reduce such search costs.
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Congratulations VR in Charleston, SC for Facilitating the Sale of a Moving Company
This was a locally based moving and storage company providing local and long distance moving solutions. Based in the Charleston, SC area they also have a location in Savannah, GA and service both markets including Hilton Head Island Bluffton and Beaufort, SC. They had a great business model in place and were easily expandable to other markets or to a possible franchise. This was a unique opportunity for an owner/operator or general manager to run a set up with a full time operations manager in place. They had an experienced sales and administrative staff. They also had strong trends upward that are forecasted to continue.
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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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