Timing the Sale of Your Business
By Peter C. King, CEO of VR Business Sales/Mergers & Acquisitions
In a perfect world, business owners sell their companies when banks are anxious to lend, the economy is strong, their industry is booming and the business is enjoying record profitability, with the future looking even brighter. Naturally, a perfect convergence of all these variables would enable you to maximize the value of your business allowing you to sell it at the highest price and on the best terms.
But most business owners don’t sell when market conditions are perfect. Instead, they make the decision for more personal reasons, such as retirement or to free up cash to pursue other investment opportunities. Unfortunately, many businesses are sold when the owner dies unexpectedly or is otherwise unable to run the business. These unplanned events increase the chance that the business will realize a lower selling price than it would in better circumstances.
Questions to Ask
Before you make the decision to sell, you need to ask yourself several questions. First, how motivated are you to sell? Selling a business is an arduous process that can take a year or more from the initial valuation to finding a buyer to finalizing the deal.
Second, have you adequately prepared your business to be sold? Most experts agree that owners should plan for the sale of their business at least three years in advance. You may even want to plan for an eventual sale as you’re still establishing and building your business.
But even if you have no current plans to sell, managing your company as if it will be sold is likely to result in a more efficient, financially viable business. For example, your business plan whether a formal or informal document should evaluate growth opportunities, market position, and business goals, and explain how progress in reaching these goals will be measured. Not only is your business plan an important tool in unlocking the current value of your company, but it also serves as an initial prospectus for prospective buyers.
|
|
How To Understand a Buyer’s or Seller’s Personality Type
By JoAnn Lombardi, President of VR Business Sales/Mergers & Acquisitions
The key to good observation and listening skills is to build a better picture of how the seller or buyer is likely to react. You want to anticipate reactions so that you can solve problems before they become an issue.
To build this picture, it is helpful to use a model to describe general personality types. Although all individuals are unique, most can be generally characterized by one of four personality types:
● Analytical ● Driver ● Amiable ● Expressive
There are certain traits and styles of action which each of these personality types displays. By understanding what these characteristics are, and how to deal with them, the selling process becomes much easier.
To determine the personality type of the individual you are selling to, you must stop talking and start observing. This process of catego¬rizing developed by psychologists weighs two particular components of an individual’s personality. First, how much do they assert themselves: are they very assertive and demanding, or are they quiet and a bit timid Second, how much emotion do they put into their actions and decisions: are they cool and logical, showing no emotion, or are they a passionate individual who makes judgments from the “heart”.
These two personality components are represented by two axes of the following chart
|
|
Measuring The Financial Condition of The Business
byShawn Hyde, CBA, CVA, CMEA, BCA, ECA, Canyon Valuations, LLC
|
|
Reading in Revenue Ruling 59-60, in Section 4. Factors to Consider, letter (c) says, “The book value of the stock and the financial condition of the business.”
This is one of the eight factors business appraisers are supposed to consider when determining our conclusion of value for privately held businesses. This is also one of the most commonly skipped sections in valuation reports, especially in those valuation reports I have been reviewing lately.
Now, the book value of the stock of a privately held business, is really rather immaterial as the book value of a privately held stock is almost never equal to its fair market value, but the second half of that factor, where it says, “… and the financial condition of the business.” That part can be quite material.
How does a business appraiser consider the financial condition of a business?
That’s a great question! I believe it happens when we analyze historical financial statements. Many of us request historical financial data and tax returns whenever we are asked to appraise a business. I ask for five years of that data when I can get it. Most of us will also take that data and place it in a spreadsheet or some other format for comparing the company’s growth to itself over the time periods presented. We can garner quite a bit of understanding of the subject company’s operational risk from such an analysis, but consider what we could do if we also compared the Subject Company’s operating results with those of similar companies across the industry.
We have to use our professional judgment to select market multiples when using the Deal Stats or Bizcomps or Peer Comps databases. I have noticed that many appraisers who do not complete a comparative financial ratio analysis tend to also always select the median or average market multiples for use in their appraisals. Every time I see that, I ask the appraiser if the subject business was a median or an average business, and if so, how did they arrive at that determination?
When I compare the subject business’ liquidity ratios, various turnover ratios, and profitability ratios to their industry average, I can point at specific analyses and tell the report reader that since the subject business’ profit per employee is lower than the industry average, and the working capital turnover ratio is elevated as compared to the industry average that the subject business may be struggling. A business with financial ratios indicating that it is underperforming as compared to its peers is likely not worth as much as an average business, therefore by selecting an average or a median multiple, those appraisers may very well be overvaluing certain businesses.
|
|
How to Successfully Plan for Exiting Your Business
One of the challenges that business owners face is how to plan for a successful ownership transition. Whether it is a transfer of ownership to a family member, a management buyout, or the sale of the business to an outside party, the process requires careful consideration well in advance. This article covers the basics of business transition planning and important actions that business owners can take during each stage — from years before a sale to the weeks and months post-transaction.
The Business Lifecycle
|
|
The Early Years
In the early years stage, business owners should start thinking about their exit strategy and long-term vision for the business. Key actions that business owners can take during this stage include evaluating their personal wealth, identifying potential successors, and developing a thoughtful succession plan with the help of an advisor who aligns with the owner’s objectives and understands all stages of the business lifecycle.
|
|
Outstanding Structural Engineering Company for Sale in Miami, FL
The Firm has a wide choice of services :
- New Residential construction and renovations: This includes very high-end homes to simple low-budget homes. The firm provides full new designs, additions, and alterations.
- Commercial low-rise construction and renovations: This market share includes retail stores, shopping plazas, and restaurants. This work includes chain restaurants throughout Florida.
- High-End retail Facades and specialty buildouts: This includes high-end retail establishments and restaurants. Full store build-outs, facade design, and engineering.
- Hurricane Impact Glass and specialty glazing: This includes impact glazing design, wind load engineering, and specialty glass applications. In addition, they prepare Product Approvals for glazing systems, wind load analysis, and plans.
- Condominium concrete restoration and waterproofing include concrete repairs to high-rise buildings: Waterproofing repairs, pool deck repairs, and parking garage restoration.
- Building studies and structural evaluations: This market share includes 40-year safety inspections. Building structural evaluations, change of use evaluations and building - performance evaluations, and Construction Litigation associated with construction defects.
|
|
VR Office in Denver, CO Sold an Exceptional Welding and Fabrication Business for $610,000
This was a highly profitable, strong cash flow business, well established and turnkey, with tremendous growth and no sign of slowing down. The business was well-staffed with long-term employees, a great reputation, and perfect online reviews. Offering more services than the competition, its equipment was practically brand new, and the client base was well diversified with a good mix between commercial and residential clients.
Congratulations to Jeff Child for your successful closing.
|
|
Thinking of selling your business or looking for an established
|
|
The M&A Market Is A Shark Tank
Nothing works here without pointed elbows....
Or is it actually the other way around?
In order to work successfully, active relationship management plays an elementary role. No matter whether it is within your own team, as an investor vis-à-vis the managing directors and employees of the portfolio companies, or in the deal vis-à-vis the seller.
Basic trust does not come by itself and must always be cultivated. This is the only way to work together on major goals and overcome challenges.
In parallel, positive leadership plays a decisive role. It motivates everyone involved to focus on common goals and creates an environment of cooperation and efficiency. It creates an atmosphere of resilience and adaptability, which is invaluable, especially in the often-turbulent phases.
Active relationship management refers to the process of actively nurturing and maintaining relationships with individuals or entities in order to achieve mutually beneficial outcomes. It involves proactive communication, regular interaction, and strategic efforts to build and strengthen connections.
In various contexts, such as personal relationships, business partnerships, or customer relations, active relationship management is crucial for fostering positive interactions, enhancing collaboration, and ensuring long-term success. Here are some key aspects of active relationship management:
- Communication: Open and effective communication is essential for relationship management. It involves actively listening to others, sharing information, expressing needs and expectations, and addressing concerns or conflicts promptly.
- Regular interaction: Maintaining regular contact with the individuals or entities involved in a relationship helps to build rapport and trust. This can be achieved through face-to-face meetings, phone calls, emails, video conferences, or any other appropriate means of communication.
- Understanding needs and expectations: Actively seeking to understand the needs, goals, and expectations of the other party is vital. This enables you to align your efforts and actions, demonstrating your commitment to the relationship and increasing the chances of mutual satisfaction.
- Providing value: Actively contributing value to the relationship is crucial for its success. This can involve sharing knowledge, resources, or opportunities, offering support and assistance, or going the extra mile to meet the other party's needs.
- Conflict resolution: Conflicts or disagreements can arise in any relationship. Active relationship management involves addressing these conflicts in a constructive manner, seeking mutually beneficial solutions, and maintaining open lines of communication throughout the process.
- Relationship evaluation and adjustment: Regularly assessing the health and progress of the relationship allows you to identify areas for improvement or adjustment. It may involve soliciting feedback, conducting performance evaluations, or engaging in collaborative problem-solving to optimize the relationship.
- Long-term focus: Active relationship management requires a long-term perspective. It involves investing time and effort to cultivate sustainable relationships that can withstand challenges and evolve over time.
Overall, active relationship management is about being proactive, engaged, and responsive in your interactions with others. By nurturing relationships and prioritizing effective communication, you can strengthen connections, foster collaboration, and achieve mutually beneficial outcomes.
|
|
VR is The Only Remaining Founding Firm of The International Business Brokers Association ("IBBA").
|
|
Have You Ever Considered Selling Businesses?
|
|
As a loyal subscriber of Today’s Business Owner electronic magazine, we invite you to click on this link follow us on LinkedIn.
Now you can be updated daily on business sales, valuation techniques, mergers and acquisitions, career opportunities with VR, and much more.
Be the first to find out about new businesses for sale, and what has just sold.
|
|
|
|
|
|
|