When in the process of buying a business, some buyers have accidentally overlooked important questions that need to be asked. However, you don’t want to find yourself in a situation where you wish you’d found out details that would have impacted your decision-making. With that in mind, let’s take a look at some often-overlooked inquiries.
1. What Is Included in the Sale?
It is possible to get so focused on the purchase of the business itself, that you overlook key details such as what is included. Don’t just assume that you’ll also receive important assets such as real estate, inventory, or machinery. All of this must be carefully outlined and documented. You will want to know exactly what you’ll be getting for your investment.
2. What Assets Are Included?
You’ll want to get the ins and outs of the proprietary materials and ensure that they are included with the business. If there is intellectual property, such as patents and copyrights, formulations, or software, you’ll want to ensure it is included. If it’s not included in the sale, you’ll want to know why. After all, the success of the business could depend on these.
3. How Can You Grow the Business?
Before you buy a business, it’s a good idea to ask yourself about its potential for growth. Many sellers will be prepared to provide you with ideas and strategies. If it is deemed that the growth for the business is limited, this is something you’ll want to determine in advance. Also, it is important to think about the amount of working capital you’ll need to not only run the business, but also to make any necessary changes.
4. What is the Staffing Situation?
You’ll want to think about how dependent the business is on the current owner or manager. If and when the current owner leaves, how much will that impact operations? You’ll also want to know in-depth information about who the management team is and how experienced they are. It is essential that your expectations are in line with reality.
As you can see, many variables must be taken into consideration before you sign on the dotted line. Much of this will be handled during the due diligence process. However, it is essential that you ask the right questions and speak up whenever you need clarity on an issue. When a business is properly vetted, you’ll not only be satisfied, but you’ll also be more successful.
The post 4 Questions to Ask Yourself Before Buying a Business appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
While brokerage professionals are working to sell your business, it’s important for you to keep running things in a smooth and seamless manner. In countless cases, sellers have made the mistake of letting things slide simply because they are distracted while trying to sell. You’ll want to make sure things remain the same, as prospective buyers will otherwise start to become nervous. Be sure to keep the premises in tip top condition. Things such as operating hours and inventory levels should remain unchanged. After all, if sales and earnings decrease, that will raise a red flag for buyers.
Business brokers and M&A advisors will help tremendously with various details and events that will take place during the sales process. From start to finish, they will keep their eye on the prize so that you have the time and energy to focus on running your business. The same holds true for other professionals who may help you, such as attorneys and CPAs.
Get Professional Advice on Pricing
You may have a pre-established figure in your mind of what your business is worth and how much you expect to make when you sell. However, the truth is that you will only receive what the market will allow. That’s why it’s so important to get a professional valuation before you decide on a price. If you set too high of a price on your business, it will only slow down or even halt your journey towards successful results.
Keep Things Confidential
Until your sales transaction is completed, you’ll also want to make sure the highest standards of confidentiality are held. If your vendors and employees know that you are selling, it could lead to circumstances that are detrimental to the value of your business. For example, key employees could seek employment elsewhere and/or vendors could terminate contracts.
Decide On Your Strategies
Will you be willing to stay on in some capacity? In many cases, this decision can help increase what you receive for your business. Buyers will often pay more when a seller stays on for a designated period of time as they see this as a reduction in their risk. Would you be willing to offer seller financing? Again, buyers will see this as a sign that you believe in the future success of the business.
Prepare in Advance
It’s always best to prepare when you are not experiencing external pressures. You never know when life could take its toll and force you to sell. That’s why so many sellers start preparing years in advance by taking actions such as cleaning up paperwork, handling litigation and/or environmental issues, and organizing documents.
Selling a business can be highly distracting for business owners. That’s why most reach out to a business broker or M&A advisor. In fact, the best policy is for business owners to start talking to brokerage professionals quite a few years in advance. That way they can make sure everything is optimized for positive results.
It takes small business owners an average of two to four years to sell their businesses on their own. If you don’t plan to sell your business in advance or if you don’t get professional help, there is a high risk that your business will not sell or that you will not make as much profit from the sale of your business. One of the most important things you can do is find reliable local business brokers to help you sell your business.
Do you want to learn more about choosing the best small business brokers for the sale of your business?
Keep reading this article for the top factors to consider when choosing the right business broker.
Ask About Experience
Asking about the company’s experience is one of the first things you need to do when hiring a business broker.
There are a few questions that can help you answer this question. For example, how long have they been working in the industry? How many clients have they had in the past?
Another way that you can learn about your business broker’s experience in the industry is by asking them for references for their past clients. They can provide you with a list of people they have worked with in the past, the companies that they have helped buy or sell, and more.
You can also get the contact information for these past clients and ask them about their experience working with the same business broker. If they had a good experience and felt like they received professional quality services, you can trust that you will have a similar experience.
Make sure your business broker has worked with clients in a similar industry before and is familiar with the buying or selling process.
You must also learn more about your business broker’s credentials before you hire them to work with your company. In some states, you don’t need to be licensed in order to sell a business.
In these cases, you must consider other qualifications. Have they earned any other professional qualifications? For example, the International Business Brokers Association can train them to be a Certified Business Intermediary.
These additional credentials show that they value professionalism and are dedicated to learning more about their work.
Ask About Track Record
Another important part of choosing a broker is learning more about their track record.
Asking about the company’s track record will help you feel confident that they deliver results for their clients. While many people will try to sell their businesses, not many of them will ever find a buyer or end up selling.
If you have a low-quality business broker that is unable to deliver results, you may end up wasting money on their services without ever selling your business.
Many business brokerage companies will keep track of their past clients so they can prove their success rate for future clients.
Because it can take several months or even years to sell a business, you must be comfortable working with your business broker. Because you will be working with them for so long, you need to connect on a personal level and ensure that they will do what they can to help you.
If any issues arise, having this comfortable relationship will help you lower your stress and resolve the problems together.
Check Online Reviews
Before hiring a business broker, you must also check their online review. Reading online reviews will help you learn more about the company’s reputation, past client experiences, and more.
You can read through past buyer and seller reviews to ensure that they were satisfied with the services that they received.
If a company has more than a handful of negative reviews, you may want to hire a different business broker to help you sell or buy a business.
Get Free Consultations
Often, business brokers will offer potential clients free consultations. This is an easy way to learn more about their company and to establish a relationship before hiring someone to help you buy or sell a company.
Free consultations are important, as they help you answer your questions about the buying or selling process. During this consultation, you can also learn more about their pricing.
You can see whether they charge an upfront fee for their services or if they will only take a percentage from the final sale of your business.
Consider the Level of Service
Finally, you must consider the level of service that your business broker is able to offer you. This includes their customer service and communication skills, the services they offer, and more.
To get an idea of the level of service a company offers, you should pay attention to your first impressions. When you met with the broker were they responsive? Did they return your calls or answer your questions in a timely manner?
If your business brokerage truly cares about your success, they will keep you up to date with new information and will continually work to find a reliable buyer or seller.
Looking for Business Brokers Near Me?
Choosing the right business brokers for your company is necessary to get the best price for your business sale or purchase. By following each of these tips, it will be easy to find reliable business insurance brokers to help you buy or sell your business.
Are you looking for home health business brokers in the St. Louis area? Fusion Advantage can help! We offer services for buying or selling businesses and can help you through the entire process.
Contact us to learn about our services or to schedule a free consultation with our team.Read More
Whether you are thinking of buying or selling a business, it’s worth taking a look at the quarterly BizBuySell reports. The findings from these publications are taken from analysis of sales and listing prices of approximately 50,000 businesses across the United States. The report covers the statistics of sales prices and successful transactions. It also discusses the trends that are at play. Regardless of your role in the business world, these trends likely will have some sort of impact on you.
A Boom for Sellers
The latest BizBuySell report, which covers Q4 of 2021, found that now is a very positive time for sellers. Q4 actually surpassed the pre-pandemic numbers of the fourth quarter of 2019. Of course, this is a major shift away from the sales numbers in 2020. It is typical to see transitions dip in the fourth quarter; however, 74% of brokers stated that their sales were steady during this time period. Experts say that this strength has carried into early 2022.
Other notable sales statistics include the following:
- 8,647 closed transactions were reported in 2021, an increase from 7,612 in 2020
- Sales prices increased 16% year-over-year
- Median cash flow grew 10% year-over-year
Buyers are Looking for Quality
In terms of what buyers are currently looking for, 60% of surveyed buyers indicated that strong financials were simply a “must have” when they were considering a business. This number is in stark contrast to 18% of buyers who responded that discounted opportunities were a top consideration.
Labor Shortages a Factor
The BizBuySell report also discussed the prevalent factor of labor shortages. In fact, 64% of owners surveyed say that this issue has impacted them. Business brokers agree that labor shortage is currently the largest problem for small businesses. Another corresponding issue is that of supply chain disruptions, which 75% of the business owners responding to the survey said had an impact on them.
A More Balanced Landscape
In the survey, brokers were asked if they believed that owners were more or less likely to sell their business in 2022 versus 2021. The general trend was towards brokers believing that there would be more businesses sold this year as compared to last year. Last year, the view was that buyers had the edge over sellers. However, now it seems as though brokers feel that the landscape has shifted and become more balanced overall.
The post Takeaways from the Latest BizBuySell Insight Report appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Family businesses are critical to both the US and World economies. In fact, in the US alone, there are approximately 5.5 million family owned and controlled businesses. While much of the world’s wealth is a byproduct of family-owned businesses, the fact is that most are not actually prepared to sell in a way that will profit the owners for their life’s work.
Many owners of family businesses care deeply about the legacy that they built and want it to remain in their family or with someone that will continue it with the same mission, vision, and values on which it operates. This is often difficult as the owners lack an established succession plan or exit strategy.
Studies show that about one-third of family owners never even plan to retire. As a result, they have no succession or exit plan in place. In some cases, the business is forced to form a strategy by default when the business owner becomes burned out, disabled or worse, passes away. This is clearly not the best path when it comes to maximizing profits.
Pros and Cons of Conveying Your Business to Family Members
According to Businessweek.com, the average lifespan of a family-owned business is 24 years. About 40% of family-owned businesses are successfully passed down to a second-generation with only about 13% passed down to a third generation.  With the fourth generation and beyond, the survival rate is 3% or less. Regardless of whether a family business owner intends to convey their business to a third party or have it remain in the family, it is important to maintain confidentiality and have the proper documentation in place for a successful transition.
There are disadvantages that need to be considered if you plan to sell your business to a family member. One key disadvantage is that a family business owner will typically receive less value for their business than engaging the sale with an independent third party. Selling to an independent third party can often force a family business owner to also paradoxically agree to a lower value in an effort to negotiate the retention of jobs and incomes for the family members they wish to remain with the business after the sale. It is important to prepare the remaining family members that they will have to accept the fact that they now answer to new ownership and management with the business.
Handling Multiple Owners and/or Decision Makers
If there are multiple owners and/or decision makers in the family-owned business and the business is being sold to a third party, it is important to appoint one family member to represent the negotiations. Having multiple decision makers at this critical step in the process of conveying the business to a third-party owner can lead to numerous issues and headaches for both the buyer and seller. Many times, multiple decision makers cause failure in the ability to transition the business to third-party ownership, as the parties involved have competing priorities with the sale of the business that prevents satisfying everyone involved in the process. Keep in mind that all family members must be in consensus with the price, terms and sale of the business or it will never happen. This fact can be true even if the family members involved are just employees or active/passive investors in the business. Disagreements among family members often derail the possibility of a deal happening.
Obtaining Outside Assistance
To increase your probability of success with conveying a family-owned business to future generations or new independent ownership, having a third-party guide you through the process who is not emotionally involved like the various family members involved, can be critical in making the deal happen. That’s why a variety of professionals including business brokers, M&A advisors, lawyers, and accountants should be brought in to help.
This article highlights just a few of the myriad of issues and process involved in conveying your business to new ownership once you decide it is time to retire or move on to a new venture. If you are just beginning or actively considering transitioning your business to new ownership, please do not hesitate to reach out to us for advice and assistance.
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