If you’re selling a business for the first time, you might have a preconceived notion of the type of buyer that’s most likely to purchase your business. However, the truth is that sellers often get competitive and attractive offers from buyers that they were not expecting to have an interest in their business. Let’s take a look at some of the variety of buyers you might encounter on the path to selling your business.
Your Family Members
One common buyer would be a member or members of your family. One of the advantages to selling to family members is they already may have a deep understanding of what it means to own and operate your business. As a result, they may feel more prepared.
On the other hand, just because someone is your family member does not mean they have the chops to actually run your business. Further, if you sell to a family member, you may end up dealing with someone who has less cash available to buy.
Competitors and Synergistic Buyers
You may not have warm fuzzy feelings towards your competitors, but the truth is that you need to be open to the idea of receiving offers from them. In fact, many competitors immediately look to their competition first when they decide they are going to expand their business. Your competitors make a lot of sense as good candidates because they understand your industry. Purchasing your business represents a viable way to rapidly expand their own offering with products and/or geographical reach.
Along similar lines, synergistic buyers acquire new companies in order to leverage their existing operations. You will find these buyers are typically larger entities in the same or related industries. In buying your business, their goal is to support and quickly add value to their current organization.
Individual Owner Operators
Many sellers end up with a deal on the table from an individual buyer. There are definite advantages associated with this type of buyer including the fact that it can streamline the sales process when you are dealing with one person rather than a group. Individual buyers oftentimes have corporate experience that helps them to effectively take over and manage a business. Another advantage to the individual buyer is that he or she oftentimes has a personal interest in the business and plans to successfully operate and improve it.
A financial buyer is most interested in their ROI. They will zero in on finding out about the cash flow and long-term exit strategies. These investors are typically only interested in very solid companies that are generating solid revenue. They will be less likely to want to take the time to make changes and improvements, so they will expect healthy returns on their investment on day one.
Your business broker or M&A advisor will help you understand the pros and cons of various buyers when it comes to your unique situation. Ultimately, you’ll find the type of buyer that is best suited to buy your business and that fulfills your needs and goals simultaneously.
The post The Different Buyers You Might Encounter appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Many buyers and sellers are not aware of the complexities that go into appraisals for businesses. To get the most accurate results, a business needs to be looked at from a variety of angles. When completing a business valuation, we look at everything from comparable businesses to EBITDA. There are a lot of nuances involved that are customized depending on the business at hand. Without looking at a wide range of factors, you could accidentally get less for your business than what it’s really worth.
What Will Be Important for Your Buyer?
When you’re selling a business, part of the fair market value of your business relates to benefits that your buyer will receive. Obviously, your valuation will include factors such as market share and profitability that a buyer will enjoy. But there are also less obvious factors. For example, is there potential for the business to expand beyond its current niche? What is the competition like? What about access to customers?
Also brought into consideration should be trends that will impact the business. These trends could be everything from trends in technology to economic or social changes. In some cases, business trends might make a business much more valuable. For example, due to the recent pandemic and fast adaptation of online conferences, companies that integrated video conferencing had a major edge over those that did not.
When business owners are aware of emerging market trends, it allows them to develop new offerings to meet current demand. In turn, this can boost business growth and increase a business valuation.
Recent workforce issues have definitely impacted the value of businesses across the board. If you have a strong, highly trained and dependable workforce, it will help to increase the value of your business. If your staff members are customer-facing, positive customer experiences will drive revenue growth. Further, buyers will feel more confident buying a business with a reliable roster of employees.
There are many questions that will affect your buyer and those should be considered in the price you ultimately decide upon. The savviest business owners are always thinking about trends in society and how to work with them to strengthen the value of their business. They will also consider the decisions made by their competitors and how they impacted their businesses for better or worse.
The post The Complexities of Business Valuations appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
The accommodation and food industry in St. Louis brings in well over 1.6 million in a year. Have you put in the hard work to grow a successful catering company? If so, you deserve every penny it’s worth.
Still, you may find it difficult to connect with the perfect buyer. You shouldn’t settle for anything less than what you’ve worked for.
Are you wondering what strategies can help sell your company? Keep reading for valuable insights on successfully selling your full-service catering business.
Understanding the Current Catering Industry
Even if you’ve been in the catering business for some time, it’s worth emphasizing that aspects continue to change. Before you try to sell your catering business, you must have a solid grasp of the catering industry’s current dynamics.
Most catering companies provide services for many different event types. This can include everything from weddings and business gatherings to private parties. Understanding the market demand and competitive landscape in St. Louis and the Metro East is crucial.
Staying in the know will help you position your business effectively. That way, you can appeal to a broader pool of potential buyers.
Valuing Your Catering Business
One of the critical steps in selling your catering company is determining its value. Business valuations are complex and involve assessing diverse factors. Several main elements can impact your business’s overall value.
Start by evaluating your company’s financial health. Review your revenue, expenses, and profitability over the past few years. Buyers will want to see a consistent track record of financial stability.
Be prepared to explain the circumstances surrounding any nosedives.
Take into account your long-term contracts or recurring clients. This can add significant value to your business by providing a predictable income stream for the new owner.
Estimate the value of your equipment, kitchen facilities, and other assets. Well-maintained equipment can be a solid selling point for potential buyers.
A strong brand and positive reputation in the catering industry can increase the attractiveness of your business. Consider how others view your brand. Gather evidence to back it up, such as feature articles, catering awards, and more.
As you look for a buyer, remain in the loop about current market trends and the demand for catering services. Buyers may be more interested in businesses that align with current trends, such as eco-friendly catering or niche markets.
Understand your competition and how your business makes itself unique. Be sure to highlight your special selling points to potential buyers.
A diverse and loyal customer base can be an asset. Be prepared to provide information about your client’s demographics. Don’t forget to outline the types of events you often cater to.
Prepare Your Business Financials
Do you want to attract serious buyers? If so, you need to have your financial house in order. You can do several vital things to prepare your business financials for the sale.
First of all, you should prepare accurate and up-to-date financial statements. This must include income statements, balance sheets, and cash flow statements. Instead of being optional, this documentation is essential for potential buyers and their financial advisors.
Double-check that your tax records are organized and up-to-date. Buyers will want to review your tax history to assess potential liabilities.
Hand over a detailed analysis of your business’s profitability. This should include profit margins, revenue growth, and cost management strategies.
Spend time breaking down your expenses, such as overhead, labor, and food costs. This transparency helps buyers understand the financial aspects of running your catering company.
Remember to organize your accounts receivable and payable. Buyers will want to know about outstanding invoices and liabilities.
Gather all legal documents related to your business, from contracts and permits to licenses and more. Ensure that your business is compliant with local regulations.
Marketing and Selling Your Company
Once you’ve assessed the value of your business and prepared your financials, it’s time to market it for sale. Several strategies are proven ways to attract potential buyers.
Consider hiring a professional business broker with experience in the food service industry. They can help you hone in on potential buyers and facilitate a smooth sale.
Develop a detailed information packet highlighting your catering company’s strengths. This can include financial data, client testimonials, and growth potential.
Post your catering business on online marketplaces and business-for-sale websites. Include high-quality photos and a compelling description of your services.
Are you feeling overwhelmed? Be sure to leverage your industry contacts and network within the catering community. Attend industry events and join associations to connect with potential buyers.
When sharing sensitive information with potential buyers, have them sign confidentiality agreements. Doing this will protect your business’s proprietary data.
Sell a Business by Negotiating
As you begin negotiations with potential buyers, keep some tips in mind.
First off, buyers may have their own terms and conditions. Be flexible and open to negotiation while still protecting your interests.
You can count on buyers to do their research and double-check the information you’ve provided. That’s why you should always be transparent and provide access to relevant documents.
Consider hiring legal counsel experienced in business sales to help draft and review the contract.
By now, you should have developed a transition plan to help the new owner take over the business. This may include training, introductions to key clients, and ongoing support.
Once the terms are agreed upon, work with your legal and financial advisors. They can help finalize the sale and transfer ownership.
It’s Time to Sell Your Full-Service Catering Company
With these proven strategies, you can sell your full-service catering company for a fair price. That way, you can start the next chapter of your life, whether that’s a new business or relaxing in retirement.
Fusion is here to help. We’re a discrete and full-service broker that’s well-respected in the St. Louis area and beyond. From valuation to closing the deal, our experienced brokerage team can help you every step of the way.
Do you have questions about our process? Feel free to touch base with a Fusion team member to get the ball rolling.Read More
Experts recommend that sellers prepare years before they plan to put their businesses up for sale, and there are many good reasons why they make this recommendation. A wide range of factors can interfere with the sale of a business, ranging from life changes like divorce and burnout to a new competitor moving into town. Preparing to sell your business in advance will help prepare you for the day you need to sell, whenever that day may be. Now, let’s take a look at a few of the surprises that sellers may face when selling their company.
Topping the list of surprises that sellers often face is the time commitment involved. As almost any business owner will tell you, it takes a tremendous amount of time and effort just to run a business. Adding the additional variable of putting a business up for sale can be a real strain on a business owner’s time and resources. The idea that one can simply put a business up for sale and “the rest will take care of itself” is very rarely the case.
Most businesses take many months or even years to sell even with considerable effort put into the process by both the business owner and brokerage professionals. Prospective buyers can take up a considerable amount of time to deal with, and this is one of the many reasons it is important to work with a business broker or M&A advisor. A competent brokerage professional has expertise in determining if a potential buyer is worth the time, effort and money it will cost by you and licensed Deal Team professionals such as attorneys and CPAs – vetting a buyer’s ability to close on the sale of your business – saving you a great deal of time and aggravation.
Sellers are often unaware of just how much documentation must be compiled for the Confidential Business Review (CBR) alone. However, the CBR is key in the selling process. If you’re selling your business in the near future, be prepared to compile, create and review a lot of documents.
Shared Decision Making
Of course, there are many other variables that must be considered when a seller makes the decision to sell their business. Minority stockholders or family members with an interest in the business must be taken into consideration.
Typically, sellers are accustomed to handling most of the key decisions regarding their business. This approach might work for running a business, but it can be quite challenging when it comes time to sell. Everyone from members of the management team to lawyers, accountants, and, of course, business brokers or M&A advisors, must be involved in the process.
Owners simply cannot realistically handle every aspect of getting a business ready to be sold. Usually, the requirements of the sale process are too diverse and complex to be handled effectively by one individual.
While the above-mentioned surprises are often the most common, a wide range of other factors can often be unexpected. These factors range from sellers accidentally decreasing the value of their businesses due to failing to maintain normal business operations during the sale which can decrease the value of the business to confidentiality leaks.
Selling a business is a complex process. Many business owners feel that since they are accustomed to the complexities of operating a business that they can handle the complexities of selling a business. The reality of the situation is quite different.
The post Why Do Sellers Often Face an Array of Surprises? appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Have you ever dreamt of running your own business? St. Louis is the perfect starting point, with over half a million small businesses in Missouri.
But perhaps the intricacies and risks of building a business from scratch are too risky for you. There is another option, though, and that’s to buy an existing company.
When you do that, you’ll need to carry out due diligence. Here’s a due diligence checklist to help ensure you cover every check you need.
You’ll want to check a few basics at the start of any due diligence process. The first is the business model.
The business model will tell you whether you are buying a business that can make money. Business models vary. Still, they all need to show you an operation that can solve specific market needs, making a profit along the way.
Ask questions about how the company adds value to a customer. Plus, it should outline how that business creates and delivers its products and services.
The next basic information you’ll want is the business’s profit and loss accounts. That will provide evidence about whether the business model is workable or not.
Finally, you’ll want to see a list of assets and liabilities. That will tell you how much value the business currently holds.
It’s essential to grasp the legal framework surrounding a business acquisition. Otherwise, you could run into problems with the law or unnecessary costs.
First, check the company has the correct licenses and permits to operate in their industry. Second, ensure the company owns the intellectual rights to vital assets. That includes patents, trademarks, and copyrights.
Finally, check whether the company has any existing legal disputes, such as a dispute with a customer. It could leave you with potential costs or reputational damage. It’s essential to know about this upfront before making an offer.
Review the Management Team and Other Employees
Staff are the biggest asset of any company. Their talent and creativity is what can make a business grow. So check the teams as part of your due diligence.
Look at management roles and the background and experience of those individuals. Identify talent gaps in the group.
Examine employee morale. Check salaries, benefits, and retention rates. Look at what training the company offers to staff.
All this will show whether you’re buying a highly productive and motivated team when you invest in the business or whether there is work to do.
Review the Market
You want to know that you are entering a market that has promise. You’ll need a picture of the market profile and competitors. First, check the company’s share in the industry.
For a local business, examine by geography when you do this. Second, identify competitors and run a SWOT analysis.
Next, look at current trends. You want an industry that’s on the up, not in decline. Look at how demand has changed and any market innovations that could threaten the status quo.
Ask yourself whether there is room for expansion for the business, either into new markets or by launching other products or services.
Check Relationships With Suppliers and Customers
Good relationships are the glue that holds a business together. Any growing enterprise must have nurtured solid relationships with its suppliers and customers.
You can check this as part of your due diligence.
Start by reviewing customer relationships. Examine what customer service process is in place and statistics on customer complaints, issues, and public reviews.
Review supplier relationships to spot glaring problems like outstanding payments or late deliveries.
By reviewing both relationships, you can help prioritize any issues if you do take over the business.
Check the Company’s Online Presence
Most modern businesses have an online presence. For some, it’s central to their business model. For others, it’s mere marketing. However, reviewing all digital assets when buying a business is essential for all companies.
Check for a website and social media profiles. You should also examine the company’s branding.
Other information to review includes website traffic, social media numbers, and online reviews. You should check engagement statistics and conversion rates if it’s an eCommerce business.
Spot Red Flags
Potential red flags could show that a promising business could become a costly investment. Here are the red flags you need to monitor:
- Unpaid tax
- Pending lawsuits
- Potential lawsuits
- Repeated patterns in customer complaints
- Financial discrepancies
- High staff turnover
- Overdependence on one customer
- Overdependency on one supplier
- A recent change to the leadership team
In addition to this list, be mindful of anything else that looks out of place or gives you cause for concern. At the very least, do some further research to alleviate any worries.
Final Checks Before Signing
If you’re happy with all your investigations, you will want to progress to the signature process. However, this is also when you must run some final checks.
First, review the terms of the contract. If your due diligence found any concerns, now is the time to review those terms and ensure you are happy with them.
If not, you might consider renegotiating the price to reflect those issues you found. It will help protect your interests.
Take the time to review any last-minute disclosures from the seller. That can happen, and you shouldn’t shortcut the review process as those may be important issues.
Next, consider your transition plan and speak to the seller about how it will work. A smooth transition is essential because problems could damage your revenue, or you could lose customers or employees.
Finally, plan the communications for when you sign. Letting everyone know what’s happening as soon as possible is crucial.
Use This Due Diligence Checklist to Make the Right Investment
We hope you find this due diligence checklist helpful. Use it to ensure you make a sound investment and don’t regret your decision. Taking the time to check a company now will save you from problems later.
Are you ready to make the plunge and buy a business? If so, our business brokerage at Fusion is the perfect place to start. Browse our vast database of businesses for sale to find the perfect one for you.Read More