3 Ways to Make Your Business Appealing to Buyers
If you are like most business owners, you have never sold a business before and might not have a clear idea of what the process is like. We recommend preparing your business in a way that makes the sale and transition process as easy for your buyer as possible. It should come as no surprise that buyers will like the idea of an easy transition.
It will be very beneficial if you take the time in advance to evaluate the steps and think about what you can do on your end to benefit your buyer. Since you’re the expert on your business, you have unique insights into what would make the transition the most seamless for the other party. When you prepare for the sale with your buyer’s experience in mind, you will likely not only speed up the sales process, but also increase the selling price.
1. Automate Processes
Just like you may have never sold a business before, your buyer may have never bought a business before. If you can figure out how to automate as many processes as you can, it will help with their workflow and reduce the level of intimidation your buyer may be feeling about taking over.
2. Establish a Second in Command
One thing you can do is have a second in command on your staff. If there is a competent employee that your buyer can depend upon for assistance and support, that fact alone will be tremendously attractive. If you do not yet have that person in place, you might have an eye on choosing a person and preparing them for this role. Speaking of staff, you will want to make sure your entire staff is well-trained and any HR issues are resolved in advance.
3. Keep Things Consistent
As you get closer to the time you will put your business up for sale, you will want to begin to work with vendors and key customers. You will want to ensure that the supply chain and significant customers are consistent. Otherwise, this could cause major disruptions for your buyer and impede his or her success. Of course, it goes without saying that you’ll want to keep the potential sale of your business completely confidential. If customers, vendors, and even employees learn about an upcoming sale, this fact alone can lead to a chain reaction of disruptions and problems.
A business broker or M&A advisor can help in a wide variety of ways when you are getting ready to sell. They are experts in maintaining confidentiality while taking you through the sales process from start to finish. Brokerage professionals will also assess your business and inform you of any areas that could be improved to make your business more attractive to buyers.
Copyright: Business Brokerage Press, Inc.
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4 Takeaways from the Latest BizBuySell Quarterly Report
BizBuySell is an online resource that focuses on offering unique content that specifically addresses the needs of buyers and sellers. To make this happen, BizBuySell has teamed with a range of experienced business brokers who are covering topics relevant to business owners, buyers, and sellers. For example, they feature articles that focus on how to make a business more interesting to a potential buyer. These resources help to position BizBuySell as a go-to place for a range of relevant business information.
Of course, every quarter BizBuySell publishes Insight Reports complete with interactive market data. These reports offer a comprehensive overview of trends that are essential for brokerage professionals to know about. The latest report can be accessed here. It covers important trends noted in the first quarter of the year.
Some of the changes that were noted in this important report include the following:
1. Rebounding Transactions
For Q1 2022, the Quarterly Report indicates that transactions are continuing to rebound from the slump of Q2 2020. Year over year, transactions shot up a whopping 24% and are now beginning to return to 2019 levels.
Overall, the main sector that seems to be holding back an even stronger rebound is the restaurant sector, which is still not where it was in pre-pandemic years. However, with that stated, the restaurant sector has also dramatically improved and has shot up by 42% year over year. Yet, the restaurant sector is still down 22% from Q1 2019.
2. Changing Buyer Preferences
When BizBuySell surveyed buyers as to what kind of business they wanted to buy, the numbers were eye opening. 35% of surveyed buyers responded that they were interested in the service sector, and this was followed by 15% of respondents choosing retail. Director of Sales Doug Whitmire stated, “Buyer demand seems to be leaning toward business services, self-storage, car washes, as well as advanced distribution services for manufacturers. There have been few opportunities, so buyers are flocking to them and inventory is limited.” The result of the limited inventory is record sales prices.
3. Listing Growth
In Q1 2022 listing growth has increased substantially, with service listings up 14%. While the restaurant sector is obviously still lagging, it is important to note that the Quarterly Report indicated that restaurants were experiencing a 10% growth. If the pandemic continues to recede, we could see a robust rebound in the restaurant sector.
4. A Boom in Sellers
The Q1 report also indicates that sellers, who have previously been sitting on the sidelines, are deciding that now is the time to sell. Once again there is talk of a “silver tsunami” approaching as Baby Boomers begin to sell. It is also interesting to note that many of those who are selling are doing so due to burnout. Importantly, burnout is occurring for a variety of diverse reasons, ranging from supply chain and labor issues to pandemic burnout.
Advice for Sellers
The BizBuySell team strongly advises that sellers should fix major supply chain issues before entering the market. Whitmire noted, “We try to get our clients to work with us to fix those issues before we go to market. Many times, you only have one chance with a buyer and then you lose them.” It definitely makes sense for sellers to try their best to remedy any issues that might have resulted from Covid-related circumstances. This will ensure that the sales process goes as smoothly as possible.
Copyright: Business Brokerage Press, Inc.
The post 4 Takeaways from the Latest BizBuySell Quarterly Report appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
How to Sell Your Small Business in St. Louis
What if you could swap worrying about driving your business forward with relaxing in retirement? 45% of entrepreneurs report feeling stressed compared to other workers. It’s become something of a modern pipe dream, but it doesn’t have to be – provided you do the right things.
One of the wisest and most profitable things you can do is sell your small business.
Why not share your legacy with another ambitious entrepreneur and watch them carry on where you left off? If you live in the greater St. Louis region, we’ve got plenty of tips on finding a buyer.
Read on for our in-depth guide on how to sell a small business in St. Louis.
1. Know Your Worth
Before you put a price tag on your business, it is important to have your finances in order. Your books must be immaculate and ready to be looked over by accountants, lawyers, and valuation specialists. The prospective buyer will also look at your financial records to see if your business is worth their investment.
Once your finances are in order, you can calculate your business’s value. The value of your business is less about your assets and more about profitability. If your books are up to date, then it shouldn’t take long to calculate the value of your business.
The best option for calculating the value of your business is to hire a business valuation expert.
2. Find the Right Buyer
Providing intricate details of your business to serious prospective buyers is an important part of the selling process. Unfortunately, this is an opportunity for your competitors to find out information that could undermine your business. Including a non-disclosure agreement (NDA) along with your sensitive documents will prevent other business owners from posing as buyers for nefarious reasons.
Many business owners allow prospective buyers to view sensitive documents on their premises to avoid them falling into the wrong hands. Gather a shortlist of buyers so that you have plenty of options if the deal falls through. Allow some room for negotiation and keep in touch with potential buyers to build a relationship.
3. Have a Solid Plan
Every business owner should have an exit strategy in place for when they want to sell. The details of your plan will depend on your personal and business circumstances.
Are you selling to family or friends? Your employees may also show interest in buying the business. Make sure that you get everything in writing and keep the transaction as professional as possible.
Your plans should also include details of how the new business owner will take over the business to ensure a smooth transition. This may include information about equipment, location, and competition so that your successor can continue to make a profit. A business that is growing will sell quickly to investors who are looking to take advantage of your success.
A business broker could help you formulate a plan for selling your business. You can concentrate on running your business while the broker takes care of the sales process. They can also help to increase your business value before you agree on a sale.
4. Consider Your Options
Depending on your goals for the business, there are lots of options for you to consider. Selling to someone you know can reduce the business transition risk because they have prior knowledge and understanding of your business. Some of the options for selling include:
- Management or employee buy-out
- Sell to a third party (individual or company)
- Partial recapitalization
Be clear about why you are selling and how you will support yourself in the future once your business has sold. Planning your future is an important part of the sales process to avoid any remorse after the transaction is complete.
You can choose to sell your business with or without a business broker. If you have the knowledge and tools to complete the process without professional help, then this is a viable option. You’ll get to keep the money from the sale and will earn more than if you hired experts to help you.
5. Get Professional Help
Enlisting the help of a business broker and pre-qualified valuation expert could make the sale of your business easier and more profitable. Selling a business can be stressful and time-consuming. With the help of a professional business broker, you can get the best deal possible for your business.
A business broker could also help you identify the best time to sell your business. It makes sense to sell your business when profits are high. A business with falling sales is less desirable to a potential buyer.
It is important to note that there are risks to selling your business without a business broker or legal team. You may cheat yourself out of potential profits by skipping a business valuation. A broker could negotiate a better deal for your business that will cover the costs of their fees.
Your team could also include an accountant, financial advisor, and lawyer to help guide you through the process of selling your business.
Learn More About How to Sell a Small Business
Learning how to sell a small business can be overwhelming without the right help on your side. After years of building your business, it can be difficult to let go of what you have built. With these helpful tips, you can start formulating your exit strategy and sell your business with minimal stress.
Are you ready to sell your business? Contact Fusion Business Services for expert advice and support on how to sell your small business.
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The True Meaning of a Fairness Opinion
Many people assume they know what “fairness opinion” means because they are familiar with the term “fair market value.” Fair market value refers to a price that is reasonable for both a buyer and seller in an open and competitive market. However, a fairness opinion is quite different. This term refers to a report that evaluates the facts of a merger or acquisition or any other type of business purchase.
A fairness opinion is typically in the form of a letter that contains an actual opinion and justification of why a selling price is fair. Of course, there are limitations, as this report is fully based on information that has been provided by the management of the business.
Who Prepares a Fairness Opinion?
A fairness opinion must be prepared by a professional with expertise in business valuation. It is typically done by a business intermediary or appraiser. An investment banker can also prepare a fairness opinion. Although the professional who prepares the fairness opinion may very well have experience in structuring deals, this letter does not include any information or opinion on the deal itself. It also doesn’t include advice or recommendation. In preparing the report, the advisor seeks to look at the deal from the perspective of the investors.
Basically, it is structured to specifically comment on fairness from a financial perspective, based on the information on hand.
Who Uses Fairness Opinions?
You will most frequently see fairness opinions utilized in the sale of public companies by the board of directors. When this document is received, it shows that the board is working to protect the shareholders. Of course, fairness opinions can also be used for private companies. In this case, it can serve to protect the interest of shareholders or family members who may later look to challenge the sales price. However, in most situations that involve middle market private acquisitions, a fairness opinion is not necessary.
In the end, a fairness opinion assists with communication and decision-making. It serves to lower the risks surrounding a deal. This important document can be used in court if a shareholder later decides to file a lawsuit against the director of a company.
Copyright: Business Brokerage Press, Inc.
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How to Work With a Small Business Broker in St. Louis
There are plenty of reasons a small business owner in St. Louis would choose to sell their business.
The market may be in your favor, and you’re ready to make a profit by selling. It could be time to move on to the next thing or just time for you to end this professional chapter. Finding the right buyer can be difficult regardless of why you’re selling.
When you’re ready to sell, working with a small business broker is always a good idea. Having extra help from an expert who knows the ins and outs of the local market can be a huge help.
If you’re considering hiring a business broker, you’ll want to ensure you get the most out of your arrangement. Here’s what you need to know to have the best experience possible with your broker.
Understand How Payment Works
Every business broker handles payment in their own way.
Some require money to be paid upfront, others collect money once the sale has gone through, and some do a combination of the two or something new entirely. Regardless of how the broker handles getting their payment, ensure you understand payment terms before agreeing to work with them.
Most business owners expect brokers to take a small commission from the sale. The issues start to arise when they’re unclear about how much the broker plans on taking or when it’ll happen.
It isn’t unusual to see some brokers request anywhere from 8% to 15% in commission. In addition, some brokers charge monthly or progress fees on top of that commission.
Make sure that payment is discussed and understood early in the process. This way, everyone involved can avoid unpleasant surprises.
Come Prepared
When working with a business broker, there’s no such thing as giving them too much information. The more information you can provide the broker about your business, the easier job they’ll have finding the right buyer.
Take the time to prepare for your first few meetings by gathering all the documents and files they’ll need to sort through. Going as far back as possible can help give them insight into your business, but generally, a good rule of thumb is to have documents going back at least three years.
Bring documents around money like profit/loss statements, balance sheets, and information about cash flow. They’ll play a significant role in your business valuation. However, they’re far from the only helpful documents your broker will need.
Any paperwork you can bring that explains your business plan or executive summary can benefit your broker. It’ll teach them essential details about your business and could help them form their marketing plans and sales pitches.
Agreements with vendors, suppliers, and employees can also be beneficial. This can educate your broker on any legal obligations with employees and entities.
Be Prompt
Things move fast in the business world. The last thing you or your broker would want is to miss out on something because you didn’t notice a missed call or sent email.
Remember, you’re far from the only small business owner that wants to sell their company. You can have a lot of competition in your local market or industry, and they could snatch up your buyer if you aren’t careful.
Make it a point to check your phone and email throughout the day. Answer questions your broker may have as quickly as possible, and don’t be afraid to let them weigh in on some of your decisions.
Develop a Communication Cadence
Some business owners want weekly updates from their brokers to see how things are progressing. Others only want to hear from their broker when they think they’ve found the right buyer. Regardless of your choice, talk to your broker about how often you wish to communicate.
Both you and your broker are busy professionals. Coming up with a communication schedule is an easy way to ensure you get the information you need at the right time.
When thinking about how often you want to be in contact, also think about how you want to be contacted. For example, some people prefer to talk on the phone. Others only want things in writing and prefer texting or emails.
Have the Right Expectations
Brokers may be a great asset, but there are some things even the best brokers can’t do.
It can take time to sell a business, and as recession fears loom, it may take even longer. Your broker may be able to find a buyer, but they won’t be able to help you make thousands in profit if your business is underwater.
A lot of the tension that happens between brokers and business owners comes from having misaligned expectations. This is why both parties must be as open and honest as possible.
Be as upfront as possible with your broker. Talk to them about your expectations around how long it’ll take to find a buyer, the broker’s involvement, and how much you think you’ll get for the business.
This allows you to be transparent about what you want. The broker may change some expectations, but that can be good. You’ll want to work with someone realistic who also understands what you want.
Find the Right Small Business Broker for You
A broker is a must when you’re trying to sell your business. If you follow the tips in this post, you’ll be setting yourself up for success with your small business broker.
Are you ready to work with brokers that understand the right way to sell in St. Louis? We’re dedicated to helping you find the right buyer. Contact us today to discuss the best way to market and sell your business.
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