Mass Mutual Life Insurance Company provided the following survey results based on family-owned businesses. Although the survey was conducted several years ago, the results are still quite revealing, and still applicable.
• Four out of five companies are still controlled by the founders.
• 30% of family-owned companies will change leadership within the next five years.
• 55% of companies fail to conduct regular valuations of the company.
• 55% of CEOs who are 61 or older have not chosen a successor.
• 13% of CEOs will never retire.
• 90% of businesses will continue as family owned.
• 85% of successor CEOs will be a family member.
• 20% of family owners have not completed any estate planning.
• 55% of family owners do not have a formal company valuation for estate tax estimates.
• 60% of businesses do not have a written strategic plan.
• 48% of companies rely on life insurance to cover estate taxes.
The above survey indicates that many family businesses are not optimizing their opportunities. Their insular approach to succession, leadership, planning, etc., indicates their vulnerability for the long term. These vulnerabilities suggest that many business owners should work with professional advisors to resolve these issues. A professional intermediary is an essential member of this advisor group.
Tuesday, May 31, 2011
Friday, May 27, 2011
Seller Financing -- How a Broker Can Help
Another important factor relating to the asking price is the amount of cash involved in the sale. There is an old saying that the higher the full-price, the lower the down payment - and vice-versa. The sale of almost any business involves some seller financing. The smaller the down payment, the higher likelihood of a quick sale. No seller wants to take back his or her business because the buyer wasn't successful. On the other hand, a buyer wants to make sure that the business will not only pay for itself, but also provide sufficient income for his or her family's needs.
What it all boils down to is that the seller wants the buyer to be successful and the buyer wants to buy a successful business. With the amount of capital required in today's market to buy a business, sellers should feel optimistic that they are dealing with successful buyers.
Click "HERE" to view entire article.
What it all boils down to is that the seller wants the buyer to be successful and the buyer wants to buy a successful business. With the amount of capital required in today's market to buy a business, sellers should feel optimistic that they are dealing with successful buyers.
Click "HERE" to view entire article.
Wednesday, May 25, 2011
Don't Let Sleeping Dogs Lie
If you're considering selling your business, and you are employing a professional business broker or intermediary, it's imperative to be absolutely open with him or her. This is not the time for secrecy -- or even for subtlety, especially when it comes to problems. If you've been having trouble with your lease, one of your best customers or your fixtures and equipment, spell it out! Any one of these "sleeping dogs" is bound to wake up sometime during the process. After the first growl comes the bite. The sale will get buried deeper than last year's bone. And the buyer, scared off by the ruckus, will have long since disappeared.
Tell your broker all there is to know prior to the beginning of the marketing effort. Your broker and the buyer are aware that there is no such thing as a perfect business, and buyers are much more likely to deal with the problems of your business during the decision-making process rather than after they have decided to buy.
And it's not just the sale that's at stake. Concealing a problem or defect that adversely affects the business can lead to litigation and years in court. It's not worth it. Problems and defects don't mean your business won't command an attractive price. Your professional business broker is prepared to deal with these issues and give you competent advice.
Some sellers try to hide the problems of their business and hope the sleeping dog never wakes up. You'd be well-advised to get him on a good, strong leash instead of letting him "lie."
Click "HERE" to view entire article.
Tell your broker all there is to know prior to the beginning of the marketing effort. Your broker and the buyer are aware that there is no such thing as a perfect business, and buyers are much more likely to deal with the problems of your business during the decision-making process rather than after they have decided to buy.
And it's not just the sale that's at stake. Concealing a problem or defect that adversely affects the business can lead to litigation and years in court. It's not worth it. Problems and defects don't mean your business won't command an attractive price. Your professional business broker is prepared to deal with these issues and give you competent advice.
Some sellers try to hide the problems of their business and hope the sleeping dog never wakes up. You'd be well-advised to get him on a good, strong leash instead of letting him "lie."
Click "HERE" to view entire article.
Monday, May 23, 2011
When Selling Your Business: Confidentiality Is Key
You've make the big decision to sell. Your books are in order, you've spiffed up the premises. What are you waiting for?
Many sellers get to this threshold and then become concerned about confidentiality. They do not want the news of their decision to reach their customers, competitors, employees, or creditors. After all, they figure, customers may lose confidence in the business and go elsewhere, competitors might use this opportunity to spread rumors, employees might fear for their future security, and creditors might push for earlier payment. Not all of these qualms are reasonable; however, when selling a business, discretion is definitely the better part of valor. Few, if any, transactions have been wrecked due to excessive discretion. A breach of confidentiality, on the other hand, can severely alter the course of the transaction. What can you do to protect yourself against this possible deal-wrecker?
Your first step is to look for expert guidance. When a business broker is involved in the sale, he or she will channel the process to keep the transaction within safely silent bounds. You can expect your business intermediary to do the following:
1. Qualify the buyer.
Screening potential buyers is one of the most important benefits a business broker can provide for you. Keep in mind that roughly 90 percent of those who respond to business-for-sale ads are either not serious buyers or are not financially qualified. By screening prospects, the business broker will contribute to confidentiality by limiting the exposure of the business to the most promising buyers instead of to the merely curious time-wasters.
2. Use appropriate marketing strategies.
How can you advertise a business for sale without spreading the news too far? The business broker, as intermediary, is in an ideal position to do just that. Brokers place advertising and post listings that contain non-specific descriptions of the business. This \"blind ad\" approach can be phrased to attract interest in the business without revealing its name or exact location.
3. Prepare paperwork designed to promote confidentiality.
After screening prospective buyers and assessing the degree of interest and financial qualification, the business broker will also require prospects to sign a strictly-worded confidentiality agreement.
4. Manage appropriate release of information.
Until a purchase-and-sale agreement has been signed, the business broker can phase the release of information about the business to match the growing evidence of buyer sincerity and trustworthiness.
Click "HERE" to view entire article.
Many sellers get to this threshold and then become concerned about confidentiality. They do not want the news of their decision to reach their customers, competitors, employees, or creditors. After all, they figure, customers may lose confidence in the business and go elsewhere, competitors might use this opportunity to spread rumors, employees might fear for their future security, and creditors might push for earlier payment. Not all of these qualms are reasonable; however, when selling a business, discretion is definitely the better part of valor. Few, if any, transactions have been wrecked due to excessive discretion. A breach of confidentiality, on the other hand, can severely alter the course of the transaction. What can you do to protect yourself against this possible deal-wrecker?
Your first step is to look for expert guidance. When a business broker is involved in the sale, he or she will channel the process to keep the transaction within safely silent bounds. You can expect your business intermediary to do the following:
1. Qualify the buyer.
Screening potential buyers is one of the most important benefits a business broker can provide for you. Keep in mind that roughly 90 percent of those who respond to business-for-sale ads are either not serious buyers or are not financially qualified. By screening prospects, the business broker will contribute to confidentiality by limiting the exposure of the business to the most promising buyers instead of to the merely curious time-wasters.
2. Use appropriate marketing strategies.
How can you advertise a business for sale without spreading the news too far? The business broker, as intermediary, is in an ideal position to do just that. Brokers place advertising and post listings that contain non-specific descriptions of the business. This \"blind ad\" approach can be phrased to attract interest in the business without revealing its name or exact location.
3. Prepare paperwork designed to promote confidentiality.
After screening prospective buyers and assessing the degree of interest and financial qualification, the business broker will also require prospects to sign a strictly-worded confidentiality agreement.
4. Manage appropriate release of information.
Until a purchase-and-sale agreement has been signed, the business broker can phase the release of information about the business to match the growing evidence of buyer sincerity and trustworthiness.
Click "HERE" to view entire article.
Thursday, May 19, 2011
Seize the Moment -- Tips for Sellers (Option B)
If you have made the decision to sell your business, the wisest first move is to contact a qualified business broker professional, who can . . .
Advise you on pricing and structuring the sale of your business.
Prepare the marketing strategy, using professional resources.
Determine the right buyer for your particular business.
Educate buyers in the business-buying process.
Keep you informed about market reaction.
Present offers and point out strengths and weaknesses.
When it comes time to sell, one of the best decisions a business owner can make is to continue managing his or her business efficiently (and profitably), while depending on the services of a business broker to forge the steps of the sale. The business broker professional is an invaluable advisor during the entire process, offering both objectivity and negotiation skills honed through years of experience in the buying and selling of businesses.
Advise you on pricing and structuring the sale of your business.
Prepare the marketing strategy, using professional resources.
Determine the right buyer for your particular business.
Educate buyers in the business-buying process.
Keep you informed about market reaction.
Present offers and point out strengths and weaknesses.
When it comes time to sell, one of the best decisions a business owner can make is to continue managing his or her business efficiently (and profitably), while depending on the services of a business broker to forge the steps of the sale. The business broker professional is an invaluable advisor during the entire process, offering both objectivity and negotiation skills honed through years of experience in the buying and selling of businesses.
Monday, May 16, 2011
Dealing with Inexperience Can Ruin the Deal
The 65-year old owner of a multi-location retail operation doing $30 million in annual sales decided to retire. He interviewed a highly recommended intermediary and was impressed. However, he had a nephew who had just received his MBA and who told his uncle that he could handle the sale and save him some money. He would do it for half of what the intermediary said his fee would be – so the uncle decided to use his nephew. Now, his nephew was a nice young man, educated at one of the top business schools, but he had never been involved in a middle market deal. He had read a lot of case studies and was confident that he could “do the deal.”
Inexperience # 1 – The owner and the nephew agreed not to bring the CFO into the picture, nor execute a “stay” agreement. The nephew felt he could handle the financial details. Neither one of them realized that a potential purchaser would expect to meet with the CFO when it came to the finances of the business, and certainly would expect the CFO to be involved in the due diligence process.
Inexperience # 2 – It never occurred to the owner or his nephew that revealing just the name of the company to prospective buyers would send competitors and only mildly interested prospects to the various locations. There was no mention of Confidentiality Agreements. Since the owner was not in a big hurry, there were no time limits set for offers or even term sheets. It would only be a matter of time before the word that the business was on the market would be out.
Inexperience # 3 – The owner wanted to spend some time with each prospective purchaser. Confidentiality didn’t seem to be an issue. There was no screening process, no interview by the nephew.
Inexperience # 4 – The nephew prepared what was supposed to be an Offering Memorandum. He threw some financials together that had not been audited, which included a missing $500,000 that the owner took and forgot to inform his nephew about. This obviously impacted the numbers. There were no projections, no ratios, etc. This lack of information would most likely result in lower offers or bids or just plain lack of buyer interest. In addition, the mention of a pending lawsuit that could influence the sale was hidden in the Memorandum.
Inexperience # 5 – The owner and nephew both decided that their company attorney could handle the details of a sale if it ever got that far. Unfortunately, although competent, the attorney had never been involved in a business sale transaction, especially one in the $15 million range.
Click "HERE" to view entire article.
Inexperience # 1 – The owner and the nephew agreed not to bring the CFO into the picture, nor execute a “stay” agreement. The nephew felt he could handle the financial details. Neither one of them realized that a potential purchaser would expect to meet with the CFO when it came to the finances of the business, and certainly would expect the CFO to be involved in the due diligence process.
Inexperience # 2 – It never occurred to the owner or his nephew that revealing just the name of the company to prospective buyers would send competitors and only mildly interested prospects to the various locations. There was no mention of Confidentiality Agreements. Since the owner was not in a big hurry, there were no time limits set for offers or even term sheets. It would only be a matter of time before the word that the business was on the market would be out.
Inexperience # 3 – The owner wanted to spend some time with each prospective purchaser. Confidentiality didn’t seem to be an issue. There was no screening process, no interview by the nephew.
Inexperience # 4 – The nephew prepared what was supposed to be an Offering Memorandum. He threw some financials together that had not been audited, which included a missing $500,000 that the owner took and forgot to inform his nephew about. This obviously impacted the numbers. There were no projections, no ratios, etc. This lack of information would most likely result in lower offers or bids or just plain lack of buyer interest. In addition, the mention of a pending lawsuit that could influence the sale was hidden in the Memorandum.
Inexperience # 5 – The owner and nephew both decided that their company attorney could handle the details of a sale if it ever got that far. Unfortunately, although competent, the attorney had never been involved in a business sale transaction, especially one in the $15 million range.
Click "HERE" to view entire article.
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