2018 – Right Time to Sell your Business?
Optimism for small & medium business owners is strong. According to a National Federation of Independent Business survey released last week, business optimism is reaching an all time high. This is the highest since 1983; small business optimism has not been this high since the Reagan economy.
Because of the strong business climate, 2018 may be the right time to sell your business. When you do plan to sell, here are some ways you can help in the process:
- Be Friendly and cooperative: When the buyer asks for information, provide it to them in a timely manner. This helps with building trust and gives the impression that you have nothing to hide.
- Communicate openly and honestly: Most transactions are closed in a timely manner when trust and good chemistry exist between the Buyer and Seller. This is built through honest, open communication.
- Avoid being defensive: Buyers may ask personal questions, but rarely are they intended to serve any purpose other than gathering needed information for a Buyer to make a decision.
- Help the Buyer see himself/herself as the new Owner: Let the Buyer know they are capable of successfully managing this business.
- Make your Business a Showplace: First impressions count! A Buyer may draw conclusions about product quality and the organization of the business based on the appearance of the facility.
- Be candid and optimistic about growth opportunity: A Buyer will look at the business from the perspective of managing and improving it. Help the buyer understand the opportunities and allow them to see the upside potential.
- Make Yourself available: Once a buyer has been identified and qualified, plan meetings when you will be available and not have a threat of having to cancel or being interrupted. This is critical as the due diligence process begins.
- Keep Financial Records Current: When a Buyer has to wait weeks for the Seller’s accountant to prepare financial statements, the enthusiasm to move forward is usually lost. When you decide to sell is the time you should notify your advisers of your intentions and explain that you will require their services in a timely manner.
- Understand the Emotional Roller Coaster: There is no way to avoid the emotions you will experience as you go through the due diligence and sale process. You have poured yourself into this business the past number of years and you need to keep reminding yourself the reason for selling. The Buyer will also experience emotions as he/she goes through the process.
- Create a team of professional advisers: Have a team of qualified transaction-oriented professionals who understand that your goal is to sell the business in a timely manner. Bring them into confidence early in the process so there are no surprises.
- Continue to focus on your business: It is easy to let the enthusiasm about the sale distract you from running your business. It’s important that you continue to focus on “business as usual” so that the business remains healthy and vibrant during this critical time. A Buyer wants a business that has been well managed right up to the sale. Do not postpone or ignore critical decisions.
These points are taken from an article written by Adam Petricoff from the VR Office in Charlotte, NC.
Business Sales Awards
2017 marks Lakes Business Group;s 10th year assisting privately held companies execute their exit strategy in the lower-middle market. Our team has had the privilege of working with outstanding clients over the years. We take pride in designing and implementing our clients’ goals, while leveraging value up and getting maximum dollar for the sale of their businesses.
Throughout the past 10 years, our office has grown to become the #1 top producing M&A advisory firm in the Midwest. We have been providing Merger & Acquisition services in a wide range of industries. Below is a picture of our ‘trophy wall’ in our office. These awards are from 2008 to the present.
These award plaques and trophies include:
2017: Acquisition International’s Leading Mergers and Acquisition Adviser of the Year
#1 Internationally Ranked VR Office – 1st Quarter 2017
#1 Internationally Ranked VR Office – 2nd Quarter 2017
2016: #1 Internationally Ranked VR Office!
#1 Internationally Ranked VR Sales Agent – Mark Smith
#2 Internationally Ranked VR Sales Agent – Joe Braier
#5 Internationally Ranked VR Sales Agent – Nicole White
#6 Internationally Ranked VR Sales Agent – Andrew Falci
#9 Internationally Ranked VR Sales Agent – Michael Szmanda
#10 Internationally Ranked VR Sales Agent – Larry Heck
2015: #1 Internationally Ranked VR Office!
#1 Internationally Ranked VR Sales Agent – Michael Szmanda
#3 Internationally Ranked VR Sales Agent – Mark Smith
#7 Internationally Ranked VR Sales Agent – Tom Alberts
#8 Internationally Ranked VR Sales Agent – Larry Heck
2014: #1 Internationally Ranked VR Office!
#1 Internationally Ranked VR Owner – Tim Bullard
#1 Internationally Ranked VR Intermediary – Mark Smith
#3 Internationally Ranked VR Intermediary – Andy Schmelzer
#4 Internationally Ranked VR Intermediary – Michael Szmanda
#7 Internationally Ranked VR Intermediary – Joe Braier
#8 Internationally Ranked VR Intermediary – Larry Heck
2013: Most Valuable Intermediary – Tim Bullard – President/CEO
#2 Internationally Ranked VR Office!
#3 Internationally Ranked VR Intermediary – Joe Braier
#9 Internationally Ranked VR Intermediary – Michael Szmanda
2012: #1 Internationally Ranked VR Office!
#2 Internationally Ranked VR Intermediary – Mark Smith
#3 Internationally Ranked VR Intermediary – Joe Braier
2011: #1 Internationally Ranked VR Owner – Tim Bullard- President/CEO
#2 Internationally Ranked VR Office
#7 Internationally Ranked VR Intermediary Joe Braier
If you are considering selling your business call our office at 262-347-2083
Do You Have a Business Exit Strategy?
Most business owners plan to sell their business to fund their retirement. It is the number 1 reason for business owners, followed by burnout and new opportunities. Yet, when it comes time to sell their business, less than half of all business owners plan ahead.
|Deal Size||#1 Reason||#2 Reason|
|$500 – $1MM||Retirement||Burnout|
|$1MM – $2MM||Retirement||TIE: Burnout/Opportunity|
|$2MM – $5MM||Retirement||New Opportunity|
|$5MM – $50MM||Retirement||Burnout|
|These stats are fom an IBBA.org article in early 2017.|
Business owners assume their business is salable, but that is not always the case. By not having an exit plan and understanding the value of your business, you are taking a huge risk. Even if you are not ready to sell your business, you should get an annual estimate value of your business. Lakes Business Group can help. Our agents work with businesses in all industries and can provide an evaluation for your business with industry comparisons to help you properly prepare ahead.
Five Business Exit Strategies
Entrepreneur.com has a article with five primary exit strategies available to most entrepreneurs, written by Stever Robbins. Following is a short synopsis of these five strategies.
1- Just Take It: One favorite strategy of forward thinking business owner is simple to bleed the company dry on a daily basis. I mean pay yourself a huge salary, reward yourself with a gigantic bonus regardless of actual company performance, and issue a special class of shares that only you own that gives you ten times the dividends the other shareholder receive.
2- the Liquidation: One often-overlooked exit strategy is simply to call it quits, close the business doors and call it a day. I don’t know anyone who’s founded a business planning to liquidate it someday, but it happens all the time.
3- Selling to a Friendly Buyer: If you’ve become emotionally attached to what you’ve built, even easier than liquidating your business is the option of passing ownership to another true believer who will preserve your legacy. Interested parties might include customers, employees, children, or other family members.
4- the Acquisition: Acquisition is one of the most common exit strategies: You find another business that wants to buy yours and sell, sell, sell. If you choose the right acquirer, your value can far exceed what would be reasonable based on your income. How do you select the right company? Look for strategic fit: Which acquirer can buy you to expand into a new market, or offer a new product to their existing customers?
5- the IPO (initial public offering): There are millions of companies in the U.S., and only about 7,000 of those are public. If you’re funded by professional investors with a track record of taking companies public, you might be able to do it. You start by spending millions just preparing for the road show, where you grovel to convince investors your stock should be worth as much as possible. (You even do a “reverse split,” if necessary, to drive up the share price.) Unlike an acquisition, where you craft a good fit with a single suitor, here you romancing hundreds of Wall Street analysts. If the romance fails, you’ve blown millions. And if you succeed, you end up married to analysts. You call that a life?
This is a small portion of the article titled “Exit Strategies for your Business” by Stever Robbins
Business Information Needed when Ready to Execute your Exit Strategy
You’ve built your business and now ready to execute your exit plan. When contacting your business consultant, they will ask for the following information to complete an offering memorandum outlining the details of the business.
- AR Aging Report
- AP Report
- Number of Customers in Database/Number of Active Customers/Customer Concentration
- Number of Suppliers of Vendors/Supplier/Vendor Concentration
- Vending Contracts
- Maintenance Contracts
- Lease/Purchase Agreements
- Corporate Employee Chart
- Employee Benefits Summary
- Corporate Documentation
- Corporate Insurance Policy
- Any Shareholders agreements
IF REAL ESTATE IS OWNED:
- Floor Plans
MISC ENGAGEMENT DOCUMENTATION:
- Partnership/Consent of Spouse or Corporate/Partnership Resolution
- Licenses & Permit Documents & Process to Obtain Licenses and Permits
- Copies of Patents, Trademarks, Copyrights, Etc.
- Description/Documentation of Technology being used
- List of products and services sold Top 5 Income Producing Items
- Any outstanding legal issues
What Buyers Look for in a Business Opportunity
You’re ready to sell your business. You assume there’s a buyer out there who will pay you a fair price and then nurture the company with the same attention you have. What’s more, selling the business is a major part of your retirement plan.
Buyers look at businesses differently than sellers. So to achieve the outcome you want, it’s important to think like buyers and understand how they evaluate a business.
There are many types of buyers: strategic and financial, individuals, companies, and private equity funds. Despite differences, all buyers consider how much they’ll invest to acquire a business, the amount of risk they’ll bear and the potential return on their investment. To evaluate an opportunity, buyers focus on three major areas:
- Cost and Terms
What will it take to acquire the business? How much cash and how much debt? What are the deal’s terms and conditions?
Will the business continue to operate similarly after the sale? Much of the risk of buying a company relates to continuity. For example: The current owner has personal relationships with customers, distributors or vendors that the new owners may have to struggle to maintain, The owner has special expertise that is undocumented and difficult to learn, Key personnel aren’t committed to staying, or Outside competition looms. Sellers armed with solid responses to these types of continuity concerns are more likely to get their desired price. Even if you don’t want to sell your business for a few years, take steps now to ensure it can run smoothly without your personal involvement. That independence could be worth millions when you sell.
Are there unexploited opportunities? You may have focused your sales efforts in one geographic region, but there may be many opportunities to take the product national or international. A buyer that believes it can increase revenues substantially will pay more for the business than one that believes the current owners have already maximized opportunities. What sellers should do?
It may seem counter intuitive, but the things you may be most proud of can work against getting the best price for your company. Not many entrepreneurs like to boast that their company could run just fine without them or that there are plenty of opportunities they’ve failed to exploit. Yet these may be the very factors buyers seek, along with lower cash requirements. Please call us for help in understanding how to best present your company for sale.
Taken from an article written by Peter C King, VR Business Brokers/Mergers & Acquisitions, CEO