Most business owners who have not been involved in a transaction before are likely unaware of the various exit strategy options that may be available. Professional business brokers and business appraisers are able to outline the possibilities for the business owner and the likely benefit of each option. Owner financing is an often used and attractive way to structure an acquisition of a business. This may eliminate the need for bank financing and allow the seller the opportunity to defer taxes and earn interest on the seller finance note that results in total deal proceeds in excess of the initial transaction price. Continue reading →

It is not uncommon for the business owner pursuing a sale of the business to require additional financial analysis services from a business appraiser during the sale process. This financial analysis may involve updates to the original valuation based on changing circumstances after the initial report, analysis relative to potential synergies and the impact on value to a strategic buyer, industry analysis and/or research, financial modeling, fairness opinions as to offers and the structure of an offer, or financial analysis for use in supporting a counter offer to a prospective buyer. Continue reading →

Many small business owners are individuals who have started or acquired a “lifestyle” business—a business that provides the owner with a job and enables the owner to maintain their desired lifestyle. Most of these business owners have considered or will consider an exit strategy from their enterprise. Consideration of an exit strategy may be prompted by many factors such as retirement, a desire to achieve liquidity to pursue other business ventures, owner burn-out, illness, etc. In addition, exit planning may be part of an investor’s overall strategy of acquiring, growing and increasing the value of the business, and exiting the business through a merger or acquisition as a means of creating transgenerational wealth. Continue reading →

Most owners of small businesses believe they know what the company is worth. As they may have worked to build the business, often from the ground up, they feel that their intuitive value conclusions accurately reflect the fair market value of the firm. In many cases, they are biased in their views towards the firm, and therefore, have an inflated sense of value associated with the business. Their value may differ substantially from the value that could be realized in an arms length transaction between a willing buyer and a willing seller. Without a formal valuation of the company, the owners of a small business often have nothing other than a gut feeling to support the value that they attach to the business. Continue reading →

In preparing the company for the sale, the owners must adopt the appropriate mindset that provides a level of commitment to the process that is conducive to a successful and optimal transaction. A great deal of time is needed to effectively market the business and negotiate a successful transaction. If the business owners are attempting to manage this process themselves and continue to run the business, it is likely that one side is going to suffer. Typically, the business suffers from less owner involvement when owners choose the “for sale by owner” route. Continue reading →

 Once the owners of a business have made the commitment to pursue a sale or merger of their company, a great deal of time and attention must be expended on coordinating site visits with prospective buyers, due diligence, and finally, closing. The business broker will work with the owners’ other advisors so that they do not spend time on marketing the business and negotiating to the detriment of running the business. The business broker and the owners initially must ensure that preliminary legal work is in order and that the company’s most recent annual and interim financial statements (or tax returns) are made available by their accounting firm. Continue reading →

Many small businesses utilize leverage to invest in value-creating projects, fund operations during down years, etc. Often times, this leverage may exceed the credit available based on the business’s fixed assets alone. In some cases, the financial institution may be willing to lend against the company’s goodwill, which is identified in the process of a valuation. The ability, then, of a small business to borrow based on the value of the goodwill may expand the universe of value-creating investment options available to the owners. Periodic valuations may establish a track record of value which could be used to facilitate a recapitalization of the firm, enabling owners to further seek value-creating projects, distribute funds to the shareholders via special dividends, etc. Continue reading →

The key to successfully marketing and selling a small business is confidentiality. The owners of small business do not want customers, suppliers, and the competition to know that their business is available for acquisition. Unlike real estate brokers who hang a “For Sale” sign in front of the property, professional business brokers maintain a high degree of confidentiality. Continue reading →

The process of selling a business is, in many cases, a life changing event for the owners. Many consider the business their “baby.” As such, there is a great deal of emotion involved in the process of selling a business. Continue reading →

Most small business owners are skilled at running their business but do not have the background that is conducive to successfully negotiating a transaction involving their business. Lacking negotiating skills may result in leaving money on the table in the transaction. As this is not an optimal outcome for the business owner, it is wise to have an experienced, professional business broker/transaction advisor to negotiate for them to maximize the transaction terms. Continue reading →