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What Kind of Buyers are You Most Likely to Meet?

Selling a business can be an exciting and rather lucrative time.  But going through the sales process means embracing the notion that you’ll have to be very prepared for whatever might be thrown your way.  A key aspect of preparing to sell your business is to know what types of buyers you’re likely to encounter.

It is only logical to anticipate the types of buyers you may be dealing with in advance.  That will allow you to plan how you might potentially work with them.  Remember that each buyer comes with his or her own unique desires and objectives.

The Business Competitor

Competitors buy each other all the time.  Frequently, when a business is looking to sell, the owner or owners quickly turn to their competitors.  Turning to one’s competitors when it comes time to sell makes a good deal of sense; after all, they are in the same business, understand the industry and are more likely to understand the value of what you are offering.  With these prospective buyers, a great confidentiality agreement is, of course, a must.

Selling to Family Members

It is not at all uncommon for businesses to be sold to family members.  These buyers are often very familiar with the business, the industry as a whole and understand what is involved in owning and operating the business in question.

Often, family members are prepared and groomed years in advance to take over the operation of a business.  These are all pluses.  But there are some potential pitfalls as well, such as family members not having enough cash to buy or not being fully prepared to run the business.

Foreign Buyers

Quite often, foreign buyers have the funds needed to buy an existing business.  However, foreign buyers may face a range of difficulties including overcoming a language barrier and licensing issues.

Individual Buyers

Dealing with an individual buyer has many benefits.  These buyers tend to be a little older, ranging in age from 40 to 60.  For these buyers, owning a business is often a dream come true, and they frequently bring with them real-world corporate experience.  Dealing with a single buyer can also help expedite the process as you will have fewer individuals to negotiate with.

Financial Buyers

Financial buyers are often the most complicated buyers to deal with, as they can come with a long list of demands.  That stated, you should not dismiss financial buyers.  But just remember that they want to buy your business strictly for financial reasons.  That means they are not looking for a job or fulfilling a lifelong dream.  For financial buyers, the key point is that your business is generating adequate revenue.

Synergistic Buyers

A synergistic buyer can be an excellent candidate.  The reason that synergistic buyers can be such a good fit is that their business in some way complements yours.  In other words, there is a synergy between the businesses.  The main idea here is that by combining the two businesses they will reap a range of benefits, such as access to a new and very much aligned customer base.

Different types of buyers bring different types of issues to the table.  The good news is that business brokers know what different types of buyers are likely to expect out of a deal.

Copyright: Business Brokerage Press, Inc.

12587279/BigStock.com

What Kind of Buyers are You Most Likely to Meet?

Selling a business can be an exciting and rather lucrative time. But going through the sales process means embracing the notion that you’ll have to be very prepared for whatever might be thrown your way. A key aspect of preparing to sell your business is to know what types of buyers you’re likely to encounter.

It is only logical to anticipate the types of buyers you may be dealing with in advance. That will allow you to plan how you might potentially work with them. Remember that each buyer comes with his or her own unique desires and objectives.

The Business Competitor

Competitors buy each other all the time. Frequently, when a business is looking to sell, the owner or owners quickly turn to their competitors. Turning to one’s competitors when it comes time to sell makes a good deal of sense; after all, they are in the same business, understand the industry and are more likely to understand the value of what you are offering. With these prospective buyers, a great confidentiality agreement is, of course, a must.

Selling to Family Members

It is not at all uncommon for businesses to be sold to family members. These buyers are often very familiar with the business, the industry as a whole and understand what is involved in owning and operating the business in question.

Often, family members are prepared and groomed years in advance to take over the operation of a business. These are all pluses. But there are some potential pitfalls as well, such as family members not having enough cash to buy or not being fully prepared to run the business.

Foreign Buyers

Quite often, foreign buyers have the funds needed to buy an existing business. However, foreign buyers may face a range of difficulties including overcoming a language barrier and licensing issues.

Individual Buyers

Dealing with an individual buyer has many benefits. These buyers tend to be a little older, ranging in age from 40 to 60. For these buyers, owning a business is often a dream come true, and they frequently bring with them real-world corporate experience. Dealing with a single buyer can also help expedite the process as you will have fewer individuals to negotiate with.

Financial Buyers

Financial buyers are often the most complicated buyers to deal with, as they can come with a long list of demands. That stated you should not dismiss financial buyers. But just remember that they want to buy your business strictly for financial reasons. That means they are not looking for a job or fulfilling a lifelong dream. For financial buyers, the key point is that your business is generating adequate revenue.

Synergistic Buyers

A synergistic buyer can be an excellent candidate. The reason that synergistic buyers can be such a good fit is that their business in some way complements yours. In other words, there is a synergy between the businesses. The main idea here is that by combining the two businesses they will reap a range of benefits, such as access to a new and very much aligned customer base.

Different types of buyers bring different types of issues to the table. The good news is that business brokers know what different types of buyers are likely to expect out of a deal.

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Whether you are looking to exit your privately held business, represent an acquisition-minded corporation, value your business, or are personally interested in owning or building value in your own company or franchise, Colonial Business Brokerage offers the professional services that successfully bring buyers and sellers together.

Copyright: Business Brokerage Press, Inc.

12587279/BigStock.com

Two Exiting Tips From One Of The Top 40 Under 40

Wind Mobile founder Anthony Lacavera has started 12 businesses, six of which he has exited. His exits have ranged in value from the $6 million he got for one of his recent start-ups to $1.3 billion when he sold Wind Mobile. He did it by following two key tips.

  1. Understand what kind of company you are running

Lacavera has owned hyper-growth unicorns and lifestyle businesses and urges entrepreneurs to be clear about their long-term prospects. Lacavera started a business supplying hotels with internet access and understood the company would be a good cash generator, but would never sell for a mint. He ran the business for almost two decades and used the cash it generated to fund various other ventures. Recently, he finally sold the business, which was generating $1.5 million in pre-tax profit, for $8 million—a relatively modest 5 times earnings, which was fine by Lacavera, because it had served its purpose of funding other companies along the way.

  1. The role of CEO and owner are not the same

Lacavera encourages entrepreneurs to separate the role of CEO and business owner. Even though they may be the same person, they have different functions and, at some point, your business may be better served by separating the two roles. Entrepreneurs who are comfortable handing the reins to a professional manager may do better in the long run than those who need to control everything.

Lacavera had great success, which is visible in the fact that he has won just about every business award there is, including 2010 CEO of the Year, Top 40 Under 40, Deloitte Technology Fast 50, and Canada’s Fastest Growing Company. One of the top secrets to Lacavera’s success — knowing when to bring in a CEO to replace himself in any of his ventures.

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If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

 

How to Get One Million More from PwC

Can a small, 30 employee team make a successful transition to the corporate environment of one of the Big Four auditors (and stay on-board)? Find out  what happens post-sale on today’s candid episode.

Ann Bennett was founder of Applied Information Services (AIS) – a first-of-its-kind, PC-based software company that processed K-1s (internal tax forms given to investors in partnerships). AIS was not an accounting firm, giving them a competitive advantage to powerhouses like PricewaterhouseCoopers –whose K-1 department was plateauing, still operating on traditional mainframes.

PwC realized they needed to evolve and offer the flexibility and responsiveness that only AIS’ software provided – so they approached Bennett. The two parties would eventually settle on a price (only after Bennett went back to ask for one million more), but it was the price she would later pay that has her reflecting on this story 20 years later.

Listen Now

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If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

 

 

How To Avoid Disappointment When It’s Time To Cash Out

How do you avoid not being disappointed with the money you make from the sale of your company?

Perhaps you’ve heard that companies like yours trade using an industry rule of thumb or that companies of your size sell within a specific range, and you want to get at least what your peers have received.

While these metrics can be useful for tax planning or working out a messy divorce, they may not be the best ways to value your company.

The Only Valuation Technique That Really Matters

In reality, the only valuation technique that will ensure you are happy with your exit is for you to place your own value on your business. What’s it worth to you to keep it? What is all your sweat equity worth? Only when you’re clear on that will you ensure your satisfaction with the sale of your business.

Take Hank Goddard as an example. He started a software company called Mainspring Healthcare Solutions back in 2007. They provided a way for hospitals to keep track of their equipment and evolved into a slick application that hospital workers used to order supplies.

Goddard and his partner started the business by asking some friends and family to invest. The business grew, but there were challenges along the way: Goddard had to fire his entire management team in the early days, product issues needed to be solved and operational issues needed to be resolved.

At times, it was a grind, so when it came time to sell in 2016, Goddard reasoned that he had invested more than half of his career in Mainspring and he wanted to get paid for his life’s work. He also wanted to ensure his original investors got a decent return on their money.

He was approached by Accruent, a company in the same industry, who made Goddard and his partners an offer of one times revenue. Accruent had recently acquired one of Goddard’s competitors for a similar value, so presumably thought this was a fair offer.

Goddard brushed it off as completely unworkable. Goddard had decided he wanted five times revenue for his business. Even for a growing software company, five times revenue was a stretch, but Goddard stuck to his guns. That’s what it was worth to him to sell.

A year after they first approached Goddard, Accruent came back with an offer of two times revenue and, again, Goddard demurred.

Mainspring had developed a new application that was quickly gaining traction and he knew how hard it was to sell to the hospitals he already counted as customers.

He told Accruent his number was five times revenue in cash.

Eventually, Goddard got his number.

Being clear on what your number is before going into a negotiation to sell your business can be helpful when emotions start to take over. Rather than relying on industry benchmarks, the best way to ensure you’re not disappointed with the sale of your business is to decide up front what it’s worth to you.

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If you’re interested in improving the value of your business, take our questionnaire or call Colonial Business Brokerage today at 443-982-7332.

Fortune 500 Companies Helped This Founder Exit

We know consumers have shifted their eyes from televisions to mobile devices, so how are companies raising upwards of $28 million to capitalize on this evolution?

For Mitchell Reichgut, co-founder of Value Exchange Advertising (VEA) company Jun Group, he helped create a service that has multi-national and luxury brands running to them to reach their target customers.  Jun Group is a pioneer in VEA where a marketer will offer a mobile phone user access to something cool like a game or some valuable content in exchange for watching an ad.

Jun Group raised $28 million in venture financing before ultimately being acquired by Advantage Solutions last fall.

In this interview with Reichgut, you’ll learn:

  • A refreshingly simple way to evaluate potential investors
  • The surprisingly tough question to ask interested investors
  • What to do when a partnership falls apart

Listen Now

Do you want to improve the value of your business?

If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

New Year’s Resolutions & Selling Your Business

Most people fail to keep their New Year’s Resolutions. But where buying and selling a business is concerned, failing to keep those resolutions could mean an abundance of lost opportunity.

Todd Ganos at Forbes recently penned a thought-provoking article entitled The 8 New Year’s Resolutions for the Sale of Your Business. In this article, he compares selling a business to getting in shape in the months preceding your visit to the beach. It is necessary to do a great deal of planning and hard work if you want to be in good shape for the big “beach body reveal.”

When it comes to selling a company, Ganos believes that there are eight factors that must be taken into consideration. Listed below are those factors he feels are a must for business owners looking to get their business ready for “the beach.” These are the eight factors that Ganos believes are most essential and should be on your New Years’ Resolution list for your business:

  1. Planning
  2. Legal
  3. Leadership
  4. Sales
  5. Marketing
  6. People
  7. Operations
  8. Financial

In order to get your business ready, it is necessary to take a good long and honest look at each of these eight important categories.

Planning is at the heart of everything. He points out that owners who truly want to get their business ready for the market will want to adopt a focused month-by-month plan.

This plan means having discipline, developing a business plan and involving your team in the development of that plan. Once the plan has been developed, it should be reviewed with your leadership team each month.

New Years’ Resolutions fail because they don’t get properly integrated into peoples’ lives. And the same holds true for making changes in one’s businesses. Ganos correctly asserts that in order to get your business ready to sell, you have to make it an “all-of-the-time thing” in which you are constantly focused on success.

New Years’ Resolutions have to be about doing things differently, having a plan and then sticking to these changes permanently.

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Whether you are looking to exit your privately held business, represent an acquisition-minded corporation, value your business, or are personally interested in owning or building value in your own company or franchise, Colonial Business Brokerage offers the professional services that successfully bring buyers and sellers together.

Copyright: Business Brokerage Press, Inc.

mauscraft/BigStock.com

The Big Thing Holding Back Small Businesses

Small businesses stay small either by choice or because they start chasing growth in the wrong places.

When you strip away the layers, it all comes down to darts.

Imagine a dartboard with a bull’s eye and around it is a series of wider and wider circles. The bull’s eye is where the people just like you hang out. They are the people (or businesses) who feel the problem your company set out to solve. They are usually your first customers and raving fans.

The further you go outside of your bull’s eye, the less these prospects feel your exact pain.

Why do entrepreneurs go outside their bull’s eye? When you’re a self-funded start-up, you’re scrambling — just trying to bootstrap your way to a company. You don’t have a lot of money to invest in formal marketing, so you rely on word-of-mouth and referrals, which also means you’re often talking to people outside of your bull’s eye.

These prospects may experience the problem you’re trying to solve, but they are slightly different (that’s why they’re not in the bull’s eye). They like your product or service but want a little tweak to it: customization or a different version. You don’t see the harm in making a change and start to adjust your offering to accommodate the customers outside your bull’s eye.

Your new ‘slightly-outside-the-bull’s-eye’ customer tells her friends about how great you are, and how willing you are to listen to your customers, and she refers a prospect even further outside your bull’s eye who again, asks you for another tweak.

Making these changes to your original product or service to accommodate customers outside your bull’s eye seems innocent enough at the time, but eventually, it undermines your growth.

Why?

To grow a business beyond your efforts, you need to hire employees (or build technology) that can do the work. As humans, we are usually lousy at doing something for the first time but can master most things with enough repetition.

Think about teaching a toddler how to tie his shoes. The first few attempts are usually rough. It’s a new skill and their tiny hands have never had to make bunny ears before. You break it down for the child and show them how to master each step. It can take weeks, but eventually, they get it. As adults, we don’t even think about tying our shoes — we’ve mastered the skill by repetition.

The same is true for your employees. They need time to truly master the delivery or your product or service. Every time you make a tweak for a new customer outside your bull’s eye, it’s like changing the instructions on tying your shoelaces. It’s disorienting for everyone and leads to substandard products and services, which customers receive and are less than enthusiastic about.

Having unhappy customers often leads the owner to step in and “fix” the problem. While some founders can indeed create the customized product or service for their new, ‘outside-the-bull’s-eye’ customer, they are making their company reliant on them in the process.

A business reliant on its founder will stall out at a handful of employees when the founder runs out of hours in the day.

The secret to avoiding this plateau, and continuing to grow, is to be brutally disciplined in only serving customers in your bull’s eye for much longer than it feels natural. When you want to grow, the temptation is to take whatever revenue you can, but the kind of growth that comes from serving customers outside your bull’s eye can be a dead end.

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If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

 

Inside the Mind of a Private Equity Acquirer

If you’re looking to sell a small to mid-sized business these days, one of your bidders is likely to be a Private Equity Group (PEG). They have a ton of cash looking to buy well-run companies, but they probably won’t acquire all of your company. A PEG may buy most of your business and ask you to stay on and run it for a while as a minority shareholder.

And that’s where the problems can start for an independent-minded founder if you don’t understand what is motivating a PEG to invest in your company.

This episode gets inside the head of a Private Equity (PE) investor named John Dalton, Managing Partner at Industrial Device Investments who shares his experience as an investor. Dalton started ID Investments after a career with Black & Decker and General Electric and brings his operational savvy to the companies he buys.

In this episode, you’ll learn:

  • What PE buyers see when they’re looking at your business
  • How PE firms use leverage to maximize their returns
  • How PE buyers structure a sale
  • How to find the right PE acquirer for your company
  • How to spot a PE investment train wreck

Listen Now

Do you want to improve the value of your business?

If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.

Why Companies are Adopting Subscription Billing Models

Volvo recently announced they will make their cars available on a subscription model where consumers will pay one fixed fee per month for access to a car which includes insurance and maintenance.

Everything from toothbrushes to flowers is now available with subscription billing.

Could you offer some sort of recurring plan to your customers? Here are six reasons to consider offering your customers a subscription:

Predictability: When you have subscribers, you can plan what your business needs in the future. For example, the average flower store in America throws out more than half of its inventory each month because it’s too rotten to sell.  At H.Bloom, a subscription-based flower company that sells flowers to hotels and spas, say they throw out less than 2% of their flowers because they can perfectly predict how many flowers are needed to fulfill their orders.

Eliminate Seasonality: Many businesses suffer through seasonal highs and lows. In fact, a whopping thirty percent of a typical flower store’s revenue comes on Mother’s Day and Valentine’s Day – ultimately leaving them to scramble and make a sale in November.  By contrast, H.Bloom has a steady stream of subscribers that pay each month. At Mister Car Wash – where they offer a subscription for unlimited car washes – they receive revenue from customers in November and April even though very few people in the Northeast wash their cars in rainy months.

Improved Valuation: Recurring revenue boosts the value of your business. Whereas most small companies trade on a multiple of profit, subscription-based businesses often trade on a similar multiple of revenue.

The Trojan Horse Effect: Once you subscribe to a service, you become much more likely to buy other things from the same company. That’s one reason Amazon is so keen to get you to buy subscriptions to things like Prime or Subscribe & Save. Amazon knows that once you become a subscriber, you are much more likely to buy additional products.

The Sale That Keeps On Giving: Unlike the transaction business model where you have to stimulate demand through advertising to get customers to buy, with a subscription-based model, you sell one subscription and it keeps giving month after month.

Data & Market Research: When you get a customer to subscribe, you can start to see their spending and consumption habits. This data is the ultimate in market research. It’s how Netflix knows which new shows to produce and which to kibosh.

If you’re interested in improving the value of your business, take our questionnaire or contact Colonial Business Brokerage today at 443-982-7332.