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8 Key Drivers of Company Value

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Business Valuation, Buyer FAQ, Buying a Business, Seller FAQ, Selling a Business, Value Builder System™.

 

You hear me talk about the 8 Key Drivers of Company Value, as these are often the things that acquirers look for when considering whether or not they want to buy a company. So, I thought with the curtain drawing on 2018, that I would share some of the best episodes of Built to Sell Radio (in my opinion), where entrepreneurs share their real-life stories and highlight how the 8 drivers affected their exits.

  1. Financial Performance

In Episode 145, Julie Nirvelli’s salsa company was on the brink of bankruptcy, despite having distribution agreements with big-name retailers like Whole Foods and Kroger. Nirvelli struggled to scale because she had a negative cash flow cycle. She had to buy raw material, design packaging, market her product, and then sit around and wait for her distributor to pay her weeks later.

She sent a last-ditch email to four potential acquirers – and you won’t believe what happened next.

  1. Growth Potential

In Episode 124, Claude Theoret got almost four times revenue for his company, in part because he built a powerful financial model that demonstrated the growth potential of his business to acquirers. Find out the steps he took to build an attractive acquisition.

  1. Switzerland Structure

In Episode 130, Harpaul Sambhi had a successful exit, but one of the things that nearly derailed the process was how dependent his business was on the social media platforms that were essential to his product.  If your business is over-reliant on a single employee, customer, or promotional channel, listen now as Sambhi discusses how he overcame this obstacle.

  1. Valuation Teeter-Totter

In Episode 133, Tevya Finger mastered the Valuation Teeter-Totter. Finger’s cash flow could have been compromised, as hair salons are notoriously slow to pay invoices, but he found a way to get their cash early. Listen now to learn his secret.

  1. Recurring Revenue

In Episode 152, David Hauser bootstrapped Grasshopper into a recurring revenue juggernaut. His model was so well designed that Hauser and his business partner walked away with $165 million in cash and additional stocks from Citrix. Find out how he did it.

  1. Monopoly Control

In Episode 137, Tomas Gorny’s mission-driven approach to simplifying website hosting set him apart in the industry. Listen in to find out how you can also differentiate yourself from your competitors.

  1. Customer Satisfaction

In Episode 156, George Bandarian II focused on what he calls ‘customer delight’. By turning his customers into his biggest supporters, he was able to take his family business from a remnant of a dying industry into a huge exit. Find out how customer delight created a world-class company.

  1. Hub and Spoke

Many small businesses struggle when the founder steps away. In Episode 141, Stephanie Leshney discusses how she helped transition her family’s business, Ross Organic, after taking over the company from her father. She has some great strategies if you’re planning to exit from a family-owned enterprise.

Do you want to improve the value of your business?

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.

Call Colonial Business Brokerage today at (443) 982-7332.

The One Number Owners Need to Stop Focusing On

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Business Valuation, Value Builder System™.

The value of your business comes down to a single equation: what multiple of your profit is an acquirer willing to pay for your company?

profit × multiple = value

Most owners believe the best way to improve the value of their company is to make more profit – so, they find ways to sell more and more. As experts in their industry, it’s natural that customers want to personally engage with them, which means spending more time on the phones, on the road and face-to-face to increase sales.

With this model, a company can slightly grow, but the owner’s life becomes much more difficult: customers demand more time and service, employees begin to burn out, and soon it feels like there are not enough hours in the day. Revenue flat lines, health can suffer and relationships get strained – all from working too much. Does this feel familiar?

If you’re spending too much time and effort on increasing your profit, you could find yourself diminishing the overall value of your business. The solution? Focus on driving your multiple (the other number in the equation above). Driving your multiple will ultimately help you grow your company value, improve your profit and redeem your freedom.

What Drives Your Multiple

Differentiated Market Position

Acquirers only buy what they could not easily create, so expect to be paid more if you have close to a monopoly on what you sell and/or are one of the few companies who have been licensed to provide the specific product or service in your market.

Lots of Runway

Most founders think market share is something to strive for, but in the eyes of an acquirer, it can decrease the value of your business because you’ve already sopped up most of the opportunity.

Recurring Revenue

An acquirer is going to want to know how your business will do once you leave – recurring revenue assures them that there will still be a business once the founder hits eject.

Financials

The size and profitability of your company will matter to investors and so will the quality of your bookkeeping.

The You Factor

The most valuable businesses can thrive without their owners. The inverse is also true because the most valuable businesses are masters of independence.

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.

Call Colonial Business Brokerage today at (443) 982-7332.

How to Leverage Your Strengths in a Business Exit

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Business Valuation, Exit Planning, Seller FAQ, Selling a Business, Value Builder System™.

When preparing for a large-scale event—such as an extended trip to a foreign country, sending the kids to college, or preparing your business for the future—the planning required can sometimes look too big and unwieldy to pursue. Planning for the future of your business might be one of the largest-scale financial events of your life, which implies that planning is paramount. How can you plan for a business exit when you have so many other things to do?

As a business owner, you likely have three skills you can leverage in your business exit.

  1. Your drive.
  2. Your ability to identify talented people to work with and for you.
  3. Your ability to implement processes that position you to achieve your goals.

Let’s look at how you can leverage these skills in your planning.

Leveraging Drive

Business owners are driven to succeed. This drive is essential for overcoming hurdles, addressing new challenges, and carving new paths toward more success. You can tap into that drive to begin planning for your business’ future similarly to how you began planning to start your business.

While it may seem like planning piles more work onto your plate, that’s not necessarily true. By diving headlong into planning with the same drive used to start and establish the business, owners often find that they end up with more time, more freedom, and more money in the end. There are three things you can do today to leverage your drive into successful planning.

  1. Write down your vision of post-exit life: Writing goals down increases the likelihood of achieving those goals. This does not mean that you need to have a fully fleshed plan for your exit. Broad strokes or ideas, such as “I want to travel” or “I want to volunteer” or even “I want to sit on a yacht doing nothing,” will establish a baseline for future planning.
  2. Write down things that are important to you: Your business’ future standing affects more than just you. It can also affect your family, employees, and community. Writing down things that are important to you can help you focus on addressing those things in your formal plans.
  3. Talk with trusted advisors: A conversation today with a trusted advisor who can help you may be the catalyst that launches your future planning. Advisors can analyze the wants and needs you have, the current state of the business, and which future actions to take to pursue your specific goals.

Leveraging Talented People

Finding talented people to work with and for you is challenging. Successful business owners have a knack for finding those people, and they are crucial to successful planning. There are two things you can do to lay the groundwork for your eventual business transition.

  1. Evaluate your management team: Your top managers may be able to help you position your business for either the ideal future you see for yourself and your company or the less desirable contingencies (death or disability, for example). Can they take the company to the next level? Can they move the business forward if you are less involved or unable to work? Are their interests aligned with yours? It takes time and careful planning to get to a point at which you can enthusiastically say “Yes” to these questions. Start today with a good, honest assessment of your top people.
  2. Start considering successors: A key component of a business plan is knowing who your successor will be and preparing yourself, the company, and maybe even your customers for a shift that is inevitable. There is simply no chance that you’ll play your current role forever. Learn the factors that are most likely to make ownership and leadership succession more successful. Work today and tomorrow to implement processes and talent that support your goals for who will take over the business when you are done, and when that will take place.

Leveraging Processes

Processes drive goal achievement. Rarely do successful businesses become successful by chance. Looking at planning as a process rather than extra work brings familiarity to these ongoing efforts. You can acquaint yourself with the steps involved in creating a successful plan for your business’ future, then use your Advisor Team to turn the process into a comprehensive Exit Plan through which your unique goals and objectives can be realized.

The strengths that helped you start your business can serve you well as you approach your future business planning. If you’d like to discuss more ways to leverage your strengths in your planning, please contact us today.

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.

Call Colonial Business Brokerage today at (443) 982-7332.

Farm Succession Planning

Posted by & filed under Business Owner, Business Valuation, Exit Planning, Seller Articles, Valuation.

from JDSpra.com (November 16, 2018)

A huge number of baby boomers have created or continued successful family-owned farms. As they approach retirement the future of those farms hinges on their ability to successfully transition to a next generation. Less than 30 percent of family farms successfully transfer to a subsequent generation.

A clear succession plan is the most important ingredient for successfully continuing a family farm. But when surveyed, most farm owners report not having completed any estate planning beyond a will.

Succession planning can easily be pushed aside by farmers focused on day-to-day operations. But an even bigger issue for procrastinating may be emotional issues associated with succession. Making succession decisions is rarely easy. But exploring what is needed and starting early are good things to do. Following simple steps can start farmers on the path of establishing a farm-succession plan.

Organize a team. Involve experts. Key business and estate-planning professionals such as attorneys and accountants can provide the knowledge needed to create a successful plan.

Consider incorporation. Converting to a corporation, Limited Liability Company or other formal legal entity can help ensure the continuation of a business and also provide limited liability for its owners.

Train successors well. It can take months or years to train successors about farm operations, especially making management decisions. Start early to give them the best opportunity to step into a managerial role.

Document a vision. A step-by-step guide detailing a plan for the future of the farm — including successors — will help future generations understand future goals for the farm set by current owners.

Develop a buy-sell or stock-restriction agreement. Following a triggering event such as an owner’s death or disability, an agreement can obligate one owner to buy and another to sell his or her interest in the farm. It can also be structured to control how ownership interests may be transferred to non-family or off-farm family members.

Have an insurance plan. While a buy-sell agreement can help keep the farm in the family, it may be necessary to obtain insurance in order to fulfill obligations in the agreement. Life insurance can provide needed liquidity when a triggering event such as death brings about the sale of an ownership interest.

Discuss plans with all individuals involved. Eliminate surprises by telling family members and the farm’s management team a general outline of the succession plan. Sharing a vision for the farm can help ensure a smooth transition for everyone involved. Also, share who has been chosen to take over the farm – and why.

Review and update a plan periodically. Once a plan is in place review it periodically with a team of estate-planning professionals to address changes that may be needed. Changes in laws or tax code may require adjustments to a plan. Changes in personal life and family situation also require a plan update.

The most difficult aspects of succession planning relate to emotional and family issues surrounding transition. But they must be tackled. A well-thought farm-succession plan will protect the farm and secure a legacy. And it can eliminate potential conflict and ensure family cohesiveness for the long run.

© 2018 Agri-View. Madison, WI.  Reprinted with permission.

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.

Call Colonial Business Brokerage today at (443) 982-7332.

Around the Web: A Month in Summary

Posted by & filed under Seller Articles.

A recent article from Divestopedia entitled “When is the Best Time to Sell My Business” explains that a business owner who is looking to sell should begin preparing for the sale three years before they plan to list their business on the market.

The state of the market matters when listing your business, but what you can’t control this as a business owner. What you can control, however, is the state of your financial records, whether the business has any litigation outstanding, and the overall appearance and wellbeing of the business. In order to sell your business at the highest value possible, there are certain things that need to be taken care of before listing. By giving yourself about three years (the number of years of clean, verifiable financial statements you should have) to prepare your business for sale, you are giving yourself and your business the best chance on the market.

Click here to read the full article.

A recent article from Inc.com entitled “Small-Business Financing 102: The Latest Updates and Options Available for Funding a Business Venture” explains what each type of startup funding entails and how it’s affecting both buyers and sellers. Currently the ways to fund a new business or to purchase an existing one include:

  • SBA Acquisition loans
  • Peer-to-Peer lenders
  • 401(k) business financing
  • Crowdfunding and angel investors

Each option presents its own set of obstacles and requirements that need to be met by the buyer, just as they each provide their own benefits. The increasing number of ways in which an aspiring entrepreneur can acquire the capital to start or buy a business is great news for sellers because it means more buyers on the market.

Click here to read the full article.

A recent article from Exit Promise entitled “Top Seven Important Deal Terms When Selling a Business” highlights the main factors, other than price, that influence a seller’s decision when considering an offer on their business. While price matters, business owners care about their businesses and generally want the best for both themselves and their business, therefore they consider these factors in the sale as well as price:

  • Speed of the sale
  • An all cash offer vs. a financed one
  • The compatibility of the potential new owner with their vision for their business
  • % of the business the new owner wishes to purchase (most prefer to sell 100%)
  • Whether or not there’s an earnout clause written into the deal
  • The tax consequences associated with the deal
  • Confidentiality of the sale

In the end, sale price is generally the primary focus of negotiations between a seller and a buyer. However, it is not uncommon for a buyer to choose to accept a lower offer, for example, if it’s a complete cash sale to a buyer whose business plan aligns well with the current owner’s dream for the company’s future.

Click here to read the full article.

A recent article from FinSMEs entitled “Raising funds to Buy a Business; What Are The Different Options?” explains the different ways to fund a business acquisition, how to approach each way and who it’s best for. The options explained include:

  • Savings
  • Traditional lenders
  • Borrowing from family and friends
  • Crowdfunding
  • Investors

Each of these options comes with its own obstacles and upsides, and some may be better options than others. Whichever option you choose to go with, be sure to do your research and prepare yourself for meeting the demands of each source of funding.

Click here to read the full article.

A recent article from Exit Promise entitled “Business Broker Fees and Other Selling a Business Expenses” explains the typical fees and expenses that a business owner can expect to come across during the process of selling their business.

Business Broker Fees:

  • Small Business: Typical fees include a 10% commission of final sale price and upfront $1000- $2500 to market, value and sell the business.
  • Large business: Typical fees include 3-10% commission of the final sale price and upfront fees ranging from $2,500 to $25,000+.

These fees can vary from broker to broker depending on their expertise and services offered. They can also vary depending on the size of the business and specific services and time needed from your broker. It is always recommended to get multiple quotes from qualified brokers who specialize in your industry and the services you need.

Legal costs:

  • Small Businesses ( $1MM or less) : total legal fees are typically between $5,000 and $12,500
  • Large Businesses ($1MM and up): total legal fees can range from $10,000 to $50,000+.

Your broker can recommend attorneys that are experts in business sales and negotiating with your buyer’s lawyer, protecting your interests and keeping legal fees from becoming excessive.

Other hidden fees can include severance payments to employees not retained by the buyer, prepayment penalties associated with paying off indebtedness of the seller, taxes, appraisals if necessary and a CPA.

Click here to read the full article.

Copyright: Business Brokerage Press, Inc.

LightField Studios/BigStock.com

What Sellers Don’t Expect When Selling Their Companies

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Business Valuation, Buyer Articles, Buying a Business, Seller Articles, Selling a Business, Value Builder System™.

In the proverbial “perfect world,” business owners would plan three to five years ahead to sell their companies. But, as one industry expert has suggested, business owners very seldom plan to sell; rather, selling is “event driven.” Partner disputes, divorce, burn-out, health, and new competition are examples of events that can force the sale of a business.

Sellers often find, after they have decided to sell, that the unexpected happens and they are “blindsided” and caught off-guard. Here are a few of the unexpected events that can occur.

The Substantial Time Commitment

Sellers find that the time necessary to comply with the requests of not only the intermediary but also the potential buyers can take valuable time away from the actual running of the business. The information necessary to compile the offering memorandum takes time to collect. Many sellers are unaware of the amount of their time necessary to gather all the documents and information required for the offering memorandum, nor of its importance to the selling process.

There is also the time necessary to meet and visit with prospective buyers. An intermediary will play an important role in screening prospects and separating the “prospects from the suspects.”

Handling the Confidentiality Issue

Owners of many companies are also the founders and creators of them. They can have difficulty in delegating and tend to want to make all of the decisions themselves. When it comes time to sell, they want to be involved in everything, thus, again, taking time away from running the business. Members of the management team, like the sales manager, have a lot of the information necessary not only for the memorandum but also on competitive issues, possible acquirers, etc. The owner has to allow his or her managers to be part of the selling process. This is easier said than done.

Forgetting the Others

Many mid-sized, privately held companies also have minority stockholders or family members who have an interest in the business. The managing owner may be the majority stockholder; but in today’s business world, minority stockholders have strong rights. The owner has to deal with these people, first in getting an agreement to sell, then convincing them about the price and terms. A “fairness opinion” can help resolve some of the pricing issues. Minority stockholders and family interests have to be dealt with and not overlooked or pushed to the end of the deal. When this happens, many times it is the end of the deal, literally speaking.

The Price is the Price is the Price

All sellers have a price in mind when it comes time to sell their companies. Most businesses go to market with a fairly aggressive price structure. When an offer(s) is presented, it is generally, sometimes significantly, lower than the seller anticipated. They are never prepared for this event – they are blindsided, and obviously not very happy. They turn the deal down without even looking past the price. Here is where an intermediary comes in, by helping structure the deal so it can work for both sides.

Not Having Their Own Way

Business owners are used to calling the shots. When an offer is presented, they, in some cases, think that they can call all of the shots. They have to understand that selling their company is a “give and take.” They can stand firm on the issues most important to them, but they have to give on others. Also, some owners want their attorneys to make all of the decisions, both legal and business. Unfortunately, some attorneys usurp this decision. Owners must make business decisions.

Confidentiality Leaked

There is always the small possibility that the word will leak out that the business is for sale. It may just be a rumor that gets started or it may be worse – the confidentiality is exposed. Sellers must have a contingency plan in case this happens. A simple explanation that growth capital is being considered or expansion is being explored may quell the rumor.

“Keeping Your Eye on the Ball”

With all that is involved in marketing a business for sale, the owner must still run the business – now, more than ever. Buyers will be kept up-to-date on the progress of the business, despite the fact that it is for sale.

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.

Call Colonial Business Brokerage today at (443) 982-7332.

 

Copyright: Business Brokerage Press, Inc.

Why Maintaining Exit Planning Momentum Is Important

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Buyer FAQ, Seller Articles, Seller FAQ, Selling a Business, Value Builder System™.

Planning for major events can sometimes cause a sense of dread. Whether it’s planning a honeymoon, a long family trip, or a business exit, it’s easy to say, “I’ll do it later, when I’m less busy.” While planning a business exit should never encompass your entire life, there are several reasons why you should keep your planning momentum going, instead of planning in fits and starts.

Why It’s Important to Create Planning Momentum Now

On the surface, it might make sense for you to wait until you are ready to exit to start planning for it. But you might take for granted how indispensable you are to your business’ success. In other words, if you were ever to leave the business, the business might be worthless, if not worthless. For example, a business that is primarily reliant on its owner and her industry relationships for maintaining cash flow might be worth $10 million when the owner is present but only $5 million when the owner is not present, reflecting the extent to which she is tied to key customers. Making the business less reliant on you can do two things:

1. Make the business more valuable to whoever intends to purchase your ownership, since they’re buying a stable business rather than your presence.

2. Protect the business’ value (and vicariously, your family and employees) if something happens to you before you exit.

Experience shows that once business owners are ready to exit, they tend to have less motivation to do the things that prepare the business for their exits (e.g., finding next-level management, improving company cash flow). This implies that creating and maintaining planning momentum early and throughout can be the difference between exiting on your terms and exiting on someone else’s terms.

Planning Momentum Can Speed Up the Process

Typically, it takes 5–10 years to properly plan for, implement, and see the results of planning for a business exit. This assumes that you and your Advisor Team consistently work on, work through, and update planning. Failing to keep the momentum going can stretch that timeline even longer. Sometimes, it can mean that the planning never gets done at all.

Think about the last big project you did. When you had no interruptions and could focus on the task at hand, you managed to get the project done more quickly. Once distractions began to appear, it took time away from the bigger project. When you went back to it, you likely had to reacquaint yourself with what you were doing in the first place, which took even more time away from you.

Though consistent planning can’t eliminate all distractions, it can speed up the planning process. Because the Exit Planning Advisor and Advisor Team do most of the planning work—based on your goals, needs, and wants—keeping your planning momentum going can get you through the process more quickly. Proper planning usually results in fewer responsibilities—and thus, fewer distractions—for you, since one goal of planning is to position the business to thrive without you.

Planning Momentum Removes Inertia

It can be much more difficult for you to create and implement a successful Exit Plan if you constantly start and stop every month or more. Without consistent planning flow, you and your Advisor Team are likely to become frustrated and apathetic, which can torpedo your efforts to create and implement your Exit Plan.

Consistently progressing through your planning process—even in small, incremental steps—is much more likely to produce the results you expect because ideas and solutions stay fresh. Progress tends to build on itself, which can make it easier to solve bigger problems or achieve bigger goals. For instance, if your business needs a next-level management team to increase its value, you’re more likely to find and hire the right talent if you’re constantly looking for one, rather than only looking when it’s convenient. If you only do planning when it feels urgent, you might miss out on opportunities to positively affect your company’s value, add a competitive advantage, or find a suitable buyer for your business.

Planning Momentum Lowers Costs

It’s no secret that good Exit Planning Advisors and Advisor Teams cost money. The upshot is that those advisors are motivated to be as efficient as you reasonably demand. By maintaining momentum, you can minimize the amount you pay your advisors while maximizing the return. Top advisors typically want to do high-quality work, but they work with many clients. They’ll admit that they need to refresh their memory, revisit issues, or make updates for changes in laws, regulations, or markets. This step backward in order to make the right next step forward can turn into additional fees for you.

Maintaining planning momentum can be a challenge when considering your daily obligations, but it’s a surmountable challenge. If you’d like to discuss strategies that can maintain your planning momentum or how to get back into the swing of planning, please contact us today.

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.

Call Colonial Business Brokerage today at (443) 982-7332.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
Business Exit Solutions
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The Importance of Understanding Leases

Posted by & filed under Business Owner, Buyer Articles, Buying a Business, Seller Articles, Seller FAQ, Selling a Business.

Leases should never be overlooked when it comes to buying or selling a business. After all, where your business is located and how long you can stay at that location plays a key role in the overall health of your business. It is easy to get lost with “larger” issues when buying or selling a business. But in terms of stability, few factors rank as high as that of a lease. Let’s explore some of the key facts you’ll want to keep in mind where leases are concerned.

Different Kinds of Leases

In general, there are three different kinds of leases: sub-lease, new lease and the assignment of the lease. These leases clearly differ from one another, and each will impact a business in different ways.

A sub-lease is a lease within a lease. If you have a sub-lease then another party holds the original lease. It is very important to remember that in this situation the seller is the landlord. In general, sub-leasing will require that permission is granted by the original landlord. With a new lease, a lease has expired and the buyer must obtain a new lease from the landlord. Buyers will want to be certain that they have a lease in place before buying a new business otherwise they may have to relocate the business if the landlord refuses to offer a new lease.

The third lease option is the assignment of the lease. Assignment of the lease is the most common type of lease when it comes to selling a business. Under the assignment of lease, the buyer is granted the use of the location where the business is currently operating. In short, the seller assigns to the buyer the rights of the lease. It is important to note that the seller does not act as the landlord in this situation.

Understand All Lease Issues to Avoid Surprises

Early on in the buying process, buyers should work to understand all aspects of a business’s lease. No one wants an unwelcomed surprise when buying a business, for example, discovering that a business must be relocated due to lease issues.

Summed up, don’t ignore the critical importance of a business’s leasing situation. Whether you are buying or selling a business, it is in your best interest to clearly understand your lease situation. Buyers want stable leases with clearly defined rules and so do sellers, as sellers can use a stable leasing agreement as a strong sales tool.

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.

Call Colonial Business Brokerage today at (443) 982-7332.

Copyright: Business Brokerage Press, Inc.

Chinnapong/BigStock.com

Built to Flip: How to Buy a Business for Pennies on the Dollar

Posted by & filed under Build Business Value, Building Business Value, Business Owner, Seller Articles, Selling a Business, Value Builder System™.

Carl Allen is a U.K.-based turnaround artist. He buys relatively unloved businesses, makes them better, and sells them for a profit.

When you’re in the turnaround game, you get a lot of weird phone calls, but none quite as odd as the one Allen received in 2013. A business owner had heard Allen was looking to buy a precision engineering business, and the owner had one to sell.

The only catch? Allen had to decide in 48 hours.

Two days later, Allen found himself the proud owner of a small company that made custom parts for high-performance motorcycles, which he had purchased for just £1. He immediately set to work making the business more valuable and just three years later, sold it for almost £3 million.

In this episode, you’ll learn:

  •  – How to buy a business for pennies on the dollar (or pounds).
  •  – How to get an acquirer to buy your shares, not assets.
  •  – How to use forecasting to boost the value of your business to an acquirer.
  •  – How Pareto’s Law can maximize the value of your business.
  •  – Allen’s formula for finding a business to buy.

Listen Now

Do you want to improve the value of your business?

Find out how you score on the eight factors that drive your company’s value by completing the Value Builder Questionnaire and getting your Value Builder Score today:

Get Your Value Builder Score Now

Planning Your Exit Strategy Should Begin on Day One

Posted by & filed under Building Business Value, Business Owner, Business Valuation, Seller Articles, Seller FAQ, Selling a Business.

Pepperjam CTO, Greg Shepard recently published “Planning Your Exit Should Begin When You Launch” in Entrepreneur magazine. In this article, Shepard puts forward a variety of thought-provoking ideas including that entrepreneurs should be thinking about partnering early on with those they believe will ultimately want to buy their business.

Thinking Ahead

Much of Shepard’s thinking centers around the fact that a large percentage of startups end in acquisitions. In particular, he notes that in 2017, “mergers and acquisitions accounted for 93 percent of the 809 ventures capital-backed exits, yielding a total of $45.6 billion in disclosed exit value.” Not too surprising, he also points out that according to a recent Silicon Valley Bank survey, over 50% of all startups are “hoping for an acquisition.”

For this reason, Shepard points out that entrepreneurs should be thinking about who may potentially acquire them from day one. In particular, startups will want to build their companies in such a way that they will be attractive for acquisition at a later date.

Making one’s startup attractive for acquisition means thinking about such details as the Ideal Customer Profile, Ideal Employee Profile, and Ideal Buyer Profile. This will help startups build the most attractive acquisition friendly company possible. According to Crunchbase, exit opportunities frequently present themselves well before a company’s Series B funding.

Building Successful Strategies

Startups simply must understand who their customer is and why their particular product is attractive to that customer. Likewise, having the right kind of employees with the right kind of training and know-how is key. Hiring the best talent is definitely a way for a startup to make itself more attractive for a potential future acquisition.

Shepard believes that once you understand your customer and have the right team to support your vision, you’ll want to focus in on companies that are most likely to be interested and construct an “optimal buyer pool.” Finding this optimal buyer pool means finding businesses that serve similar markets and then making sure that your product, as well as your business model, both address an overlooked need within the existing customer base. Combine all of these variables together, and your company will be more attractive for an acquisition.

Let Innovation Drive You

Another key point in Shepard’s article is that startups will want to provide products or services that potential buyers are currently not providing to their customers. Additionally, he states that “Disruptors should seek out companies that are truly driven by innovation-perhaps those that have already established or partnered with innovative labs or accelerators.”

Ultimately, it is critical for startups to understand where they could fit within a larger organization. Understanding this will help entrepreneurs make their company more acquisition friendly.

 

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.

Call Colonial Business Brokerage today at (443) 982-7332.

Copyright: Business Brokerage Press, Inc.

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