A recent article in Globe & Mail details the fact that the majority of small business owners who are ready to sell their businesses in 2019 are completely unprepared to do so. With SO many other business owners out there planning to close up shop and sell their businesses for a nice exit in a baby-boomer filled market, the statistics are mind-boggling considering we’re talking about the transaction of a lifetime, -literally. The author, Matthew Halliday states:
The article emphasizes the importance building the right team FAR in advance of the moment you’re actually hoping to sell. Preparation is key here…. If you do your research in advance, and start identifying buyers early on in the process, you stand a MUCH better chance of being able to play multiple bids against each other when the time comes to sell.
Takeaway lesson? Put together your business exit dream team early on in the process, and let them keep the ball rolling and keep you from getting distracted with day-to-day operations of your business.
To get matched with intermediaries that fit your geography, business, deal size and more, head over to BizNexus and get your top three suggested intermediaries today, for free.
How not to sell a business in 2019
It’s an M&A industry FAIL. The fact that the majority of small business owners, founders and solopreneurs out there have little to no awareness of the options for selling their business on the market is egregious, considering where this market is, and has been for sellers for some time (spoiler-alert: market is at an all-time high in terms of valuations and favorable deal-terms for sellers).
In their Q3 2018 Executive Report the IBBA states:
Few sellers are taking the time to prepare themselves for the M&A process. According to advisors, 67% of sellers did no advance planning before putting their business on the market. Nearly a quarter (23%) did less than a year of planning.
Meanwhile, retirement continues to lead as the number one reason to sell across all sectors, followed by burnout and new opportunities. And, year-over-year, time to close has increased in most sectors.
One option worth checking out? Find a business broker or related professional and figure out what you’ve got….
A consultation with a business broker, business intermediary or valuation specialist is typically free, and it’s a good relationship to start up early. If you’re an entrepreneur and you’re wondering what your business might be worth, who the buyers might be or whether it’s even sellable, -why not have a conversation? You can ask a friend, of a friend, of a friend if they have somebody the know who you can speak with, you can ask your accountant (which could be a great option if you have a trusted, established relationship), you can search online databases like the IBBA (non-profit) or BizBuySell (for-profit), or you can get matched with a professional in your industry, anticipated deal-size and geographic area with BizNexus. Either way, -probably a good idea to speak with some professionals and get your ducks in a row when you’re talking about selling the biggest asset you have, and possible the most significant financial transaction you’ll ever be a part of.
One of the many intermediaries sellers can get matched with on the BizNexus platform, -Innovative Business Advisors in Missouri.
Get matched with the perfect business broker to help you sell your business or buy a new one at BizNexus.
Wondering if you’ll ever be able to sell your business? Here are the top 7 reasons why 75% of businesses never even get sold……
Learn what it takes to sell your business, who the players involved in the process are, and why so many businesses out there simply just don’t ever sell…. -Which we think is tragic considering the untapped market of buyers out there researching entrepreneurship. Let us know what you think in the comments!
Choosing to sell a company can easily be one of the most important decisions a business owner will ever make in their life. That is why it is important to be very prepared to sell your business in order to sell it at the price that it is agreeable to you, the seller. However, preparation starts years in advance. Here are 7 steps to take to ensure your business is ready for sale:
Maybe it was a passing mention that someone was interested in buying your company. Perhaps health concerns have you thinking of an exit. Or is it a nagging feeling that you’re just done? Whatever the reason, if you’re thinking of selling your painting business, know that it’s a journey that’s not for the fainthearted.
About 80% of businesses listed for sale don’t sell, says Peter Holton, managing director with Chicago-based Caber Hill Advisors. Holton oversees Caber Hill’s construction, painting, landscaping, and facilities management division, offering valuation and business consulting insights for those looking to buy or sell service organizations.
“Unrealistic expectations of the business owner are the main reason only 20% of businesses actually sell,” he said. Few business owners truly comprehend the reality check they’ll endure when selling their company. But with a willingness to listen, learn, and correct some deficiencies, it is possible for an owner to make a profitable exit.
In 1961, Kamal Yadav arrived in the United States with $15 in his pocket. He started Chemco Industries in 1975 and grew the business to $3M in revenue. Chemco sells environmentally-friendly cleaning chemicals, and Kamal’s customers included Walmart, eBay, Amazon, and the federal government.
When his children didn’t express interest in taking over the business, Kamal decided to sell. He hired Certified Value Builder™ Steve Denny of Innovative Business Advisors to help, and they quickly received 14 offers.
Yadav sold Chemco for $3.2M cash upon closing.
An often overlooked option to help begin the journey towards buying your own business is to simply reach out to a business broker for guidance before you begin your search. If you can identify a quality business broker, which isn’t easy, this can be a way to help jumpstart your search and increase the chances of finding a successful acquisition. Brokers typically represent multiple deals within their category of expertise simultaneously, and if you’re able to establish a relationship with a productive broker you gain access to a continuous stream of deal-flow. The trick is to identify that unicorn broker.. The one who’s knowledgeable, productive, and won’t waste your time pitching you subpar, low probability deals for sale.
As we mentioned elsewhere, 2018 looks like it might shake out to be the best year in a decade to buy a business in the United States. There are a few big reasons for this:
Loans are accessible and still historically dirt-cheap.
First-time entrepreneurs have access to up to $5 million in SBA loans from the government to help finance a new business acquisition.
With small business ownership set to skyrocket over the next 10 years, there’s rapidly increasing interest out there for buying and established, viable business.
New technology solutions continue to offer increasingly efficient ways to connect buyers and sellers of businesses, and to identify the right professional for you to do so.
If your broker is telling you that seller financing isn’t an option to buy an existing business that you like, I recommend you test that with the seller of the business personally.
What is seller financing? -It’s when the seller of a business acts as your bank. More often than not, when somebody is selling their business, they expect to lend you up to 50% of the business value in the form of a note, carrying interest and being paid off through the cash-flows of the business over a period of five to seven years after the purchase of the business.
A term sheet is a non-binding agreement outlining the basic terms and conditions under which an investment will be made. The term sheet acts as an outline for the parties involved so that once an agreement has been reached, a contract will be formed that adheres to the conditions defined in the term sheet.
A term sheet covers the major aspects of a deal, reducing the chances of a misunderstanding between parties. It also ensures that expensive legal fees attributed to drafting a binding agreement are not prematurely paid due to disagreements that arise. Here are some tips on creating an effective term sheet.
Perhaps “love” is a strong word. Perhaps “not be put off by” is more appropriate. Flat revenue refers to a chart’s depiction of the historical trend of a business’s revenue – flat revenue means that the trend line is nearly horizontal, stagnant, … flat. Some prospective buyers immediately move on to the next business to be considered when they see a flat revenue trend.