Best Strategies to Build a Corporate Development Team in the Lower Middle Market

Whether you're looking to expand your business, acquire new assets, or simply stay competitive, having a dedicated team of professionals can make all the difference. This is especially true in the lower middle market, where businesses may face unique challenges and opportunities.

Building a corporate development team in this market requires a combination of strategic thinking, industry expertise, and effective communication skills.

So, what are the best strategies for building a corporate development team in the lower middle market?

Let's take a closer look.

Understand the Market

The lower middle market can be a complex and diverse landscape, with a wide range of businesses operating in various industries. Before building a corporate development team, it’s important to understand the market and the key players in it.

This means researching industry trends, analyzing competitors, and gathering data on potential acquisition targets. By gaining a deep understanding of the market, you can identify opportunities for growth and develop a clear strategy for your corporate development team.

Hire the Right People

Building a strong corporate development team requires hiring the right people. This means finding individuals with the right mix of skills, experience, and personality traits. Look for candidates with a strong financial background, excellent analytical skills, and a deep understanding of the industry.

It’s also important to find people who are collaborative, communicative, and able to work well in a team environment. When building your team, focus on diversity, both in terms personal background, culture and perspectives.

Develop a Clear Process

One of the keys to a successful corporate development team is having a clear and well-defined process for evaluating potential acquisitions. This process should include a series of steps, from identifying potential targets to performing due diligence to negotiating a deal.

By having a clear process in place, you can ensure that everyone on the team is aligned and working towards the same goals. It’s also important to have clear guidelines for how decisions will be made and who will have final say.

Focus on the Culture

Creating the right culture is essential to building a successful corporate development team. A strong culture built on shared values, trust, and respect can help you attract and retain top talent.

Leverage your network

Finally, don't underestimate the power of your network. Reach out to industry contacts, peers, and professional associations to find potential candidates. You may also want to consider working with a recruiter or business brokers who specializes in corporate development. They can help you identify top talent and streamline the hiring process.

Building the future team of who you want to run your business is a critical time in the growth of your business. Embrace this process with clear intention and effective leadership. By implement these strategies, you’ll be well on your way to building the most cohesive and effective team to reach your business’ potential.

Top Tips to Grow your Middle Market Business Quickly

So you’ve established your business within the lower middle market, but now you’re looking to grow. And quickly.

Growing your middle market business quickly can be both challenging and rewarding. The middle market is a sweet spot between small businesses and large corporations, where you have more resources and flexibility than the former, but also more agility and room for growth than the latter.

To make the most of this opportunity, you need to be strategic, creative, and focused on your goals. In this article, we'll share some top tips to help you grow your middle market business with speed so you don’t waste any time reaching your business’ full potential.

Invest in Corporate Development

Corporate development is an essential part of growing a middle market business. It involves identifying opportunities for growth, evaluating strategic partnerships and acquisitions, and assessing the risk and potential impact of each opportunity. Corporate development can help you expand your market share, diversify your product offerings, and increase your overall revenue.

Corporate development teams typically work closely with senior management, board members, and other stakeholders to evaluate potential mergers and acquisitions, joint ventures, partnerships, divestitures, and other strategic transactions that can help the company expand its operations, enter new markets, diversify its portfolio, or achieve other strategic objectives.

Define your niche and value proposition

To stand out in a crowded market, you need to have a clear idea of what makes your business unique and valuable to your customers. This starts with defining your niche, or the specific segment of the market that you're targeting, and then crafting a compelling value proposition that explains why your products or services are better than your competitors'. Make sure to research your target customers' needs and preferences, and tailor your message accordingly.

Focus on customer acquisition and retention

Growing a middle market business quickly requires a steady stream of new customers, as well as a high retention rate of existing ones. To achieve this, you need to invest in marketing and sales strategies that resonate with your target customers, such as social media advertising, email marketing, and referral programs. You also need to provide excellent customer service and build strong relationships with your clients, so they keep coming back and referring others.

Leverage technology and innovation

Technology and innovation can be powerful enablers of growth for middle market businesses. By adopting new tools, platforms, and processes, you can streamline your operations, reduce costs, and increase productivity. For instance, you can use automation software to handle repetitive tasks, cloud-based solutions to store and share data, and analytics tools to track your performance and identify new opportunities.

Pursue strategic partnerships and collaborations

Finally, growing a middle market business quickly often involves forging strategic partnerships and collaborations with other businesses, organizations, and stakeholders. Look for opportunities to team up with complementary players in your industry, such as suppliers, distributors, or service providers. Also, consider joining industry associations, attending conferences, and participating in networking events to expand your reach and influence.

Build a strong team and culture

Growing a middle market business quickly also requires a strong team that shares your vision, values, and work ethic. Hire the best talent you can afford, and provide them with the training, support, and incentives they need to excel. Also, create a positive and inclusive company culture that fosters innovation, collaboration, and personal growth. Your employees are your most valuable asset, so invest in them wisely.

Growing a middle market business quickly is a multifaceted challenge that requires a combination of corporate development, strategic thinking, customer focus, technology adoption, talent management, and partnership building.

Follow the strategies outlined above and you’ll be well on your way to creating a thriving, sustainable, and impactful business that serves your customers, employees, and stakeholders.

Business Ownership: What Your Costumers Want More Than Personalization and Ease

What customers wanted a decade ago has changed.

The pandemic presented us with significant data. What we observed was both advantageous and opportunistic for Your business.

So, the pandemic presented us with significant data. What we observed was both advantageous and opportunistic for business. In sum, we saw a mass migration of consumers demanding quality products, personalization, ease, and above all security. The necessity to compartmentalize the consumer experience became the true focal point of a successful business. Read on to learn what consumers want more than personalization and ease.

a business owner needs to be compassionate

If you’re not making every effort to be personal and compassionate with your current customers, you’re missing the point. The most valuable resources are time, energy, and attention. By placing these resources into your customers and your business, you will make more money. The more you connect with the customer, the greater the opportunity to create exactly what they want; better serving them. Whenever possible, focus on data management.

Customer Data is the Foundation of Customer Satisfaction

Where do you house and protect your customer data? Do you know your high-value customers? Lastly, how do you use the data you do have to personalize their experience? More than a first name, last name, and email. This comes down to intelligence. Used narrowly, intelligence uses customer data to identify who your customers are, what their behavior is, and tailoring communications such as email campaigns and marketing to get them to take action. The trick here is getting them to not only take action but stick with you. It’s much easier to grab the attention of a customer than it is to keep it. Hence, why collecting as much customer data and keeping it as safe as possible is crucial.

How do you use your customer data to improve the overall experience?

Moreover, it’s like a science project. Therefore, you can work tirelessly on this project but if you can’t do anything with it, it doesn’t drive anything. Even with the greatest data, if you’re not taking advantage of what the data is showing, you’re not meeting the customer where they are at. To that, being able to understand what the numbers are telling you will assist you in taking the next steps to improve the customer experience and overall satisfaction.

Your Customers want it now and they want it to be easy

Furthermore, customers are smart. As much as we think we know how to approach them and what to offer, we don’t. To this, the best way to know how to approach your customers to offer what it is they truly want, we have to ask. Patience is a virtue in operations. However, customers can be impatient and it’s important to consider your delivery time. When you can, survey your customers to gain valuable insight on how you can improve your business.

Take every security measure possible to protect your business and its customers

Lastly, what customers want more than personalization and ease is security. Anytime your collecting customer’s data, it’s important to keep that information secure. Whether you own a tax preparation business or a wellness spa, whenever a transaction has been made, you’re going to want to make sure that information is heavily guarded. There are many ways you can protect information. However, one of the best ways to protect your business information and customers is through encryption.

Encryption is a process by which information that is stored or transferred is, in laments terms, blocked out. If your point of sales system is backed by a firewall or your wifi isn’t secure, any information being received is vulnerable.

Remember these factors when buying a business

To conclude, personalization is nice and anytime you can make a product or service easy, saving time and money, is great. More than that, however, is how you both use transactional information between your business and its customers. Secure your business information. Make sure you take commercially reasonable steps to encrypt information. Doing so will help your business credibility and customer experience. What customers want more than you calling them by name is their privacy and information managed securely. Trust but verify.

Bonus Tip! Choose the right SSL Certificate for Your Business Website

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SELL With Confidence - Exit strategies For Beginners

Position your business for sale

We go over strategies for beginners. Sell your business with confidence.

5 Tips to start planning your business exit strategy:

1. Get your paperwork ready

2. Keep growing your business and increase revenue

3. Keep the sale confidential

4. Find a certified business intermediary

5. Never too late to start positioning your business for sale

SELL With Confidence- How to Take the Worrying out of a Business Exit Strategies For Beginners

The truth is, bidding farewell to an asset of yours is tough. Blood, sweat, and tears have likely laid the grounds for your success. It goes without saying, knowing how to exit makes the world of a difference.

Proper Record Keeping is Crucial

Record keeping is a must. Too many unknowns can trigger significant red flags to a prospective buyer. You’ll want to make sure all business information and records are clear and organized. Going into a deal blind does not lend itself to a done deal. If you haven’t already, begin carefully organizing important documents. Whomever the prospective buyer is, he/she will want to take a closer look. Stay ahead of the sale by making all relevant business information readily available upon request.

General List of Documents to Have and to Hold

• Invoices

• Confidentiality Agreements

• Vendor Agreements

• Partnership Agreements

• Financial Statements

• Discretionary earnings & cash flow

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Keep Your Revenue Up

Those planning to sell often make the common mistake of selling when revenue is down. There are critics out there who will say selling when sales are down is the smart thing. One size does not fit all in business. Remember, you will have to disclose financial statements to the prospective buyer. You will need to supply a valid reason why you’re selling, especially when it’s been made clear your margins are down. Most prospective buyers want to see a strong cash flow. So, just as you entered into business for your ROI so too will the prospect. Not to mention, higher numbers could also mean higher business valuation. Two things to always keep in mind

1. Recurring Revenue

2. Growth Potential

It’s OK to Go Under the Radar Until the Deal is Finalized

Moreover, don’t leave your business before you actually sell it. If there’s anything that will hurt your bottom line more, it’s the mindset that it’s over before it’s over. It’s much safer and more professional to carry on with your day-to-day operations as you did on day one. Your employees don’t need to stress about their job security and before a deal is finalized, you don’t want to jeopardize the empire you built.

Find The Right Business Broker

For anyone wanting to sell a business, hiring the right broker on your side is the difference between a successful sale and failure. You want an individual who understands your goals and sets the bar on delivering exactly that. Business brokers represent you and your business, so finding the right one is important. BizNexus instantly connects you to a business broker in your area and niche, taking the headaches out of searching; saving time and money.

It’s Never Too Early to Start Planning for a Sale

Undoubtedly, it’s never too early to start organizing the “back office” and putting your business puzzle pieces together. The most seamless deals happen when the seller has their ducks in a row and the buyer is provided all of the details to allow them to feel comfortable giving that final handshake. The best way to ensure a positive experience, when you are ready to sell, is to plan. When you are ready to sell, BizNexus can help. BizNexus instantly connects you to prospects and brokers in your industry. Don’t waste your time and energy. Put Biznexus to work for you. We’ll make sure you get that handshake.

Position your business for sale today to access active business deals.

Featured Posts on Sell a Business

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PREPARING TO EXIT YOUR COMPANY

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

What Is a Business Broker? How to Hire the Right One

Hire a Business Broker

Here are 7 tips to best choose and hire the right business broker.

7 Tips for hiring a qualified business broker:

1. Rely on referrals and ads

2. Dedicated practitioner

3. Experience

4. Industry knowledge

5. Public reputation

6. Professional connections

7. Likable

The selling and buying of businesses in the United States are more common than you may have thought, with 10,312 businesses changing hands in 2018 alone. 

The reasons people decide to buy or sell businesses are varied. It could be that changes occurred in your life in the last year or that you simply want to take a new direction this year. Whichever the reason, selling or purchasing a decision is among the biggest decisions you’ll ever make.

Whether the outcome of the transaction is a successful one depends on your business broker. But what is a business broker? More importantly, how can you hire the ideal business broker for you?

If you’re asking yourself these questions, you’ve come to the right place. In this article, we tell you all you need to know on how to hire a business broker.

Read on to learn more.

What Is a Business Broker?

A business broker refers to a trained individual or a professional agency whose role is to aid the sale or purchase of a business. Primarily, business brokers help their clients secure the best price for the business. They’re also responsible for submitting the appropriate paperwork and completing the needed permits or licensing.

As you’re going to find out, the whole process of transferring the ownership of a business can be lengthy and complicated. That’s why it helps to use a business broker, especially if you’re the seller.

A business broker can suggest a realistic price value for your business and properly advertise it for sale. They can also screen and interview potential buyers. A seasoned business broker will also help you in properly preparing your business for sale.

If you’re the one considering buying a business, a business broker can help evaluate the businesses you’re considering. They will also get the cash flow statements and financial statements of those businesses so you can make an informed decision. 

A good business broker will also help you secure financing, besides holding negotiations with the seller on your behalf.

Tips for Hiring the Best Business Broker for You

Now that you know when to get a business broker and have seen what such a professional can do for you, it’s time to look at how you can get the best one for you. Read on for practical tips on finding a great business broker. 

Rely on Referrals and Ads 

One of the best ways to find a business broker is through referrals from trusted contacts. Your friends, relatives, or colleagues may be able to recommend a business broker they’ve worked within the past.

You can seek out brokers in the business sections of major newspapers. Narrow down on two or three suitable candidates and interview them.

Choose for a Dedicated Practitioner 

During your interview, find out whether the business broker practices full-time or part-time. A dedicated practitioner can add a lot more value to the sales transaction as they’re likely to have a larger network of contacts. 

Where you’re selling a company worth millions of dollars, it’s best to work with an acquisition or merger intermediaries. 

Ask About Experience  

Industry experience is a great asset in any profession. Inquire how many years your prospective business broker has been in the industry. Sure, everyone starts somewhere, but when you’re engaged in a transaction as sensitive as the sale or purchase of a business, you don’t want to work with a newbie.

But it’s not enough that the broker has been in the industry for years if they’ve only executed a handful of deals. Work with someone who has successfully helped a considerable number of business buyers and sellers seal deals.

Consider Industry Knowledge  

Top business brokers will usually have worked with a variety of businesses. However, most successful brokers develop a liking for particular types of businesses or industries over time. 

Don’t hesitate to ask what particular types of businesses your prospective business broker handles regularly. If you’re looking to buy a SaaS company, working with a broker with industry knowledge on such businesses can lead to a better outcome for you.

Assess Their Public Reputation

If someone recommended the broker to you, it’s a good indicator that you’re going to have a great experience working with the broker. But if you found the broker through an online search or newspaper search, it’s a smart move to learn more about their reputation. 

So, how do you evaluate a broker’s reputation? The first place to start is online. Read online reviews to find out what people say about the broker.

You could also ask for a list of previous clients from the broker during your interview. Follow up with two or three of those clients to what they say about the broker. If past clients generally seem happy with a business broker’s services, it’s a good sign that you, too, will love working with them. 

Inquire Whether They Have Connections  

Besides the business broker, you’ll need other professionals to help you along this journey. These include accountants, attorneys, bankers, and others. Finding a business broker who has connections with such professionals means that you won’t have to spend time and resources finding them on your own.

Of course, not all great brokers network the same way. However, a broker without a professional network tells you a lot about how they do business.

Consider Likeability

You’re not looking for a spouse in your broker, but you’ll be working together for months. The transaction you’re undertaking together is an intense one and involves highly personal matters. That’s why you want to gauge from your initial meeting whether things are going well between the two of you.

If you and your broker do not seem to be getting along well during your interview, it could signal challenges on the road ahead. It’s best to move on to the next potential broker.

Find the Right Business Broker for You

Hopefully, we’ve aptly answered your question, “What is a business broker?” Given how significant this professional will be when you’re buying or selling a business, it’s critical that you hire the right one for you.

Are you interested in the services of a reliable business broker in your area? Get started today.

Featured

BizNexus -Learn More From Our YouTube Playlist:

PREPARING TO EXIT YOUR COMPANY

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

Think Like A Sky Jumper, Merger And Acquisition Advice By John Weber

A Contributing Blog Post By

John B. Weber, Vice President, Water Street Advisors, LLC. a boutique Merger and Acquisition firm serving businesses in the Midwest.

Those of us in the Mergers & Acquisition industry are trained to stay abreast of breaking news affecting the economy.

Merger and Acquisition Industry

Here is what John has to say about exiting your business: “If you want to sell your business but have been waiting for the perfect time when things rebound it may be a very good time to revisit a sale. Consider that buyers will be more willing to accept explainable poor performance during this time especially if the business bounces back quickly when the economy picks up again.”

John went further and stated in his recent post, Think Like A Sky Jumper, that this is a great time to make sure that your corporate records are correct, that you have a succession plan in place, that you have a funded buy-sell agreement, and that you have talked through your plans with your family.

With permission to re-post, we’re bringing you the full article to read through..

During this time, we start by first extending our hopes that you and your family, employees, associates, and friends have remained healthy, safe, and secure during this most tumultuous time. 

We also hope that you have adapted to working from home. Some, like myself and my partners at Water Street Advisors do this every day. Whether you are a veteran at it or just finding your way, the change of pace offers a time of catching up, prioritizing, and contemplation. Those of us in the Mergers & Acquisition industry are trained to stay abreast of breaking news affecting the economy. The last few weeks have been a veritable sea swell of information from well-meaning experts offering amazing opportunities for learning and enrichment to chart a course through this crisis. We have seen the assistance of leaders from all branches of Government, who refreshingly have come together to try to offer solutions. 

Economy and the new normal

Whether you believe that this will be a “U” or “V” shaped downturn in the economy, at some point we must start focusing on getting back to normal, whatever the ‘new’ normal will be. I have never snow skied, so I have no idea what it would be like to perform a ski jump. But, I have jumped some things (on either a bike or a sled when I was a much more flexible kid), and there is a point that you can sense when to push downward against gravity just before you are about to become airborne. Thinking positively, perhaps we can successfully launch once we sense we are near being airborne again.

Some things to consider: 

• If you are in the process of accessing the funding made available under the CARES Act, or if you are in the process of selling your business, it will be important during this time to keep detailed records of expenses incurred and revenues not realized as a result of the Covid-19 virus actions. This information will be important to have to document the reasons/uses for the loan proceeds, and reasons why this was a complete anomaly in your business. 

• While it may not be as robust of a Seller’s market as it was prior to this March, there will still be a large amount of cash looking for investments when things begin to return to normal. Remember, this is not a replay of 2008 – banks are much stronger financially and the US Government has just pumped trillions of dollars into the economy. 

• If you want to sell your business but have been waiting for the perfect time, when things rebound it may be a very good time to revisit a sale. Consider that buyers will be more willing to accept explainable poor performance during this time especially if the business bounces back quickly when the economy picks up again. 

• Get your house in order. This is a great time to make sure that your corporate records are correct, that you have a succession plan in place, that you have a funded buy-sell agreement, and that you have talked through your plans with your family. Those things that you did not have time for when you were busy - now is a good time to tackle them. 

• Need advice or advisors to help you with the items in that last bullet point? We are ready to listen and help. Being ready to go to market when the clouds clear will put you ahead of what could be a big crowd. 

More about John B. Weber

John provides turn-key sell-side services for business owners looking to exit their companies.  He is located in Naperville, Illinois, and brings many years of expertise to his clients as a former commercial banker, board member, and former Executive Director of a non-profit public/private partnership that assisted minority-owned businesses in accessing capital.

John B. Weber

Brings over 30 years of transaction experience in helping companies obtain debt and acquisition financing.

About John & His Current Listings

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BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

What Is Entrepreneurship Through Acquisition? Your Guide to the Benefits

What is ETA?

Your guide to the benefits

Have you heard of entrepreneurship through acquisition but are unsure of what this means? Read through here to answer this and to learn why this is a great choice.

Entrepreneurship through acquisition

Many Americans are growing tired of working in corporate America. Here, they are spinning their wheels on a fixed salary and far too many hours. To make matters worse, their wages are barely increasing on a yearly basis.

Fed up, millions are responding to an entrepreneurial spirit and starting their own business. In fact, 27 million Americans are either starting or running a new business.

Pursuing an entrepreneurial opportunity is a wise decision. The profitability rate recently surged more than 25% in a single year.

Read on to learn about entrepreneurship through acquisition. Explore the benefits of acquiring an existing business over starting a new one.

What Are the Challenges of Starting a New Business?

Many entrepreneurs decide to start their own businesses. While some find success, this path is likely to see significant challenges.

The most obvious challenge to overcome is that you are starting from scratch. You do not enjoy the luxury of an existing brand.

There are no loyal customers or equipment to leverage off of. Also, policies and processes have yet to be developed.

You do not have existing employees or subject matter experts. Instead, an employee training program needs to be developed and provided to all new workers.  There may be significant barriers to entry in the marketplace including established competitors.

What Are the Benefits of Entrepreneurship Through Acquisition?

Entrepreneurship through acquisition occurs when buyer(s) purchase an existing business. This includes pursuing franchising opportunities.

In this scenario, an entrepreneur finds a business for sale and pays a price to acquire it. This may come in the form of a lifelong small business owner who is retiring and looking to sell.

There are many benefits to this approach because the transaction may include many different items. For example, you may be acquiring the company’s machinery and supplies. Perhaps the company has popular social media accounts that you will take control of on day one.

Perhaps the greatest benefit is that an existing business has an established revenue stream. You do not have to stress over generating profit as it will be coming in from the start.

How Do Entrepreneurs Find an Existing Business?

Once you decide to forgo starting a new business from scratch, it is time to find an existing business. However, this is easier said than done. Businesses do not typically put up a for-sale sign on the storefront.

The good news is that there are online resources to pair entrepreneurs with business owners looking to sell. There are algorithms that help match your passions with existing businesses and franchise opportunities. Once financing is secured, you can get a business appraised and make an offer.

Glance through featured businesses for sale listed recently on BizNexus Marketplace

Wrapping It Up

The American Dream is alive and well. Now is the time to seize your opportunity and become your own boss.

Instead of working uphill with a brand new business, you should consider purchasing an existing business. This way, you can inherit an established brand and revenue stream.

If you want to learn more about entrepreneurship through acquisition, you can start your search for the next business opportunity by signing up to BizNexus.

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

Effect of COVID-19 to Sell Your HVAC Business

A Guest Blog Post By

Patrick Lange

Are you considering selling your HVAC Company in the next 12 to 18 months? This post is meant to help you through understanding the current M&A market amid the Coronavirus pandemic.

Here is what Patrick has to say about the effect of COVID-19 to sell your HVAC business.

Efforts to Sell Your HVAC Business

Unless you have been stuck in an attic replacing ductwork for the last two weeks, you have been overrun with speculation on what is in store next for this fast-spreading virus. Since I do not work for the Center For Disease Control (CDC) or have a crystal ball to tell me what to expect from this Virus, I will leave that to the professionals.

What I want to talk about is what it means for those who are considering selling their heating and air companies in the next 12 to 18 months. As I am sure you have already experienced with your business, there is an apprehension from your customers for letting your technicians in their homes. I have had reports out of the Tampa Florida area of gated communities that will not allow service companies to enter.  As we all know this is not a good time of year to have things slow down, or fall behind. Many companies are just starting to ramp up to perform their maintenance visits, and if they end up a month or two behind on those it can spell disaster for the start of summer. In addition to the increased workload, we all know a service call is more profitable than maintenance, and having techs catching up on maintenance agreements and not running service is a recipe for a bad year.

Thinking of selling or buying a heating and air company, we can help. We specialize in the sale of heating and air businesses.

The Impact on the economy

The federal government has already cut interest rates in an effort to push off a slowdown, but as you know by now, the good times and growth cannot last forever. Just looking at the school shutdowns, sporting events cancelled, and millions of people told to stay home and not go to work, there is going to be a financial impact of this. We have already seen record declines in the stock market which may not be over yet.

This is all happening after many parts of the country, especially the southeast had a mild summer in 2019 and an almost nonexistent winter. Buyers are paying a price based on cash flow, so it only makes sense if cash flow is down, so will sales prices and it could turn what has been a very strong sellers’ market in a buyers’ market quickly.

The good news

As I have said many times over the years in articles just like this, I own, and help others buy and sell heating and air companies because I STRONGLY believe in the industry. If companies are run properly they typically do well in times of slowdown and even during a recession. As other industries are being crushed, people still want cold air in the summer and warm air in the winter and are willing to pay for it. Companies who have strong maintenance programs and quality employees may get behind for a bit, but they will bounce back fairly quickly. That is exactly what buyers are looking for.

I have talked in the past about the push of private equity buyers trying to get into the industry, and times like this are why. Those who have built their companies on a strong foundation, and have a system to train and retain employees are in the driver’s seat to command a premium if they choose to sell.

These can be great times for those who have put in the work, and a drastic wake up call for those who have not. If you have built your business on the reliance of new construction installs and not repeat income of PMA’s, the next 12 to 18 months may be very challenging, especially if you are looking to sell. Hopefully you have the ability to withstand it, and make corrections so the next time it happens you are better prepared.

I pray that your families and loved ones remain safe and healthy during these uncertain times, and if I can help out in any way please let me know. 

More about Patrick Lange

Patrick has been a serial entrepreneur his entire life. He has not only helped others buy and sell businesses with great success, but he has done it himself with his own businesses as well. He specializes in helping those who are looking to buy or sell heating and air and plumbing companies.

Patrick Lange

Certified Business Intermediary who serves business owners in the Florida, Georgia, Alabama, and Texas markets with exit planning, business acquisition & sale.

About Patrick & His Current Listings

How Could Corona Affect The Sale of Small Businesses?

A Guest Blog Post By

Neal Isaacs, CBI, MBA,

Are you selling your small business? This post is meant to help you focus as a small business owner on what it means to survive the Coronavirus.

At the time of the writing of this article, we are on the precipice of something unprecedented.  The Corona Virus and COVID-19 have paralyzed the US emotionally and economically. It goes without saying that from a humanitarian perspective this event is devastating as people are sick and dying, but I’m a business broker, not a medical professional. This content is only meant to focus on what it means for small businesses and the owners who depend on them.

Most small business owners are just trying to put together a plan for their businesses to survive what happens when the government imposes mandatory closures and the lack of “business as usual.”   But some owners are looking farther into the future. Some were positioning for an exit and some just had offers fall off the table. Let’s explore what this abrupt stagnation could mean for business owners when reviewing this time from the future.

One Time Adjustments:

The important thing to recognize is that we’re all in this together.  Every owner and prospective buyer knows that this is a monumental, once-in-a-lifetime economic event.  Most buyers have pressed pause on acquisitions for now, and there is uncertainty when it will end at this time, but it’s well documented that it started affecting businesses in March of 2020.  

When recasting financials for 2020, most buyers would consider normalizing 2020 by replacing March and similar “Corona infected” months with documented trends from unaffected months.  In other words, an argument could be made that a business that normally produces $100K of revenue each month from January to December, which did $25K in March-June of 2020, should be valued as a business that does $1.2M in a year that didn’t experience a pandemic.  

While the banks may not consider this financial treatment, a pragmatic buyer could.

A must-watch guide on self-isolation during the Conronavirus pandemic.

Abnormal Expenses:

One thing that’s happening for event businesses and many other scheduled service businesses are cancellations.  In these scenarios, business owners are experiencing the double whammy of not only losing the business but paying the credit card processing fees twice; once for the booking and again for the return.  A data set could be prepared to show what typical credit card fees are and highlight those merchant charges that were unnecessarily attributed to the pandemic’s activity. Credit goes to Jeff Snell of Enlign Business Brokers for this insight…

A pragmatic buyer would understand that he or she wouldn’t experience these escalated merchant charges in a normal year.

The general rule of recasting is asking if the next owner of the business would experience similar revenues and expenses if they stepped into the owner’s shoes in the normal course of business.  Because we’re living through the opposite of a normal course of business, so undoubtedly there may be other adjustments in trying to reconcile the effects of the pandemic.

Another example could be the Cost Of Goods Sold for utilized food or similar perishable products purchased going into the week(s) when all businesses shut down. 

The list could go on and on, within reason...

Pivot opportunities

When considering adjustments, however, it goes both ways.  Some entrepreneurs will pivot their businesses and make money from the response to this event.  Medical distributors, for example, could add ventilators and masks to their pipeline and make a lot of money from this episode.

Savvy buyers will dig into the numbers and discern what revenues are COVID-19 specific and which couldn’t be replicated in the long term.  Lack of customer and product concentration are hallmarks of transferable businesses, and owners should move into new markets to fill the gaps but also be mindful of the proportion of the business they are depending on as they grow.

Long Term Outlook

Years from now, we should be able to look back on this time and view it from a long-term perspective.  As painful as it is now, the Corona pandemic episode can become another aberration on the trend curve, no different than previous events like SARS and Swine flu.  Long-term trends matter and time give perspective. If business owners can pull their businesses through this tough period as we make history, they can re-write it for business buyers in the future to illustrate what could have been without Coronavirus, and at the same time reap the benefits of the rebound. 

More about Neal Isaacs

Neil helps entrepreneurs acquire & sell their businesses through his firm VR Business Brokers of the Triangle and writes about the business owner’s journey on his blog at www.RaleighBusinessBroker.com

Neal Isaacs, MBA, CBI is a Business Broker

Certified Business Intermediary who serves business owners in the North Carolina Triangle market with exit planning, business acquisition & sale.

About Neal & His Current Listings

Series: Using a Virtual Assistant to Grow Your Business Part I: Why Hire a VA?

From Concept to Implementation:

Finding, Hiring, & Managing a Great Virtual Assistant.

Part I: Why Do It?

Why hire a virtual assistant?

This is the first part of what will be larger series of posts on finding, hiring, and managing a quality VA, and will be included in the BizNexus newsletter as we kick that back up with a focus on offering clear value for our entrepreneur members.

One recurring point of frustration I’ve heard from almost every type of user on our platform (buyers, owners, intermediaries, etc.) is how to successfully hire quality support to help scale operations on a limited budget, -how to hire dependable help to run the day-to-day operations of your business so that you, as an entrepreneur, can consistently focus on the strategically valuable initiatives that will actually help you succeed.

Less brush-fires, more time on shit that actually moves the needle.….

We’ve nailed down a pretty great process for running a distributed team here at BizNexus, and we’re going to start sharing some of the lessons we’ve learned along the way so you can hopefully not only benefit but ideally avoid some of the near-fatal mistakes we made early on (and continue to make).

Our VA team has been a game-changer value-add for us, so we’ll start with that piece…

The first huge mistake we made at BizNexus….

When we first started BizNexus we did what everybody else in startup land is told to do. We built the pitch deck, we tweaked the pitch, we told the story, and even won some big New England startup competitions talking about the “Baby Boomer Business Bubble” business drivers & TAM yada, yada, etc., etc.

We met with “angels” who all had their own opinions about how we needed to revise the pitch deck, tweak the pitch and tell the story. It was exhausting, and we were burning our time and effort on optimizing for the wrong thing:

Investment.

Sure, we took some initial capital to get the platform up and running because we thought we didn’t have a choice at that point. But somewhere early on we realized how much time we were wasting speaking with interested investors & groups who we had very little real background clarity on, very little data on as to whether this person or group typically invests or not, how long does that process take, how much will they ultimately invest after they deduct their own legal fees for diligence, will they want to "finesse the terms of the offering with “advisor shares” etc.. -It became exhausting, and our product development and month-over-month performance was clearly suffering, which in turn hurt our negotiations and valuation leverage.

We stepped back for a much-needed SOTU and wound up looking at five things:

1. We were running out of cash.

2. We were operating in a market (M&A) where there were (are) clear pain points and major inefficiencies when it comes to traditional methodologies around biz dev. sales & marketing.

3. We knew there were (are) successful, cash-liquid potential customers who were already engaging with us.

4. We knew (know) this niche really, really well.

5. We knew we were (are) really nailing something with the emerging concept of digital sales & social selling, and leveraging that to drive personalized lead generation at a long-term scale. We were well on our way to $1 billion in organic inventory growth, and we had refined a duplicable process we could potentially package up and sell.

Enter Paid Services & VA-Facilitated Bootstrapping…

Let’s fast-forward to the end takeaway here because nobody really reads past 50% of the post anyway according to our Hotjar analytics.

Today, BizNexus is still early on in the business life-cycle, but we’re at a point where we’re regularly fielding investor inquiries but don’t have the pressure to drop everything and respond because we’ve been able to bootstrap the platform development through our B2B digital sales agency, BN.Digital. We love speaking with the investors about future opportunities in the market and with BizNexus, but the conversation no longer has any underlying stink of needy desperation.

We got to this point by making some major pivots along the way and switching our focus to what I believe is the right thing for 99% of the fundraising-focused startups out there in today’s crazy market:

Profitability.

By transitioning early on to a clear focus on profitability over outside investment, we’ve taken a different approach to build BizNexus than most startups out there these days and we’ve had to be lean since day #1. We’ve built a cash flow positive, scalable operation and we’ve done that in a large part by leveraging the opportunity to work with virtual assistants through a distributed model based on Slack, Basecamp, Upwork, and Google Hangouts.

This blog post series will be all about finding, hiring, and managing a great Virtual Assistant for your business, and we’ll share the tricks we’ve found to be successful, along with the major red flags you need to avoid (trust us on these…).

Coming Up Next:

Part II: Our Step-By-Step Process for Finding a Great VA

Want to Chat With One of Our VA’s?

What's Your Business's Market Value? How to Value a Company

How to Value a Company

What’s Your Business’s Market Value?

Are you wondering what your business's market value is? Read this article to learn how to value a company fairly so you can sell fast and make a profit.

How to value a company

You’re finally ready to sell the business you’ve worked so hard on. The first step of the process is valuing how much your company is worth.

But if you’re new to selling a business, likely you won’t have a clue where to start. Thankfully, there are several ways to work out the market value of your company.

Ultimately, your business is worth whatever you decide it’s worth. But you can make your estimation using various ways to value the company and can choose a mix that reflects your final thoughts.

Keep reading to learn how to value a company.

Work out the Value of the Assets

If you’re wondering how to value a business, the first thing you should do is add up the value of everything the company owns. This includes all the equipment and inventory. Then, you’ll need to remove any debts or liabilities.

After all, a buyer would need to purchase all the same stuff if they were starting the business from scratch, so the company at the very least is worth the replacement cost.

While this doesn’t provide an efficient whole evaluation of a business, it’s a great starting point for understanding a business’s worth. Your final balance sheet will offer a good indication of the value of your business’s assets.

Remember that the company is probably worth a lot more than its assets though. Consider how much revenue and earnings the company pulls in.

Base It on Revenue

This leads us to another method on how to value a company. You can base the value of a company on its revenue.

How much does the company make in annual sales? Work that out and determine, using a stockbroker or a business broker, how much a company within your niche may be worth for a level of sales. For example, it may typically be worth about three times sales.

Explore Beyond Financial Formulas

It’s important not to just base your assessment of your company’s value on figures. For example, maybe the location of your business is extremely sought-after?

Always consider the value of your business based on other factors too, such as geographical location.

How to Value a Company for New Sellers

When considering how to value a company, these are some of the best methods to start with. However, one of the best ways to assist with the process is to consider professional help.

Here at Biznexus, we can help. We help match business owners with the best business intermediaries to help you sell your company for great value, on optimal terms.

The service is free for business owners, and we aim to help improve entrepreneurs’ chances of having a positive experience of selling their business. To learn more about how we can help, check out our website.

BizNexus -Learn More From Our YouTube Playlist:

PREPARING TO EXIT YOUR COMPANY

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

Factors That Influence the Business Valuation Formula

factors That Influence the Business Valuation Formula

To truly gain a profit, though, you must fully understand the value of your business.

When estimating the value of your company, there is a myriad of key factors that can substantially impact the business valuation formula.

Business valuation formula

What if a single error ruined the biggest sale of your life?

Many entrepreneurs work hard every day to turn their business into a success. The ultimate goal is typically to sell their successful business and reap a significant profit.

To truly gain a profit, though, you must fully understand the value of your business. And that means understanding what actually goes into a proper business valuation.

Wondering which factors impact your business valuation? Keep reading to find out!

Room to Grow

When someone buys your business, they are not buying what it currently is. Instead, they are buying what it has the potential to become.

It is important for your business to have growth prospects and opportunities for easy expansion. These help boost your brand in the here and now while showcasing your full potential to prospective buyers, especially if your company is young.

This is why analytics should be at the heart of any growing business. You can have your finger on the pulse of emerging trends and tailor your business to changing demographics and tastes.

Financial Performance

Growth potential is only one part of the valuation formula. Potential buyers are also interested in your past financial performance.

Put simply, it's tough to project future potential if your business has been bleeding money. Conversely, if you've steadily turned a profit for the past 3 years or so, your business will seem like a stable and steady investment.

Ultimately, this is why it makes sense to try to sell your business when it is at its peak performance and you have the financial records to prove it.

The Competition

A buyer inherits more than your future prospects when they buy your business. They also inherit all of your competition.

Make no mistake: buyers want to know what your competitors are like. This includes both the size of the competition and their overall numbers.

For example, if your market segment has a handful of large competitors, that can be a bad sign. It means that a buyer may have an uphill climb against well-funded and well-established competition.

If the segment has mostly smaller competitors, though, this can be a good sign. It means that these smaller businesses will be easier to take on as the business grows.

Business Location

Certain parts of the business valuation formula are set in stone. For example, the business location is just as important as ever.

A business designed for hip, urban millennials may not be a hot seller if you're located in a rural area. And even if the business is a perfect fit for the area, a buyer will pay special attention to rental costs and other overhead expenses.

No matter the business, an affordable location with easy customer access will always be highly valued.

Business Valuation Formula: Your Future Awaits

Now you know the most important aspects of the business valuation formula. But do you know who can help you sell your business?

We specialize in every aspect of business sales. If you want to see how we can electrify your sales chances, try out our BizNexus service today!

BizNexus -Learn More From Our YouTube Playlist:

PREPARING TO EXIT YOUR COMPAN

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

How to Make Your Business for Sale More Attractive to Buyers

How to Make Your Business for Sale More Attractive to Buyers?

Here's how to make your business for sale more attractive to buyers.

Now, more than ever, it's vital to ensure your business for sale is an appealing opportunity for potential buyers by considering these strategies.

Are you finally ready to sell your business?

Whether you started a business in recent years to sell it, or you’ve been attached to it for years, you’ll of course want to sell your company for the biggest profit.

To make your brand more attractive to prospective business buyers, there are several ways to make it more appealing. But where to start?

That’s where we come in to help. Here’s how to make your business for sale more attractive to buyers.

Boost Your Brand

If you’re wondering how to sell a business online, one of the best moves you can make is boosting your brand’s online presence.

Think about it – if you were considering buying a business online, what’s one of the first things you’d do?

You’d go straight to google and search it up, of course. And that’s exactly what your prospective buyers will do too.

Thankfully you get to control what they see. And as you can imagine, the better your brand appears online, the better you’ll be able to sell that brand.

However, if your brand’s online presence needs more work, there are several ways to improve.

At a minimum, your company should have an attractive logo, consistent branding, and a polished website.

Visibility is important too. Does your brand rank highly in Google search? If not, this may put buyers off and it’s worth making efforts to improve your search rankings.

Or perhaps your brand does appear in Google search, but in a negative way? If the first links that appear in the search results include scandalous headlines or scam reports surrounding your brand, then this is an issue.

In such cases, you need to make movements to have these removed. After all, a company that’s attractive to buyers is one that possesses integrity.

Buyers will also check up on a brand’s social media accounts, so make sure your company has these. The activity and following of these accounts are just as important too. Buyers are purchasing your customers, after all, so make sure they can see that you have some.

Promote Your Unique Selling Point

When it comes to selling a business, it’s all about promoting the unique features of your company.

What is your business good at? What makes it special? Whatever the answer, maximize it.

Maybe your company sells a niche product? Or perhaps your brand has a huge following? Or a superstar team?

Usually, a buyer will have one main reason why they’re interested in your business. Sure, there may be lots of features they find attractive but in most cases, there’s one standout quality.

Ready to Put Up Your Business For Sale?

Putting up your business for sale is usually a bittersweet experience. But while it's sad to bid farewell to a company you’ve spent so much time and work on, there’s the sweetness too. And that’s the profit you can make from it!

To truly reap the benefits of this sweetness, you’ll want to make your business as attractive as possible to buyers so you can sell it for the greatest profit.

So, remember to know your worth and take the time and effort to improve your brand’s online presence. You should also promote your selling point as much as you can.

We promise it will be worth it.

If you need help retailing your business, we can help you sell for the highest price. Learn how here.

BizNexus -Learn More From Our YouTube Playlist:

PREPARING TO EXIT YOUR COMPANY

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

5 Best Practices For Preparing Your Business For Sale

Preparing Your Business For Sale?

Here are five best practices you don’t want to miss out.

Are you ready to put your business up for sale? Here are some best practices we recommend you use to properly prepare your business for the sale.

Business for sale

When you have a business for sale, you need to be certain that you are leaving no stone unturned when it comes to the details. 

In addition to figuring out exactly why you want to sell, you'll need to cover your legal bases and come up with a strategy that works. This will help you fetch the biggest price, while also getting help with negotiating the deal.

Follow these tips so you can prepare your business for sale.

1. Get a Thorough and Up to Date Valuation

For starters, you'll need to get a proper business valuation. During a valuation, professionals that understand the market will take an objective look at your company to see how much it is worth.

They will look into all matters of the business, including your cash flow, debt, future growth potential, and other variables.

When your business has been valued, you will know what kind of sell price the market dictates and how much you can stand to earn. Having this report will also give you leverage and clarity when you're speaking to buyers.

Start to put together documentation for your business well in advance so that you can show clean, accurate records of your revenue, budgets, and other important matters. 

2. Understand Completely Why You Want to Sell

Aside from financial implications, you need to know exactly why you intend to sell the business.

For some, it may simply be time for retirement, and selling the company can give you plenty of liquidity. You may also be at a point where cutting your losses and selling a majority of your company in an acquisition might make good sense.

Your reason for selling will help you choose which strategy can work best for you.

3. Carefully Vet Your Prospective Buyers

In addition to the sales price, you need to know who you're selling the company to.

Work with a business broker so that you can research every buyer's background. Finding a broker is crucial because studies show that only 20 to 30 percent of companies ever even find a buyer. 

When you are seeking a buyer, move as carefully as possible so that your company lands in good hands, and at a good price.

4. Have a Plan in Place For the Transition

You need to have a solid exit strategy in place so that you can comfortably transition ownership and management.

When you have a plan, you're better able to choose a successor and make sure the company is in good hands once the sale goes through. It will protect the brand moving forward, and any future equity you might retain in the company.

5. Get Some Marketing Help

Your first two priorities should be to get legal help to know exactly where you stand and making a point to stay silent on it until the time is right for you to share terms with the public.

Once you are ready to announce to the public, make sure that you have a marketing team in place to help you communicate your message.

Follow the Right Tips When You Have a Business For Sale

When you have a business for sale, these are the tips that you need to keep in mind. It will help you get the best deal while protecting your interests.

Get in touch to set up a free consultation for our business sale and acquisition advice.

BizNexus -Learn More From Our YouTube Playlist:

PREPARING TO EXIT YOUR COMPANY

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

Best Practices for Getting Your Business Ready for Sale

Selling Your Business?

Best Practices for Getting Your Business Ready for Sale

Use this guide to help you in getting your business ready for sale.

There are many reasons why people sell businesses, from cutting your losses to cashing out and growing your wealth. Whatever your reason is, you'll need to understand the art and science of getting your business ready for sale.

Having an up-to-date valuation for your business is essential if you're planning to make a sale.

Getting your business ready for sale requires a diligent, scientific approach. 

Learning how to sell a business includes making sure you're handling everything on the legal front while also maximizing your profits in the sale. 

Not sure you're quite ready? No problem! Keep reading for seven tips that will have you feeling like a pro in no time. 

1. Get a Professional Valuation For Your Business

Having an up-to-date valuation for your business is essential if you're planning to make a sale. 

During a business valuation, a credible third party will break down everything from your marketplace value, cash flow potential, and how much you can expect to make in a sale, to an in-depth look into your strengths and weaknesses. 

Accountants or investment bankers will make your valuation as accurate as possible. 

2. Shore Up Any Red Flags and Make Improvements

The last thing you'd want is to give a prospective buyer any reason to balk at buying your business. Be sure that you audit your business for any red flags before moving forward with the sale. 

This means getting rid of any liens or tax issues, and ensuring that ownership is crystal clear. Settle any outstanding balances and legal issues so that they don't bleed into the sale. 

3. Be Clear on Your Intentions For Selling and What You Hope to Gain

Everyone has different reasons for selling their business. Never move forward with the process unless you're clear on your intentions and goals. 

For instance, you might sell the business to retire, dissolve the business during a dispute, or get an influx of cash flow. When you know your goals on the front end, you'll be able to get the results you're looking for. 

4. Analyze and Clean Up Your Books

Without question, your books need to be in order if you're going to sell your business. 

If you don't have clear financial records, no credible buyer will take the chance of purchasing your company. You'll need to have up-to-date books from the past three years, in addition to tax records. 

Piece together your reports and have copies available to buyers. 

5. Put Together a Financial and Legal Team to Facilitate the Sale

In order to get the best from your business sale, you'll need the backing of financial and legal professionals every step of the way. 

Make sure that they specialize in mergers and acquisitions, and that you use M&A analytics tools for due diligence. In the meantime, ensure that you're staying on top of your business matters so that your company doesn't falter while you wait for the sale. 

Follow These Tips When Getting Your Business Ready For Sale

Getting your business ready for sale requires a diligent, scientific approach. 

Using the strategies listed above will help get the end result you desire.

Looking for more professional help? Reach out to learn more about how to get your business ready for sale on your terms. 

BizNexus -Learn More From Our YouTube Playlist:

PREPARING TO EXIT YOUR COMPANY

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

Top 10 Entrepreneurs Tips & Ideas for Buying an Existing Business

How to Take a ‘Sprouting Seed’ and Make It Grow

Ideas for buying an existing business for sale

One thing that differentiates entrepreneurs from other people is the ability to see opportunities and take them. Opportunities exist in different forms and buying a business is one of the uncommon ones. There are people that erroneously assume that for a business owner to desire to sell, something must be wrong with a particular business. However, real entrepreneurs do not reason that way.

There are myriad reasons founders may like to sell their businesses. Some may just be bored of the business and are looking for new challenges. Others are particular about getting ideas off the ground and moving into the next idea in their heads. There are businesses that are in the form of ‘sprouting seeds’ with real potentials to grow into great companies. An entrepreneur may decide to buy such an existing business instead of starting a new one from scratch.

Actually, there are several advantages of buying an existing business. The chances of failing with an existing business are slimmer than the chances of failing with a new startup business. This means it is less risky and can be extremely rewarding when handled the right way. Before buying an existing business; however, it is important that a true entrepreneur performs his/her homework. There are so many things to know about an existing business before buying it.

From the time you decide to buy a particular business till the first few months of running it, you have to get so many things right in order to succeed. It may be a little less risky than starting a business from ground zero, but a single wrong move can lead to failures too. Here, we will discuss some tips that can be helpful in setting you and your ‘sprouting seed’ up for success:

 Understand Why the Business Owner Really Wants To Sell

This may sound a little disconnected from the picture we painted above about why some founders may want to sell their businesses. We will be living in denial if we don’t point out that there are businesses for sale that are actually not in great shape. There are instances where business owners want to sell because their businesses are going down or are facing some legal or licensing issues. Take your time to understand exactly why the business you want to buy has been listed for sale. This will save you from buying a business that is bound to fail.

 Be Sure the Business Is What You Really Want

Before setting out to buy an existing business, it is important that you define what you want in a business. You also need to make sure that a particular business you are interested in meets your requirements before considering it. The most important factors to consider include the location of the business, the size, the industry, and its suitability to your lifestyle and aspirations. It is important that the business you are considering buying meets the majority of these important factors. This will help you to buy a business that you will enjoy running. You should also consider your short-term and long-term goals. 

Consider Working With a Business Broker

No matter how experienced you are in business, it is not advisable to go on the road alone when it comes to buying an existing business. In fact, it is impossible to do that. There are a number of people you will need to complete the transaction. It is not compulsory to have a business broker as part of your team but it is very important. There are so many things a business broker can do for you: a reputable one will help you avoid pitfalls while buying an existing business. A business broker can even help you find a business for sale that meets your requirements. He/she will also stand by you to ensure that the process is completed smoothly.

 Ensure You Have a Strong Acquisition Team

Asides from your business broker, there are several other professionals that you need to complete your due diligence and buy the right business that you can grow to an organization you will be proud of. You need to assemble a strong acquisition team with members you trust. You will need an acquisitions attorney, a professional accountant, as well as an independent business valuation team. You don’t need to leave anything to chance, have the right professionals by your side to make the entire process smooth.  

 Take Business Valuation Seriously

There is a mention of an independent business valuation team in the tip above. The point is only stressed here to give you an idea of how important it is. Even if you are very conversant with financials, there are things that can confuse you when you are looking at the records of an entirely strange business. When you have an independent team that is focused on business valuation looking at a business you intend to buy, you will have a better understanding of the business standings and make a better decision. Hiring an independent valuation team will give everyone the impression that you are serious. Take a step further by stressing to the team you’ve hired what you really need.

 Consider the Reputation of the Business Seriously

Asides from the financials of the business and its true value, you also need to consider the reputation of the business you are buying. How is the image of the business in the eyes of customers and suppliers? Do not assume that once you take ownership, people’s opinions about the business will change. There is no need to gamble with a business that has a shattered image. To know more about the reputation of the business you are trying to buy contact such important stakeholders as customers, suppliers, and banks. Steer clear if the image is severely damaged.

 Consider Current Employees and Organizational Chart

While knowing everything about the financials of a company is very important, the human factors behind the figures are also important. The current employees of a business can be its biggest asset in some instances. There is also the possibility that the employees of a business and the organizational structure is the reason behind its poor performance. Look at the organizational chart, consider the current management practices and the management-employee contracts besides union agreements. Make sure you understand all legal contracts with the employees in time.

 Have a Clear Vision of What You Want For the Business

Identifying a good business with potentials is never enough. If you are truly taking ownership of any particular business organization, you must have a clear vision of how to take it forward. There are instances where entrepreneurs that have prepared their businesses for sale will offer a growth plan in their marketing package; you can consider this a bonus. It is important, however, that you have your own vision of how to transform what you have at hand into what you are hoping to achieve in the future.

 Sort Out Your Funding Options from the Beginning

Unless you are independently wealthy or have a very wealthy financial backer, there will be a need to sort out your funding options when trying to buy an existing business. You won’t get any good business that is in great shape cheap. Any business, irrespective of size, that has real potentials for growth will be considerably expensive and you must figure out how you will meet the price. It will be necessary to do your math and sort out your funding options before agreeing on a fair price for any existing business you truly want to buy.

 Pay Attention to the Sales Agreement

Drafting the sales agreement may be the most emotionally charged aspect of buying an existing business, but you need to set your emotions aside and approach it as an entrepreneur. If you have considered all the factors that matter to you most and have decided to buy a particular business for a certain price, you need to make sure that the agreement is well drafted to avoid any surprises. This is one of the reasons you need an acquisitions attorney as part of your team. If there is any aspect of the agreement you don’t understand fully, speak up until you are sure of what you are signing. Do not leave even a single ambiguity as it could lead to issues at closing or even after the acquisition has been concluded.

 As an entrepreneur, you must realize that buying an existing business can offer several benefits. You also need to understand that there are several things involved in it and you need to take all of them seriously. The tips discussed here can be very helpful in taking that ‘sprouting seed’ and making it grow.

Are you finding it hard to decide if buying an existing business is actually worth it? Log in today at BizNexus. Our trusted experts are always available to speak with you and provide suitable answers to your questions and concerns. A fantastic experience awaits you.

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BUSINESS ACQUISITION

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

Buying an Established Business: Why It's Better Than Starting a Business

Starting A Business

Better to buy one than startup

There are so many small businesses today and they come with many risks. Buying an established business is a better option.

For this reason, many entrepreneurs choose to buy an established business instead.

There are many advantages to buying an established business and, in many cases, it's a better option than starting one.

With an existing business, the company's financial documents serve as a road-map for optimizing the business moving forward.

However, purchasing an existing business gives you a head start.

There are different ways to start a business. Many savvy business owners prefer to buy an established business over a startup.

Here's why:

Starting a new business is not easy. Did you know that 50 percent of small businesses fail in the first 5 years?

For this reason, many entrepreneurs choose to buy an established business instead. Franchise opportunities, for example, end in failure only 17 percent of the time.

There are many advantages to buying an established business and, in many cases, it's a better option than starting one. Read on as we explore the top reasons why purchasing an existing business is a great investment.

Existing Cash Flow and Customer Base

The hardest part of starting a new business is establishing a customer base. Without a steady stream of customers, your cash on hand is minimal.

By purchasing an existing business, you can leverage the prior owner’s hard work. The company has already established itself in the marketplace and there is brand recognition from day #1.

There are processes and procedures in place for servicing customers and delivering a product. Perhaps most important is lessons learned from existing employees and customers. You can learn from the previous owner's failures and so you won't be likely to repeat their mistakes.

Using Historical Financial & Performance Data

Another advantage is inheriting years of financial & performance data. In a startup, you're jumping head-first into the unknown with little existing data to guide you. Everything is a "first," and you just need to make fast, repeat decisions with your gut and hopefully a really, really smart management team. But that cannot ever replace experience.

With an existing business, a the company’s financial documents serve as a road-map for optimizing the business moving forward. You have a baseline and existing trajectory to work off with improvements, and you can evaluate the company’s operating expenses to reduce waste and increase the profit margin.

This financial snapshot serves many other purposes. With less uncertainty, your business is more likely to secure loans, and you may be able to attract other investors with an updated business plan.

Purchase at a Discount

If you're buying at a multiple of inefficient cash flow level, you are likely to acquire business assets at a significant discount. This is especially true for startups that are overpaying too many employees, or purchased a lot of capital equipment.

Social Media Footprint

Nearly every business in the United States has a social media footprint. It is not easy to acquire a robust following or steady web traffic on a blog.

However, purchasing an existing business gives you a head start. Now, you can leverage off of the prior owner’s Facebook or Instagram account.

In addition, there are e-mail marketing lists to inherit. You can start running digital promotions immediately after acquisition. For a startup, prospective customer information has to be collected the hard way, from scratch.

A Recap of Buying an Established Business

There are different ways to start a business. Many savvy business owners prefer to buy an established business over a startup.

The primary reason is taking advantage of all the time and money the prior owner put in. Acquiring business data like financials and e-mail marketing lists go a long way.

3 Tips on How Not to Sell Your Small Business

3 TIPS ON HOW NOT TO SELL YOUR SMALL BUSINESS

Successful planning will have you laughing all the way to the bank.

If you are going to sell your business, here are three tips on how not to sell your business. Successful planning when selling a business can have you laughing all the way to the bank.

For an entrepreneur thinking about selling their business, it’s important to know the reasons why it’s sellable, and more importantly why it is not. Just recently, SCORE identified 3 main reasons on how not to sell your business:

First reason why not to sell your business

Don’t sell your business if you still love what you’re doing: If you still love your work and feel fulfilled every day, there isn’t a reason to step away from your business. Generally, business owners should look to sell because they want to make a lifestyle or professional change.

Second reason why not to sell your business

Don’t sell when the market is in a downturn: The value of your business is correlated to the market within which it operates – therefore, you should look to sell when business is good, not bad. There’s a caveat to not selling during a downtown-- the downturn must be temporary. If you anticipate growth in the future, hold for the rebound.

Third reason why not to sell your business

Don’t sell to the wrong person: Not all buyers are created equal. If you care about the long-term success of your business after the sale, you should do your due diligence for any potential buyer.

Make sure you’re selling for the right reasons if you really want to exit your business. 

With the recent upward economic trend and low interest rates, many small businesses are now attracting interest from potential buyers.  In fact, BizBuySell Insight Report found that a record number of small businesses were sold in 2018 for the third straight year.

Buying a business is one of the best ways for companies to enter a new market or increase market share. 

The best way to determine your business's actual worth is to hire a third-party accountant or business broker to conduct a business valuation. A business valuation typically starts by assessing the value of your company's current and long-term assets, income statements and receivables, short-term and long-term liabilities, and other metrics that show the financial health of your business.

If you are in the market to sell your business, you need to sell it for the right reasons and at the right time. Otherwise you will be seeing someone else laughing to the bank and it will not be you. 

How to use seller financing to buy a business in 2019

There are various ways to go about funding the purchase of a business. A strategic option would be to negotiate seller financing with the business seller to alleviate the burden of paying full price for the business upfront. Jessica Fialkovich, President of Transworld Business Advisers - Rocky Mountain explains how this works, particularly for small businesses.

In the U.S., about 60-90% of business sales involve seller financing. Before going through with the purchase, you need to thoroughly vet the business. Because owners rarely finance 100% of the purchase price, you might also need to find other sources of funding, such as a bank loan.

Once your business is up and running successfully, you might want to refinance so you are free and clear of the seller.

You can get up to $5,000,000 with an SBA loan, but you'll need a good credit score (680 or better), collateral, and at least a 10% down payment.

If you default, the owner might want to retain the power to take back the business within 60 days of you missing payment.

Helpful Resources:

1. Types Of SBA Loans

2. Business Appraises

3. Rollover for Business Startups (ROBS)

4. How To Finance A Business

Helpful Business Sites:

1. Small Business Administration

2. American Society of Appraisers

How to Buy a Business | Four Vital Questions to Ask

How To ACQUIRE A Business

Four Important Questions to Ask

It can take a lot of time and effort to develop a business from scratch. This is why people savvy enough to tap into available public and private resources decide to buy an existing business. However, going forward with the purchase is not an easy decision to make. Here are four important questions to ask during the process of buying a business.

Where to Find A Business to Buy?

The initial step is to find a place where you can buy a business. Many people go to brokers seeking help to identify the right business for them. Others check industry publications, newspaper advertisements, or various online business for sale platforms.

Online marketplaces can be a great way to find a business to buy, especially if you’re looking to focus on digital business and e-commerce startups that are increasingly putting themselves up for sale.

Is That Business the Right Fit for Me?

Here are three key questions every entrepreneur like you should ask themselves when vetting an acquisition:

1. What are my skills and interests? – You would be more motivated to succeed with a business in a niche that you are passionate about. Needless to say, you want to make sure you know the industry enough to take over the business effortlessly.

2. What is my budget? – The price tag of the business needs to fit your pro forma budget. Furthermore, the business should generate monthly sales to cover the cost of operations with the potential of making a profit. If you need additional capital, you can consider getting a business loan from a financial institution like your local bank.

3. Do I have time and resources? – There is no point in buying a business if you are going to neglect it. You need to have enough time, effort, and energy to ensure that your business has the right allocated resources to become a profitable investment.

What Will You Get for the Price OF THE BUSINESS?

The chances are you will have some wiggle room when negotiating the purchasing price, but before you do that, ask the business seller exactly what assets will transfer for that price? Yes, you will become the owner of the business & manager of the team in place, but will you also get its inventory, social media accounts, a functioning website, and other relevant items?

Do You Have Accurate Historical Financial Reports?

The general rule of thumb is to stick to buying businesses that generate profits for at least a couple of years. The current business owner needs to be ready to provide financial statements and reports for at least that period. This includes a detailed overview of revenues, expenses, and debts. Also, it would be great if they include a projected financial statement.

Learn More About Business Management

While you should have general knowledge about managing a business, we are talking about the day-to-day operations of the business you are acquiring. For example, you may need permits and licenses to continue operating the business. There may also be operating procedures that you can adopt as that can make you a better manager.

Here are some more general questions related to the business operations:

• If the business that you are buying is digital, the product or service will be sold through a subscription model, or use one-time payments?

• Are there any employees whose salary you are expected to pay?

• Are there any contracts with vendors or other suppliers or providers? How long do they last, and is there an extension option?

Are you an entrepreneur?

An Austrian economist defined entrepreneurship as the “competitive behavior that drives the market process”.Thus it creates value for both market and society. Entrepreneurship is the process of creating something new of value by devoting the necessary time and effort, assuming the accompanying financial, psychological, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.

What problems can small businesses face in terms of entrepreneurship?

America's small business owners' optimism took a modest downturn in June, according to the NFIB Small Business Optimism Index, slipping 1.7 points to 103.3. While optimism remains at historically high levels, the June figure reverses the gain posted in May, with six components falling, three improving, and one unchanged.

Fifty-four percent reported capital outlays, down 10 points.

The net percent of owners reporting inventory increases fell two points to a net-zero percent, indicating no further building in inventory stocks in June.

The net percent of owners expecting higher real sales volumes fell six points to a net 17 percent of owners.

Twenty-seven percent of those reporting weaker profits blamed sales (down three points), 12 percent blamed labor costs (up five points), 11 percent cited materials costs, and nine percent cited lower selling prices (down two points).

Final Take On Buying A Business

As you can see, purchasing a business is both challenging and fun! You want to ensure that you pick the right business, which is why you should carefully evaluate all the details related to the purchase. Take as much time as necessary to ensure you are making the right decision as this can be the difference between success and failure down the road.

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.