ENTREPRENEURSHIP THROUGH ACQUISITION
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Exit Planning Challenges When Transferring Business to Family & Multi Family Office
When you're ready to pass on your business to your family, it's important to make sure that everyone is on board and understands the challenges that are ahead for successful exit planning. While many owners are worried about losing control, diligent business exit planning is key to ensuring that everything goes smoothly. There are many ways to maintain ownership while still giving family members a stake in the company. You can create a succession plan that allows you to transfer ownership gradually over time to avoid disrupting operations and giving family members time to learn the ropes. You should also consider creating a buy-sell agreement that outlines what will happen if one member dies or becomes incapacitated and cannot work in the business anymore. The deal origination agreement should include…
When you're ready to pass on your business to your family, it's important to make sure that everyone is on board and understands the challenges that are ahead for successful exit planning.
Some of the most common challenges owners face in succession planning when transferring their businesses to their family (or multi family office) include:
- The new owner might not be as dedicated, hardworking, or skilled as the previous owner.
- They may not have the same vision for the business as the original owner did.
- The new owner might not have a deep understanding of how things work in a corporate development or how to run a business from day to day.
- There might be issues related to succession planning, such as choosing who should take over when they leave or which members of their family will inherit their shares in the company.
While many owners are worried about losing control, diligent business exit planning is key to ensuring that everything goes smoothly. There are many ways to maintain ownership while still giving family members a stake in the company. You can create a succession plan that allows you to transfer ownership gradually over time to avoid disrupting operations and giving family members time to learn the ropes.
You should also consider creating a buy-sell agreement that outlines what will happen if one member dies or becomes incapacitated and cannot work in the business anymore. The deal origination agreement should include how much each person has invested in the business, how much they're entitled to receive when someone leaves or dies, and how much each person gets paid for their work in the company (this is called an "incentive").
We asked our BizNexus Community Advisors of M&A advisors and professionals what they see and experience when dealing with family succession planning.
Read below to see the challenges they often see in deal origination with family.
Challenges Owners Often Face when Transitioning Their Business to Family & Multi Family Office Deal Origination
Business owners wait too long to have a serious conversation with family members until it is too late.
Randy Hendershot, Business Intermediary @ Evolution Advisors
Business owners that don't train and prepare the next generation on capital utilization and overall financial management.
Steve Denny, Business Broker @ Innovative Business Advisors
Trouble letting go and allowing the next generation take over.
Frank Byskov, Wealth Manager @ Forty4Financial
Business owners don't prepare for this and don't know there are options besides leaving the business to a family member. You have options and need to learn what they are before this happens.
Curtis Stohr, Trainer @ Family Investor LLC & Owner of Coffee With Curtis
In some cases, the kids simply are not interested. When they are, sometimes they simply are not prepared for the opportunity. Some of the most successful scenarios occur when the business owners encourages the kids to take jobs at other companies (early in their careers) to gain some perspective before coming to work for the family firm.
In the scenario where there are no kids, other family members should be viewed the same as any other potential management / owner candidate. If they are up for the task, then it can be really good. However, it should not just be handed over simply because there is a shared family name or line. It's a recipe for disaster if that happens. That benefits no one.
Dave Sheppard, CMAA @ Medworld Advisors
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We bring together entrepreneurs, investors, and M&A experts to master the process of getting your business acquired or recapitalized, so we can learn how to set up a great deal team, financing, and exit plan from a network of industry professionals & M&A advisors.
How long is a business broker listing contract? - Selling a business
The process of selling a business can take upwards of six to twelve months, and you should expect to hire a business broker for that timeframe to coordinate buyers and maximize competitive interest.
The process of selling a business can take upwards of six to twelve months, and you should expect to hire a business broker for that timeframe to coordinate buyers and maximize competitive interest.
Selling or buying a business takes time, and every sell-side engagement contract is unique. We recently asked our community advisors and M&A professionals how long the typical sell-side engagement contract is, and what owners should expect. Read below to see what they had to say.
Most Common Contract Lengths Owners Should Expect
Our standard agreement term is six months. However, we are willing to compromise to a 3-month renewable term if this becomes a sticking point.
David Fairley, Business Intermediary @ Website Properties
12 months. The seller has to have reasonable expectations. It takes time and effort to sell a business.
Angelo Ferrara, Business Intermediary @ Rapt Enterprises, Inc.
12 months, but clients should be able to cancel sooner if the intermediary isn’t performing.
Tyler Evans, Business Intermediary @ SoCal Business Brokers
12 months or more.
Mike Adhikari, M&A Chair @ Illinois Corporate Investments, Inc.
A 12-month term helps set reasonable expectations that a transaction will probably take months.
Bob Fariss, Business Intermediary @ Murphy Business Sales
12 months is the standard.
Eric Gall, Business Intermediary @ Edison Business Advisors
12 months
April Femrite @ True Real Estate Mankato
18 MONTHS
António Mendes, Business Intermediary @ Opção PME Negócios
12 months with a 2 year tail.
Mark Mroczkowski, Business Intermediary @ Chapman Associates Mergers & Acquisitions
JOIN THE CONVERSATION IN OUR COMMUNITY
We bring together entrepreneurs, investors, and M&A experts to master the process of getting your business acquired or recapitalized, so we can learn how to set up a great deal team, financing, and exit plan from a network of industry professionals & advisors.
Tactics For Assessing Whether a Potential Buyer is Qualified
We recently asked our community for some tips on best practices for qualifying potential buyers, and below, you’ll see the preferred tactics our BizNexus Community Advisors and M&A professionals referenced as some of their reliable go-to strategies for managing this successfully at scale, -an art form not easily replicated.
Assessing a potential buyer for your business can be an absolute rabbit hole when it comes to wasting time, -your most valuable commodity as a business owner.
We recently asked our community for some tips on best practices for qualifying potential buyers, and below, you’ll see the preferred tactics our BizNexus Community Advisors and M&A professionals referenced as some of their reliable go-to strategies for managing this successfully at scale, -an artform not easily replicated.
Does the Buyer Provide you Information Upfront?
As part of the vetting process of first-time buyers, three administrative items are requested/required. 1) Up to date resume or curriculum vitae. 2) Personal financial statement, 3) a current credit report - secured by a potential buyer. Next, an in-depth conversation about their motivation to become an entrepreneur.
For first-time buyers who have the right attitude & awareness, additional due diligence on them is done to further evaluate their buyer worthiness.
George Scott @ Business Consulting Solutions, LLC
Show me, upfront, your money. Enough for the deal you intend. Prove, right now, that what you say you can do is true.
Ted Leverette @ Partner On-Call Network, LLC
Can The Buyer Provide You With Their Previous Experience?
Prior experience in deal-making or related business operations.
Vipin Singh @ Murphy Business Sales, LLC
For an individual buyer, they need to have prior experience in deal-making.
Yatin Thakore @ Technology Park
Interview them, assess background experience and get a loan pre-approval.
April Femrite @ True Real Estate Mankato
Does the Buyer Have a Funding Strategy?
As part of my initial conversation, I usually just ask them what their strategy is to fund the acquisition. If an individual investor can’t tell me then that is a red flag. If they are relying on the seller for too much financing, that’s also a red flag. As soon as they ask for tax returns, I ask them to complete a personal balance sheet. If they are PE or VC and say they have committed funds, they I tell them we will need to see the funds or know who the investors are before too long to see their reaction.
Joshua Meltzer @ Sunbelt Business Brokers of Boston & Providence
Join The Conversation In Our Community
We bring together entrepreneurs, investors, and M&A experts to master the process of getting your business acquired or recapitalized, so we can learn how to set up a great deal team, financing, and exit plan from a network of industry professionals & advisors.
Most Common Reasons Owners Decide to Sell Their Business
Each day we ask our community of M&A experts questions about niche topics related to strategies for getting your business acquired or recapitalized. For today’s poll, we wanted to know “What’s the most common reason you typically see for owners deciding to sell?”
Each day we ask our community of Advisors & M&A professionals in the BizNexus Community questions about niche topics related to strategies for getting your business acquired or recapitalized.
For today’s poll, we wanted to know “What’s the most common reason you typically see for owners deciding to sell?”
Here’s what the Advisors and M&A professionals from the BizNexus Community shared.
Retirement
Retirement #1, but recently, I’ve been running into business owners who opened up shortly before COVID and are running out of energy, capital, and desire to run the business.
Jason Ward @ TruView Business Advisors
Definitely retirement #1, and health #2.
Eric Gall @ Edison Avenue
Retirement then burn out
April Femrite @ True Real Estate Mankato
2. Health Issues
Getting older & less energetic/sick of fighting with family members over the direction of the business, & who gets what when the owner dies/loses or lost interest in the business.
Harrison R T Davis @ New York Business Brokers
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The BizNexus Community
We bring together entrepreneurs, investors, and M&A experts to master the process of getting your business acquired or recapitalized, so we can learn how to set up a great deal team, financing, and exit plan from a network of industry professionals & advisors.
The Top 5 Factors Driving and Detracting Value From a Business Prepping to Sell
Our M&A experts from the BizNexus Community shared with us some insight into what they’ve routinely observed as the top five factors driving and detracting value from a business prepping to sell and offered up some quick advice. Read below to see what they had to say.
Our M&A experts from the BizNexus Community shared with us some insight into what they’ve routinely observed as the top five factors driving and detracting value from a business prepping to sell and offered up some quick advice. Read below to see what they had to say.
#1 Deferred Maintenance
Many owners will say they will probably exit in 5 years, but these same owners won’t want to prepare until they have decided to sell. This clearly detracts from the overall value.
Bob Fariss @ Murphy Business Sales
#2 Clear Financials
Lately, I have seen too many businesses with sloppy or incorrectly done financials. Businesses that should be doing accrual accounting are not, P&L’s that don’t match the tax returns, incorrect COGs. These all make a buyer suspicious and reduce the amount they are willing to offer. The cost for a good bookkeeper is small compared to the reduction in offering price when the financials are suspect.
Joshua Meltzer @ Sunbelt Business Brokers of Boston & Providence
#3 Seller Mindset
The seller has to have the right attitude about the entire process of selling a business, including the market-tolerate value of the business.
George Scott @ Business Consulting Solutions, LLC
#4 Business Operations
Lack of having an operations management team in place detracts. Take the time to put together a proven team, it takes a while no matter how much money you throw at it but it’s worth it to the buyer and you as a seller.
Bob Latham @ Altapraem M&A Advisors
#5 Unreasonable Expectations
It seems like there is never just one. Customer concentration can seriously detract from value. Sellers unreasonably expecting all cash at closing is a big detractor.
Mark Mroczkowski @ Champman Associates, Inc.
#6 Owner’s with Too Many Responsibilities
The owner having too many responsibilities and not preparing management team to take over some/all of the duties. Messy financials....P&L's don't match tax returns
April Femrite @ True Real Estate Mankato
Join the Conversation in our community
We bring together entrepreneurs, investors, and M&A experts to master the process of getting your business acquired or recapitalized, so we can learn how to set up a great deal team, financing, and exit plan from a network of industry professionals & advisors.
Why Business Owners Back Out Of Selling Their Business Last Minute
What are the top reasons business owners change their minds last minute when they’re looking at selling a business?
Why You Might Change Your Mind About Selling Last Minute
Selling your business is typically the biggest decision of an entrepreneur’s life, and there are plenty of reasons an owner will back out of a transaction if it’s not what they need for their personal and professional goals.
Below, Advisors and M&A professionals from the BizNexus community offered their tips for owners hoping to move towards an eventual exit, and avoid the typical pitfalls that can derail a great transaction from taking place.
Family, personal guarantee & life after selling
There are three areas that we focus on with sellers before taking on the listing to avoid them backing out of the deal at closing:
1. Family. We talk about family to make sure that all the key members of the family are on board with the owner selling and that there aren't any family members that would like to take over the business.
2. Personal Guarantee: We review the lease for personal guarantees and determine if the seller will remain personally liable for the new tenant on transfer and if there are any opportunities to remove the guarantee.
3. Plans After Selling: We talk about what their plans are after they sell to ensure they know what they will do with their time.
Working capital adjustments can be deal killers
I have seen sellers simply change their minds because they aren't ready to sell yet. Sometimes it's the working capital adjustment or other factors that affect the price. Lawyers can be problematic when they try to take over the deal and restructure it in ways that the buyer or seller cannot accept.
Reliance on one solo “rainmaker” reduces valuation or kills the deal
My problem has been with owners who are the rainmakers for their business. When they realize buyers really want them more than their business, the deal isn’t attractive.
Join The Conversation In Our Community
We bring together entrepreneurs, investors, and M&A experts to master the process of getting your business acquired or recapitalized, so we can learn how to set up a great deal team, financing, and exit plan from a network of industry professionals & advisors.
A Quick Look Into the Merger and Acquisition Market - What's Hot And What's Not
On a business level, it will be interesting to observe the supply chain, PPP funds, and SBA options as businesses continue to operate. Looking to sell or buy? Read on to dive more deeply into the M&A market to see what’s hot and what’s not.
What the Buyer and Seller Market Shows Us
Encouraged by low interest rates and concerned about pending tax changes more and more sellers and buyers are entering the arena.
We’re seeing a very interesting trend as we continue to see businesses pop up around the country. Deal volume is up. Now, lending companies are gaining a lot of attention given the increase of business acquisition as it supports the merger and acquisition market. On a business level, it will be interesting to observe the supply chain, PPP funds, and SBA options as businesses continue to operate. Looking to sell or buy? Read on to dive more deeply into the M&A market to see what’s hot and what’s not.
Commercial Real Estate is Booming
Contrary to what previous data suggests, commercial space as it relates to brick and mortar is making a comeback. The pandemic brought retail sales down significantly. However, with the vaccine and awareness, there’s been an increase in retail, particularly as it pertains to brick and mortar sales. Recent data suggest that in addition to the vaccine, more people are looking forward to shopping in person, increasing sales, and bringing the brick and mortar stats back to normal. Just in time for the Holidays.
Inevitably, interest rates will begin to rise. Many business owners have seen this time as an opportunity to position themselves more comfortably for a sale. For example, many brick and mortars are renovating and improving their current space with the additional lending to attract prospective buyers. Whether you’re looking to sell your commercial space or buy, perhaps it’s worth researching commercial real estate. Checkout our current BizNexus commercial listings today.
Home Improvement Businesses Are Popular
During the pandemic, Home Depot experienced a 20% growth in sales. Many businesses were closed down and what better way to spend your time than to make home improvements. Contractors can take advantage of the low interest rates and increase in demand for housing remodels.
Research indicates steady growth over the next five years, driven mainly by a continued rise in per capita disposable income.
“Without question, the need for home improvement projects remains strong, from maintenance touch-ups and new roofs to massive remodels and full-on reconstruction”
As per capita disposable income rises, we will continue to see an increase in demand in home improvements and contract work.
Home Healthcare is Entering the market
Though it’s hard to start home healthcare businesses, these listings have shown to have a lot of buyer interest. Those looking to exit the medical confines, have begun their own healthcare endeavors by providing services from their homes.
Pizza Shop sales are through the roof
Unless. Unless a prospective buyer has been in the food service industry before, it’s becoming increasingly difficult to sell foodservice businesses. Additionally, this does not hold true across the board. Franchise opportunities have seemingly been shown to have success in the current market. So, it really all depends on the buyer. Pizza shops are rocking and rolling! From 2016-2020, $46.24 billion dollars were spent by pizza lovers. To that, when thinking of ways to meet consumer demand, takeout establishments are booming. Those in the industry who’ve pivoted their business model to appease their patrons have seen an increase in profit margins and cash flow.
Market Trends That Have Remained The Same
Moreover, franchises are still popular and the less risky of business opportunities. Granted, each deal is different and many factors come into play when owning and operating a business. Contract work has always been in high demand and given the circumstances, home healthcare is on the rise for both economic and obvious health reasons. If you can keep up with the demand and have the necessary expertise and capital to begin, data is showing a boom in home healthcare. I encourage those interested in following business trends to look at market data and research trends.
Additionally, if you can, take advantage of the low interest rates and the opportunity for cheap money by making improvements now. There is still buyer and seller action, contrary to what you may be seeing in the market. We may not see another time where money comes to us at such a low cost.
Broker and Buyer Concerns
Where have all the workers gone? Weekly and monthly P&L’s are now more important than they ever were. Yearly numbers have become less important than weekly and monthly P&Ls. When it comes to buying a business or selling a business, additional requests for financials over short and longer period of time are the norm. Consider putting together a due diligence lists from business accountants. When it comes to concerns from buyers, this relates to any governmental approval; anything related to government is significantly delayed. Solution: Start the process earlier.
Summary
To conclude, it’s time to do business with actual books. Gone are the days where you can make money and not have to track profit and loss. To that, now is the time to take a look at interest rates that you may never see again. With increase awareness and the availability of the COVID-19 vaccine, many industries that faced some significant profit loss are now seeing a nice upward trendline.
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Buy Faster - Creative Business Acquisition Methods to Speed Up The Buying Process
In order to compete with the masses, a prospective buyer must consider creative strategies. If you’re looking to buy a business, defy traditional methods in order to win. Read on to learn about creative business acquisition methods to speed up your buying process.
Be Creative and Buy Faster
Things change. Traditional business strategies are now being challenged as the competitive acquisition landscape grows.
If there’s any time to get creative, it is now. Every day, there is an individual or company growing and working their way up the success ladder. Hence, why buying a business today must be approached differently. In order to compete with the masses, a prospective buyer must consider creative strategies. If you’re looking to buy a business, defy traditional methods in order to win. Read on to learn about creative business acquisition methods to speed up your buying process.
Structure The Deal
When you think of structuring a deal, think of decision-makers. Who is the main point of contact? One way to slow down any process is by communicating with the wrong person. Don’t make that mistake. Instead, know the individual who holds the key.
Network Your Business Tail Off
It goes without saying, one of the best ways to know what’s out there is to simply chat about it. If you’re not building your network on a daily basis, you are missing out on hot opportunities. Reaching out to those within your network and asking if they too can reach out to their network, creates a nice funnel of communication and awareness around the interest in buying a business. Besides, any businessman or woman knows that having a conversation can lead to learning opportunities. Sometimes, it’s not always what you know, but who you know.
Use professional platforms to network
Don’t hesitate to use platforms that are built to support networking. Platforms like LinkedIn are great for building professional networking groups. In addition, LinkedIn allows you to choose specific groups tailored to your experience and background.
Use business listing platforms that work
With so many advertisements out there, pay attention and research the most effective business acquisition platforms like BizNexus. Unlike other platforms, BizNexus offers you quick business matching, placing only the businesses that you want buy-in front of you. Using the unique search options, just create a profile and begin searching in seconds. Knowing where to find businesses for sale is half the battle. You can spend countless hours on the wrong opportunities. No more emotional roller coasters, it’s smooth sailing with BizNexus. Search for a business for sale today.
Know Your Finance Options Ahead of Time
Want to slam dunk your acquisition? Yes or yes? Knowing your finance options will help to streamline the buying process. There are traditional methods that exist. However, those options are becoming less popular due to the increase in differing levels of assistance needed from a prospective buyer. Larger lending companies tend to think new business is too risky and smaller lending companies may not have enough options to choose from. As a result, you’re left spending countless hours wondering how you will afford your dreams.
Popular non-traditional lending options to consider
Use Straight Up Cash
Now, if you have the cash to purchase a business outright, that will speed up the process a lot. Not having to go through banks and loan companies, doesn’t require as much time and energy. This also allows you to stand out to sellers. The fewer hurdles, the better. Money talks.
To that, make sure you invest time into researching your options and the fine print embedded. If you’re looking to acquire faster and have the cash to prove it, our BizNexus finance partners can get you in front of the right people faster. Skip the lenders, and get approved as a cash buyer today.
Summary
To summarize, the process of acquisition can be timely or efficient depending on how you strategize and plan. To speed up the process, it’s important to know who you are dealing with; the key players in making the final sale decision, and your options to finance. By networking accordingly, you can skip the hassle of speaking to the wrong professionals and buy right away.
Lastly, knowing how much money you are working with and the amount you will need when buying a business is crucial. Don’t get bogged down by lenders if you don’t need to. If you have the cash, skip the lines and let BizNexus place the right cash buyer businesses in front of you.
Bonus Tip! No Numbers. No Deal. Retrieve proper financial data before you buy.
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To the Rescue: Golden Opportunities in Buying a Struggling Business
With your know-how, capital, and a few changes, you could transform a struggling business into a real performer! Here's what you need to know when buying one.
Buying a business can be very rewarding, but it's not something everyone should do
With your know-how, capital, and a few changes, you could transform a struggling business into a real performer! Here's what you need to know when buying one.
Are you looking to buy a business? You’ve got the know-how, capital, and desire. But do you have what it takes to turn around a struggling business?
It's essential to understand the process and what steps you need to take before making an offer. Buying a business can be very rewarding, but it's not something everyone should do.
So before taking on this kind of responsibility, make sure you have the time and money necessary for such an undertaking.
Keep reading to get the full checklist to help you along your way and provide some insight into the world of small businesses and entrepreneurship in general.
Find the Best Business Opportunities in the Market
Business opportunities are everywhere. While most people do not have the means or expertise to start a business from scratch, many are looking for turn-key opportunities.
That is why buying a struggling business can appeal to those with ambition and a love for business. It requires less capital and time than starting a business from scratch but can still be very rewarding.
Prepare for the Decision
Forget buying a business; it's time for you to become an entrepreneur. Before you buy any struggling businesses, make sure this is the road you want to take. It's not like most vocations where you start out small and progress with your career. But, if done right, entrepreneurship can lead to great success.
So, are you ready to put your fate into your own hands? If so, then it's time for you to become an entrepreneur. It can be hard work, but the reward is great. Put in the necessary effort, and you might find yourself providing for a family one day with your business. Remember, buying a troubled business is not easy. Hence, preparation is necessary.
Find the Best Way to Buy a Struggling Business
There are several different ways to buy a struggling business. The main four options are asset sale, stock sale, merger, and management buy-out.
Each has its own unique advantages and disadvantages that you must understand to make the right decision. To that, consider the following when looking to buy a struggling business:
Assets
Stock
Merger
Management Buy-out
Auctioning
Assets
There is a complete transfer of ownership of all assets from the old owner to the new owner. The old owner is not liable for any debt or taxes if they get paid off.
It is the easiest and quickest way to buy a business, but the price may be more than you can afford. This type of deal is usually best suited for buyers who have plenty of capital on hand.
Stock
Selling some, most or all, their stock to a new owner. This is an easy process and provides the seller with personal time to leave the business on good terms.
The buyer must own at least 51% of the stock for this transaction to be valid. Suppose you buy more than 80% of stakes. In that case, it may affect the tax-exempt status, and the seller will be liable for any debt or liability.
Merger
One company combines with another to create one big business. However, because this business only exists in theory, the old owners are not responsible for any debts or liabilities.
Also, this type of deal is usually best suited for buyers who have plenty of capital on hand and can manage a larger company with more employees.
Management Buy-out
This type of transaction is when managers or critical employees buy the shares from the current owner. They must have at least 30% of the total shares for this transaction to be valid.
Because they lack experience, it's also perfect for buyers with plenty of capital and excellent management of large companies with more employees.
Auctioning
You can also auction off your business or sell it to the highest bidder, but keep in mind that this transaction method is often very unpredictable. You never know who will show up at the auction and what they want for your business.
Also, many buyers may take advantage of you if you are not aware of all the necessary procedures involved. The best way to buy a struggling business is from the current owner.
This way lets you become familiar with all aspects of the company and ensure that there are no debts or liabilities before signing any contracts. But, ensure you know what you're doing if you decide to go this route.
Know Your Competition
Once you decide about purchasing a distressed business, it's time to start looking for the perfect one. But where do you find them? Is it better to go with personal connections or an advertisement in the newspaper?
When it comes to finding promising companies, word of mouth is often the best form of advertising. If you know successful businessmen, or competitors, who have taken the path, ask them about their experiences and if they would recommend it to you.
If you know anything about the business world, then there's a good chance that you have seen an advertisement or two for businesses that are up for sale. Although these ads can help find a failing business, try to find as much information about the company as before getting involved.
Identify Your Resources
Many resources can help you in buying a failed company, but they may cost money to use. Whether it's for sale by the owner or through an ad, be sure to ask them how much commission you need if you buy the business.
If it turns out to be more than you expected, then you should consider using a different resource.
Stay Focused
After deciding on the best struggling business to buy, invest more in its operations, how you can build it, and not only on the profits. As exciting as this may be, many other factors come into play when buying a business, such as location and suitability.
The most important factor in buying a company is whether it's for sale for the right price. If you have enough capital on hand to buy this company from its current owner, then go ahead and make an offer.
Many companies are currently up for sale because the owners do not know how to manage such a large business, and it's up to you to turn this struggling company around.
Summary
If you have the resources and know-how, then go out and find a struggling company needing great improvement. But, remember to stick to a price you can afford.
Also, if you need more advice on how to buy a struggling business, feel free to contact us, Biznexus at any time. Put our team to work for you.
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How SaaS Companies Have Been Popular Acquisition Targets Since COVID
Are you curious about how SaaS companies have become popular acquisition targets since the COVID-19 pandemic? Learn more here.
Even during the pandemic and all the restrictions, business happened!
Many companies were bought and sold during the pandemic. One of the most popular companies being bought and sold was SaaS companies. SaaS stands for software as a service. These companies provide access to a software system online, and people pay a subscription for it. This gives the company regular income and provides up-to-date software for the user. There are a few key reasons why SaaS companies have been popular acquisition targets and why you may need to think about acquiring one. This could also be a great time to sell your SaaS company if you are ready.
SaaS Business Model
SaaS companies have increased in popularity because so many people are using them. You don't have to buy software and then buy the updated software like in the old days. This trend only increased during the pandemic because many people started working from home. The need for SaaS products has dramatically increased, and the trend isn't going down.
Many people have found out they enjoy remote work, and that segment of the market is increasing. Companies have to rely on SaaS products to keep their remote teams aligned. As the market sees these trends increase, more investors are seeing the benefit of a business acquisition of a SaaS company.
Benefits of an Acquisition Target
Acquiring a SaaS company makes sense for those who want to increase their reach or gain a foothold in a new market. The SaaS has already done the heavy lifting of starting and building an audience. The acquisition meaning in business for the company is shown in their instant growth of market share. They didn't have to build the market share from the ground up; they were able to obtain it through acquisition. This saves the company time and can be a great investment into a market that still sees significant growth.
Further, as the remote workforce increases and internet access becomes more available, SaaS will be even more important. The benefits of acquiring can help the company in two different ways. Defensively, the company can buy potential competitors and gain their creative resources. Offensively, the company can expand into new areas quickly. Acquiring a company with a customer base allows you to focus on retention and monetization of the current base. This focus builds a stronger financial base for the company because it is more effective at revenue growth. Gaining new customers can be expensive, but those expenses can be diminished when you have a base of customers already. You can offer more options to them to increase revenue.
Business Acquisition Financing
Financing an acquisition can be done very creatively today. You can decide if you want to pay with your money or pay with other people's money. There are many options at your disposal when planning to finance an acquisition.
One of the most popular options that many uses when acquiring a company is seller financing. The owners of the company will often accept a financing deal where they are paid a sum upfront, and then the rest is spread out over time.
Moreover, this provides the seller residual income, so many will accept a settlement like this. It is a benefit for the person acquiring the company because the income from the new company can help pay the residual amount.
Another option for investors wanting to buy a SaaS is to build an investment team. If one investor sees the potential in acquiring a company, most likely, they can find other investors to go in with them. You can even build a team of investors who help you find potential companies to purchase. Their expertise can assist you in finding the right SaaS company with the right potential.
The Importance of an Acquisition Team
One of the most important things you can do when planning to acquire any business is build a strong acquisition team. You want people who can help you see the reality of a business. You will want to have a CPA and a business acquisition lawyer who can help you go through every aspect of the deal, so you don't miss anything. They can help you answer the question, "Why is this business for sale?"
A strong acquisition team will help you reach your acquisition targets faster.
Additionally, you want to dig down to make sure you aren't buying a company on its way down. You need to study the market and the potential growth of the company for the future, as well as the costs per customer for the SaaS. Healthy Saas growth only happens when the customer acquisition cost is low, and the customer acquisition rate is high. This, along with a high speed of acquisition, sets up a SaaS company for strong, healthy growth.
You need people who will help you decipher the data to know what type of investment you will be making. There are business acquisition companies and websites that assist you in every aspect of your search.
These companies will also work with the sellers of companies to find the right buyers. The business acquisition doesn't have to be an unknown journey for the seller or the buyer. Whether you are buying or selling, you don't have to figure it all out yourself. These sites will help you find companies for sale and assist with all aspects of the deal, from financing to negotiations.
Your Acquisition Plan
There are many acquisition targets out there. What you want to do is find the right one that fits you or your company. The SaaS market is exploding, and it won't be slowing down. With creative financing and the right help, you could make a great investment for your future. Our passion is simplifying the business acquisition process. We assist sellers and buyers through the complicated world of acquisition. Find a Business For Sale Now and discover how simple the process can be.
Summary
With SaaS (software as a service) companies on the rise, it’s no wonder they are turning quick profits if set up properly. With the right acquisition team and plan, you’ll be well on your way to hitting; even exceeding your acquisition targets. To learn about your options and to buy or sell a software company, check out Biznexus. Put BizNexus to work for you. List your business for sale or find a SaaS business today.
Bonus Tip! Don't be afraid to utilize upsell funnels to increase your SaaS profit
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Business Ownership: What Your Costumers Want More Than Personalization and Ease
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.
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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3 Easy Tips to Sell Your Startup Fast
Want to sell your startup fast? Take the time to cultivate relationships and build trust. Know what you’re willing to negotiate and begin decluttering your digital footprint.
It’s easy if you do it smart
3 easy tips to help you sell your business fast.
The average length of time it takes to sell a business is 6-9 months. However, by following these 3 easy tips, you can speed up the process.
As an entrepreneur, selling your startup is validation that your hard work yielded significant value. So, if you’re ready to cash out, here are some helpful tips to help you sell your startup fast.
Spend time building trust with investors and buyers
Know your non-negotiables
Clean Up Your Digital Footprint
Invest in Your Network to Build Trust
Who are your strong key players in your network? Identify strategic buyers early on to engage and build genuine relationships. A majority of buyers say efforts in cultivating and maintaining relationships were critical in making a purchase decision. Oftentimes, existing partners opt to buy and so keeping those close ties may end up paying off. Moreover, relationship building is an essential piece in owning and operating a successful business.
“As economic growth accelerates, so do business buyers’ personal finances and investment opportunities. In an environment with more relaxed lending policies, plenty of financing options, and a stable stock market, more buyers have the capital needed to buy a business.”
Know Your Non-Negotiable’s
Only you know your business inside and out. When it comes to wanting to sell your business fast, the more concrete details you can provide, the better. To that, it’s just as important to know what you are willing to part ways with. Do you want to give up complete ownership? Do you still want to stay on the team after-sale? Knowing these will keep the process moving. Plan ahead. Think about royalties, your employees, and current partners.
Declutter Your Digital Footprint
We live in a digital world where a lot can be seen. Cleaning up your digital footprint is a rule of thumb whether you are prepping to sell or not. Customer reviews, website copy, social content, and voice will be researched by the prospective buyer. A common mistake many business owners make is not responding to or monitoring the negative comments. How your business will be perceived is based on accessible public data. Take the time to strengthen your online presence.
Summary
There’s a lot that goes into the exit process. So, whether you’re just getting started or 4 months into a sale, these three easy tips will help to speed up the process. Remember, it’s not always a sprint. A proper exit strategy takes time and a tremendous amount of consideration.
Bonus Tip! Choose and hire the right advisor (M&A)
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The BizNexus Roundup Podcast series
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.
SELL With Confidence - Exit strategies For Beginners
Selling your business is exciting. Stop worrying and start planning. With the proper preparation, you can seamlessly exit your business with confidence.
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:
Get your paperwork ready
Keep growing your business and increase revenue
Keep the sale confidential
Find a certified business intermediary
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
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
Recurring Revenue
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.
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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.
Why There's No Better Time Than Now to Buy a Business
So, if you’re thinking about buying a business, you’ve likely considered the risks and the rewards.
Buy a Business
There is no better time to acquire a business more than now.
So, if you’re thinking about buying a business, you’ve likely considered the risks and the rewards.
What you might have also questioned, however, is the timing. Before you walk away from closing a deal, let us outline why there’s no better time than now to buy a business. Here’s why:
Valuation
More businesses have sold in 2021 than in previous years. This is because recent market trends have shown the economy rebounding. More buyers are looking to sell, given the increased valuation. As a result, you have more room to negotiate a price you can "deal" with as a buyer. Private and public companies continue to grow in this market, increasing demand for profitable companies.
Business Availability
Additionally, business owners in 2020 took time to rethink their life aspirations. Many, chose to list their business for sale to retire and spend more time with their family. The ease of virtual business deals increased significantly over the past two years. Business listings that solely existed outside of the “www” decided to make their listings available online. Over 440 thousand businesses were started in 2021. There are several businesses for sale, but when it comes to investing in the right one, BizNexus has you covered.
Financial Support
Moreover, from personal banking, VCs, partnerships, angels, crowdfunding, grants, and more, there are many ways to obtain the funds needed to buy a business. Be careful, you want to choose the option that best fits your needs.
BizNexus helps you find a business for sale that’s right for you.
Whether you’re looking to buy a business to diversify your portfolio or a first-time business extraordinaire, BizNexus can help you get started!
Featured Posts on Buy a Business
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.
From the Trenches - Interview With California Business Broker Randy Hendershot
Q&A with business broker Randy Hendershot on the current state of the business acquisition & sale industry, and where things are headed.
Randy Hendershot
Current market perspective from the trenches of the business acquisition & sale industry
Sit-Down Interview With Business Broker Randy Hendershot
What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?
If the last quarter of 2020 is any indication of business for sale activity in 2021 the marketplace will be very active. Both individual and strategic buyers are looking for strong businesses to acquire.
Due to the Pandemic, we are seeing quite a few buyers looking to exit the corporate world and become their own boss.
What do you see as the most significant SELF-IMPOSED threats out there that could hurt the market for business acquisition & sale and small business activity in general?
Business owners need to continually update their monthly financial records keeping them current and in order for buyers to have a complete understanding of the business.
We also continue to see examples of high customer concentration issues creating challenges for buyers to move forward with a purchase.
What Makes Evolution’s Approach so Special?
What do you see as the top three things the government needs to do to support the main street business acquisition and sale opportunities for small business owners through the remainder of this year?
Allow small businesses to make their own decisions in creating an environment in their business that makes customers feel safe. If they do this customers will return. I have the utmost faith in entrepreneurs in that they will figure out how to be successful during the Pandemic.
Provide financial assistance options if need be for qualified businesses.
Stop changing the rules weekly and monthly on how businesses need to act during the Pandemic.
What do you see as the top three reasons to BUY a business in 2020?
Take control of your future by being your own boss and not relying on someone else.
Banks are eager and willing to lend in this environment with reasonable rates.
Automotive Service shops continue to perform well during these hard times here in Northern California.
What are some of the questions a business owner should ask when choosing an advisor to help buy a business or work on exit planning to help navigate through this challenging stretch?
Sacramento and Bay Area business owners should dig into the details on how a business broker will market their business to find buyers.
Other than the numbers, which are very important, how will a business broker "package a business" to help buyers understand the true story of the business?
3 Value-Wasting Mistakes to Avoid When Hiring a Professional Business Broker
How would you rate the current political environment related to small business growth, business acquisition & sale?
2/5
What are your thoughts on transaction terms for buyers & sellers in the current market?
We are seeing buyers seeking to have more of a percentage of seller carry in business for sale deals in the Northern California market place.
The main reason is the "unknown" as we navigate forward in the Pandemic. The challenge is showing buyers how the business is performing during these times compared to pre-Covid-19 times.
A month by month comparison for 2020 compared to 2019 is a must to help tell the story.
Why Should I Hire a Broker?
Thoughts on business valuations in today's market?
The key to valuations in the current Sacramento and Bay Area market place is how fast a business comes back to pre-Covid-19 times.
If a business is getting back to normal, valuations will most likely remain close to the pre-Pandemic times, yet the terms will most likely be more risk-averse for buyers.
Businesses still affected by the Pandemic may be hard to sell and if so will most likely see a drop in the sales price. If your business is performing better during the pandemic you may see some increase, but more likely have much more buyer interest which can help with both price and terms.
Marketing The Deal - Interview With Cleveland Business Broker Brad Ruth
Q&A with business broker Brad Ruth on marketing businesses for sale.
Brad Ruth
Current marketing the deal state of the business acquisition & sale industry
Sit-Down Interview With Business Broker Brad Ruth
Talk to me about the marketing process for marketing a business for sale… What are the top considerations a business broker needs to manage well?
I market my businesses on my company and personal LinkedIn profile, business Facebook page, company website, BizNexus, and BizBuySell. I have an email list of about 650 active buyers that have expressed interest in businesses I have sold in the past. As a broker, it is important that I respond quickly to interested buyers with a link to NDA and a phone call.
Where do you see sellers typically fail when marketing their own business for sale?
Sellers typically do not have a strong network and they should be concerned about keeping the sale confidential.
What are your favorite tools & platforms for marketing a business for sale?
How many buyers do you typically want to have bid on a deal you represent?
It just depends on the business, but usually 2 or 3.
Anything else? What’s special about your particular marketing strategy for sellers in this market?
I believe I am more active on social media and I have an extensive list of active buyers that I stay in touch with. This is definitely an area I can always improve.
From the Trenches - Interview With Florida Business Broker Charlie Meeks
Q&A with business broker Charlie Meeks on the current state of the business acquisition & sale industry, and where things are headed.
Charlie Meeks
Current market perspective from the trenches of the business acquisition & sale industry
Sit-Down Interview With Business Broker Charlie Meeks
What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?
I believe that there will be significant opportunities to assist our clients through the sale of their business and with the influx of new Florida residents there will be great opportunities to assist buyers as well.
What do you see as the most significant SELF-IMPOSED threats out there that could hurt the market for business acquisition & sale and small business activity in general?
If the trend continues whereby everyone continues to hunker down under the threat of COVID-19 we are in for a very long recovery.
That recovery may not even be realized is our political client doesn't correct itself as well. Business owners will not contemplate a structured exit for their business, but rather sell out of fear that they could lose everything.
So there are two issues to consider as we move forward that could threaten the survival of our total social system.
What do you see as the top three things the government needs to do to support the main street business acquisition and sale opportunities for small business owners through the remainder of this year?
Lift the restrictions on how businesses operate.
Allow businesses to function as they have in the past.
Keep our tax structure in place as it is.
Eliminate ObamaCare
Let businesses run themselves instead of allowing government to override what has worked for many years.
What do you see as the top three reasons to BUY a business in 2020?
The inventory is available and unfortunately, the prices are lower than they have been for many years. This is difficult as there are so many uncertainties at this time in our economic environment.
7 critical points every business owner must know berfore selling their business
What are some of the questions a business owner should ask when choosing an advisor to help buy a business or work on exit planning to help navigate through this challenging stretch?
When choosing a business broker to help you sell your business, be sure to ask the following questions:
What is your experience in selling a business like mine?
How will your market my business for sale?
How will you price my business so that it will sell quickly?
What do you know about my industry and where to find the likely buyers?
buying a business - where do you start
How would you rate the current political environment related to small business growth, business acquisition & sale?
2/5
What are your thoughts on transaction terms for buyers & sellers in the current market?
There needs to be flexibility on the parts of both buyers and sellers to get the deals done. There needs to be some seller financing.
Sellers need to provide a comfort level to the buyer regarding retention of the customer/client base.
Thoughts on business valuations in today's market?
Business valuations are very important in the determination of what a business may sell for.
Watch the whole interview with Florida Business Broker
Charlie Meeks.
CVBBA Webinar: Deal Origination in a Post-COVID World
In this webinar hosted by CVBBA President Neal Isaacs, Adam Ray (Founder and CEO of BizNexus) shares his thoughts on the state of deal origination in a post-COVID-world.
Deal Origination In A Post-COVID World
In this webinar hosted by CVBBA President Neal Isaacs, Adam Ray (Founder and CEO of BizNexus) shares his thoughts on the state of deal origination in a post-COVID world. He covers some key shifts in the deal origination space, including the reactions of central industry players like private equity & strategic acquirers as well as individual buyers and sellers, and changes in the way technology is used to get deals done. He also elaborates on the changing nature of the deal process itself and what business brokers should do to position themselves for success.
See the full interview here:
More content from the BizNexus Business Broker community below…
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
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From the Trenches - Interview With Alberta Business Broker Steve Fylypchuk
Q&A with business broker Steve Fylypchuk on the current state of the business acquisition & sale industry, and where things are headed.
Steve Fylypchuk
Current market perspective from the trenches of the business acquisition & sale industry
Sit-Down Interview With Business Broker Steve Fylypchuk
What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?
My brokerage is focused on the Main Street market. For a few months in early 2020, we saw a slow down of new businesses coming on the market in Calgary and Alberta. That period has past and activity has picked up. That pause in new businesses will cause a drop in closed deals over the next 3 - 12 months but it will be spread out.
What do you see as the most significant SELF-IMPOSED threats out there that could hurt the market for business acquisition & sale and small business activity in general?
The most significant self-imposed threat to our industry in the near future may be business owners that think a sale is impossible due to a dearth of buyers. There is no shortage of buyers for good businesses. Business owners should always talk to a professional and get an unbiased opinion on the saleability of their business.
What do you see as the top three things the government needs to do to support the main street business acquisition and sale opportunities for small business owners through the remainder of this year?
Governments need to make it easier to borrow money for the acquisition of a business and lower the tax burden on sellers. The more a business owner can keep after a sale, the more likely he/she will want to sell and for a reasonable price that makes sense for a buyer and a lender.
What are some of the questions a business owner should ask when choosing an advisor to help buy a business or work on exit planning to help navigate through this challenging stretch?
When choosing a business broker to help you sell your business Calgary, be sure to ask the following questions:
What kind of qualifications do you have?
Are you a member of the IBBA?
How many businesses did you sell last year?
Do you know what the market will pay for my business?
How will you keep the sale confidential while attracting buyers?
How would you rate the current political environment related to small business growth, business acquisitions & sales?
3/5
From the Trenches - Interview With Virginia Business Broker Hal Feder
Q&A with business broker Hal Feder on the current state of the business acquisition & sale industry, and where things are headed.
Hal Feder
Current market perspective from the trenches of the business acquisition & sale industry
Sit-Down Interview With Business Broker Hal Feder
What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?
I am seeing brisk activity and engagement from both buyers and sellers but the interest levels are very business category-dependent. By this I mean there seem to be 4 main groups of businesses:
Thrivers: businesses that are essential and doing better than ever within the COVID landscape.
Survivors: businesses that are experiencing an adverse short-term impact, but will come back to pre-COVID performance over time.
What I Worry: businesses that have not been very impacted by COVID either up or down.
Demise: these are businesses that will not be able to survive the impact of COVID and the related economic disruption surrounding the virus.
I expect the next six months into 2021 to continue along with the "cautiously optimistic" mindset. The buy-sell market seems to have digested the news and adverse impact of the virus, and despite, the rise of infections and deaths in certain geographies, I think business owners and prospects believe in the strength and resiliency of the underlying favorable economic fundamentals of the marketplace.
The promise of an effective vaccine and improving therapy outlook is also a positive which provides an air of hope that come 2021 we can return to a pre-COVID pace.
What do you see as the most significant SELF-IMPOSED threats out there that could hurt the market for business acquisition & sale and small business activity in general?
Attitude determines altitude ... business owners need to adapt, be flexible, and learn important lessons from the current market challenges.
Why waste a good crisis? Seriously, 2020 is shaping up to be a great litmus test of adaptability and survivability for all of us. What can we learn from these challenges now that will better position us in the future? I will give you an example .... after spending 35 years in the global auto business, I specialize in valuing, marketing, and selling franchise automotive dealerships.
Before COVID, many auto dealers were reluctant to get into digital selling in a meaningful way. The virus came and changed all that.
Auto dealers were "forced" to find new ways to sell products in a touch-less manner. The virus challenge enabled a sea-change of new methods, processes, and initiatives that will improve the way customers choose to buy vehicles. Event + Reaction = Outcome. The reaction to a difficult event has now led to a positive outcome for both dealers and their customers.
The greatest self-imposed threat is everything that lies between our two ears!
POSITIONING FOR A SUCCESSFUL EXIT
What do you see as the top three things the government needs to do to support the main street business acquisition and sale opportunities for small business owners through the remainder of this year?
Develop a fast and simple way for business owners to get their PPP loans forgiven. It worries us when I see a one-page form to obtain the loan and a ten-page form to get forgiveness for the loan.
Provide banks with guidelines to facilitate the sale/transfer of business when a PPP loan is still active and not yet forgiven. Businesses are bought and sold every day including during a global pandemic ... help us help the business owners!
Continue to monitor the market impacts of COVID and act swiftly with new programs if and when they are required. Small business is the lifeblood of the USA economy and can lead us back to full recovery if we continue to support them.
What do you see as the top three reasons to BUY a business in 2020?
There are vast numbers of great businesses for sale right now. The boomers are retiring in big numbers and demographics are driving excellent business inventories and opportunities.
Interest rates are near historical lows which greatly improves business affordability. This fact coupled with banks having available capital and an aggressive leading posture set up nicely for buyers.
In the auto sector, the shift to electrification, autonomous vehicles, and ride-sharing platforms is driving a lot of industry disruption. Where there is disruption, there is an opportunity. Right now it seems as if half the dealers are looking for the exit door, and the other half wants to consolidate operations and get bigger. Depending upon your goals, this is a great time to be a buyer and a seller if you are working in the franchise automotive industry!
What are some of the questions a business owner should ask when choosing an advisor to help buy a business or work on exit planning to help navigate through this challenging stretch?
The effective business broker has to wear a lot of hats ... they have to be a trusted advocate and place the client's interests upon all else, they have to be a financial wizard and understand the financials to develop a market-based pricing offer.
They have to be marketing experts and develop a campaign that gets the business in front of the right prospects. They need to be an effective merchandiser and develop a package of materials that conveys value in a compelling, relevant, and differentiated manner. They have to be the "deal quarterback" and call the plays they move the deal towards closing, including bringing in functional experts when needed. Above everything, they have to protect the confidentiality of the client, safeguard their interests, and help them derive the most return from their hard-earned investment in a swift, stress-free, and high integrity manner.
The question to the broker should be: How many hats can you wear?
How would you rate the current political environment related to small business growth, business acquisition & sale?
4/5
What are your thoughts on transaction terms for buyers & sellers in the current market?
Every deal, every buyer, and every seller is different. There is no such thing as an average deal. What I try to do is to pre-qualify all my listings such that there is a term sheet included in the prospectus package which spells out for the buyer an attractive, viable way to purchase the business via a bank loan.
I have found this practice makes a good listing, a great listing, and makes a great listing, a terrific listing!
Learn More On Deriving The Highest Return From The Sale of Your Dealership
Thoughts on business valuations in today's market?
Business valuations are a fundamental process step in the pricing of the business. Depending on the business category, the COVID situation can impact the valuation -- both positively or negatively.
I am finding that solid, established, and profitable businesses that possess strong brand equity, and motivated, talented teams are holding their multiples and business values in this environment.