ENTREPRENEURSHIP THROUGH ACQUISITION
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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
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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.
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’s financing with the business seller to alleviate the burden of paying full price for the business upfront. 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.
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:
Helpful Business Sites:
How to Buy a Business | Four Vital 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.
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:
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.
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.
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.