5 Things to Consider When Transferring Your Business to Family Members

Letting go of a business isn't a process that one should jump into lightly, and that fact holds true even when it comes to your loved ones. Let's take a look at five of the most important factors to consider when selling or transferring a business to a family member. #1 The All-Important Buy-Sell Agreement One of the single most valuable tools available when it comes to selling your business is a buy-sell agreement. Simply stated, this essential document puts everything in writing. In situations such as a family owned business, people may be tempted to skip a contract, but that doesn't mean they should. When transferring your business, you should have an expert created document in place that outlines the following: The business valuation Who is to be kept on the payroll and the amount he or she will receive The amount being paid What level of involvement you will have in the business once the transfer has taken place #2 The Benefits of Gifting Consider the option of gifting. … [Read more...]

How to Ensure Confidentiality During your Sale

Selling a business is a process that depends upon professionalism and confidentiality. Selecting a business broker who understands the critical role that confidentiality plays is simply a must. Unfortunately, countless sellers have in fact dealt with a situation where a breach in confidentiality has caused a deal to fall apart. A failure to maintain confidentiality can lead to a slew of negative reactions from a range of parties. Everyone from supplies and vendors to creditors could react in a way that could harm your business, for example, vendors could change their terms and this could in turn negatively impact your cash flow. A breach of confidentiality could also lead to negative reactions amongst both employees and customers. The reason is that employees may begin to worry about the security of their jobs and may also become nervous about the change in management. These fears could prompt employees to find a new job and leave you with a position that needs to be filled. … [Read more...]

Can you Understand Your Buyer’s Key Motivations?

Negotiations can be tricky affairs. One wrong move can undo a tremendous amount of work. In negotiations, it is best to take a moment and think about where the other party is coming from. What are their needs and how best can you meet them? Understanding your buyer's motivation increases the chances of a successful negotiation. What Appeals to Most Buyers? When it comes to selling a business, you likely will not know your buyer personally. This means that you will not know what they value most, how exacting their standards will be, and how easy or challenging they will be during negotiations. That's why it is imperative to err on the side of caution and act in such a way that would appeal to most buyers. Ensuring that your business is in strong financial health means that your business will be appealing to both a corporate executive as well as an individual buyer with a leadership/managerial background. Keep in mind that individuals who buy businesses will want a strong ROI, and … [Read more...]

Seller Financing

The majority of business sales include some form of seller financing. Typically, seller financing is when the seller provides a loan to cover part of the purchase price. The rest of the purchase price is covered by the down payment or often other financing sources are used as well. Summed up another way, the seller is essentially acting as a bank for the buyer. When sellers offer financing, it often also helps them achieve a higher final sale price. Sellers who are not open to seller financing will likely limit their possibilities. Performing Due Diligence When a seller opts for seller financing, it is necessary to do much of the work that a bank would usually perform, for example, checking a potential buyer's credit report, financial statements and other key financial information. After all, if you opt to offer seller financing, then you'll want to ensure that your buyer will not default. Usually contracts allow for the seller to take back a business in 30 to 60 days if … [Read more...]

The Power of Recurring Revenue

Buyers and sellers alike love recurring revenue. But what is it exactly that makes it so attractive? Recurring revenue is generally viewed as a very good factor as it indicates positive cash flow, the potential for growth, business success and business stability. Let's take a closer look at how it can benefit you. Show You're in Demand Businesses, including IT companies, are valued higher if they can show recurring revenue, such as monthly subscriptions, SaaS subscriptions, or a transaction that consistently occurs. If your business is centered on a subscription based platform and you have high subscription levels, then you can expect keen interest from prospective buyers. If you want to show a prospective buyer that your business is a good bet, then recurring revenue is a great place to start. Recurring revenue indicates that you have ongoing consumers and that means ongoing revenue. But recurring revenue indicates something else as well, namely, it indicates that your business … [Read more...]

What is EBITDA and Why is it Relevant to You?

If you've heard the term EBITDA thrown around and not truly understood what it means, now is the time to take a closer look, as it can be used to determine the value of your business. That stated, there are some issues that one has to keep in mind while using this revenue calculation. Here is a closer look at the EBITDA and how best to proceed in using it. EBITDA is an acronym for earnings before interest, taxes, depreciation and amortization. It can be used to compare the financial strength of two different companies. That stated, many people don't feel that EBITDA should be given the importance that is frequently attributed to it. Divided Opinion on EBITDA If there is disagreement on EBITDA being able to determine the value of a business, then why is it used so often? This calculation's somewhat ubiquitous nature is due, in part, to the fact that EBITDA takes a very complicated subject, determining and comparing the value of businesses, and distills it down to an easy to … [Read more...]

Five Reasons Business Brokers Improve Closing Rates

It has long been a well-known fact that business brokers can help improve closing rates. In this article, we will take a closer look at the five top reasons why having a business broker on your side can make all the difference in the world. #1 – They Reach the Most Buyers What seller isn't looking to reach more buyers? When more candidates are reviewing your business, the odds of selling for your desired price only go up. The simple fact is that business brokers reach the most buyers. In fact, they usually have a long list of prospective buyers waiting. #2 – Business Brokers Know How to Navigate Negotiation Hurdles As the old saying states, “there is no replacement for experience,” and this definitely holds true for business brokers. Business brokers know what it takes to circumvent negotiation hurdles. Their years of hands on experience means they can spot problems long before they occur, and this dramatically helps them to successfully boost closing rates. #3 – They Know How … [Read more...]

5 Tips for Buyers of International Businesses

The decision to buy an international business is no doubt quite serious. There are numerous factors that must be taken into consideration when deciding whether or not an international business purchase is the right move. Let's take a closer look. Tip #1 – Relocating Vs. Hiring a Manager Buying an international business can also mean a substantial life change. Before jumping into the process, it is critical that you know whether you will be relocating or hiring a manager to run your newly acquired business. Obviously, owning a business is a substantial responsibility and you'll want to ensure that you know exactly what is going on with your new acquisition. Sometimes that means actually being there. The bottom line is that you will either have to relocate or hire a manager. Tip #2 – Regulations Understanding regulations, taxes and customs are another must for buyers of international businesses. A failure to factor in these elements can literally undo one's business or at the very … [Read more...]

How to Keep Employees Engaged During an Ownership Transition

Ensuring that your employees stay on course during your ownership transition should be one of your key areas of focus. There are many key steps that you should take during this delicate time. Let's explore the best tips for keeping your employees engaged throughout the entire ownership transition process. Step 1 – Establish and Implement a Training Program Early On If you are selling your business, then be certain that you train replacements early on in the process. Failure to do so can result in significant disruptions. Additionally, if you are buying a business it is of paramount importance that you are 100% confident that there are competent people staying on board after the sale. Step 2 – Address Employee Concerns No matter what your employees say or how they act, you must assume that they are worried about the future. After all, if you were them wouldn't you be concerned at the prospect of a sale? The best way to address these concerns is to meet with employees in small … [Read more...]

Is It Possible to Sell to a Business Competitor?

A common question in the realm of buying and selling businesses is, “Is it possible to sell to a business competitor?” The short answer is yes, it is quite possible and rather common. That stated, selling to a business competitor is different than selling to a buyer who is completely new to the industry. The two types of buyers should not be treated the same way, as there are various differing variables. A Competitor Can Be a Great Buyer One reason is that a competitor may indeed be the right party to buy your business, is that they usually have an excellent understanding of how your business and your industry works. They may also enter the negotiation process already understanding the value of your business, and this can serve to speed up the process. Always Proceed with Caution Competitors, however, must be approached carefully. Unfortunately, there have been many cases where competitors acted as though they wanted to buy in order to acquire access to inside information. That's why … [Read more...]