Every business has to be concerned about maintaining confidentiality.  In fact, it is common for business owners to become somewhat obsessed with confidentiality when they are getting ready to sell their business. It goes without saying that owners don’t want the word that they are selling to spread to the public, employees or most certainly their competitors.  Yet, there is something of a tug of war between the natural desire for confidentiality and the desire to sell a business for the highest amount possible.  At the end of the day, any business owner looking to sell his or her business will have to let prospective buyers “peek behind the curtain.”  Let’s explore some key points that any good confidentiality agreement should cover. At the top of your confidentiality list should be the type of negotiations.  This aspect of the confidentiality agreement is, in fact, quite important as it stipulates whether the negotiations are secret or open.  Importantly, this part of the … Read More »

Many sellers worry that employees might “hit the panic button” when they learn that a business is up for sale.  Yet, in a recent article from mergers and acquisitions specialist Barbara Taylor entitled, “Selling Your Business?  3 Reasons Why Your Employees Will Be Thrilled,” Taylor brings up some thought-provoking points on why employees might actually be glad to hear this news.  Let’s take a closer look at the three reasons that Taylor believes employees might actually be pretty excited by the prospect of a sale. Taylor is 100% correct in her assertion that employees may indeed get nervous when they hear that a business is up for sale.  She recounts her own experience selling a business in which she was concerned that her employees might “pack up their bags and leave once we (the owners) had permanently left the building.”  As it turns out, this wasn’t the case, as the employees did in fact stay on after the sale. Interestingly, Taylor points to something of a paradox.  While … Read More »

In Divestopedia’s article, “The Myth of Fair Business Valuation: What Professional Valuations Don’t Tell You,” author Chak Reddy is quick to point out that the “type of buyer and method of sale are two important (yet often overlooked) value determinants when finding a starting price for your business.” Reddy brings up some excellent points.  One notion in particular that every business owner should be aware of is that there is “NO fair value for illiquid assets.”  He points to the fact that between January 2007 and March 2008, the historic Bear Stearns went from a value of $20 billion dollars to just $238 million.  In a mere 14 months, Bear Stearns lost most of its value. Additionally, the article points to the fact that business owners often suffer enormously from “dramatic valuation compression.”  In Reddy’s view, this compression is the direct result of poor planning and a failure on the part of business owners to select the right advisory teams. Reddy believes that professional … Read More »

How should the purchase of a business be structured?  This is a point that you’ll want to address early in the sale process.  For most people, buying or selling a business is one of the most, if not the most, important business decision that they will ever make.  For this reason, it is vital not to wait until the last minute to structure your deal. Let’s turn our attention to the most significant questions that you need to answer when entering the sales process. 1. What is My Lowest Price? The first question you should ask yourself is, “What is the lowest price I’m willing to take?”  If an offer is made, the last thing you want is to be sitting around trying to decide if you can take a given offer at a given price.  You need to be ready to jump if the right offer is made. 2. What are the Tax Implications? Secondly, you’ll want to seriously consider the tax consequences of any sale.  Taxes are always a fact of life and you need to work with a professional, such as an accountant or … Read More »

Divestopedia published a rather insightful article, “Letting the Market Bridge the Valuation Gap.”  In this October 2018 article, Dave Kauppi dives in and explores how fair market value can be used as a way for business owners to “bridge the gap between the valuation they feel they deserve and that which they’re likely to receive.”  This, of course, increases the chances of a deal actually taking place.  Let’s turn our attention to some of the key points in Kauppi’s informative article. Understanding the Reality of Selling a Business One key point is that only a low percentage of businesses actually sell on their first attempt.  The article points out that a mere 10% of businesses that are for sale are actually sold three years later; this is a simply brutal fact.  Few facts, if any, help underscore the value of working with a business broker more than this point.  Selling a business can be difficult under even the best of circumstances.  The process is complex, and most sellers have … Read More »

In the proverbial “perfect world,” business owners would plan three to five years ahead to sell their companies.  But, as one industry expert has suggested, business owners very seldom plan to sell; rather, selling is “event driven.”  Partner disputes, divorce, burn-out, health, and new competition are examples of events that can force the sale of a business. Sellers often find, after they have decided to sell, that the unexpected happens and they are “blindsided” and caught off-guard.  Here are a few of the unexpected events that can occur. The Substantial Time Commitment Sellers find that the time necessary to comply with the requests of not only the intermediary, but also the potential buyers can take valuable time away from the actual running of the business.  The information necessary to compile the offering memorandum takes time to collect.  Many sellers are unaware of the amount of their time necessary to gather all the documents and information required for the offering … Read More »