A couple of weeks ago, we launched this new section of our blog, meant to let subscribers know what businesses our network is selling and what businesses we have buyers for. It will appear here at the top of each post. If interested in buying or selling, let us know. Feel free to forward the information to anyone you think might like to see it.
LOOKING FOR: Manufacturers of valves, specialty motors, etc.. Revenue: >$1 million; EBITDA: >$100,000. Location: Continental U.S. in**@Wo**********************.com
27 May 2024: Selling a Business: Derailing the Deal
Selling a business is a significant event – and generally one that happens only once in a lifetime. If you’re considering selling yours, you must be cognizant that selling involves a myriad of complex issues, considerations, and challenges.
Whether yours is a small family-owned “mom and pop” or Main Street enterprise or a lower-Middle Market firm, the process of selling a business requires careful planning, thorough evaluation, strategic decision-making and emotional preparedness.
From financial and legal complexities to emotional and practical considerations, here are some of the key issues involved in selling a business, all of which must be addressed going into the effort.
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Our next Thursday Special in The Brokers Roundtable℠ is scheduled for the 30th and will focus on what real estate agents don’t know about selling businesses. In the meantime, don’t miss Office Hours (“Ask Me Anything”), workshops, Live Streams, Thursday Specials and more.
REALTORS: The Announcements space has news you can use!
If you’re not yet a Member of The Brokers Roundtable℠, you can find out what other benefits Members enjoy – and join us – here.
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- Valuation: Determining the true value of a business is essential for setting a realistic asking price and attracting potential buyers. Valuation methods may vary depending on the industry, assets, revenue, and profitability of the business. If you’re selling a business, get a pro involved.
- Financial Records: Accurate, organize, coherent and transparent financial records are crucial for demonstrating the financial health and performance of the business to potential buyers. Any discrepancies or inconsistencies could raise red flags and deter prospective buyers.
- Market Conditions: External market factors, such as economic conditions, industry trends, and competitive landscape, can significantly impact the sale process and valuation of a business. It’s essential to assess market conditions and timing strategically.
- Legal and Regulatory Compliance: Ensuring compliance with relevant laws, regulations, and contractual obligations is imperative throughout the sale process. Issues such as permits, licenses, contracts, intellectual property rights, and employment agreements must be carefully reviewed and addressed.
- Confidentiality: Maintaining confidentiality during the sale process is critical to protect the business’s reputation, relationships, and competitive position. Confidentiality agreements and controlled disclosure of information are commonly used to safeguard sensitive business details.
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Courses! Courses! Courses!
Many of you have asked if our Flagship Course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, could be made available on a module-by-module basis. Instead of enrolling in the complete course, could you enroll only in the module(s) you wanted? We’re happy to report that this is now possible.
We’ve broken our Flagship into six separate modules (or module groups) to give you all the flexibility you need to learn only what you want to learn – and we’ve moved them all over to the new Brokers Academy in The Brokers Roundtable℠ . The Flagship is still available but the modules are now available individually.
You don’t need to be a Member of The Brokers Roundtable℠ to access any of these courses but if you are, you’ll receive a 20% discount on any course you enroll in. If you’re not yet a member of The Brokers Roundtable℠, you can learn more – and get access to all the talent and resources – here.
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- Negotiation: Negotiating the terms of the sale involves balancing the interests of both parties, including price, payment structure, liabilities, warranties, and representations. Effective negotiation skills and understanding of the buyer’s motivations are essential for reaching a mutually beneficial agreement.
- Due Diligence: Buyers typically conduct thorough due diligence to assess the risks, opportunities, and financial performance of the business before finalizing the purchase. When selling a business, sellers must be prepared to provide comprehensive documentation and address inquiries during this process.
- Tax Implications: The sale of a business can have significant tax implications, including capital gains taxes, depreciation recapture, and potential tax benefits or liabilities associated with the transaction structure. Consulting with tax advisors and financial experts is essential for optimizing tax outcomes.
- Employee Concerns: The sale of a business can create uncertainty and anxiety among employees regarding job security, benefits, and organizational changes. Effective communication and transition planning are essential for mitigating employee concerns and maintaining productivity.
- Transition Planning: Planning for a smooth transition of ownership and operations is crucial to ensure continuity and minimize disruptions to the business. Transition plans may include training, handover of key responsibilities, and integration with the buyer’s organization.
- Non-Compete Agreements: Sellers may be required to enter into non-compete agreements to prevent them from competing with the business or soliciting its customers and employees after the sale. Negotiating the scope and duration of non-compete provisions is essential to protect the buyer’s interests.
- Financing Options: Buyers may require financing to fund the purchase of the business, which can involve various options such as bank loans, seller financing, or venture capital. Understanding the available financing options and their implications is essential for structuring the deal.
- Contingencies: Including contingency clauses in the sales agreement can help protect both parties against unforeseen events or risks, such as failure to obtain regulatory approvals, financing issues, or material adverse changes in the business.
- Emotional Considerations: Selling a business can be an emotional process for owners who have invested significant time, effort, and passion into building their enterprise. Managing emotions and expectations throughout the sale process is crucial for making rational decisions and achieving a successful outcome.
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Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to accurately value and successfully sell businesses.
The Bottom Line
Selling a business involves navigating a complex landscape of financial, legal, operational, and emotional considerations. By addressing these issues proactively, seeking expert advice, and conducting thorough due diligence, sellers can maximize the value of their business and facilitate a smooth transition of ownership.
But addressing these issues must begin long before bringing the business to market. Consult with someone with experience – someone who knows what they’re doing.
I’d like to hear from you. What topics would you like me to cover? How can we tailor these posts to be more useful to you and your business. Let me know in the comments box, below, or email me at jo*@Wo*******************.com.
If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe
Searching For…
NOTE TO READERS: Our “Searching For…” feature has been moved to our online community, The Brokers Roundtable℠. It will appear there exclusively from now on.
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The author is the founder, in 2001, of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 600 in the world. He can be reached at jo*@Wo*******************.com