If You Are Truly Ready to Sell, Ask Yourself These Questions

By Murphy Business & Financial Corporation LLC

 

  • If I sell the business now, will I get enough money to satisfy my needs?
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  • Will I really improve my personal financial position, or should I wait a little bit longer?
  • Define priorities: Do I want an all-cash deal, so that I can wash my hands and be done with the business? (This will generally result in a lower price the buyer will be willing to pay.)
  • Am I willing to finance part of the sales price? (This usually results in a higher price being offered by the buyer.)
  • Am I looking for a buyer to continue my business traditions and carry on in a similar style?
  • Am I looking to protect my employees and ensure they are retained by the new buyer?
  • Have I taken all of the steps necessary to make my business as attractive as possible to a new buyer?
  • What will I do after the sale? Do I want to maintain a relationship with the business (perhaps working for the new owner on a part-time basis or as a consultant)?
  • Have I thought about how much time I will give a new buyer for a transition and training period?
  • Have I done enough to ensure that the business is not dependent on me being there, so that the new owners can take over and be successful?
  • Am I willing to sign a non-compete agreement with the buyer?
  • Is this the right time to sell, and can I do it without experiencing seller’s remorse?

IS YOUR BUSINESS READY TO BE SOLD?

 
By Murphy Business Broker – Shelly Stansfield
Two recent discussions are worth considering when thinking of about selling your business. One gentleman wants to sell his business to a couple employees in a couple of years and the other wants to sell in 10 years.

TWO YEAR GOAL: A moderately successful business owner and I discussed having a business valuation completed on his business so it could be listed for sale in two years. In the meantime, his sales person discovered a new niche market and the business has exploded this summer. He is now working on expansion into new markets and will sell shortly afterward the expansion to his employees. We are working as a team with his CPA-Tax advisor, banker, and Business Attorney to develop the proper structure for both seller and buyers, and are putting the documents together for a Business Appraisal.

TEN YEAR GOAL: A business owner called to discuss the process required to sell his business in 10 years. Being well-prepared is smart. The problem is that this owner was not only the operation of the business, but the sole employee. He makes plenty to live on, cover his expenses, and would be able to provide another person a reasonable living. The reluctance is to hire an employee or two and accept the responsibility for educating them in his field of expertise. When asked if he enjoys vacation time, he immediately affirmed that he takes plenty of time off, but that he lives with the phone in his pocket 24/7. His equipment and assets are minimal, so it is his expertise and experienced service that is of value. The name of his company is his own. You get the picture.

How do you currently operate your business? Are you concerned with short-term goals or are you planning the future? Consider the above, your industry, and your succession plans. Which is salable at a premium? We at Murphy Business & Financial are here to help.

Murphy Business Broker Explains the Process of Selling Your Business Step by Step

By Business Broker Russell Cohen | Murphy Business & Financial Corporation LLC

 

Anyone selling a business should be considering the elements of the sales process. Business brokers are invaluable in each of these considerations:

Think It Through – Know What You Want
Do you want to retire completely or continue to have a hand or profit in the business? Do you want to move or stay where you live? Surprisingly, some people are not clear on these basic aims. Business brokers can help you refine these goals and the ways to achieve them.

Know What You Are Offering and Why You Are Selling
Is the business growing or declining? Is the competition getting tougher? Are the facilities and equipment in good working order or are they approaching the end of their useful commercial lives. Does the business need an infusion of capital to be profitable? Are most of your customers there just because of you (goodwill)? Are you tired of the rat race or are you ready to embrace a new chapter in life? Professional business brokers know how to express each of these circumstances to your greatest benefit.

Prepare Your Records – Orderly and Understandable
If you are trying to sell your business, you have a duty to provide honest information to your potential buyer. You make the job of your business brokers (and the sale of your business) easier if your financials, net worth statements, contracts, employment procedures, etc. are organized in such a way that the reviewer can discern clear information without having to conduct overly consuming research. Your professional may choose to reorganize your information (truthfully, of course) to your greatest benefit. Easily discernible records vastly assist in this process.

The Two Big Questions – Price and Marketing
The biggest concerns of the business seller will always be, “How much can I get?” and “How and to whom should I try to sell?” Murphy Business Brokers are the consummate experts in these areas. They work for you. Their job is to maximize what you get out of the deal and to let you know, straight up, if you have unreasonable expectations. They know where to look for customers, how to package your deal and how to advertise. Will public knowledge of a pending sale hurt the business and the chance for a sale?

Professional business brokers study and are experienced in all of these situations. It’s what they do. They optimize your benefit in terms of both asset return and expedience of sale.

What Matters Most to Business Buyers?

By Murphy Business & Financial Corporation LLC

An established business has much to offer a prospective buyer. A proven product or service exists, as well as a customer base. Typically, there are experienced employees and managers in place (and many choose to remain with the company after the sale is complete). There is a cash flow from the first day the buyer takes over the business. The company is already accustomed to paying its debt service in addition to a reasonable salary for the owner. The following are some of the things that will make your business stand out and be attractive to buyers:

  • Proven verifiable books and records, tax returns
  • Reasonable Price
  • Leverage and terms, They want to use bank financing, owner financing and as little of their own money as possible
  • Solid, verifiable cash flow
  • Furniture Fixtures and Equipment properly valued and in good condition
  • Positive appearance of facility, good reputation
  • Favorable lease and lease options
  • Training, transition period with the seller
  • Covenant not to compete, non-solicitation agreement
  • Solid Reason Why the owner wants to sell
  • Experienced Employees who will stay on
  • No last minute surprises

Small Business Seller’s Wish List

By Murphy Business & Financial Corporation LLC

Today we are offering a wish list for a typical seller of a small business. Entrepreneurs who are selling their companies, as well as those looking to purchase, generally agree on what would make the process more seamless overall.

What the seller wants:

  • A qualified buyer – This not only means someone with the financial resources to meet a down payment and secure financing, it also describes someone with experience owning or managing a business — perhaps with some knowledge of the industry itself. A qualified buyer more than likely has established ties to the geographical area and if married or in a domestic relationship, has the support of his partner.
  • An appropriate offer – A seller appreciates an offer that is solid, reasonable and timely. Sellers expect contingencies to be a part of the offer, but also anticipate these to be realistic. One of the most common contingencies is a lease transfer with equitable terms for the buyer.
  • A practical due diligence phase – Sellers are pleased to answer questions and share pertinent data during the due diligence phase; however, buyers should take care not to pose queries or make statements that may be perceived as an insult to the seller. Common sense should dictate how the buyer should best introduce discussions on past decisions the seller made or how the business is run on a daily basis. Buyers should prepare their due diligence requests in writing and as soon as possible after the offer has been accepted.
  • A smooth closing – The closing should be a time of celebration for both parties, not a time for second-guessing, bickering or hesitation. Hiring a closing attorney experienced in the business transfer process helps immensely. By the time everyone is seated at the closing table, all questions should have been answered, all pre-closing paperwork completed and the buyer and seller should be confident this is a win-win situation for everyone involved.
  • An efficient transition – Most sellers, particularly those who created the business from the ground up, truly want to see the business continue to grow and prosper. Sellers want their buyers to be successful, and most will work hard to ensure the buyer is completely comfortable with all facets of the business during the training period that begins after the closing. This transition phase often involves introducing the new owner to suppliers and customers and showing the buyer everything related to running the business, from how to operate office equipment to the best way to manage employees’ schedules.

As a business broker, I have most enjoyed working with buyers and sellers who are forthright, reasonable and agreeable. Having realistic expectations on both sides and keeping a professional and positive attitude throughout the business transfer process goes a long way toward reaching a successful closing.

Small Business Buyer’s Wish List

By Murphy Business & Financial Corporation LLC

 

We recently presented a wish list for a typical seller of a small business. Now, it’s the buyer’s turn.

Entrepreneurs – whether they are buyers or sellers – generally agree on several factors that make the business transfer process more seamless overall.

A buyer wants:

  • A solid business – Although that phrase may be somewhat subjective, buyers are searching for stable companies with a track record of success. The savvy buyer approaches the situation just as a lender would: requiring a history of financial data that is able to be verified. Filed tax returns are the preferred record for conducting due diligence. It is also important that a business be established. Most lenders require a minimum of three consecutive years of financial history and prefer that the company was under the same ownership (the current seller) for these three years.
  • Reasonable seller expectations – This comes into play at the first moment a buyer begins looking at a business for sale. Does the seller receive an adequate income from his company? Are his revenues increasing or, in this economy, at least staying consistent from year to year? Is his business priced appropriately? Will the seller consider offering some financing?
  • Disclosure during the due diligence phase – Buyers hope sellers will share the items requested in a timely fashion and be able and available to answer questions or present further information where necessary. Courtesy and common sense should prevail during this delicate phase of the business transfer process.
  • A smooth closing – Just as the seller wishes, the buyer also wants the closing to be a positive experience for both parties involved. It is a time of celebration, not a venue for uncertainty, debate or hesitation. Closing attorneys experienced in the business transfer process assist immensely with a seamless closing. By the time everyone is seated at the closing table, all questions should have been answered, all pre-closing paperwork completed and the buyer and seller should be confident this is a win-win situation for everyone involved.
  • A seller who stays involved (for a while) – While a typical buyer probably has some new ideas for the business, almost all buyers want training and initial support from the seller. Buyers want to be successful and retain employees and customers wherever possible and practical. Buyers look for sellers who will spend a week or two showing them the ropes, and buyers are especially appreciative if a seller remains available at a later date should an unexpected question arise. Buyers generally do not want sellers to be involved for a long period of time, unless they have previously presented the seller with an offer of employment. A buyer wants to feel comfortable and prepared as he assumes control of his new enterprise.

As I mentioned in Murphy’s previous blog, my experiences working with buyers and sellers who are forthright, reasonable and agreeable have been the most enjoyable and produced the most successful closings. When buyers and sellers have realistic expectations — initially and throughout the business transfer process — and maintain a professional and positive attitude, they typically find the transactions to be pleasant and seamless.

Develop a Negotiation Strategy when Selling a Business

By Murphy Business & Financial Corporation LLC

When you begin to negotiate the sale of the business, you will be much better off if you have developed a personal plan and have prioritized which items in the deal are the most important to you and which items you can compromise on and still accomplish your objectives.

  • Prioritize which items are most important in the sale. In every business sale there is negotiation where the buyer and seller have some give and take
  • Understand which things are important
  • Understand which things are not as important and where you can compromise and still get the desired results
  • Make sure to analyze what the post-sale looks like. Will you have enough money, what you will do with your time?

You Have Goodwill…Because??

By Dick Halterman
Murphy Business – Shenandoah Valley, Virginia

From time to time, I am in the unfortunate position of telling some 50-year old business owner that they “just don’t have any goodwill”. “But we have been around forever, or our name is like a household word in the community, or we literally have thousands of customers” might be the seller’s response. I am constantly amazed at how little knowledge most business owners have of what their business is actually worth. They will follow their checking account, their investments, and the value of their house but won’t think anything of whether their business value is increasing from year to year. So, what then does this have to do with goodwill? To understand whether you have goodwill, you must first know the value of the business, in total. With that number at hand, it’s simple math. Business Value minus replacement value of the assets it takes to generate the given cash flow equals goodwill, or Intangible value (in other words a value you just can’t put your fingers on or touch). This intangible can also be called “blue sky” or “intellectual property”.

It really doesn’t matter who has been there the longest or whose name is the most recognized, the proof is always in the numbers. Many times, the business with the 50-year history or a recognized name “is” the one that will generate the biggest goodwill. Why? Because those businesses have found a way to beat the competition in a myriad of ways. Better systems in place, better marketing, more productive employees, trade secrets and the list can go on and on. You have goodwill…because…you have found a way to squeeze more profits out of every sales dollar, end of sentence.

How To Get Your Business Ready To Sell

by Murphy Business & Financial Corporation LLC
(edited by Murphy Business Broker Ron Buck)

Here are some of the obvious, and not so obvious, steps you can take as you get ready to sell your business:

  • Clean the premises
  • Organize the books and records
  • Deal with any customer/vendor/employee issues prior to the sale
  • Try to increase revenues without sacrificing margin (increasing revenue is important to the buyer as they analyze trends)
  • Diversify the customer base (customer concentration is a risky issue for buyers and their lenders)
  • De-emphasize owner’s personal role in the business by not being the only decision maker
  • Get other employees involved in customer and vendor contact
  • Develop a management team or a right hand person
  • Build infrastructure to further reduce dependence on the owner
  • Reduce the # of family members working in the business, especially if they will be leaving
  • Reduce the amount of owner’s perks that are paid for by the business
  • Don’t live out of the business checkbook
  • Sell or remove unnecessary or personal assets
  • Adjust inventory to a normal level
  • Other smaller items include: update website, renew leases, eliminate unproductive employees, collect past due accounts receivable

The Importance of Intangible Assets When Selling a Business – Business For Sale

By Business Broker Russell Cohen | Murphy Business & Financial Corporation LLC

You’ve spent a lifetime building up your business. Whether you have always planned to move on or are selling your business due to the continuing pressures exerted by the many recent economic downturns, you will be looking to achieve the greatest profit attainable for your efforts.

That is why it is so important that the sale be handled correctly. The goodwill that you have established over the years with customers, employees, suppliers, creditors and neighbors is something that is not easy to put a price on.

The owner of a business is usually one of the last persons that should be considered to handle the sale of it. For the often rough and tumble negotiations likely to ensue in the business marketplace require the utmost objectivity. Because you are probably too close to it to make an effective, unbiased presentation. You are likely to be too emotionally involved in ‘your baby’ to maintain the needed distance during the many details of the sales process.

There is just too much riding on the outcome of the sale to allow yourself to fall into a do it yourself mentality. While such approaches have their place, not when it comes to your livelihood. Hiring the best is the best way to achieve your desired results. That is why a record number of businesses have made the smart choice of securing the services of local business brokers to handle all of the many details that make up selling their business. Business brokers like Murphy Business Brokers have already amassed all of the specialized know-how through years of local experience.

You have more important things to do than to waste time reinventing the wheel. Business Brokers like Murphy Brokers, one of the acknowledged leaders in the field, know the ropes and will steer you clear of the many potential pitfalls.

Business Brokers consistently get the best prices when selling business because that is their forte. Put their skills to work for you and experience the difference that a successful selling price brings.

Murphy Business brokers are experts at communicating with authority the intangible benefits that are obtained when a buyer invests in an existing concern rather than building from the ground up.