A “Pig in a Poke"

Once a buyer has negotiated a deal and secured the necessary financing, he or she is ready for the due diligence phase of the sale. The serious buyer will have retained an accounting firm to verify inventory, accounts receivable and payables; and retained a law firm to deal with the legalities of the sale. What’s left for the buyer to do is to make sure that there are no “skeletons in the closet,” so he or she is not buying the proverbial “pig in a poke.” The four main areas of concern are: business' finances, management, buyer's finances, and marketing. Buyers are usually at a disadvantage as they may not know the real reason the business is for sale. This is especially true for buyers purchasing a business in an industry they are not familiar with. The seller, because of his or her experience in a specific industry, has probably developed a “sixth sense” of when the business has peaked or is “heading south.” The buyer has to perform the due diligence necessary to smoke out the … [Read more...]

Creating Value in Privately Held Companies

“As shocking as it may sound, I believe that most owners of middle market private companies do not really know the value of their company and what it takes to create greater value in their company … Oh sure, the owner tracks sales and earnings on a regular basis, but there is much more to creating company value than just sales and earnings”      Russ Robb, Editor, M&A Today Creating value in the privately held company makes sense whether the owner is considering selling the business, plans on continuing to operate the business, or hopes to have the company remain in the family.  (It is interesting to note that, of the businesses held within the family, only about 30 percent survive the second generation, 11 percent survive the third generation and only 3 percent survive the fourth generation and beyond). Building value in a company should focus on the following six components: the industry the management products or services customers competitors comparative … [Read more...]

Questions to Consider for the Serious Buyer

A serious buyer should have the answers to the following questions: Why are you considering the purchase of a business at this time? What is your time frame to find a suitable business? Are you open-minded about different opportunities, or are you looking for a specific business? Have you set aside an amount of capital that you are willing to invest? Do you really want to be in business for yourself? Are you currently employed or unemployed? Are you the decision maker, or are there others involved? The real key to being a serious buyer, however, is whether the individual can make that “leap of faith” so necessary to the purchase of a business. No matter how much due diligence a buyer performs, no matter how many advisors there are to advise the buyer, at some point, the buyer has to make a leap of faith to purchase the business. There are no “sure things” and there are no guarantees. If a buyer is not comfortable being in business, he or she should not even … [Read more...]

Buying or Selling a Business: The External View

There is the oft-told story about Ray Kroc, the founder of McDonalds. Before he approached the McDonald brothers at their California hamburger restaurant, he spent quite a few days sitting in his car watching the business. Only when he was convinced that the business and the concept worked, did he make an offer that the brothers could not refuse. The rest, as they say, is history. The point, however, for both buyer and seller, is that it is important for both to sit across the proverbial street and watch the business. Buyers will get a lot of important information. For example, the buyer will learn about the customer base. How many customers does the business serve? How often? When are customers served? What is the make-up of the customer base? What are the busy days and times? The owner, as well, can sometimes gain new insights on his or her business by taking a look at the business from the perspective of a potential seller, by taking an “across the street look.” Both owners … [Read more...]

Article on Sale of Boomer-Owned Businesses

Baby Boomers are Getting Ready to Sell in Mass It has been talked about often over the last few years; baby boomers are getting ready to exit their businesses on an enormous scale. As they near retirement age, (10,000 people per day turn 65 in the U.S.) a wave of boomers who own businesses will soon be heading for the exits. With some experts estimating up to a $10 trillion wealth transfer via the sale of approximately 800,000 boomer businesses over the next 10 to 20 years, professionals in virtually every industry that serves boomers are taking notice. Are you ready? Read More... Click here to read the full article. … [Read more...]

What Would Your Business Sell For?

There is the old anecdote about the immigrant who opened his own business in the United States. Like many small business owners, he had his own bookkeeping system. He kept his accounts payable in a cigar box on the left side of his cash register, his daily receipts – cash and credit card receipts – in the cash register, and his invoices and paid bills in a cigar box on the right side of his cash register. … [Read more...]

Burnout: An Ever-Present Threat

Burnout is an often-used reason for an owner selling his or her business. Potential buyers may have trouble accepting this as a valid reason for sale. However, burnout is a valid reason for selling one’s business. … [Read more...]

How Long Does It Take to Sell a Business?

Recent studies indicate that it now takes, on average, about eight to ten months to sell a small business. This figure seems to increase yearly. Why does it take so long to sell a business? … [Read more...]

Succession Planning – It’s Never Too Early. A Message For Today’s Business Owners

There are more than 15 million family businesses in the United States. History tells us that less than one-third of family owned companies will make it to a second generation. One reason for the disheartening statistic may be that business owners tend to forget about succession planning. … [Read more...]

When to Create an Exit Strategy

There is the old saying that the time to develop an exit strategy is the day you open for business. Sounds good, but it’s not very realistic. Further, it also isn’t very optimistic. On the day you open for business, thoughts about how you get out of it aren’t pleasant, or helpful, thoughts. … [Read more...]