By Loren Schmerler of Bottom Line Management, Inc.
Are you ready to sell your business? Thinking about starting new adventures? Certain changes you may make now can help you increase your business value. Below are top 10 tips on how to prepare your business for sale from expert, Bottom Line Management, Inc. founder, Loren Marc Schmerler, a Certified Professional Consultant and Accredited Professional Consultant.
Top Ten Must-dos When Selling a Business
- Know why you want to sell your business. Make sure it’s a good reason and not just to dump your problems into someone else’s lap.
- Give some thought as to what you will do with your time after your business sells. Finding yourself with nothing to do can be very demoralizing.
- Make certain that your taxes are current. This includes sales taxes, unemployment taxes, payroll taxes, state income taxes and federal income taxes.
- Document all your policies, procedures and controls. Not only will this help during the transition period when you train the buyer, but this will make your business more appealing to the corporate buyer who is accustomed to formal documentation.
- If possible, develop and train a strong “second in command” who can fill in for you when necessary. The buyer might be hands-on or hands-off, and having a strong assistant provides flexibility. Many business sales are lost when there is no depth of management.
- Review each employee’s strengths and weaknesses and show when they were last reviewed and when they next need to be reviewed by the new owner. Not reviewing an employee on time can cause anxiety and diminish loyalty.
- Make sure your financial statements and tax returns are “bullet proof.” You do not want the transaction to fall apart when the buyer or buyer’s CPA finds discrepancies.
- Prepare a business and marketing plan that will help a new owner understand where the opportunities for growth exist. This plan should include an Executive Summary that explains why the business was started, how it progressed to its current status and what a new owner should do to take it to the next level.
- Select an asking price that is based on reality – not fantasy. Be able to justify it based on a multiple of Owner’s Discretionary Cash Flow. Bad reasons include “it’s what I want”, “this is what I have in it”, “this is what I owe the banks” “I have put blood, sweat and tears over x years into the business.”
- Be willing to be flexible on price, terms or both. Deal structure can make or break a transaction. When each party to the transaction is willing to bend, there is a higher probability of success.
Leonard Jackson, a professor in the Cecil B. Day School of Hospitality Administration and the Enterprise & Innovation Institute at Georgia State University’s J. Mack Robinson College of Business, spoke to the Georgia Association of Business Brokers on Aug. 29.
Dr. Jackson’s areas of expertise include business development and venture creation, revenue management practices, asset management and real estate investment trusts performance, information assurance and security in the hospitality industry, corporate responsibility and green practices in the lodging industry, pricing of lodging goods and services hospitality investments and hospitality business financial performance.
The GABB is the state’s only association of professionals who work to facilitate the purchase and sale of businesses and franchises. The group includes business brokers as well as lenders, attorneys, business appraisers, insurance agents, environmental specialists and other professionals. GABB’s member business brokers work with businesses of all sizes to help them through all steps of selling their company: valuation, marketing, financing, and closing. Aspiring business owners also work with business brokers to purchase existing businesses at a fair price.
GABB meetings start at 10:30 a.m. at the Atlanta Realtors Center at 5784 Lake Forrest Dr. NW, Atlanta, GA 30328. The meeting will be preceded at 9:45 a.m. with a free networking session with coffee and pastries sponsored by a GABB Affiliate.
GABB meetings are free and open to the public, but we ask that you let us know you are coming by filling out this form.
Dr. Jackson’s academic background spans several business disciplines. In addition to his academic degrees, he also earned certificates in revenue management and hotel real estate investment and asset management from Cornell University and is certified by the Committee on National Security Systems (a United States intergovernmental organization that sets policy for the security of the U.S. security systems) as a certified risk analyst. Dr. Jackson also earned the following professional certifications: Certified Hospitality Accountant Executive, Certified Hospitality Revenue Manager, Certification in Hotel Industry Analytics, Certified Hospitality Technology Professional, and Certified Hospitality Educator. He also studied German at the Neue Sprach und Handelsschule, Basel, Switzerland.
Prior to entering academia, Dr. Jackson acquired extensive experience in the hospitality industry. He held senior managerial positions with leading hospitality enterprises including resorts and commercial hotels, a free-standing restaurant and a national airline. His corporate experience includes positions in the areas of financial controlling, accounting, auditing and lodging operations management. Dr. Jackson’s international experience includes living, working and studying in the Caribbean, North America, Central America and Europe. He also co-founded and managed his own venture.
Dr. Jackson earned a Ph.D. and M.S. from Oklahoma State University, a M.S.E. from the University of Florida, an MBA from the University of Guelph, an M.Acc. from Florida Atlantic University, a B.A./B.Comm from Ryerson University, and an A.A. from George Brown College. He also holds a graduate certificate in information assurance from Oklahoma State University.
Directions to the GABB meeting location at the Atlanta Realtors Center:
From the South: I-75 north to I-285 east or I-85 north to I-285 west. Exit at Roswell Road south and turn right onto Northwood Drive. Turn right onto Lake Forrest. The Atlanta REALTORS® Center on the left at the stop sign (intersecting Allen Road).
From the North: Take GA 400 south and change to I-285 west. Continue as above via Roswell Road.
From East or West: I-285 to Roswell Road. Continue as above.
There is no charge for parking.
For more information about the GABB, contact Diane Loupe at email@example.com or GABB President Mike Ramatowski at 770-634-0428.Read More
When it comes time to sell a business, not everything goes as planned. You may be one of the lucky ones and find that selling your business is a streamlined process with only a few unexpected occurrences. But most CEO’s looking to sell a business find they can expect the unexpected. Let’s take a closer look at some of the top surprises CEO’s experience during the sale process.
Unexpected Occurrence #1 – Surprisingly Low Bids
CEO’s looking to sell their businesses need to be ready for almost anything. One of the larger surprises that CEO’s face are surprisingly low bids. Don’t let low bids shock you.
Unexpected Occurrence #2 – A Huge Time Commitment
CEO’s have to make sure that everything from an offering memorandum to management presentation and suggestions to potential acquirers are ready to go. The offering memorandum is considered the cornerstone of the selling process and is typically at least 30 pages in length.
Most business intermediaries expect the potential acquirers to submit their initial price based on the information contained in the memorandum. Management presentations are also time consuming, but it is common to have these presentations ready before the final bids are submitted. Ideally it is best for the CEO to show the benefits involved in combining the acquirer and the seller as well as the future upside for selling the company.
Unexpected Occurrence #3 –The Need for Agreement from Other Stakeholders
You, as the CEO, are able to negotiate the transaction, but the sale isn’t authorized until certain shareholders have agreed and done so in writing. Until the Board of Directors, shareholders and financial institutions who may hold liens on key assets, have agreed to the deal, the deal simply isn’t finalized. Often this legal necessity turns out to be an issue that gets in the way of a successful deal.
Sellers can take their “eye off the ball” during the time-consuming process of selling a company, however, this can be a serious mistake. CEO’s must understand that potential acquirers will be examining monthly sales reports with great interest. If potential acquirers notice downward trends they may want to negotiate a lower price. No matter how time consuming the sales process may be, CEO’s have to maintain or even accelerate sales.
Ultimately, there can be a wide array of surprises awaiting a CEO who is looking to sell a business. Avoiding these kinds of issues is often, but not always, a matter of excellent preparation. However, it is vital that they keep in mind that even with the very best preparation and diligence, there can still be surprises when selling a business.Read More
The time you invest getting to know and understand your customers is time very well spent. The feedback you get is gold, pure gold. Yet, there are other reasons why this is a prudent move. Let’s take a look at some of the key reasons you should learn more about your customers and their specific needs.
Today’s world has become increasingly impersonal. Most of us spend a shocking amount of time looking at one type of digital screen or another. Personal interaction isn’t what it once was, and you can use that fact to help build your business.
The Ultimate Form of Customer Service
Good old fashioned human contact goes a long way when it comes to keeping customers happy, loyal and returning. The personal touch can go a long way towards building your business by improving customer service. Customer service has become, in general, a very impersonal experience for most people in the modern world.
In most businesses, the owner is more of an impersonal theoretic concept that an actual being; after all, how often do you meet the owners of the businesses that you frequent? As a business owner, when was the last time that you got on the phone or had lunch with a good customer? The truth is that customers and clients enjoy working directly with owners, and it makes them feel more connected with a business. An owner who is working directly with his or her customers or clients is engaged in a powerful form of customer service.
Investing time to build your business’s key relationships is a prudent step. When was the last time that you took a moment to contact your accountant, banker, legal adviser or other key people that support your business, such as key suppliers? The time you invest communicating with these key people and institutions is time well-spent especially should a problem ever arise. Since most communication is now done online, a handwritten thank you note or a quick phone call can go a long way towards maintaining and building relationships.
It is important to rise above all the background noise of life. One of the best ways of doing so is to invest the time to add a personal touch.
Owning and operating a business shouldn’t be a stealthy activity. Instead, you the business owner should be out front meeting with customers, suppliers and other key people. Running a business isn’t a “backroom” operation, so go out there and meet your customers and other key people! This is how you build and protect your business.Read More
Two businesses could report the same numeric value for earnings but that doesn’t always tell the whole story. As it turns out, there is far more to earnings than may initially meet the eye. While two businesses might have a similar sale price, that certainly doesn’t mean that they are of equal value.
In order to truly understand the value of a business, we must dig deeper and look at the three key factors of earnings. In this article, we’ll explore each of these three key earning factors and explore quality of earnings, sustainability of earnings after acquisition and what is involved in the verification of information.
Key Factor # 1 – Quality of Earnings
Determining the quality of earnings is essential. In determining the quality of earnings, you’ll want to figure out if earnings are, in fact, padded. Padded earnings come in the form of a large amount of “add backs” and one-time events. These factors can greatly change earnings. For example, a one-time event, such as a real estate sale, can completely alter figures, producing earnings that are simply not accurate and fail to represent the actual earning potential of the company.
Another important factor to consider is that it is not unusual for all kinds of companies to have some level of non-recurring expenses on an annual basis. These expenses can range from the expenditure for a new roof to the write-down of inventory to a lawsuit. It is your job to stay on guard against a business appraiser that restructures earnings without any allowances for extraordinary items.
Key Factor # 2 – Sustainability of Earnings After the Acquisition
Buyers are rightfully concerned about whether or not the business they are considering is at the apex of its business cycle or if the company will continue to grow at the previous rate. Just as professional sports teams must carefully weigh the signing of expensive free-agents, attempting to determine if an athlete is past his or her prime, the same holds true for those looking to buy a new business.
Key Factor # 3 – Verification of Information
Buyers can carefully weigh quality and earnings and the sustainability of earnings after acquisition and still run into serious problems. A failure to verify information can spell disaster. In short, buyers must verify that all information is accurate, timely and as unbiased as is reasonably possible. There are many questions that must be asked and answered in this regard, such as has the company allowed for possible product returns or noncollectable receivables and has the seller been honest. The last thing any buyer wants is to discover skeletons hiding in the closet only when it is too late.
By addressing these three key factors buyers can dramatically reduce their chances of being unpleasantly surprised. On paper, two businesses with very similar values may look essentially the same. However, by digging deeper and exercising caution, it is possible to reach very different conclusions as to the value of the businesses in question.Read More