The Importance of Quality Negotiations
When it comes to finalizing deals, successful negotiations are at the heart of the matter. It only makes sense to think about how to improve your communication skills and to choose a Business Broker or M&A Advisor who is well versed in the art of negotiation.
Cultivating Win-Win Situations
Achieving a win-win for all parties is essential, and there are many components involved. It’s essential to understand what the other party is seeking and to help them also feel as though they succeeded in the deal.
One tried and tested strategy is to lead people through a series of “yeses” by starting with topics and points that can be agreed upon and then working forward. In the beginning of this negotiating strategy, the yeses may come from getting others to agree on what may be seen as trivial things. However, this step works to create the right climate for moving forward so that yeses can be obtained on more important issues.
Maintaining the Flow of Information
The flow of information is a critical aspect of the negotiation process. For this reason, it’s best for negotiations between buyers and sellers to go through their brokerage professionals, rather than conducted directly.
The simple fact is that otherwise there are too many variables and opportunities for something to go wrong, ranging from egos getting in the way to miscommunications. When you choose a qualified Business Broker or M&A Advisor, you’ll be able to place trust in that person to achieve optimal outcomes.
Understand One Another
It is important to keep the other side talking and show that you understand their perspective and the issues they may have. It is in this way that you can encourage cooperation and diffuse resistance in advance.
Ultimately, great negotiations stem from proper strategy, preparation, proper education, enhanced communication, and understanding the other party’s needs. When you and your Business Broker or M&A Advisor foster good communications with the other party, it will enhance the chances of achieving the kind of cooperation you are seeking. This in turn, dramatically increases the chances of achieving win-win outcomes.
Copyright: Business Brokerage Press, Inc.
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It’s a Business Seller’s Market: IBBA and M&A Source Market Pulse Survey: Second Quarter 2021
Across the spectrum of sizes and price ranges of businesses, sellers now have an advantage or are at least in a better position to sell their business, according to IBBA and M&A Source Market Pulse Survey for Q2 . Created in 2012, the IBBA and M&A Source Market Pulse Survey was created to provide business owners and their advisors with a clear understanding of ever-changing market conditions.
Why has the market has shifted towards being a seller’s market? Private equity groups are now looking for ways to grow their money. Acquiring an existing business has become an increasingly attractive option to buyers due to the current labor pool conditions.
“The current M&A market is incredibly active, with North American deal volume hitting near-record peaks. Buyers, constrained by a relatively low number of sellers who went to market during the COVID-19 pandemic, continue to search for expansion and growth opportunities. It’s a seller-friendly market and that confidence shows in this quarter’s Market Pulse Survey. Seller-market sentiment is back to levels reported before the pandemic,” according to the report.
Buyers are now looking at existing companies as a way to bypass attracting talent. Instead, they can secure that talent via acquiring a new business. In short, many buyers are looking to buy versus organically build to meet their talent needs.
Another reason that now is a good time for sellers is that many buyers are looking to leave corporate America. This situation has likely been accelerated by the pandemic and people seeking to control their own destiny. The increase in global uncertainty has made the idea of becoming a business owner increasingly attractive. Experienced business brokers can help owners evaluate their businesses, determine an asking price and develop a marketing plan.
“Recognizing the strong momentum in the market, most brokers and M&A advisors are reporting optimism for the rest of 2021. There was a much more positive outlook for rising deal activity for the quarter ahead. Likewise, advisors also expect lifts in valuation,” the report said.
Through this survey, it is possible to gain clarity on businesses being sold in Main Street (values $0-$2MM) and the lower middle market (values $2MM -$50MM). Scott Bushkie served as the originator of the Market Pulse Report with IBBA and M&A Source and has continued to play a key role since the report’s inception.
The shift in climate from 2020 to 2021 underscores the value of the IBBA and M&A Source Market Pulse Survey. Through this revealing survey, it is possible for business owners and their advisors to gain a clearer understanding of market conditions and what to expect.
Copyright: Business Brokerage Press, Inc.
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Important Points for Selling to a Family Member
Eventually every business owner will have to turn over control of their business to someone else. Among the many options are selling the business to a prospective buyer, selling to a competitor, or turning your business over to a family member. To ensure the smoothest transition, a business owner should start thinking about these options years before they end up in a situation where they actually have to sell.
Working with a Business Broker or M&A Advisor is one way to determine what sales options are optimal for you based on your specific situation. Let’s explore some of the variables you’ll want to consider when you decide to transfer your business to a family member such as a son, a daughter, a nephew, a niece or another relative.
Tax Advantages
Transferring your business to a family member has some significant advantages. Topping the list of advantages is that the transfer can be considered a gift, which will reduce the real estate taxes you owe. Depending upon how the agreement is written, you also may be able to maintain some control over the business. For many business owners, this factor can be a big advantage.
Seller Financing
Seller financing is a common practice when it comes to buying and selling businesses in general. This type of financing is even more common where transfers to relatives are concerned.
Seller financing opens up the versatile option of implementing a private annuity. A private annuity can spread payments out across a long period of time. This could be a win-win situation for both you and your relative. You would receive a long-term stream of income as a result of ongoing payments. Additionally, this decision may very well make ownership more financially realistic for your relative.
Legal Agreements
If you sell your business to a relative, you still need a formal buy-sell agreement. Even when you are dealing with your most trusted family members, legal agreements must be firmly in place. A buy-sell agreement protects everyone involved.
This contract clearly outlines all aspects of the arrangement. Your buy-sell agreement should include such key information as the value of the business, amount being paid, which employees will be retained, the current business owner’s level of future involvement, and other critical details about future business operations.
Working with Professionals
Ultimately, there are a range of potentially powerful benefits associated with transferring a business to a relative. While you can expect the IRS to closely evaluate the sale, this should not dissuade you from considering this option. Business Brokers and M&A Advisors are experts at buying and selling businesses, and they understand the specifics of transferring businesses to relatives. Working with professionals early in the selling process can help you gain tremendous insight into the best way to proceed.
Copyright: Business Brokerage Press, Inc.
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How to Circumvent Three Legal Mistakes Sellers Make
After decades of hard work, selling your business can be an exciting and rewarding time. Yet, many business owners overlook some important legal matters associated with sales. In this article, we’ll explore three of the most significant legal mistakes sellers make when selling a business.
1. Use an NDA
The first critical mistake that business owners make is skipping a non-disclosure agreement. Before disclosing to any buyers that a business is on the market, a business owner should always make sure that a non-disclosure agreement is in place.
NDAs restrict who does and does not know your business is for sale. If competitors or employees learn confidential information about the business for sale, it could hurt the sale and possibly lower the selling price of the business.
2. Hire an Attorney
It may be tempting to skip working with an attorney, but you shouldn’t. If you are selling a business or anything of significant value, you need to work with a lawyer experienced in the area of sales.
Business owners become accustomed to doing a great many things themselves and learning on the job, a personality trait that has served them well over the years. When selling your business, however, there is zero room for “on the job training” or relying on your own instincts. One of the best ways that you as a business owner can protect your future is to work with a lawyer when selling your business. In fact, a Business Broker or M&A Advisor can be a vital resource for helping you to find a proven lawyer with a background in the buying and selling of businesses.
3. Get a Letter of Intent
A third significant mistake that business owners frequently make when selling their business is that they fail to get a letter of intent. Much like an NDA, a letter of intent is a key legal document in the process of selling a business. All too often business owners will skip requesting a letter of intent out of fear of slowing down the process and potentially disrupting a deal.
The letter of intent is designed to clearly spell out expectations while simultaneously protecting your interests as a business owner. When buyers sign a letter of intent, it indicates that they are taking the process seriously. This will protect you from wasting your time.
Selling a business is a process with its own unique challenges. Whether dealing with human psychology, organizing your books, thinking about what information prospective buyers are likely to want to see, or addressing a wide array of legal issues, selling a business is a complex and time-consuming process. Working closely with a Business Broker or M&A Advisor is one of the fastest ways that you can increase your chances of a successful sale.
Copyright: Business Brokerage Press, Inc.
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Put Your Strengths First When Selling Your Business
You understand the finer points and potential of your business better than anyone; however, that doesn’t mean that prospective buyers will instantly see your business’s various strengths. When you are looking to sell your business, you have two very important jobs. The first is to get your business ready to be sold. A second essential job is to showcase your business’s greatest strengths. At the end of the day, you must be the one to articulate why your business is worth buying. This effort, of course, will be supported by your Business Broker or M&A Advisor.
Understand Who Will Buy Your Business
Most people have never sold a business before and don’t fully understand what is involved in positioning one’s business for sale. The bottom line is that not every business is a good fit for every buyer. Finding the right buyer for your business will greatly expedite the process. This is yet another reason why it is critically important to work with experienced professionals. Business Brokers and M&A Advisors not only know what buyers are looking for, but also what sellers need to do to get their business ready to sell.
How to Navigate Roadblocks
Selling a business, especially if you attempt to do so without professional help, is a very time-consuming and often draining process. Successfully running a business requires attention to detail and focus. Unfortunately, these can both suffer when owners attempt to put on yet another hat and handle the sale of their business.
While you are attempting to sell your business, it is critically important that you maintain normal operations. The last thing you want is to weaken the finances of your business while you are waiting to find a buyer. Remember that it takes months, a year, or even longer to find a buyer for the typical business. Don’t let your business suffer damage in the interim.
Think Like a Buyer
Preparing your business to be sold isn’t as simple as making a few cosmetic changes and calling it day. Instead, you’ll want to think like a buyer.
What would you want to see if you were buying a business? You would want to know a great deal about that business and how it operates, who its key employees are, how likely those key employees are to stay, who the main customers and suppliers are, and the strength of the business location and competitors. Of course, you would also want a very detailed picture of the business’s financial situation.
In short, you would want to clearly understand what the business does and what it’s really worth, how financially healthy it has been in the past, what the business’ prospects are moving forward and, in general, how much effort the business will take to operate. These are exactly the kind of key facts that any serious buyer will want to know. It’s only to be expected that a buyer would expect to learn this information before making a decision.
At the end of the day, working with a Business Broker or M&A Advisor is one of the easiest ways to streamline the sales process. Thanks to years of experience, they already understand the pitfalls that you may experience as well as what is needed to position your business so that you can find the right buyer quickly and receive the best price possible.
Copyright: Business Brokerage Press, Inc.
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