The Benefits of Growth Through Acquisition

CEO Advisor, Inc. works with CEOs and business owners to accelerate growth – both organically and through strategic, opportunistic acquisitions. As a mergers and acquisitions (M&A) advisor with decades of experience, we guide you through every step of the acquisition process. The benefits of growth through acquisition are many, and should be part of every company’s growth plan.

For small and mid-market companies like yours, finding the right acquisition target takes focus, commitment and expertise. Finding great acquisition targets also requires a disciplined approach, experience, time and finesse.

The benefits of making opportunistic acquisitions include:

  • Increasing Revenue and accelerating growth, while acquiring badly needed technology, products and services.
  • Acquiring needed management team members and industry expertise to enable future growth.
  • Adding to your programming/development team with specialized expertise.
  • Adding Revenue and Gross Margin, while minimally increasing Overhead Expenses to further increase Net Profits.
  • Increasing the value of your business by acquiring a business at a 1X or 2X Revenue multiple and combining it with your 3X or 4X Revenue multiple business making the acquisition accretive immediately.
  • Borrowing the money for the acquisition from a bank at 6% interest and gaining a 20% return annually.
  • Acquiring a company that has specific strengths that your company lacks, such as a company with a strong national sales team or an international sales channel.

Implementing an Acquisition Process
Strategic acquisitions take a real commitment, but are doable by most any company given the right team in place, including a corporate/transaction attorney, tax attorney/CPA and a M&A advisor to initiate and manage the entire transaction process.

Most small and mid-market companies that pursue acquisitions on their own miss real opportunities due to a lack of a process and experience. Many companies tend to overpay so a defined, disciplined process with a seasoned M&A advisor is extremely important and will save your company a substantial amount of time and money.

Here are the most important steps to develop and implement with your M&A advisor leading the initiative:

  • Define your acquisition strategy considering the points below
  • Define your investment criteria and budget
  • Build the acquisition target list
  • Begin the outreach to targeted companies
  • Gather information on interested parties
  • Secure conference calls and meetings to better understand the business and the management team
  • Gain additional information to compose a Letter of Intent
  • Negotiate the Letter of Intent
  • Perform Due Diligence to gain detailed information about the target company
  • Renegotiate certain aspects of the LOI, if needed
  • Draft and negotiate legal contracts
  • Close
  • Post-acquisition integration

Focus on the Strategy
If you make the decision to focus on highly strategic, opportunistic acquisitions, you can greatly accelerate your growth, profits and value of your company, so focusing on the acquisition strategy is a key aspect of the process. Here are some key issues to consider:

  • What is the maximum size company you are comfortable acquiring? 
  • What is the minimum size company you might acquire? Buy too small and you’ll incur a high relative cost to getting a transaction done.
  • What is the range of EBITDA you will target?
  • What are the Revenue and EBITDA multiples you would expect to pay in your industry?
  • Do you have a minimum Net Profit requirement for the target company?
  • Do you have a minimum Gross Profit Margin requirement for the target company?
  • What types of synergies do you expect from acquiring a company in this industry segment, product/service, or geographic region?
  • What technology, product or service will be the primary focus of your acquisition?
  • What geographic expansion do you want to achieve from the acquisition?
  • What technologies are compatible or incompatible as part of your acquisition search? 
  • What management positions, if any, do you seek out from an acquisition?
  • Are you interested in eliminating a competitor, while acquiring customers for growth?
  • What is the acquisition team (internally and outside advisors) that will be involved in the acquisition?
  • What are the sources of funds to acquire companies with? Banking relationships? Internal funds? Private Equity Firm relationship?

Negotiations in acquiring a company are extremely different from any other negotiations given the seller has typically built the business from the ground up and it may be a once in a life-time event. With the right M&A advisor, you will feel completely comfortable pursing strategic, opportunistic acquisitions given the expertise, experience and proven process to achieve your goals.

CEO Advisor, Inc. has the expertise and experience to guide you through this exciting process to grow your business to the next level. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc., for a free initial business consultation at (949) 629-2520, by mobile phone at (714) 697-3370, by email at MHartsell@CEOAdvisor.com or visit us today at www.CEOAdvisor.com for more information.

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Successful Acquisitions for Growth

Acquisitions are a key way to accelerate growth. Completing a strategic or small tuck-in acquisition is very doable for companies of all sizes with the right advisory team in place. Completing an acquisition and ensuring its success long-term is the magic formula that requires commitment and a dedicated team of advisors.

The key is having the right team of advisors consisting of an M&A/business advisor who will initiate and lead the team and work closely with the CEO, a seasoned corporate/transaction attorney and a CPA or tax advisor. The M&A/business advisor is the liaison between the CEO, attorney and tax advisor. The M&A advisor also does all of the planning, creates a list of target companies, contacts these companies, requests initial information, creates and negotiates the Letter of Intent, coordinates the entire Due Diligence process and assists the CEO through the legal documents with the corporate/transaction attorney by negotiating business aspects of the acquisition.

An acquisition creates value through at least one of the following five strategies:

  1. Accelerates access to additional products and services
  2. Improves the performance of the acquired company to build value in the acquiring company
  3. Eliminates competition
  4. Acquires expertise or technologies more quickly or at a lower cost than if they were built in-house
  5. Creates the opportunity for scalability

Five Acquisition Strategies

The goal of an acquisition should be very clear.

1. Accelerate and Expand Products and Services

Small companies with innovative products have challenges reaching the potential market for their products and services. IBM pursued a similar strategy in its software business in the past decade when it acquired 43 companies. By pushing the products of these companies through IBM’s global sales force, IBM estimated that it was able to accelerate the acquired companies’ revenues as much as 40% in the first two years after each acquisition.

2. Improve the Target Company’s Performance 

Improving the performance of the target company is one of the most common strategies to create sales and value. When you acquire a company to improve sales, marketing and its products, as well as, reduce costs and expenses to improve Gross Margin and Net Profit, you substantially increase shareholder value. Keep in mind that it is easier to improve the performance of a company with low Gross Margins and low Net Profits than that of a high Gross Margin and high Net Profit company so acquiring a nominal performing company may be a good strategy.

3. Eliminate Competition and Excess Capacity from the Industry 

As industries mature they typically develop extensive competition and excess capacity. By eliminating competition you also gain market share, increase sales and even expand your products and services. Additionally, you eliminate downward pricing pressure and create the opportunity to increase your Gross Margins company wide.

4. Acquiring Expertise or Technologies Faster or at a Lower Cost 

Technology companies acquire other companies that have expertise or technologies they need to enhance their own products and services. They can acquire the technology more quickly than developing it themselves, avoid royalty payments on patented technologies, and keep the technology away from competitors. They can also gain valuable expertise in a cohesive team with far more efficiencies than hiring individuals.

5. Acquiring a Business for Industry-specific Scalability 

Creating economies of scale are often a key source of value creation in mergers and acquisitions. Economies of scale can be important in creating value with purchasing power or other areas that can benefit from larger volumes. This can substantially increase Gross Margins, Net Profits and value of the business.

By focusing on the types of acquisition strategies that have created value for acquirers in the past, CEOs can utilize acquisitions to create substantial growth and value for their shareholders.

Negotiations in M&A deals are extremely different from any other negotiations of the day-to-day business world. With the right M&A advisor, you will feel completely comfortable pursuing strategic, opportunistic acquisitions. CEO Advisor, Inc. has the expertise and experience to help you through this process of acquiring companies. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

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10 Critical Issues When Selling Your Company

As I have told our clients for over fifteen years, you never know when a buyer may contact you to make an offer to purchase your company. Below are 10 critical issues to help you become better prepared to realize the greatest wealth in your lifetime by selling your company.

At any time a company may contact you to meet the next time they are in your city. They’re vague about the reason why, but it’s a credible CEO who runs a large company, so you agree to meet. Two weeks later he or she is in your office discussing your thoughts on selling your company. This may be a once in a lifetime opportunity so it pays to be ready at all times.

Would you be ready?

Here are 10 issues to help you be better prepared to sell your company:

Get a Signed Confidentiality and Non-solicitation Agreement in Place First.
All information needs to remain confidential! And you don’t want your prospective buyer poaching customers or team members. A well drafted non-disclosure agreement (NDA) with a clear provision for non-solicitation of your staff and customers is a key protection you must have before you engage in early conversations of selling your business.

Have a Team of Advisors Ready.
Your M&A advisory team should be made up of a corporate/transaction attorney, CPA/tax advisor and a seasoned M&A advisor that will manage the entire process. CEO Advisor, Inc. acts as an M&A advisor for both buy-side and sell-side transactions and will manage and coordinate the entire sale process.  In order to maximize your sale price, run a proactive sale process to multiple prospective buyers.

Maintain Preparedness so You Are Ready for the Opportunity to Sell.
Run your company in a manner that promotes preparedness. Preparation by your M&A advisor is critical and will optimize your sale price and your ability to get a transaction completed. “Normalizing” your financials is a key part of this process. The more you have to “explain away” some part of your financials, the more your prospective buyer will start to question their accuracy. Your M&A advisor will help you with all of your preparation.

Not All Buyers are Created Equally.
Sometimes the best offer isn’t the highest dollar offer. Factor in the certainty that they will in fact close – this is key. This means gauging your prospective buyer’s commitment level, capacity to close, and track record with you and with other business dealings. Don’t be shy about qualifying your prospective buyers carefully. If you’re working with a seasoned M&A advisor or investment banker, this is something they will do for you.

Focus on Running the Business and Let Your Advisors Manage the Sale Process.
Selling your business is a strange dynamic. Emotionally, you need to remain focused and calm. Keep running the business through the closing, because if sales decline, and the trend line drops down, it could literally cost you millions of dollars of enterprise value. This is the primary reason why you want a seasoned M&A Advisor like CEO Advisor, Inc. representing you and running the sale process leaving you to focus on running your company to a great degree.

A Transaction is a Marathon Not a Sprint.
A sale process takes 6 to 9 months to occur. It can take longer depending on your level of preparation. In summary, you need to accomplish A) Preparation, B) Secure an LOI, C) Complete Due Diligence D) Complete the legal documents and E) Close. This takes a tremendous amount of experience and expertise and a seasoned team of advisors to accomplish.

Minimize Client Concentration Risk with One or Two Very Large Clients.
If you have too much concentration in a single customer, a prospective buyer may pause or ding your valuation. By focusing on mid-size and large prospects, many of your customers will tend to be larger thus avoiding client concentration risk to a buyer.

Set up a Confidential Team for the Due Diligence Process.
Working with an M&A advisor or investment banker will be critical to get the Due Diligence done. They will set up an online data room that will house the many documents on all aspects of your business. This will require your help with a high level of focus, and may require an additional team member in confidence.

Be Very Disciplined About When You Tell Your Team.
Your advisory team will carry the bulk of the load through the sale process, but you may need to solicit help from one or two members of your management team in complete confidence. Most buyers will require employment contracts with incentives to keep your key staff onboard well past the sale date. Only tell your whole company after the deal is closed – this is critical.

It’s Normal to Emotionally Detach From the Business as you Go Through the Sale Process.
Make sure you correct for that tendency to detach emotionally by keeping your focus on running the business. Again, the sale process is a marathon and not a sprint, and deal fatigue will set in. But stay focused, listen to your advisors and keep your eye on the prize.

These are 10 issues to help you more effectively navigate the sale of your company. Whether the sale occurs in the coming 6 months or 3 years, you’re now more prepared with 10 common threads to help persevere the sale process efficiently and effectively.

Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

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Act Now to Maximize Profits in 2020

Most CEOs perform annual planning to grow their business and increase sales and profits, as well as, the value of their business. However, there are certain methods companies must use for implementing a growth strategy.

The method a company uses to expand its business is largely contingent upon its financial situation, the competition and specific goals of the CEO.

Market Penetration
One growth strategy in business is Market Penetration. A small to mid-size business uses a Market Penetration strategy when it decides to market existing products and services within the same market. The only way to grow using existing products and markets is to increase market share. Market share is the percent of unit and dollar sales a company holds within a certain market vs. all other competitors. This requires a strong sales strategy and effective marketing.

Market Expansion
A Market Expansion growth strategy involves selling current products and services in new markets either in new industries or new geographic markets – or both. There are several reasons why companies consider a Market Expansion strategy. First, the competition may be such that there is little room for growth within the current market. If a business does not find new markets for its products, it cannot grow or increase sales or profits – in fact, profits will decline over time. A business may also use a Market Expansion strategy if it finds new uses for its product and services.

Product Expansion
A business may also expand its product line or add new features to increase its sales and profits. When companies employ a Product Expansion strategy they continue selling within the existing market. A Product Expansion growth strategy often works well when technology starts to change. A business may also be forced to add new products as older ones become obsolete.

Diversification
Growth strategies in business also include Diversification, where a company will sell new products to new markets. This type of strategy can be risky and companies will need to plan carefully when using a Diversification growth strategy. Market research is essential because a company will need to determine if customers in the new market will potentially like, need and purchase the new products.

Acquisition
The above strategies focus on organic growth, and most CEOs and business owners focus solely on this strategy. Growth strategies in business can also include Mergers and Acquisitions. With Acquisitions, a company purchases another company, or purchases the assets of a company without taking on the liabilities to expand and grow. A business may also use this type of strategy to expand its product line and enter new markets, as well as, acquire needed talent and deeper management.

An Acquisition growth strategy can be risky, but not as risky as a Diversification strategy. One reason is that the products and market are already established. A company must know exactly what it wants to achieve when using an Acquisition strategy, mainly because of the investment required to implement it.

CEO Advisor, Inc. specializes in advising and implementing growth strategies to grow small and mid-size businesses to the next level. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. today at (949) 629-2950 or email MHartsell@CEOAdvisor.com for a free initial consultation.

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Securing Valued Advisors for an Optimal Exit

Great advisors will take your business to the next level. Advisors increase sales and profits, generate tremendous value in your business and position you and your company for the optimal exit and big payday.

A strong advisor will generate a tremendous return on your investment. CEO Advisor, Inc. has worked with clients generating a 100X return by increasing our client’s investment in sales, profits and increased business value.

Engaging The Right Advisors. CEO Advisor, Inc. is a business advisory, growth capital and mergers and acquisitions advisory firm that works exclusively with CEOs, presidents and business owners. Our focus and expertise is a critical aspect of growing our clients’ sales, profits and value of their businesses for an optimal exit. Your corporate attorney, CPA or tax advisor, as well as, your insurance and banking advisors are also extremely important to your success. Your business/M&A advisor such as Mark Hartsell, MBA, President of CEO Advisor, Inc. will be the one to guide your through the entire preparation and sale process and will coordinate all of your other advisors to ensure maximum results.

Clear Goals. Your engagement with a business/M&A advisor should include a set of clearly defined, written goals, time-frame for achieving the initial goals, hours to be committed monthly by the advisor for a monthly retainer, along with regularly scheduled meetings and conference calls in a clearly stated engagement agreement, with an incentive bonus for achieving a successful exit.

Run on all Cylinders. No matter how ambitious or talented a CEO, president or business owner may be, it is extremely hard to cover all aspects of business in today’s complex environment, especially the complexity and amount of work of selling your company. This is why all CEOs and business owners need sound, seasoned, trusted advice and help with executing their plan to maximize sales, profits and value for the sale of the company. Otherwise, your business may be running on only half of its cylinders at half speed.

Time is Precious. Many CEOs, presidents and business owners create a Board of Advisors and then have no idea what to do with them or do not follow-up on gaining value from them. Similarly, retired industry veterans agree to advise businesses without any clear sense of responsibility, continuity or hands-on advice with substantial work performed. Group coaching can be a major waste of time and money as 90% of the time is spent on someone else’s problems from other industries.

Hands-on Work and Expertise. An Advisor should be much more than a mentor or coach. A trusted business/M&A advisor is a special relationship between a CEO or business owner and a third party expert with a specific value or expertise working on a written set of goals and deliverables on a weekly basis.

Your advisors must roll up their sleeves and invest the needed time to serve the business properly, and the business must invest time and money into the relationship in order to ultimately achieve these goals. Otherwise, your goals may be out of reach for many months or years costing the business tremendously in lost sales, lost opportunities, lost profits and diminished value or the inability to sell the company at all.

CEO Advisor, Inc. works with well defined, written goals conducting weekly meetings with agendas based on these goals and needs of the CEO, while performing a tremendous amount of work that is instrumental in achieving the CEO’s goals.

Communicate. Ask for the help you need and then maintain open communications with your advisors and expect your advisors to be direct and to the point with you. This is important for several reasons and will serve you well as you build your business. The reason you signed up an advisor is because they are successful, connected, and knowledgeable people. If you want their help, simply ask for it.

Pay for Expertise. If you’re going to gain the expertise you need, you should be willing to pay. Actually, you should be happy to pay. The right advisor can positively affect your business, your profits and your life tremendously. If you can generate a 25X, 50X or 100X return on your investment, you should be prepared and excited to pay a reasonable fee to gain the help you need.

Initiating the Sale Process. When you have discussed a plan to sell the company with your business/M&A advisor, and other advisors and you are committed to initiating the sale, your business/M&A advisor will perform the needed preparation work (1 – 3 months), including creating a target list of potential acquirers; contact the potential acquirers (1+ months); solicit and negotiate offers (1 month); perform the required Due Diligence (1 – 1.5 months) and assist with the business issues in the legal documents (1 month) through to the closing of the transaction.

With a trusted business advisor/M&A advisor, you should see a clear and methodical path to substantial rewards within three months. All information should be documented and the plan and goals should be pursued consistently toward success and completion. The right team of advisors will increase sales and profits, protect your assets, build your business, increase your value substantially and enable you to tremendously enhance your ability to sell your company for an optimal value for an ultimate sale and the largest payday of your life.

We address your specific needs with hands-on action, expertise and seasoned advice. Call Mark Hartsell, MBA, President of CEO Advisor, Inc. today at (949) 629-2520, text Mark at (714) 697-3370 or email MHartsell@CEOAdvisor.com to schedule a free initial consultation.

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Growth Through Acquisition vs. Organic Business Growth

Growth through acquisition is a very viable option for small and medium-size businesses. You can accelerate your growth dramatically, acquire expertise, strengthen management, gain a stellar sales team, acquire technology and new products and services, as well as, secure customers and revenue.

Every CEO/business owner and business is unique so you want to determine if an acquisition is the right growth strategy for your company. Or are you better off growing in more organic ways by expanding geographically, or developing new products or focusing on aggressive sales and marketing?

Let’s look into the pros and cons of growth through acquisition versus organic business growth so you’re in a better position to make that decision. CEO Advisor, Inc. focuses on growing businesses to the next level, and are experts in assisting CEOs with both organic growth and growth by acquisitions.

The Pros of Organic Growth

Growing your business organically offers the most control over how that growth occurs, but certainly takes longer. By staying focused on continually improving your sales and marketing, improving your products or services, and identifying new or more profitable markets, you’re going to find that growth is more predictable and controllable over the long term.

The Cons of Organic Growth

The biggest potential negative aspect of relying on strictly organic growth is that it’s a slow process. It may take years for the market to evolve and for your business to be able to afford expansion into a new geographic area. Developing new products and building substantial sales for these products can take many years. Growth is paramount to profits and building value in your business so compressing time can be critical.

The Pros of Growth From Strategic Acquisitions

Unlike steady organic growth, growth through an acquisition or merger is generally much faster and can yield a number of other instant benefits, if done right, that can help make that rapid growth sustainable.

Growth through acquisitions is a faster, less risky method of growing your business and achieving economies of scale. The competitive advantages include acquiring and eliminating competition, immediate market penetration, gaining key people and expertise, securing new products and technology, gaining access to international markets, as well as, gaining valued management team members, customers and added sales.

The Cons of Growth Through Acquisitions

Growth through acquisitions is rapid and can yield fast results, but you will need the expertise and experience to execute on this strategy properly. CEO Advisor, Inc. are experts in the entire acquisition process. The planning and execution required in the time immediately following an acquisition or merger can present a number of management challenges that could hinder that rapid growth or plant the seeds of future failure.

Each merger or acquisition requires organizing the workforce and/or management team so the post-acquisition integration process is very important and CEO Advisor, Inc. can assist you through the process.

The question of whether to make an acquisition or expand organically must be answered individually by each CEO or business owner based on their own unique circumstances, but a business advisor/M&A will be extremely helpful in advising you every step of the way.

Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

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Planning for Success in 2020

CEO Advisor, Inc. has expertise in helping CEOs, presidents and business owners focus on priorities to grow their businesses to the next level.

We are hands-on advisors that roll up our sleeves and perform desired work with the expertise you need.  First, we ask CEOs critical questions about planning and managing their business such as:

Does your company have a strategic plan? 

Does your company have a defined sales strategy to maximize sales? 

A marketing plan and budget to optimize leads and fuel sales? 

A clear path to increased Net Profits? 

An exit strategy that enables you to maximize the sale of your company at the right time for you?

Every business needs to plan. Unfortunately, there is a myth that associates business planning with start-ups. As a CEO or owner of a small or mid-size business, can you afford not to plan? Do you prioritize, focus and manage your time, staff and growth proactively?

Benefits of Planning

1. Proactively Guide Your Growth

Your business will grow or not depending on many factors, including overall economic trends, size of the industry, growth of the industry, specific market needs, your products/services, sales management effectiveness, proper management of labor, hard work and other elements. Businesses that plan do it to guide and accelerate their growth so they move proactively towards defined objectives, higher profits and higher value when deciding to sell rather than just reacting to business events, which is very risky and costly.

2. Manage Priorities

Goal setting involves focusing your time where it will generate the most sales and profit. Manage the company by prioritizing your most important goals according to your long-term objectives and plan.

3. Assign Responsibilities

A plan gives your company efficiency, accountability and develops organizational responsibilities. Clear accountability and responsibilities drive businesses forward, increase sales and profits, and build value for an optimal exit.

4. Track Progress

With a written plan, you can track your progress towards your defined goals and measure results. Without a plan, how can you tell whether or not you are moving in the right direction or measuring success? In addition to your financials, create a management dashboard to consolidate your reporting to optimize your decision-making and success.

5. Manage Your Cash Needs

Most businesses don’t plan well for their cash needs, yet this is critical to all companies. Financial forecasting is not only strategic to your business, but critical to setting goals for Sales, Gross Profits and Net Profits which are at the core of every business.

Business Planning is Critical to All Sizes of Companies

Strategy:

Strategy involves taking a hard look at your products and services, your core competencies and management team, your target markets, sales strategy, geographic sales coverage, your customers, pricing, operations, sales and marketing. Bring in the needed expertise to ensure your strategy yields success and optimizes sales, profits and the value of your business.

Define Responsibilities, Goals, Tasks, Deadlines and Budgets:

We collectively call these Milestones. These key aspects of business planning are critical to business success.

Financial Forecast:

One of the most important aspects of strategic planning is the financial forecast. A business needs to set financial goals and targets to truly measure its success and drive the business forward.

CEO Advisor, Inc. has the expertise, coupled with hands-on advice to help you plan, strategize, grow and succeed.

Call Mark Hartsell, MBA, President of CEO Advisor, Inc. today at (949) 629-2520, text Mark at (714) 697-3370 or email MHartsell@CEOAdvisor.com to schedule a free initial consultation.

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Top 20 Reasons For When to Sell Your Company

There are different reasons why business owners choose to sell their business. There will come a time when selling it might be the best decision you can make. Valuations are very high currently so this can be a tremendous opportunity for any business.

As an industry expert on mergers and acquisitions, CEO Advisor, Inc. can help you identify the optimal time to sell your business.

Below are the 20 common reasons for when to sell your business:

1. Your Business’ Value Has Improved Significantly
When your business has grown substantially, it can be the optimal time to sell. Running a business is risky, and the bigger you get, the larger the risks you have to face. The value of your business is not liquid until you go through the transaction of selling your company and realizing the opportunity.

2. You Receive an Offer Too Good to Turn Down
If a buyer presents you with an offer you can’t refuse, it can be ample reason to accept and sell your business. Such an offer is usually priced way above the market value of your business. This kind of offer is rare, so you wouldn’t want to pass it up because you may not get another one like it in the future. Your optimal method is to prepare for and initiate a sale process to many potential buyers, but you never know when a serious buyer is going to knock on your door.

3. You Don’t Have the Energy, Skills, or Capital to Grow the Business
One primary reason to sell a business is that you don’t have the energy, time, experience, skills, and capital to take the business to the next level. A business should continually grow, and as business owners, there will come a time when you’ll feel you can’t generate substantial growth. This is the right time to sell your business and entrust it to those who have the skills and resources to grow it to the next level.

4. You Experience Fatigue or Lack of Alignment
If you got into a business for the wrong reasons or the market opportunity has changed dramatically, you will eventually experience a certain level of exhaustion that will no longer be healthy for you physically, emotionally, and mentally. If you think that there is no quick fix for the burnout you feel, then it’s time to sell and realize the opportunity of today’s extremely high valuations.

5. Your Business Has Substantial Sales Growth
One reason entrepreneurs choose to sell their business is that it has experienced substantial growth. This is extremely appealing to buyers and you can gain a higher valuation from the sale. Some business owners just want to take a lump sum of money from the sale, and the best time to do this is when you can show substantial and consistent sales growth and earnings.

6. Your Personal Interests Change
After years of running and growing your business, you may conclude it doesn’t feel as interesting and exciting as when you started it, and you’re losing your passion in your business. This is a sign that you should consider selling it. Over time, it’s normal for your interests to change, and you should capitalize on the right opportunity to sell.

7. Your Business Doesn’t Have the Capital to Grow or Survive Long-Term in a Highly Competitive Market
Private small and mid-size businesses are highly illiquid and risky assets. Without adequate capital, you can’t realize the full potential of your business. If you need more liquidity and are presented with the possibility of selling your business, you should consider this opportunity. This can be more advantageous today given the high valuations.

8. You Want to Have a Fresh Start
Entrepreneurs have other motivations to sell their business and one of these is the desire to start a new one. Some entrepreneurs go into business because they want to start and build something bold and take a risk. This is what drives their spirit. If a business has already reached a certain point of growth and stability, some entrepreneurs just want to move forward, sell the business to cash out their hard work, and start something new and exciting. Although you need to plan on staying a year or two with the buyer in order to get a deal done, starting the sale process now will get you to your goal sooner.

9. You Need More Time for Your Personal Life
At some point, as a business owner you will finally realize that running a business takes too much of your time. When the time comes that you will need more time for your family, to take care of your health and/or your personal life, then selling your business is a good way to do it.

10. Your Overall Exit Strategy Is to Sell Your Business
There are business owners who invest in building a thriving business to eventually sell later on at an optimal time for a huge sum of money. If this is your purpose for starting the business in the first place, then it’s a great reason to sell the business as soon as you have reached your desired growth. Having an exit strategy is critical to every business, and CEO Advisor, Inc. can help you to discuss your options, formulate an exit strategy, prepare for the sale of your business, and execute the sale process at the proper time.

11. You Want to Retire
The majority of entrepreneurs plan to sell their business as an exit strategy to provide a comfortable retirement. Most business owners plan to sell their business rather than keep it in the family or hire someone to run it in their place when they retire as this is very risky. The driving force for this stems from the lifestyle many entrepreneurs face and lack of savings for retirement.

12. You’ve Achieved Long-Term Financial Security
One reason to sell your business is if you have achieved a certain level of financial security from running the business and you want to step down and start a less stressful lifestyle. You don’t need to fully retire to do this, as you can take on a temporary lesser role or a consulting role after an acquisition. There are often options such as a majority sale to a Private Equity firm, and CEO Advisor, Inc. has the expertise to manage this for you. At this point, you want to sell all or a majority of your business when valuations are peaking.

13. You Feel Physically & Mentally Exhausted
As a business owner, you are most likely the hub of your business and make most of the decisions. This can be physically and mentally draining, and the time will come when your responsibilities as a CEO or business owner will take its toll on you. If you feel physically and mentally exhausted running the business, then it’s time for you to initiate an exit and sale process. Don’t wait until an illness or excessive fatigue sets in before you decide to sell, as the buyer will fully expect you to remain with the company for 1 – 2 years.

14. You Want to Take Advantage of Low Capital Gains Taxes
The tax rate on capital gains is at an historically low level. This is one good reason to sell your business and enjoy low tax rates if you can achieve a straight stock purchase. If you are at an age near retirement, or if you have already grown and stabilized your business, then it may be best to sell your business and take advantage of taxes at such relatively low levels.

15. You’ve Become More Risk-Averse
Risk is essential to your business’ continued growth. If you have become risk averse, and you get to the point that new opportunities invoke more fear than excitement, it is a sign that you should sell your business. Becoming too conservative means losing your drive to grow the business, and this alone is a good reason to sell.

16. Your Business Partner Wants to Sell
If your business partner wants to call it quits and move on, you have the option to either buy out his/her shares and own the business entirely, or just sell the business to a third-party. Most of the time, the second option is more prudent because you may not have the capital or want to borrow substantial funds to buyout your partner.

17. A Sudden Lifestyle Change Affects Your Business
CEOs and business owners need to understand that there should be a clear delineation between their personal lives and their business. If a sudden lifestyle change (like getting married, divorce, health issues, going back to school, or giving birth) becomes a conflict with your commitment to your business, then it’s time to consider selling.

18. You Struggle with Poor Business Performance
Running a struggling business can be very stressful and demotivating. If you notice that your business’ performance doesn’t improve, even after you have exerted a lot of effort and invested many resources to grow the business, then perhaps it’s time to consider selling it to someone who has the skills and money to revive and grow it. Just don’t expect to secure an optimal sale price or terms.

19. Your Business’ Industry Is Thriving or You See a Decline Looming
If your business’ industry is thriving, it’s a good time to sell your business. A business in a thriving industry will likely sell for more than if your business’ industry is struggling. You can take this opportunity to sell your business while there are more acquirers interested in buying it at a good price. It’s important to pay attention to industry trends, as it will benefit you when you decide to sell.

20. You Have Health Issues or You are in Your Sixties with Previous Health Issues
If you think your business has cost you your health, then it’s time to seriously consider selling it. Facing serious health issues is one of the most common reasons why some business owners choose to sell their business. After all, it’s best to prioritize your health, and capitalize on today’s lofty valuations.


There will come a time when you will need to sell your company. The right time to sell a business is based on various reasons, such as economic conditions, industry trends, valuations, personal situations, and professional considerations.

Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

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What Every CEO Needs to Know About Mergers and Acquisitions

CEO Advisor, Inc. has decades of experience in mergers and acquisitions (M&A). The following are some need to know factors about valuation and M&A.

EBITDA Multiples Drive Acquisition Deal Prices
Most acquisition deals are valued off of financial metrics and completed deal comparables. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, is the key metric for applying a multiple to derive the value of a company. Corporate mergers and acquisitions (M&A) departments (strategic buyers) and Private Equity firms (financial buyers) value deals based on EBITDA multiples. The EBITDA multiple is affected by the company’s industry, size of the market, revenue growth rate, recurring revenue, gross profit margin, management team, intellectual property, EBITDA, EBITDA growth rate and other factors.

You Have to Stay On
M&A isn’t a one-time cash-out, at least not anymore. Most acquisition deals have a 2-3 year retention of the owner(s) or CEO, seller notes and potentially a 2-3 year earn-out. Assume if you get acquired, you’re committing to a minimum of 24 months with the acquiring company in a specific role. This is critical to getting a transaction done, and you should show a world of enthusiasm to help the buyer grow the combined business after closing the deal.

Acquiring Companies Don’t Buy Low or No-Growth Companies
A ten year old company that is growing 10% per year is of little or no interest to strategic buyers. A financial buyer, such as a Private Equity firm, may be interested if a strong fit, but at a depressed valuation. It is critical to fix your deficiencies and excel in all aspects of your business to optimize your value and attract buyers. CEO Advisor, Inc. works with CEOs to accelerate growth, as well as, create an exit strategy and provide M&A advisory services to facilitate the entire sale process.

Companies Don’t Buy Startups or Small Companies
There are 1,000 companies that Apple, General Electric, Microsoft, Google, Salesforce or Facebook could buy and all could make strategic sense. But that’s not how M&A deals happen. It’s when a CEO sees a strategic gap, or a SVP sees a gap in what he/she can get done in the next 12-18 months – and fills that gap with an acquisition, right or wrong. In the end, corporate M&A departments have limited time and a very specific M&A strategy.

Smaller companies clearly enter the radar screens when they approach $10 million in sales. Your goal is to reach $10 million in sales in a profitable manner as soon as possible through organic growth or by acquiring a company. The great majority of the time M&A deals actually happen when a CEO, president or business owner has an experienced team of advisors (M&A advisor like CEO Advisor, Inc., corporate/transaction attorney and tax advisor) behind him/her working extremely hard for 6+ months to seek out a buyer and get a transaction to closing.

Knowing the “Value Drivers” is Critical
Once a Letter of Intent (LOI) is signed, the acquirer will spend a substantial amount of Due Diligence effort to identify the sources of value (Revenues, Gross Profit, Gross Profit Margin, Quality Customers on Contracts, Recurring Revenue, Technology and other Intellectual Property, Management and Personnel, Brand, EBITDA, EBITDA Growth) from the deal. It is essential for you to maximize these value drivers and present them to potential acquirers clearly and di

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stinctly.

CEO Advisor, Inc. provides mergers and acquisitions advisory services to CEOs, presidents and business owners of small and mid-size companies. Call Mark Hartsell, MBA, President of CEO Advisor, Inc. today at (949) 629-2520, text Mark at (714) 697-3370 or email MHartsell@CEOAdvisor.com to schedule a free initial consultation.

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Top 10 Reasons Why Not to Sell Your Business On Your Own

CEOs and business owners are a motivated, driven, self-sufficient group. You have built your business by doing things your way and learning how to save money along the way. You’ve also developed a lot of self-confidence and feel that you can do almost anything.

But when it comes to selling a business that you’ve worked so long and hard to build, it’s not only prudent, but very cost-effective to hire a professional mergers and acquisitions (M&A) advisor. Invest in a professional who has the expertise and experience to get the sale done and get it done at the optimal price and terms. There is too much at stake to risk making it a sale by owner project.

Selling your business is extremely complex, requires a tremendous amount of time, preparation and follow through, organization and skill, and is one of those things that requires the experience of a business, finance, and M&A professional all in one.

Here are 10 reasons why you shouldn’t attempt to do it yourself:

10. Maintaining Confidentiality.
Maintaining a certain level of confidentiality across 75 to 100 targeted buyers is essential when selling your business. How do you maintain confidentiality while marketing to your potential buyers? You can’t. You need an intermediary between you and the buyer. An M&A professional who is not involved with the business, contacts your targeted buyers, qualifies buyers, provides select amount of information and puts you in a strong, competitive position to sell.

9. You May Not be Dealing with the Optimal Buyers.
Because of the large task of selling your company, many business owners selling their own business are dealing with buyers who happen to approach them. In many cases, these buyers are savvy business owners, in the same industry, looking to buy a business on the cheap or are very experienced at buying businesses. These types of buyers typically do not make the best offer nor are they financially qualified to buy the business.

8. It Involves an Extensive Amount of Time Better Spent Running Your Business.
Selling a business takes a tremendous amount of time, organization, and a sale process that generates results. The preparation alone to launch the process and generate multiple offers takes a lot of time (and expertise). Dealing with multiple potential buyers takes time. Meanwhile, you’re trying to run the business and live your life. Do you really have the extra time to spend your precious hours selling your business when an expert should do it for you?

7. You Lack the Expertise and Experience in Selling a Business.
Selling your business is not as simple as selling a property, and a business requires several types of expertise. You need to prepare information and reporting, and be very knowledgeable about financial statements and how businesses are valued. You need to know how to conduct the Due Diligence process and assist in the many business and tax issues that arise in the legal process when selling a business. You need to know what you can do, what your M&A advisor should do, what your tax advisor should do and what your corporate/transaction attorney should do to keep the buyer engaged and on track to get the deal completed.

You may have a very good attorney and accountant, but they do not have the same expertise as an M&A advisor to prepare the needed information to initiate the sale process, solicit offers from a pool of many selected potential buyers, secure offers from these buyers and conduct the Due Diligence process when it comes to selling a business.

6. Representing and Selling Yourself Typically Backfires.
If you don’t have the time, expertise, experience, great organization and sales skills, you definitely should not be selling your own business. But, even if you are a good salesperson, there is another good reason not to sell your own business. The more you pursue a buyer, the more you are sending a message that you are anxious or desperate to sell, which will tend to make the buyer think that they can pay less for the business. Since it is an M&A advisor’s job to pursue buyers, doing so doesn’t send the same message.

5. Your Sale Process and Marketing Doesn’t Stack Up to an M&A Advisor.
Sure, you can entertain a single offer from a company that contacts you but they will know that they are the only interested party, which puts you in a very disadvantageous negotiating position. You can also advertise on a few of the Internet business-for-sale websites, but a strong, experienced M&A advisor has a very disciplined, targeted approach with many pre-existing contacts and a staff to research and pinpoint all of the top potential buyers of your business. The result is that an M&A advisor will reach far more buyers resulting in a much higher probability of a completed sale, a faster sale and at a higher price with better terms.

4. An M&A Advisor Acts as a Buffer.
Buying or selling a business is very stressful, takes hundreds of steps and may be the most valuable asset that you own. During the sale process, the buyer and seller are likely to get upset with each other and things may be said that would kill the deal if they were said directly to the other party. The M&A advisor is a buffer between the parties that prevents these deal-killers by implementing an element of Good Cop (you) and Bad Cop (M&A advisor) to perform the tougher negotiations and keep you in a strong standing with the buyer and your future boss.

3. The Sale Process is Much More Than a Couple of Meetings and Accepting an Offer.
Accepting an offer to sell your business is only one aspect of the sale process and closing the sale. The sale process includes a plan, researching and documenting the potential buyers, creating and housing all of the preparation materials that will attract and secure a strong offer, negotiating and finalizing the offer, a complete Due Diligence process, overcoming any tax issues, typically negotiating a lease with the landlord, and working through all of the purchase agreement and employment agreement issues.

2. You Need a Trusted Advisor.
Your attorney and accountant may be very skilled and knowledgeable, but most don’t commit the needed time, don’t focus on a goal of securing multiple offers, and don’t have the knowledge about the marketplace and selling businesses that is needed to be successful.

Attorneys and accountants react to an offer that is secured. A hands-on M&A advisor will advise you throughout the process and help you avoid making a major mistake that will cost you a ton of money or that will jeopardize the sale altogether. Also, a buyer is more willing to accept what an M&A advisor recommends since the prospective buyer will have developed a relationship with the M&A advisor from the first phone call initiated to the buyer, rather than what your attorney or accountant desire, who are typically pressing on a legal or tax issue.

1. Selling Your Business Faster For the Best Price.
This reason alone should be enough to move any seller to using an M&A advisor. Selling a business is both tedious and stressful, and the only reason to undertake such an endeavor on your own would be to save money. But when it comes to selling a business, do-it-yourselfers typically get a lower price for their business and most don’t get a transaction done at all. Why is that? An M&A advisor will reach a greater number of prospective buyers who know they must compete on price. Because they widen the field, an M&A advisor more than makes up for their fees with a proven sale process, higher sales price and better terms, providing the seller with a higher take-home figure.

Some sellers attempt to sell their own business, only to find the sale process is much more complicated and time consuming than they anticipated. Business deals are complex transactions that require expertise well beyond what the typical CEO or business owner has.

An M&A advisor is an expert and your trusted business advisor, your marketing team, and your expert negotiator all wrapped up in one.

Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

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