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.
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.
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.
Bottom Line - When to Sell a Business
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.
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.
Bottom Line - When to Sell a Business
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.
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.
Bottom Line - When to Sell a Business
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.
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.
Bottom Line - When to Sell a Business
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.
Selling your business is a very complex process and most business owners have never been through a sale process before. But business owners have more options than they realize. Lacking a team of professional advisors, including a strong M&A Advisor, corporate/transaction attorney and a CPA/tax advisor could have serious financial and tax consequences for both the business owner and the company so seek professional help from the beginning of the process. It pays to understand the various methods to sell or partially cash out of your business for a successful exit.
An outright sale could be the simplest and best way to exit a business. This makes sense when a business owner’s family members have no interest in taking it over or when the owner does not have the desire or capital to take the company to the next level.
There are several ways to sell your business. Regarding the structure of a sale, a business owner can 1) Sell the company’s Assets outright, or you can 2) Sell the stock in the company (or units if it is a limited-liability company). Stock sales benefit the seller, while Asset sales are more beneficial to the buyer, especially from a liability and tax standpoint.
1. Asset Sale. Asset sales involve transferring the company’s equipment, facilities, customers and customer contracts, as well as, intellectual property, such as trademarks and patents including intangibles like goodwill. Asset sales do not involve liabilities (unless specified by the buyer) and are generally protected against prior law suits facing the business.
2. Stock Sale. Stock sales involve buying the company itself along with the exposure to all of its legal issues and potential problems, as well as, the liabilities of the company. This is why most sales of small or mid-size, closely-held businesses are structured as Asset sales.
3. Partial or Full Sale to a Private Equity Firm. Companies with $10M or more in Revenue and $1.5M or more in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) can explore selling all or a large portion of their business to a professional Private Equity firm. This method comes with stipulations but has many advantages and potential upside. It also enables business owners to take a significant amount of cash upfront and still work as the CEO until the business is sold 100%. There are thousands of Private Equity firms in the United States, and CEO Advisor, Inc. has many relationships with PE firms as potential buyers of your business.
4. Management Buy Out. Selling the business to its management team is also a popular option for the right company. An owner might use this method when the company has a trusted, entrepreneurial management team that wants to carry on the business and this represents the best and most flexible process for the business owner. The primary advantage to this method is that the business owner doesn’t have to spend time trying to seeking out a buyer. The trade-off for a streamlined sale (assuming family issues don’t complicate the process) is that the purchase price may be lower than what an outside strategic buyer would pay.
5. ESOP. Another option is to sell the company to its employees through an employee stock-ownership plan (ESOP). Setting up these plans can be a complex undertaking, but they have their advantages. With an ESOP, the owner may want to remain with the company while slowly transitioning the business over time. It’s a way to reward employees with a long-term incentive for loyalty and hard work.
With this method, the company sets up an independent trust (the ESOP) that buys the owner’s stock at a price set by an independent valuation firm. The trust holds the stock for the employees for as long as they work for the company. When an employee leaves or retires, he/or she can sell the stock back to the company at fair market value. This can be a challenge as some business owners don’t like having a third party determine the value of their business as it may mean accepting a lower price than they could receive on the open market. Also, the company has to grow or have cash on hand to buy back employee shares when workers leave. This can divert cash from other business uses and can be a real cash drain if several employees leave the company in close proximity.
6. Recapitalization. Owners who want to sell their stake gradually, or who want to take some cash out of the business without giving up control, can recapitalize the business, or change its financial structure using instruments such as stock, preferred stock or debt. Suppose there is an outside buyer who is interested in acquiring the business, but doesn’t want to buy it outright upfront. The company could issue Preferred Stock and sell it to the potential buyer on a predetermined schedule. This gives the owner cash upfront, while the buyer has a chance to learn the company’s operations and line up financing before taking it over completely.
7. Debt Buy Out. If there is no readily available buyer and the business has healthy cash flow, the company might take on debt to buy out all or a portion of the owner’s stake. This is similar to a Management Buy Out, and must be evaluated carefully between you and your advisors.
There are many options for business owners who want to sell or cash out. The best method depends on the desire and health of the business and the owner. Understanding your options and getting the right advice from a team of experienced business professionals, such as an M&A Advisor, corporate/transaction attorney and a CPA/financial advisor will make it far easier to pursue the method that’s best for you.
Selling your business is a very complex process and most business owners have never been through a sale process before. But business owners have more options than they realize. Lacking a team of professional advisors, including a strong M&A Advisor, corporate/transaction attorney and a CPA/tax advisor could have serious financial and tax consequences for both the business owner and the company so seek professional help from the beginning of the process. It pays to understand the various methods to sell or partially cash out of your business for a successful exit.
An outright sale could be the simplest and best way to exit a business. This makes sense when a business owner’s family members have no interest in taking it over or when the owner does not have the desire or capital to take the company to the next level.
There are several ways to sell your business. Regarding the structure of a sale, a business owner can 1) Sell the company’s Assets outright, or you can 2) Sell the stock in the company (or units if it is a limited-liability company). Stock sales benefit the seller, while Asset sales are more beneficial to the buyer, especially from a liability and tax standpoint.
1. Asset Sale. Asset sales involve transferring the company’s equipment, facilities, customers and customer contracts, as well as, intellectual property, such as trademarks and patents including intangibles like goodwill. Asset sales do not involve liabilities (unless specified by the buyer) and are generally protected against prior law suits facing the business.
2. Stock Sale. Stock sales involve buying the company itself along with the exposure to all of its legal issues and potential problems, as well as, the liabilities of the company. This is why most sales of small or mid-size, closely-held businesses are structured as Asset sales.
3. Partial or Full Sale to a Private Equity Firm. Companies with $10M or more in Revenue and $1.5M or more in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) can explore selling all or a large portion of their business to a professional Private Equity firm. This method comes with stipulations but has many advantages and potential upside. It also enables business owners to take a significant amount of cash upfront and still work as the CEO until the business is sold 100%. There are thousands of Private Equity firms in the United States, and CEO Advisor, Inc. has many relationships with PE firms as potential buyers of your business.
4. Management Buy Out. Selling the business to its management team is also a popular option for the right company. An owner might use this method when the company has a trusted, entrepreneurial management team that wants to carry on the business and this represents the best and most flexible process for the business owner. The primary advantage to this method is that the business owner doesn’t have to spend time trying to seeking out a buyer. The trade-off for a streamlined sale (assuming family issues don’t complicate the process) is that the purchase price may be lower than what an outside strategic buyer would pay.
5. ESOP. Another option is to sell the company to its employees through an employee stock-ownership plan (ESOP). Setting up these plans can be a complex undertaking, but they have their advantages. With an ESOP, the owner may want to remain with the company while slowly transitioning the business over time. It’s a way to reward employees with a long-term incentive for loyalty and hard work.
With this method, the company sets up an independent trust (the ESOP) that buys the owner’s stock at a price set by an independent valuation firm. The trust holds the stock for the employees for as long as they work for the company. When an employee leaves or retires, he/or she can sell the stock back to the company at fair market value. This can be a challenge as some business owners don’t like having a third party determine the value of their business as it may mean accepting a lower price than they could receive on the open market. Also, the company has to grow or have cash on hand to buy back employee shares when workers leave. This can divert cash from other business uses and can be a real cash drain if several employees leave the company in close proximity.
6. Recapitalization. Owners who want to sell their stake gradually, or who want to take some cash out of the business without giving up control, can recapitalize the business, or change its financial structure using instruments such as stock, preferred stock or debt. Suppose there is an outside buyer who is interested in acquiring the business, but doesn’t want to buy it outright upfront. The company could issue Preferred Stock and sell it to the potential buyer on a predetermined schedule. This gives the owner cash upfront, while the buyer has a chance to learn the company’s operations and line up financing before taking it over completely.
7. Debt Buy Out. If there is no readily available buyer and the business has healthy cash flow, the company might take on debt to buy out all or a portion of the owner’s stake. This is similar to a Management Buy Out, and must be evaluated carefully between you and your advisors.
There are many options for business owners who want to sell or cash out. The best method depends on the desire and health of the business and the owner. Understanding your options and getting the right advice from a team of experienced business professionals, such as an M&A Advisor, corporate/transaction attorney and a CPA/financial advisor will make it far easier to pursue the method that’s best for you.
CEO Advisor, Inc. provides business growth advisory, funding
and mergers and acquisitions (M&A) advisory services to CEOs and business
owners of small to mid-size companies. We will cover major issues that you
should inquire about when considering to sell your company. A major issue is to
ensure you have a seasoned expert at your chosen M&A advisory or investment
banking firm heading up your sale process.
A significant benefit to our clients is that Mark Hartsell,
MBA, President works directly with each CEO first hand on a weekly basis.
Beware of M&A advisory firms that solicit your business and then assign a
junior associate to handle the great majority of the process - an extremely
risky roll of the dice that you need to avoid completely.
Mark Hartsell has 39 years of business experience with
decades of mergers and acquisitions experience. He is certified in Mergers
& Acquisitions from the Wharton Business School, University of
Pennsylvania, achieved a Master's Degree in Business from Loyola University and
has a hands-on approach to guiding entrepreneurs through every aspect of the
sale.
Here are 10 key questions to ask prior to engaging an
M&A advisor. Your business is your most valuable asset. Contact Mark
Hartsell at (949) 629-2520, by mobile phone at (714) 697-3370 or by email at
MHartsell@CEOAdvisor.com.
10 Critical Questions
1) Exit Strategy – What is my exit strategy? What are my
options? Well, this is actually 2 questions but all point to one important
issue - You never know when a potential buyer with a fat check is going to
knock on your door, so Yes, every company needs an exit strategy. Simply
stated, an exit strategy is a plan and process suited to you and your business
to optimize the value of your business and to facilitate a sale at the proper
time.
2) Timing - Is this the right time for me to sell my
business? There are many considerations here, but I like to look at it slightly
differently. I ask CEOs and business owners, when is it too late to sell your
business? Meaning, what could happen that would make it very difficult and
burdensome for you to sell your business? These issues include, A) A deep
recession and now you have to wait 7 more years to sell to retrieve a good
value or to find a legitimate buyer; or B) If I become ill or my illness was to
return, how much risk would occur to my business surviving or how much burden
would it be on my family and employees; or C) If stiff competition surfaced or
a disruptive and far less expensive technology, product or service directly
encroached on my business how would I recover or reinvent my business and how
long or how much investment would that take?
3) Market Timing - Is the market timing right to sell my
business? Today, valuations are still extremely high. The economic cycle is now
10+ years old with the average economic cycle ending at 7.9 years over the past
75 years. With high valuations and a low interest rate environment, it has never
been a better time to realize the best value for your business in our opinion.
And this window of opportunity will not last indefinitely; in fact it is
shrinking by the month with volatility in the financial markets.
4) Readiness - Is my business ready to be sold? The answer
is typically a resounding, No. Preparing your business for sale can take up to
a few months or longer. Optimizing the value of your business can take years.
At a minimum, you want to always be prepared to sell (when that proverbial
buyer comes knocking on your door) and this is where an M&A advisor is
extremely valuable. An M&A advisor will optimize your value and
attractiveness to buyers during this preparation process and greatly increase
your odds of a successful transition. And remember, to optimize your purchase
price and likelihood to complete a sale you want to prepare for and target many
potential buyers. Don’t get captivated by one buyer who will know there is no
competition!
5) Time Commitment - How much of my time will be involved in
selling my business and how long will it take to sell my business? Selling your
business is a commitment and will take a substantial amount of time over six to
nine months or longer. With the right team of experienced advisors, your time
involved will be weekly, but far more manageable, predictable and minimized
with a far greater opportunity of success. To minimize your time and optimize
your value, efficiency and likelihood of securing a buyer, you will need to
engage a team of advisors up front to zero in on a buyer and complete a
transaction.
6) Team of Advisors - What is the team of advisors I will
need to take me through the sale process and how do they benefit me? It is
absolutely critical that you continue to manage and grow your business, keep it
on track and not have any downfall in your revenues or profits if you expect to
find a buyer and optimize the sale price.
An M&A advisor will initiate, manage and drive the sale
process from the start to closing including the following responsibilities:
a) Create the needed materials in preparation for the sale,
such as an Executive Summary, 3-Year Forecast, PowerPoint Presentation
specifically for buyers, make sure your financials and tax returns are in order
and current, and many other preparation steps and information that will be
requested by potential buyers.
b) Strategize, research and create a list of 50 - 200
prospective buyers.
Contact the prospective buyers multiple times by phone and
email to arrange conference calls and meetings to provide requested information
by potential buyers and secure a bona fide offer in the form of a Letter of
Intent (LOI).
c) Negotiate and finalize the Letter of Intent.
d) Prepare for, gather and coordinate the extensive amount of
Due Diligence information the buyer will require to validate your valuation and
proceed with the sale, including organizing this information in a Virtual Data
Room.
e) Coordinate with your CPA/tax advisor to ensure your tax
situation is optimized.
f) Complete the rigorous Due Diligence process timely.
g) Coordinate the legal documents with your
corporate/transaction attorney and assist you in negotiating the many business
issues that arise from these documents.
h) Negotiate your future compensation for after the sale.
Prepare for the closing of the transaction and coordinate
all aspects of the sale to completion.
i) In summary, you will need an M&A Advisor,
Corporate/Transaction Attorney and CPA/Tax Advisor as your advisory team.
Remember, there are over 1,000 variables that must occur properly to close a
sale, and just one misstep can kill the deal.
7) Valuation - How will buyers value my business? Most
businesses are acquired based on a multiple of EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization). The multiple varies based on
your type of company, growth rate, your gross profit margins, your
profitability, the size of your market, the strength and depth of your
management team, and many other factors. In some cases with technology companies,
in the absence of profits, but in the presence of an extremely high growth
rate, margins and size of the market, businesses may be valued on a multiple of
Revenue, as well as, other factors.
8) Cash at Closing - Will I receive 100% of the sale price in
cash at closing? Unlike selling real estate where comparable properties are
common place and basically 100% of the property can be inspected, tested and
validated, a business has many variables that are fluid and cannot be validated
easily, and comparable deals are very hard to come by. Realistically for small
to mid-size private companies, buyers will pay you 50% to 80% in cash at
closing, occasionally ask you to hold some stock to keep you fully vested and
committed to the business, and the balance in the form of an Earn Out. The Earn
Out is paid yearly once you meet milestones, including your forecasted revenue
and profits each year over a period of two to four years after the closing. An
all cash deal is possible, but you need to be realistic when selling your
business.
9) Continued Service - Will I need to stay on with the buyer
after the sale? Every situation is different, but 99% percent of the time the
buyer is fully expecting you to not only stay on, but help them to further grow
the business and meet your financial forecast. Taking your cash and heading for
the beach is not realistic and this is one more reason to devise an exit
strategy while you are still willing and able to work for at least 2 years
after you close the sale of your business.
10) Alternatives to Outright Sale - What are the
alternatives to an outright sale of my business? I speak with many CEOs and
business owners and many feel that they can simply sell their business to the
employees. Others want to find a person to run their business for them so the
owner can move on and do other things, while pulling cash out of the business
each month. These alternatives are rarely feasible in realistic terms.
The best alternative to outright selling your company is to
team up with a Private Equity firm by selling a minority or majority equity
stake and taking money off the table, while still having substantial upside in
the ultimate sale of the balance of the business three to seven years in the
future.
The Private Equity firm will provide money for you, growth
capital for the business, highly experienced management help and an opportunity
to ultimately sell the business at an optimal sale price. A seasoned M&A
advisor should have many relationships with Private Equity firms focused on
small and mid-size companies. CEO Advisor, Inc. has developed relationships
with many Private Equity firms over the past two decades.
Selling your business is a very complex and time consuming
undertaking requiring tremendous experience and expertise. Mark Hartsell has 39
years of professional experience and 16 years of experience advising some of
the most successful CEOs and business owners of companies in the Southern
California area.
CEO Advisor, Inc. has the expertise and experience to guide
you through this exciting process to sell your business. 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.
