Prospecting Buyers for the Sale of Your Business

In order to sell your business you must generate prospects.  Prospects are people or companies who are ready, willing, and able to buy your business.  The first step is to draw in contacts and get them to approach you by phone or email. To accomplish that, price your business properly (assuming you have a smaller business – see our posts on pricing a business for sale) and let these prospects know about the business for sale without breaching the required confidentiality of the owner.

Considering Selling Your Business? Please click here for a downloadable e-book, “ 10 Ways to Increase the Value of Your Business“.

Fishing Story Number 2

The first time I went out on a charter fishing cruise with a professional captain and first mate I was amazed.  Of course, I am old enough that this was before radar type ‘fish finders,’ but they  not only seemed to know where the fish were but they had a strategy for catching the fish.  Multiple fishing poles were carefully baited and dropped into the water.  Different weights were placed on different lines to put them at different water levels.   All this work to find fish that we could not see.

Marketing your business is very similar.  This critical part of the process involves doing the things your experience suggests will work and, if necessary, trying different variations until you find the “fish.”  Patience is required.  And, once you hook a fish, it is very important not to lose him as many businesses have only a very few good Buyers.  Of course the good news is that just like dating, or selling a house, it only takes one.

 

Gregory R. Caruso, JD, CPA, CVA
Harvest Business Advisors
609-664-7955
gcaruso@harvestbusiness.com
www.harvestbusiness.com

Start Retirement Planning Today

Most small business owners don’t make nearly enough money from the sale of their business to survive the thirty to forty years they may live after the sale.  You must start saving early and consistently.  Consider a tax assisted retirement savings program.  Another strategy is to buy the real estate where your business is located. Find a financial planner you trust and start today.  There is nothing worse than being physically or mentally exhausted and having to leave the business but resisting it because you do not have the downstream financial resources.

Many owners we work with intend to augment their savings by seeking employment in the future.  They just want to get the weight of owning a business off their shoulders.  If the income expectations and time requirements are realistic this is a good plan.  Limited future employment is becoming a normal component of many owners’ plans.

If you are not in a position to properly make these types of plans yourself meet with a competent financial planner early.  Find a way to save.  Make it a priority because your future depends on it.

Gregory R Caruso, JD, CPA, CVA
Harvest Business Advisors
Business Brokerage, Business Valuation, Transaction Planning
609-664-7955
www.harvestbusiness.com

Ways to Generate Qualified Prospects – Tips from a Maryland Business Broker

This post lists proven ways to generate leads for your business sale.  Each requires experience and most require quite a bit of work.  Also, several of these may breach your confidentiality if they are done by you directly.  One more reason to always use a knowledgeable business broker.

Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

Management of your Company.  We suggest that at least once a year you talk about succession planning with key employees and family members. Over many years, you can determine who in your family and organization might have an interest in your business.  It is then easier to start a conversation by saying, “Although it is still several years off, do you really have an interest…”.   Take this conversation through to preliminary financing etc. before you move up the timetable.

Trusted Advisors.  Sometimes your attorney or accountant will have a likely Buyer.  Professional advisors are a good source for referring Buyers. Talk to that Buyer.  Just recognize that if that person is not the final Buyer your attorney or accountant probably cannot perform the salesman’s role of an intermediary or broker.  If they do, then you should worry about the time they have to do your accounting and legal work!

Internet Listings.  Primarily www.BizBuySell.com , www.ibba.org , www.mergernetwork.com, and others.  This is effective for generating leads if the financial summaries fit the recommended valuation rules of thumb and it is the best source for corporate managers and corporate sales people.  You can also reach competitors who have set an automatic email for anything in their industry.    With Internet listings you need to list a little information about the business to indicate scale and industry and really focus on the numbers in order to generate calls.  The ratios must work in order for the phone to ring so this is an excellent reason not to overprice the business.  If necessary,  make aggressive adjustments in your cash flow and clearly point them out in your package in order to generate leads through this source.

Cold Calling and Direct Mail.   If a competitor, private equity group, or other business is a likely Buyer, both cold calling and direct mail can generate responses.  While the response rates are generally low, again it only takes one Buyer.  You can greatly assist your broker by providing trade association lists and contact points to help them generate an inclusive list of prospects.  Research to identify potential buyers is a very important and time consuming part of the work when this technique is appropriate.

Industry Magazines and Websites.  Some industries have trade magazines and websites where ads are occasionally posted for business acquisitions and sales.  Sometimes these can be effective.

Suppliers and Jobbers.  In some industries, suppliers and other people who work regularly with many companies may know people interested in buying businesses.  Obviously this does not work if maintaining confidentiality is important to you.  This is pervasive among liquor stores.

Once you have some interest qualification of your prospects becomes key.  Ah – the need for a future post.

Gregory R. Caruso, JD, CPA, CVA
Harvest Business Advisors
609-664-7955
gcaruso@harvestbusiness.com
www.harvestbusiness.com

Presale Planning for your Business Sale – Getting Started

Be Mentally Prepared For Your Business Sale.
Sooner or later every business is sold, merged, shut down, or given away.  Most of you didn’t think about that when you started our new and exciting venture. Yet, at some point your interests start to change and our enthusiasm and energy for the business wane.
 Considering Selling Your Business? Please click here for a downloadable e-book, “ 10 Ways to Increase the Value of Your Business“.

If you are reading this article, you are at least starting to think about the possibility of your life going on without your business.  Keep thinking about that.  When you started your business you had a business plan.  It may not have been written down, but it existed.  This plan probably did not spill over to, or include, your personal life because the entire focus was on getting the business going and then growing it.  At this point, you should try to develop a succession plan or exit plan that looks at what you want to do next and how you will get there.  A few critical questions you need to answer are:

  • Where are my interests now and where will they be in five years?
  • What do I get enthusiastic about?
  • What is the current value market of my business to different buyer groups?
  • Will I provide seller financing for my business?
  • What are my priorities regarding my family (or families in many cases), key employees and other people I am close to?
  • How long can I, or will I be willing to, continue to put forth the energy necessary to lead my business?
  • Am I looking to sell because times have been tough?  If the market for my product turned tomorrow would I reconsider selling?      
  • Besides the highest price and lowest taxes what do I want from the Buyers?
  • Do I want the name to live on?
  • Do I want the real estate renovated?
  • Do I want the employees treated well?
  • Do I want future involvement?
  • Do I want my children or other family members to stay involved?
  • How do I handle fairly one child who is active and another who is inactive in the business?
  • Financially, what do I need to survive?
  • Who can best help me answer these questions?

These are not easy questions.  The correct answers may take quite a while to arrive.  And, by correct answers, we mean the answers that are correct for you.  These will vary greatly from one owner to another.  It often helps to talk it out with people you trust such as your spouse, CPA, attorney, business coach, clergy, therapist, life-long friend…..or a combination of these.   Quiet reflection also helps. 

Gregory R. Caruso, JD, CPA, CVA
Harvest Business Advisors
609-664-7955

gcaruso@harvestbusiness.com
www.harvestbusiness.com

 

How Your Balance Sheet Affects Your Business Sales Price and Business Value in Merger and Acquisition Transactions

Or, In Business Planning such as: Business Mergers and Acquisitions, Business Valuations,  M&A Business Valuations, Exit Planning, Succession Strategies, Business Strategic Planning, Business Brokerage, for Companies Such As, Construction Contractors, General Contractors, Engineering Companies, Sub-contracting Companies, Distributors and Supply Houses, Service Firms, how your balance sheet will affect your ultimate business sales price.

Connect with Harvest Business Advisors today – email info@harvestbusinessadvisors.com or call 443.334.8000

 We mainly focus on the income statement in order to determine earnings and company value.  But your balance sheet is an essential component of any transaction.  This article will briefly address how your balance sheet impacts your business market value in the sales process.

 A strong balance sheet can keep you in business in tough times.  That can be true in business sales also.  After all, if you are running out of cash or have had a loan called – how strong is your negotiating position?

 When selling any business the theory is that the buyer should get the assets necessary to produce the income that they are buying.  These assets may be trucks but they may also be cash and receivables (working capital).  Just like when you sell your house and pay off your mortgage (whether it is more or less than the sales price) debt will be paid off by the seller out of the sales proceeds or at least count as part of the sales price. 

 General balance sheet tips – Have cash.  Manage accounts receivable.  Try to collect as rapidly as possible.  Put systems in place to collect.  This includes making sure your requisition package is complete, all insurance certificates are current and whatever else is required.  Keep inventory as low as possible.  Do you really have savings after handling, storage, loss, etc. from buying in bulk?  The squeaky wheel does get the grease.  Manage accounts payable.  You must pay but do your best to obtain extended terms when possible.  Keep bank debt to a minimum if possible.  I was once told and the saying has never failed me, “A banker is someone who gives you an umbrella and when it starts to rain asks for it back.”

 Have lines of credit but do everything you can to not NEED to be in them.  Keep physical assets in good repair but do not overinvest in the 3-2 years before a sale.

 If you have real estate owned by your company (review with your advisors then in 99% of the cases) get it into a stand-alone entity now.

 In this time of low profits and high receivables many businesses – particularly many contractors are worth more dead than alive.  Namely many contractors have more due to them in accounts receivable than the value of their company.  A market buyer will not give them a price as high as the accounts receivable.   An uncomfortable place for any owner to be.

In summary, maintain a strong balance sheet with plenty of current assets and working capital in order to strengthen your negotiating position in a business sale and tide your company through any short term rough waters. 

 

 Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

 

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