21 Jun Around the Web: A Week in Summary
A recent article from Divestopedia entitled “Flirting with a Single Buyer for Your Business” explains reasons why a seller might try to “court” a single potential buyer and why this may not be the best strategy for getting the most out of a business sale. While having a good idea of what type of buyer should buy a business is typically an effective strategy, pursuing one specific buyer from the beginning can actually hurt a seller’s prospects and potentially the entire transaction. Below are some reasons that a seller may try to connect with a single buyer, each with its own drawbacks:
- It’s Easy
- It’s Cheap
- No One Will Know
While these factors may sound appealing, there is often much more to consider when finding a suitor. Although this is certainly one way to find a buyer, finding the right buyer is of utmost importance and should be taken with proper care and diligence.
The recent Sunbelt Network article “How to Protect Your Business in the Event of Death” covers some of the most important steps to take to protect a business in the event of the passing of a key stakeholder. Having a proper plan in place can help ensure that the business is able to continue to run smoothly and efficiently without this person in place. Important factors to consider include the business’ organizational structure, whether or not there is a succession plan in place, and what type of life insurance, if any, the stakeholder carried at the time of their death.
While the first thought on many people’s minds may not be about the business in the event of an untimely or unexpected death, having a proper plan in place in preparation for this type of situation will certainly ease the headache of figuring out what to do afterward. Plus, keeping things running smoothly through unfortunate circumstances is a sure-fire way to create a strong, stable, and resilient company.
A recent article posted on the Axial Forum entitled “Succession Planning — A Critical Missing Element in Many Family-Owned Businesses” outlines shocking statistics from a recent survey that shows the succession plans of U.S. family-owned businesses: only 52% plan to keep their businesses in the family! This is down a whopping 22% from only two years ago and raises some questions regarding the goals and plans owners have for their businesses after their death or retirement.
These statistics can help to reveal some important findings about the owners of family-owned businesses in this country: they often have little understanding of the fair market value of their businesses. Unfortunately, many small businesses overestimate the true value of their investment, which can come as a shock when it comes time to sell. According to the survey, less than 25% of respondents had a clear, actionable transition plan in place, while almost a third had no plan in place at all. These things alone can debilitate any seller, especially in the necessity of a quick sale.
Understanding what an effective transition plan and process entail is a great start for any business owner, especially one that falls into the category of owners without proper transition plans. These things can be better understood with the help of an M&A advisor or business consultant, who will help iron out some of the wrinkles and prepare a business for its future.