28 Feb Around the Web: A Week in Summary
A recent article posted on the CBB Blog entitled “10 Tips – Negotiating a business purchase from a buyer’s point of view” explains how negotiating should be about finding a solution that is mutually acceptable for both parties and gives 10 tips for making successful negotiations:
- Determine the maximum amount you can offer based on your financial situation.
- Resolve the toughest issues first.
- Make sure your offer is realistic.
- Consult with an attorney or CPA.
- Learn as much as you can about the selling party.
- Don’t be afraid to get personal while also keeping it professional.
- Don’t let emotions get in the way and keep egos at bay.
- Stay focused on key issues and don’t get bogged down by minor details.
- Focus on common interests.
- If you get to a point where it seems impossible to reach an agreement, take a timeout. Your business broker can guide you through the issues and get you back to the deal table.
A recent article from Business in Vancouver entitled “Top tips for transitioning or selling a business” emphasizes the importance of exit planning and the differences between transitioning and selling. Your strategy will vary depending on whether you plan to sell the business or transition ownership to a family member or partner, so it’s good to think about this sooner rather than later.
If you plan to sell the business, you should get a business valuation which can help show you exactly what it is you have to sell. From there, you can determine how to present the business to make it the most attractive to potential buyers. Business owners also need to leverage their responsibilities to others in the business. Potential buyers will want to see that the company is not completely reliant on one person but more reliant on a strong management group.
If planning on transitioning the business, the owner needs to make sure they have found someone who is passionate and determined to take on this business, as well as someone who has the needed skills and qualifications. The owner should also be prepared to act as a mentor to the new owner. In any case, exit planning will help make the process go much smoother and it’s never too early to start thinking about a succession plan.
A recent article posted on Divestopedia entitled “What Is Your Company Actually Worth?” explores how buyers and sellers often perceive a company’s worth differently and how business owners misjudge their company’s value. Private company valuation is a complex process and most owners have difficulty staying objective when it comes to a business in which they have put their life’s work into. On the other hand, to a buyer, the company is an asset to be acquired at the lowest possible price, which often leads to a large difference in perception between a buyer and seller.
An experience advisor can help negate these problems and make the sale process better for the owner for the following reasons:
- The business owner can focus on factors of the business which will increase the valuation such as EBITDA, sales, gross profit margins, customer growth and employee skills.
- The owner will get an extensive look at the financial health of their business from an advisor along with recommendations for improvement.
- An advisor will also be an experienced negotiator, helping the owner get the best sale price for the business.
The key to avoiding mistakes in selling a business starts off by getting an accurate valuation of the business and making sure everything is analyzed effectively to prepare for a profitable sale.