23 May Around the Web: A Week in Summary
A recent article from Estate Agent Today entitled “The ten worst mistakes to make when selling your business” gives an overview of 10 common mistakes to avoid when selling a business.
- Responding to a direct approach. This will not be the way to get the best price and it’s better to compare prices before making a decision.
- Believing that the price you are initially offered is the price that you will receive. Research the buyer’s reputation to make sure they won’t try to reduce their initial offer later.
- Poor presentation. To get the best price for your business, you must use the best quality presentation of your business.
- Inaccuracy. Make sure all the numbers are accurate before your business goes to market because buyers will be sure to double check this.
- Asking for too much money. A competitive asking price is critical. It can be difficult to get a buyer to reconsider the business later if the initial price is too high.
- Accepting the highest offer without reading the small print. The highest offer is not always the best one and you want to make sure to check all the small details of the deal before making a decision.
- Choosing the wrong solicitor. The process will go much more smoothly using the right experts.
- Underestimating the time necessary to deal with the due diligence process. This process can be very time consuming and you may need to take some time off to focus on it.
- Taking your foot off the gas too soon. Keep running your business with full commitment until the deal is done so there is no drop in performance before the sale process is complete.
- Putting off a sale for too long. Don’t delay the sale for too long or you might miss the right time.
A recent article posted by WealthManagement.com entitled “When Your Client Sells the Family Business to a Child” explains how a business sale to a child may not be as easy as you think. In some ways, it can be better because a family member will most likely share the same vision and values for the business. On the other hand, the client may ignore important issues when selling to a child, or potential disputes may be hidden because they are family issues which are not directly related to the business sale.
Here is a list of topics to discuss with a client before a sale to help prevent hidden issues from arising later on:
- What will the role of the client be after the sale?
- Can the child hire and fire family employees or determine the compensation for them?
- What happens if the client sells the business to siblings?
- What will happen if the direction of the business changes when the child takes over?
- Is the client selling the business to the child for full value or as a gift, and how does it affect their estate planning?
- Make sure legal documents are in place to protect both client and child.
Hidden issues are what can actually make a business sale to a child more complicated than selling to a 3rd party. Taking these factors into consideration will help the sale process go smooth and prevent future problems.
A recent article from the Smart Business Network entitled “How the strength of a business plays into succession planning” emphasizes how important succession planning is for maximizing the value of a business. To make a succession plan more successful, the first step is to conduct an organizational assessment, which can be done by a professional or the business owner can do a self-assessment. A financial benchmarking analysis should also be performed, which focuses on the key metrics of the business such as cash flow, growth and profitability, productivity, and strength and value creation.
These assessments will show where the company’s strengths and weaknesses are so improvements can be made. Once the issues are identified, a plan should be developed to fix them which may include items such as a definitive timeline, metrics to monitor, and a schedule to maintain accountability. After improvements are made, the value of the business may increase resulting in a better sale for the business owner.