16 Feb Around the Web: A Week in Summary
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A recent article from Forbes entitled “How To Sell Your Business To A Strategic Buyer” explains what a strategic buyer is and what to know about selling your business to this type of buyer. Strategic buyers are often a great fit for owners seeking to sell.
A strategic buyer seeks to grow their existing business by acquiring another business. For example, Amazon was a strategic buyer when it acquired Whole Foods.
When selling to a strategic buyer, it is important to understand their goals and how your business fits those goals, determine if they want you and your full staff to join their team or not, discuss their post-sale intentions with them, consider the size of both companies, get the timing right, and keep your options open.
A recent article from Smart Business Dealmakers entitled “Timing Is Everything When Selling A Business” discusses why it’s so important to properly time the sale of your business. The timing of a sale can impact the selling price, the likelihood of a sale, and post-sale life for the seller.
Waiting too long to sell can have severe consequences. If the owner has gotten to the point of being burned out or lost their passion for the business, it’s quite likely the business is not at peak performance which can negatively affect the value of the business.
If the owner has waited to the point where they are in their 70s or 80s, they might not want to stick around for a transition which may be a negative for the buyer. They may also not have the physical ability to do the things they had wanted to do in retirement.
A recent article from Divestopedia entitled “The Top 10 EBITDA Adjustments to Make Before Selling a Business” discusses the importance of normalizing EBITDA and how to do it. Normalizing EBITDA involves making adjustments to present a better, more accurate financial representation of the business for sale. EBITDA is a key figure for determining the value of the business, so this process is very important.
10 of the best EBITDA adjustments are:
- Non-Arms-Length Revenue or Expenses
- Revenue or Expenses Generated by Redundant Assets
- Owner Salaries and Bonuses
- Rent of Facilities at Prices Above or Below Fair Market Value
- Start-Up Costs
- Lawsuits, Arbitrations, Insurance Claim Recoveries and One-Time Disputes
- One Time Professional Fees
- Repairs and Maintenance
- Other Income and Expenses