01 Mar Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Forbes entitled “Disregard The Asking Price When Buying A Business” discusses the often mysterious process of how sellers arrive at their asking price when putting their businesses up for sale.
Sellers often are clouded by emotion when pricing their businesses. This can lead to inflated prices that might not necessarily align with the true market value of the business.
Buyers should approach valuations with logic and objectivity. While sellers may factor in their emotional investment, buyers should focus on quantifiable factors to determine a fair price. For the buyer, it’s crucial to focus on the facts and not take the seller’s emotional attachment and investment into the business into consideration.
Every business is unique and should be evaluated accordingly. Proper valuations should consider various factors such as growth potential, competition, and barriers to entry, among others. Buyers should submit offers based on factual data and defendable valuations, even if it means potentially “insulting” the seller. It’s crucial to prioritize paying a fair price for a good business, one that reflects reality and is based on logical reasoning rather than emotional attachment.
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A recent article from Smart Business Dealmakers entitled “Inside The Thought Process Of Sell Or Don’t Sell” highlights the journey of Emily Foote, co-founder of Practice, from funding to eventual acquisition by Instructure in 2017. Initially, Practice secured non-dilutive grants from the National Science Foundation, followed by seed-stage funding and a Series A round. Seeking bridge financing to bolster metrics for a Series B round, Practice approached strategic investors like Instructure, who politely declined but expressed future interest. However, just days after closing their bridge round, Instructure revisited with an acquisition offer.
Facing a tough decision, Foote grappled with whether to sell or continue independently, with split opinions on the board. While the company was performing well, the prospect of competing against copycat companies and the need for significant capital influenced the deliberation. Personal challenges, including the loss of a team member and negative cultural impacts, compounded Foote’s decision-making process.
Reflecting on the experience, Foote acknowledged the importance of trusted advisors and learning to trust her instincts. This experience shaped her approach to decision-making and highlighted the need for comprehensive support during pivotal moments in an entrepreneurial journey.
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A recent article from Brown Brothers Harriman entitled “Is Now the Time to Sell the Family Business?” discusses the difficult decision-making behind selling the family business.
In an uncertain market environment marked by factors like rising interest rates and tight labor markets, many business owners are contemplating whether it’s the right time to sell their businesses. Family-owned businesses face an additional layer of complexity, given their significance beyond financial considerations.
While market conditions play a role, the decision to sell is often driven by family dynamics and business factors. For family businesses, questions about succession planning and shareholder returns are crucial. Recognizing that not every family member may be suitable to take over the business and planning for liquidity needs are essential.
On the business side, staying competitive requires strategic investments in sales, marketing, technology, and talent. Owners must assess whether their business can thrive in a competitive market and make complex capital allocation decisions accordingly. Sometimes, divesting noncore parts of the business or considering attractive offers from potential buyers may be the best course of action.
Ultimately, the decision to sell requires thoughtful consideration of market conditions, family dynamics, and business prospects. Engaging with trusted advisors and seeking insights from other family business owners can help navigate this complex decision-making process.
