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Selling Your Business
Introduction to Selling Your Business
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Recently I reread a study that had been conducted by Newport Partners in 2007 to determine what successful business sellers would do differently if they had to do it all over again. The results are extremely important for all business sellers or business owners looking to sell their businesses.
The study interviewed 100 Canadian business owners who have sold businesses in the last five years.
Business Owners are selling their companies as a reactionary process, instead of planning the process out methodically. When asked why they sold their businesses, they received the following responses:
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26% “I received an attractive offer"
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14% "I needed more capital or strategic support"
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13% "sale was motivated by partners or shareholders"
When asked if they had planned the sale in advance:
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23% planned the sale in advance, 62% wish they had done so
All professionals and sellers agree that selling a business is much more successful when methodically planned in advance. This statistic means that many business owners are leaving a significant amount of money on the table, and experiencing more angst in the process than they should be.
Business Owners are not getting the proper advice when selling their company. 81% of the respondents relied on advice of their attorney, and 68% relied on their accountant for advice. Only 32% hired a Mergers & Acquisition Intermediary, Investment Banker, or broker. 71% of the business sellers recommend you select an advisor experienced in business sales, but only 40% of them did.
The process of selling a business always appears on the onset to to be a simple sale, much like selling a building or a large asset. The truth is sellling a business is very complicated, and there are a large number of traps and pitfalls involved. You need to have the right team with you from the start, it is too important to learn as you are going along.
Sellers are not marketing their businesses to all the potential buyers, and therefore not obtaining maximum value for their business. Only 42% of the business sellers evaluated all types of buyers, but 74% recommend that other do that. This is another reason why an outside business broker, or M&A intermediary is important to the process. The business intermediary will know how to identify and market to a large range of prospective buyers. Marketing businesses is their core expertise, and they have experience recognizing buyers that you might not have thought of otherwise who would have an interest in buying your business.
It is important to learn from others who have been through this process before, and heed their advice so that you get the maximum value for your company.
Princeton Capital Strategies, Inc.
Princeton Capital Strategies, LLC
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A survey of Business Brokers and M&A intermediaries was run to determine what the buyers are looking for as they look for a business for sale. The survey was conducted by BusinessesforSale.com. The top four responses were as follows:
If you want to have a successful business sale, you need to look at these to determine how you can best market your business. If you look at any one of these, the "feature" a prospective business buyer is seeking in order to make his decision is simplicity.
Many of the buyers we work with here in Connectictut, or the New York area, are scared away from a prospective business due to the complexity involved. With complexity, comes increased risk, and fear, and then it is almost impossible to have a buyer make a commitment.
It does not matter if the prospective buyer has experience in the industry or not. In almost every case, each business is unique, and has a unique business model. The prospective owner does not want to spend years coming up to speed on that model, or learn how that business makes money.
As a business owner, you need to work with a business broker, M&A intermediary, or Investment banker to outline the business business model, and make the business as simple as possible. The buyer will want to know that they can step in tomorrow and begin making money, like clockwork. You must draw that map, and show them the way. |
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Most business owners seeking to sell their business will look at the fee of a typical business broker or M&A intermediary and balk. After all, it can't be that difficult to sell a business. And the statistics on your side - most business sales do not involve a business broker or intermediary.
This is somewhat self serving, since Princeton Capital Strategies profits from business owners looking to sell their companies, or buyers seeking to buy businesses or companies. But please read on, as this also gives us an excellent perspective on the work and problems involved. In addition, Princeton only makes money in the long term where we create value beyond our fees, so we do not take on businesses, or charge fees where we do not believe we can add substantial value.
There are many reasons I could list on why to use a business broker, but I believe the best is simply the numbers, and the large numbers involved. This is not like selling a used car, where you may or may not be willing to go through the hassle, and might make some additional money. Chances are this sale of your business is substantial enough that an additional 5-10% (after the intermediaries commission) will mean a lot. In addition, if the sale is not handled correctly, and the confidentiality is broker, or a competitor gets their hands on some competitive intelligence, the negative impact to your business could be enormous.
A qualified Business Broker or Intermediary will get you more value for your business because they know how to market the company to buyers outside of the "usual suspects". In addition, they will help you move the sale to the finish line, which is a process most underestimate.
The fact is selling a business is a complex process, filled with pitfalls. Taking this on yourself, without having the experience of selling multiple businesses in the past, will typically wind up costing you a lot of money and hassles.
Princeton Capital Strategies, LLC
www.PrincetonCapitalllc.com
Providing Value beyond a typical Business Broker |
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Princeton is Remaking the Way Businesses are Bought and Sold
The Importance of Good Advice when Selling your Business or Buying a Business cannot be overstated.
We know, we have been on both sides of the transaction in the past. The process can be very frustrating and inefficient if not handled correctly. Worse yet, it can wind up in a lose-lose transaction in which neither the buyer nor the seller realize their goals.
Even a minor percentage difference in price can mean a significant amount of money. Most business sales do not realize their maximum value for sellers or buyers for many reasons. Advice from a qualified M&A intermediary with experience can help you avoid mistakes such as:
- tax ramifications
- Keeping the Sale of the Business Confidential
- Understanding the Best Structure for both parties
Princeton is not your typical Business Broker - we are Merger & Acquisition Intermediaries that act as Investment Bankers for your business, utilizing a proprietary system which matches you with the most valuable opportunity for your particular goals.
Princeton is different from a typical Business Broker because we have an experienced team of business brokers and Merger & Acquisition specialists (M&A) to help you get the most value by using customized processes that are typically found in larger investment banks throughout the CT, NY and entire tri-state area.
Princeton will reduce your headaches and stress by giving you an experienced M&A intermediary that you can rely on for professional advice throughout the entire process.
If you are considering selling your business, or just looking at various exit strategies, our process assures you that you will get the most value for your company. Princeton is only compensated after a successful sale of your company.
Call us know whether you are looking at retirement, or a succession for your business.
Please leave your contact information so that we can understand your goals, and begin helping you TODAY! |
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