The Invaluable Benefits of Working with A Business Broker
One of the worst mistakes any business owner can make is neglecting their business during the sales process. It is quite common for sellers to become overwhelmed, lose focus, and see their business suffer as a result. The last thing any business owner wants is for their business to encounter problems right before it is put up for sale. Fortunately, there are straightforward and effective steps that business owners can take to avoid this potential pitfall.
Maintaining Business Operations
Ensuring that your business is ready to be sold means making sure everything is in top condition before the business is placed on the market. In short, you don’t want to make any major changes to the way your business normally functions. Your hours of operation, inventory levels, and other key business factors should remain as stable as possible. To put it another way, everything should be “business as usual” until you have officially sold your business.
Maintaining a “business as usual” environment can, of course, be easier said than done. Juggling the operation of your business while finding and negotiating with a buyer can be remarkably difficult. Working with a business broker or M&A advisor is a savvy way to take the pressure of selling a business off your shoulders. This allows you to focus on what you do best—operating your business. If you are like most business owners, you’ve never sold a business before, and this means you’ll have a steep, and potentially painful, learning curve.
Handling Logistics
A brokerage professional can assist you with every aspect of the sales process. From determining how much your business is worth and what the market will allow to maintaining confidentiality, a business broker or M&A advisor has the experience to properly prepare and position your business for sale.
It is difficult to overstate the tremendous importance of maintaining confidentiality. Business brokers are experts in this area, ensuring that you don’t lose key employees, vendors, or clients during the process. Employees, management, vendors, and clients may become nervous and look for new options if they learn that your business is being sold.
Sharing Valuable Advice
Brokerage professionals can also help you make a range of key decisions in advance. For example, buyers will often pay more if the seller is willing to stay on after the sale to train them. Additionally, a deal may be more likely if a seller is willing to provide financing. Knowing in advance how you will handle these important issues is critical, and a business broker can guide you toward the optimal decisions.
Selling a business is a complicated process. It makes sense for business owners to take steps toward selling their business well in advance. The sooner you talk to a brokerage professional about what you need to do to sell your business, the better off you are likely to be.
Copyright: Business Brokerage Press, Inc.
monkeybusinessimages/BigStock.com
The post The Invaluable Benefits of Working with A Business Broker appeared first on Deal Studio.
Selling Your Business Like a Pro
Having a player mindset when selling a business can be a real gamechanger. The goal with this approach is to steer clear from coming across as desperate or highly motivated to sell. Instead, a seller who embraces a player mindset operates from a position of strength. It’s all about realizing you have something of value and then realistically taking steps to move forward.
Keep Operations in Check
It is vital that you, as a seller, realize that your number one responsibility is to your business. You must keep normal hours of operation and activities should proceed as normal. This will ensure that everything at your business is operating at peak levels. Inventories must be maintained, team members must stay on board, and you should continue moving forward as though there is no sale on the horizon. After all, business deals fall apart every single day.
Stay Realistic
Being a player doesn’t mean being unrealistic or greedy when it comes to pricing. While you, and your business broker or M&A advisor, will want the very best price for your business, it is essential that you remain realistic about the value of your business. Remember that like any asset, your business is not worth what you think it is worth. Instead, it is worth what someone is willing to pay for it. If you are like most business owners, you have a great deal of sweat equity built up in your business, and that means your emotions are likely involved. Having an impartial expert evaluate your business and reach a realistic price is in your best interests.
Maintain Confidentiality
A key part of achieving a successful sale is to maintain confidentiality. Experienced brokerage professionals always use confidentiality agreements because they work to protect their clients. One slip up in the realm of confidentiality can destroy a potentially great deal and even damage your business. Don’t work with any business broker that doesn’t utilize the powerful tool that is the confidentiality agreement.
Get the Upper Hand
Being a player instead of a seller means that you act from a position of strength. Circumstances often dictate whether or not a seller is in a position to act from a position of strength. For this reason, you’ll want to sell when you are not forced to do so for personal or financial reasons. You’ll want to prepare your business for sale when you are not under any pressing stress to sell. Investing the time to clean up your balance sheet, address any environmental or leasing issues, assemble key documents, settle litigation and other key steps, should be done long before you wish to sell. In short, you want to be ready to sell whenever you feel like doing so.
Selling a business is a complicated process with many moving parts. Quite often, it is the structure of the deal that is more important than the price. Maintaining momentum is often the most important part of achieving a successful sale, for deals that drag on for an extended period of time are more likely to fall apart.
As a player selling from a position of strength and not a seller who is in reactivity mode and must sell immediately, you set yourself up to be firm but also utilize flexible thinking. Being flexible and realizing when to bend can make all the difference between a deal happening and a deal falling apart.
Copyright: Business Brokerage Press, Inc.
The post Selling Your Business Like a Pro appeared first on Deal Studio.
Strategic Negotiation: Essential Tactics for Deal Success
Negotiation can evoke a range of feelings: some people thrive on it, others dread it, and many fall somewhere in between. Regardless of your stance, the ultimate goal remains the same: to emerge successfully from the negotiation. Mastering effective negotiation methods and tactics can give you an edge where others might falter. The objective is to close deals effectively. Here are three negotiation strategies that have been proven to close more deals.
Leverage the Experts
One common belief is that you should never negotiate your own deal. Business owners are often too emotionally invested in their businesses, which can cloud their judgment. Buyers can also become overly emotionally attached. Engaging a professional business broker or M&A advisor can be a strategic move toward achieving a favorable outcome. A professional broker not only knows what constitutes a fair price but also understands the many factors that influence the negotiation.
Take it or Leave it
Another strategy to consider is the “take it or leave it” approach. In this method, the buyer presents their offer, the seller makes a counter-offer, and then the negotiation ends. The seller maintains their position and hopes for the best. This approach carries risks, as showing some flexibility can often lead to a successful deal. While the “take it or leave it” strategy can be high-risk, it also has the potential for high rewards. An experienced brokerage professional can assess whether this strategy is appropriate based on factors such as the business’s appeal to future buyers.
Addressing Variables
A third approach involves focusing on the most important variables for both the buyer and the seller. Understanding what matters most to both parties can be crucial in crafting a successful deal. It’s important to remember that key issues aren’t always financial; they might include commitments to retaining key employees or allowing a relative to remain involved with the business. Recognizing the complexity of buying a business and addressing these variables can facilitate a smoother negotiation process.
Reaching a Compromise
Finally, consider the strategy of splitting the difference. It’s essential for both buyers and sellers to avoid letting ego derail the deal. Quibbling over minor differences in a multi-million-dollar transaction is usually counterproductive.
Offering to meet halfway between the seller’s asking price and the buyer’s offer—provided the disparity isn’t too large—demonstrates goodwill and flexibility. By proposing to split the difference, you reduce emotional tension and show that you value reaching an agreement.
In dealmaking, don’t be afraid to think creatively. Every business, buyer, and seller is unique, and each deal presents its own challenges. A skilled business broker or M&A advisor will evaluate each situation on its own merits, rather than adhering to a rigid formula.
Copyright: Business Brokerage Press, Inc.
The post Strategic Negotiation: Essential Tactics for Deal Success appeared first on Deal Studio.
Why Business Brokerage Professionals Use Term Sheets
Term sheets are invaluable in that they can serve as a point of orientation during negotiations. Thanks to term sheets it is possible to keep everyone involved, focused and on target.
What is a Term Sheet?
These nonbinding agreements detail the basic terms and conditions of a deal. It is different from a legally binding agreement, so it is often misunderstood by buyers and sellers. However, the term sheet serves the purpose of moving a deal along and helping both parties to get on the same page.
A term sheet can be thought of as a preliminary proposal that contains a range of information that is essential to the deal. A well-crafted term sheet includes more than the price, as it also includes key terms and any major considerations, such as employment agreements, consulting and more.
In Russ Robb’s book, “Streetwise Selling Your Business,” Robb concluded that a term sheet serves to include the price range along with the basic structure of a deal. Importantly, Robb also notes that a term sheet will include whether or not any real estate is included in the deal.
There are other ways of thinking about a term sheet. Author and attorney Jean Sifleet once stated that a term sheet should clearly answer the four all-important questions of: Who? Where? What? And, last but not least, How much?
The Importance of Customization
The goal of any negotiation should be to achieve a win-win for everyone involved. In order to achieve that win-win environment, it is helpful to avoid lawyers, accountants and other advisors who overutilize boilerplate documents or who use adversarial tactics or adopt extreme negotiation positions.
Putting it in Writing
Once a verbal agreement has been reached on the important variables of price and terms, it is critical to put that agreement in writing. It is through this information that the process can move on to the next stage and a more formalized letter of intent can be created. It is important to remember that the term sheet is designed to help both parties and can be used to help a deal take its final form.
Term sheets are an extremely useful and time-saving tool. They orient the thinking of all parties involved in the process and help cultivate a clearer understanding of what the final agreement will look like. Through term sheets, it is possible to avoid misunderstandings and last-minute surprises, which often sabotage deals.
Copyright: Business Brokerage Press, Inc.
The post Why Business Brokerage Professionals Use Term Sheets appeared first on Deal Studio.
Mastering Your Mindset: Strategic Approaches to Selling Your Business
At some point, the odds are exceptionally high that you’ll need to sell your business. Today, fewer businesses are being passed on to the next generation, increasing the likelihood that you will be selling yours eventually. Regardless of your business’ stage of life, the time to prepare for its eventual sale is now.
Many believe that the most effective approach to selling a business is to avoid adopting a purely “selling” mindset and instead aim to position the business to be purchased. Let’s take a look at a historical example. In Cary Reich’s 1996 book “The Life of Nelson Rockefeller”, an insightful anecdote illustrates this point.
In negotiations over Rockefeller’s Mesabi iron ore properties with J.P. Morgan, John D. Rockefeller, Jr. astutely replied to Morgan’s team asking for a price with, “I think there must be some mistake. I did not come here to sell. I understand you wish to buy.” Despite Morgan eventually purchasing the properties, the price was set significantly higher.
The takeaway from the Morgan-Rockefeller interaction is that adopting a “player” mindset can be crucial in achieving success in negotiations and business deals. Never neglect to realize that your mindset going into a negotiation will likely influence its final outcome.
One of the first realities any seller must acknowledge is that selling a business can be emotionally draining. The process demands significant time and thought, and many business owners inadvertently harm the value of their business by neglecting day-to-day operations during the sales process.
It’s advisable to delegate the heavy lifting of selling your business to experts. Most business owners have never sold a business before, and even if they have, they likely lack expertise in this specialized field. When striving for optimal results in any endeavor, seeking the expertise of professionals is always beneficial. A business broker or M&A advisor, for instance, can manage every aspect of the sale—from evaluating offers and structuring deals to vetting serious buyers.
As a business owner, your primary focus should remain on running your business successfully until the day it is sold. This approach ensures that your business maintains its value and appeal to potential buyers throughout the sales process.
Copyright: Business Brokerage Press, Inc.
The post Mastering Your Mindset: Strategic Approaches to Selling Your Business appeared first on Deal Studio.