Archive for category: Prep Your Business For Sale

One of the biggest values we add to any transaction is helping to coach sellers on the various buyers that may line up to buy their business.  

We want to negotiate leverage and make buyers compete for a sale. We can only do that if we convince our sellers to be patient and to not only go down one road too quickly.

Patience and prioritization are key to a successful exit.

Strategic Buyers

When prioritizing buyers, strategic buyers are definitely at the top of the list. This is in part because they can often offer higher valuations, but also because they may already possess a great deal of knowledge about your business and have great motivation.  

These can often be (but aren’t always) competitors, suppliers, or customers who have known you and your team a long time, and as such, don’t need a “getting to know you” period.

What they may need instead is an intensive due diligence process. This is because they may be looking to acquire your company as a turnkey expansion into a market and leverage back-office economies of scale.  

They will want to examine synergies and business processes in depth to make sure joining forces won’t be overly difficult or challenging. Strategic buyers may also be private equity firms who think they can manage your company better than you and plump it up for an even larger acquisition down the road.

Don’t take it personally! Just smile and take the money.

Financial Buyers

However, many of our transactions don’t involve strategic buyers at all but are entirely composed of financial buyers. Their priorities are getting a reasonable return on investment, good growth opportunities, competitive advantages, a growing market, and strong fundamentals – be it great management or reliable staff.  

They’re willing to wait for their return, but not forever. They will also often have to line up financing, unlike strategic acquirers, which can lengthen the time of a transaction.

When we as brokers prioritize buyers to our seller, we do so taking a number of factors into account, including our own sense of the various situations and actors.  

We’re looking not just to close a sale, but to make sure there’s a good match between buyer and seller so that the transaction closes well for everyone.

We believe in win/win…always.

One of the advantages of hiring an APEX broker is knowing that we won’t introduce you to a buyer who isn’t financially qualified, or a seller who doesn’t have his/her paperwork in order. Give us a call today, whether you’re a serious buyer looking to buy or a motivated seller who is serious about selling.

In a previous article, we discussed various signs that it’s the right time to sell your company.  

What so many people see as ultimately mostly a financial transaction is possibly going to be one of the most emotional things they ever experience.  

So, even clicking through to read an article with such a title as “Is it time to sell?” means you’re contemplating it in the near future, or you want to inform yourself on future possibilities.

Whatever the reason, there are three things we want you to think about.

Clearly articulate your why

“Why do you want to sell?”  You may think this is a question only your family and friends will pose to you, but we promise that every single potential buyer will ask this question, particularly if your business is doing well.  

Often “I’m tired” or “It’s time” is plenty good enough, but that needs to be framed within a position of growth and optimism.  Buyers don’t often want something that promises a flatline future.

Whatever your why is, make sure you consider how it sounds to someone who wants to buy your business.  If you don’t like how your reason sounds, that’s a good opportunity to step back even further to get a better perspective.

Sometimes you need to look at the really big picture to appreciate the details.

Spring Clean

We’ll be honest.  We sometimes see complete disasters when it comes to financials and taxes.  Taxes haven’t been paid for years and the financials wouldn’t even have passed the smell test at Enron. Don’t wait for an imminent sale to get your business house in order.  

A potential buyer is often scared off a “fixer-upper” when it comes to a business, and the very first thing we will ask you when considering listing your business is for the last 3-5 years of financial statements and tax filings.  

Even if you don’t end up selling your business, you should want that feeling that comes with any spring cleaning…the relief that it’s done and wondering why you didn’t do it sooner.

Have a conversation

Talk with your family and trusted friends and confidantes.  Figure out what’s next for you.

We often see business owners who, after the sale, simply wander figuratively or literally, being cut off from what gave them a purpose for so many years.  

By taking that time to think about what’s next, you can go from a passive seller who is ready to move on to an active seller who is moving (or running!) towards what’s next.

That will give a potential deal momentum, and also fuel the narrative for a potential buyer that you’re looking forward to what’s next.

Of course, we welcome conversations with us as well!  With centuries (yes, literally) of experience in our office, we’ve got a broker who will suit your needs and help you through this important next phase in your business and stage in your life. Give us a call.

Selling a business is fraught with all sorts of challenges. One of the most important ones is how to deal with employees. If handled thoughtfully, they can make the transition almost effortless. If handled poorly, you could end up with a deal that doesn’t close.

Do you tell them or not?

Keeping a sale confidential is critical for both seller and buyer. If the seller discloses that the business is for sale, employees might start looking elsewhere because they (understandably) fear change and worry that a buyer will eliminate their positions.

Customers may look for a new supplier because they think you’re going out of business, and vendors may change payment plans to COD! These are just a few of the obstacles when disclosing that your business is for sale. Trust us, we’ve seen it all. People love to gossip and tend to imagine only the worst!

Buyers expect that a seller will operate their business in a normal fashion until closing which can be difficult if the seller is constantly putting out the fires due to the rumor mill.

Additionally, there are legal limits to what can be disclosed to others before and after closing.

All that said, there can be exceptions to the rule of keeping a sale quiet from your staff.

If you’re ready to retire and your employees know that you’re seeking a buyer, there are ways to handle a transition to accomplish the goals of both the buyer and the seller.

Since you’ve already disclosed that you’re looking for a buyer, your staff can assist in ensuring a transition process is in place. It shows them that you’re being transparent with them and that you want to share what’s happening.

You don’t have to give a play-by-play, but try to make yourself available to them to answer anything you can.

If you can ensure that the buyer is going to keep the employees, that will be even better. It will go a long way to quelling fears they might have about having to start looking for work elsewhere.

It might also be worthwhile to have the staff write out a vision about their position and where they see themselves in the company in the coming years. The buyer will appreciate such documents. It will also give them time to think about the best way to work with these employees.

Share the wealth

Consider a transition bonus. In order to give the buyer confidence that the staff will stay in place, you can give the employees a bonus for staying on for a given period of time, say 6 months or a year.  

Some business owners have even given key employees a percentage of the sale proceeds. This serves as a thank you for their years of dedication and assistance with the transition.

Continue on as normal

Regardless of your approach, it’s important as closing day approaches to continue to run your business as you normally would. Things change and deals can fall apart, so don’t be left in a lurch!

There are many reasons why you might not be able to sell your business, but today we want to focus on three in particular. Think of them as the ghosts of business past, present, and future.

1.The Ghost of Business Past: You have a lopsided company

Now, many businesses started with “that one client” which may have carried them through those long and lonely nights at the beginning, but for a business to truly become something other than an owned job, it needs to have a diverse client portfolio, revenue-wise.

If your business is lopsided it’s unattractive to buyers because they will naturally and obviously ask, “Well, what happens to this business if your major client goes out of business, gets acquired, or goes into crisis?”

Since you’re not in charge of your client’s business, you probably don’t know how or when any of these eventualities could occur, but more importantly, you probably don’t have an exciting answer which replaces all that revenue.

2.The Ghost of Business Present: You have no recurring revenue

While not every business will work on a subscription model, it’s definitely a trend in multiple industries to pivot to create more steady and dependable revenue streams.

While some of these pivots might be obvious, like flower companies offering a monthly subscription for both personal and corporate clients, the unexpected one that got large scale adoption was Amazon Prime: an annual recurring fee that actually led customers to buy more from the mega-giant.

If you want to learn more about this trend (and get some ideas for your business) you should read John Warrilow’s The Automatic Customer.

3.The Ghost of Business Future: The company can’t make it without you

How often are you on vacation, and how long can those vacations be?  The best answers are, “Often,” and “however long I want,” but obviously preferences are different for each business owner. The wrong answers are definitely, “Never,” and “not more than a few days.”

This indicates a strong dependence upon you – whether it’s because you are the secret sauce in the sales cycle, because you are the only manager who can keep your team on task, or because you are simply too involved in day-to-day operations to be gone for any amount of time.

This screams “owned job” to a potential buyer and if that buyer loves your industry and wants to get involved right away, that might be a great play for them, but nine times out of ten they’re going to see this situation as a giant red flag, that an owner hasn’t created systems to make the company survivable without his/her daily blood, sweat, and tears.

Remember that Scrooge was able to send away the ghosts at the end of A Christmas Carol by promising to amend his life. Take a look at your own business to see if any of these ghosts are hanging about.

And then get rid of them.

Apex is actively looking for Advisors to join our team. If you or someone you know would like to learn more, contact Doug Hubler at or 913-433-2303

Creating business value normally requires that the business owner be intentional about their business. That means there’s a business plan, business strategy, and an exit strategy. The business value has various elements, including:

Profitability – Assuming the owner wants to make money, showing a nice profit is first and foremost.

Accurate financial record keeping – This is critical to ensure that the business is operating the way you think it is. It can identify problem areas and opportunities.

Reporting income – Hiding income is a great way to go to jail and lose value.

Diverse clientele – If Walmart is your only customer, start planning your next venture.

Quality service – Having a quality business will lead to new customers through steady referrals.

Social media presence – Everyone will look for a website, Facebook, LinkedIn, Twitter, etc. Strive for more online activity.

Management structure –  The owner can’t/shouldn’t run the whole business by themselves. If the owner is delegating more to trusted staff, buyers will have more interest.

Positive growth trends, barriers to entry, no legal issues, and more…

Profitable businesses can still have poor marketability, so understanding how buyers look at businesses is really important PRIOR to trying to sell.

If you or someone you know is interested in buying or selling a business, please call us at 913-383-2671 or contact one of our Apex Business Advisors today!