Surprise #1: Substantial Time Commitment In the real estate business, once the owner engages the broker there is very little for the owner to do until the broker presents the various offers from the potential buyers. In the M&A business, there is a substantial time commitment required of the CEO/Owner in order to complete the sale properly, professionally and thoroughly. The following examples are worth noting: Offering Memorandum: This 30 + page document is the cornerstone of the selling process because most business intermediaries expect the potential acquirers to submit their initial price range based on the information presented in this memorandum. The intermediary will heavily depend on the CEO/Owner to supply him or her with all the necessary facts. Suggestions of Potential Acquirers: Chances are that the sales manager is the only person who knows the best companies to contact and those not to contact (competitors). Arguably, this information should be … [Read more...]
Business Valuation: Do the Financials Tell the Whole Story?
Many experts say no! These experts believe that only half of the business valuation should be based on the financials (the number-crunching), with the other half of the business valuation based on non-financial information (the subjective factors). What subjective factors are they referring to? SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats – the primary factors that make up the subjective, or non-financial, analysis. Below you will find a more detailed look at the areas that help us evaluate a company’s SWOT. Industry Status – A company’s value increases when its associated industry is expanding, and its value decreases in any of the following situations: its industry is constantly fighting technical obsolescence; its industry involves a commodity subject to ongoing price wars; its industry is severely impacted by foreign competition; or its industry is negatively impacted by governmental policies, controls, or pricing. Geographic Location – A … [Read more...]
Do You Have an Exit Plan?
"Exit strategies may allow you to get out before the bottom falls out of your industry. Well-planned exits allow you to get a better price for your business." From: Selling Your Business by Russ Robb, published by Adams Media Corporation Whether you plan to sell out in one year, five years, or never, you need an exit strategy. As the term suggests, an exit strategy is a plan for leaving your business, and every business should have one, if not two. The first is useful as a guide to a smooth exit from your business. The second is for emergencies that could come about due to poor health or partnership problems. You may never plan to sell, but you never know! The first step in creating an exit plan is to develop what is basically an exit policy and procedure manual. It may end up being only on a few sheets of paper, but it should outline your thoughts on how to exit the business when the time comes. There are some important questions to wrestle with in creating a basic plan and … [Read more...]