Is Now the Time To Sell Your Business?

Have you been thinking about selling your business but just can’t decide if now is the best time?  Do you find yourself repeatedly analyzing the economic situation and wishing you had a crystal ball? There are positive signs and there are negative signs….

If you’re still up in the air and can’t quite decide whether or not to hit the eject button, here are six reasons you might want to consider getting out now.

1. You’re less interested in fighting the good fight

A lot of business owners took the Great Recession in the teeth. If you’ve got your business stabilized and the prospect of possibly having to fight through another recession leaves you panic-stricken, it could be time for you to get out.

2. The worst is behind you
Let’s say you were mentally ready to consider selling a few years ago and then 2008 hit and 2009 was bad, and in 2010 and 2011 you made cuts and adjustments, so now you’re starting to see some profit and revenue growth.  With your numbers going in the right direction, now might be just the right time to make your move.

3. The tax man is coming

Governments around the world are looking for money to fund the cost of an aging population. At some point this will mean increased taxes.

4. Nobody is lucky forever
If you’re lucky enough to be in a business that actually benefits from a bad economy, congratulations... you’ve probably just had the four best years of your business life. But no cycle lasts forever and right now might be a great time to take some chips off the table.

5. The coming glut

As a business owner, demographics are not on your side.  As the baby boomers start to retire in droves, we’re going to have a glut of small businesses coming on the market. That’s great if you’re buying; but if you’re a seller, you may want to avoid the flood and head for higher ground now.

6. The closing window

Since 2008, it’s been tougher for private equity companies to raise money; so many firms had their last successful round of fundraising a number of years ago. Many of these funds have a five-year window in which to invest or they have to give the money back to the people who gave it to them. Some boutique private equity firms will make investments in companies that have at least one million dollars in pre-tax profits (larger private equity firms will not go below $3 million in EBITDA); so if you’re in the seven-figure club, you could get a bidding war going for your business among private equity buyers keen to invest their money before they have to give it back.

Sunbelt Business Brokers, Greater Bay Area | (408) 436-1900 | www.sunbeltbayarea.net

10 Planning Tips for Getting Top Dollar When Selling Your Company

Our office is proud to announce our new referral partner – ExiTrak. We are working together to complete a 4-phase process that prepares your company for a strategic sale, as opposed to a merely financial one. 

Here is a great article written by Steve Popell, the designer of the ExiTrak process, which gives a glimpse of what will be covered in more detail in our next Webinar with Steve Popell as Guest Speaker: Planningto Sell Your Company in the Foreseeable Future?  Go Strategic.  ItPays a Lot Better! October 25^th at 2:00pm PST.

Enjoy!

10 Planning Tips for Getting Top Dollar When Selling Your Company

By Steven D. Popell

Originally published in Active Garage, July 12, 2010.

            
 There are two very different reasons why effective long-range planning is critical for getting top dollar when you sell your company.  First, top-notch planning helps you to manage your company better and involve your employees at a higher and more productive level.  Second, but not as self-evident, success in this area is very impressive to prospective buyers.  Why?
Because successful long-range planning (defined as developing a plan, implementing it and achieving most or all of the long-range goals) is indicative of solid and sophisticated management – a highly valuable strategic asset for most acquiring companies.  Here are 10 elements for developing a long-range plan that increase the likelihood of success.

1.     Involve your key people.  For one thing, they will have ideas that are worth considering.  Beyond that, it is axiomatic that the best way to overcome resistance to change is to ensure that those who will be implementing the changes help to determine what those changes will be.  An effective planning group can comprise as few as three people, or as many as 17.  The important thing is that no one who can have a major impact on how the plan is implemented is left out.
2.     Make sure that there is a solid consensus around the vision for the company; i.e. what will be the company’s identity in years to come.
3.     Develop a clear and easily communicated mission statement that expresses what the company does and for whom.
4.     Conduct a SWOT analysis; i.e. identify the company’s principal Strengths, Weaknesses, Opportunities and Threats.
5.     Develop long-range goals that are challenging, achievable and in line with the company’s vision, mission and values.  These goals should be specifically designed to take advantage of strengths and opportunities, while addressing weaknesses and threats.  In addition, ensure that each member of the planning group (and the rest of the staff, as well) can relate the achievement of the company’s vision, mission and long-range goals to a high level of performance in their specific area(s) of responsibility.
6.     Identify outside factors over which you have no control and little, if any, influence.
7.     Short term objectives. Determine what you need to achieve within one year in order to give yourself a leg up in achieving your long-range goals.  But, be cautious with your scheduling.  The biggest mistake most owner-managers make is front loading implementation far too much.  If you are going to make a mistake, especially if this your first planning experience, make it on the low side of delivery.  You can always add short-term objectives later, but if you fail to achieve your objectives, it can severely damage morale.
8.     Attach task assignments, with individual responsibilities and deadlines, to each short-term objective.  Organize task assignments by quarter.
9.     Attach action items to each task assignment.
10.  Conduct follow-up sessions no less often than quarterly.  This step is, in reality, as important as all the rest, because it is all that stands between you and a dusty planning document that fails to impact the future of your company.  Make sure that you are utterly uncompromising in comparing actual performance with plan.  There is no reason to be unpleasant, but papering over poor and/or late performance helps no one.  Most long-range plans fall behind in the early stages, usually because of excessive front loading.  The critical element is that everyone agrees on the relationship between plan and actual performance, and how to get back on track and timeline with any projects that are lagging.

Sunbelt Business Brokers, Greater Bay Area | (408) 436-1900 | www.sunbeltbayarea.net

Does Your Business Have Curb Appeal?

Does Your Business Have Curb Appeal?

Let’s say you’re in the market for buying a house and you go to view one that looks appealing in the ad. How does it look on the inside? The outside? What about the location? What is your general impression?

Like your house, your business projects an image to potential buyers. When they come to see your business for the first time, your “curb appeal” can attract a buyer to your business—or cause them to walk away from it.

Do you need to improve your curb appeal? Here's a three-step plan:

1. Fix Your Leaky Faucets
Perhaps, like many other business owners, you started your business from scratch with one or two employees and now you have 20 people working for you. But do you have the appropriate HR infrastructure in place for that size of a company?  Perhaps you even take pride in your informal management style, but it can prove to be a liability when it comes time to sell.

Make sure your human resources policies are at least as stringent as those of the company you hope will buy your business. Some basics to have in place:

•    A written policy making it clear you forbid any form of harassment or discrimination;
•    A written letter of employment for each staff member;
•    A written description of your bonus system;
•    Written policies for employee expenses, travel and benefits.

2. Assemble Your Binder
When you go to buy a house, it will give you confidence if the owner has the instruction manuals for the appliances, information on where they were purchased, and who to call if one of them breaks down.

Similarly, when a potential buyer looks at your company, he wants to see that you have your business information in order.  Documenting your office procedures, core processes, and other intellectual capital can help you attract more bidders and a higher price for your company, while also lowering the chance of the deal falling apart during diligence. 

If you want to attract a buyer one day, your business needs a binder with instructions for basic functions, such as:

·         Opening up in the morning and closing down at night;

·         Forms and step-by-step instructions for routine tasks;

·         Templates for key documents;

·         Emergency numbers for service providers;

·         Billing procedures for customers.

·         How your company is positioned in the market and your marketing tools.

3. Document Your Intangibles
Intangibles for house buying might include: Is the house near a good school or daycare? What kind of neighborhood is it?  What kind of commute are you looking at to get to work?

Your business also has intangible, often intellectual, assets that a potential buyer needs to be made aware of, such as:

·         Proprietary research you’ve conducted;

·         A formula for acquiring new customers;

·         Criteria you use to evaluate a potential new location;

·         Your unique approach to satisfying a customer.

As with selling a house, your company's curb appeal can go a long way toward closing a deal. 

Curious to see if you have a business you could sell one day? Get your Sellability Score now.

Sunbelt Business Brokers, Greater Bay Area | (408) 436-1900 | www.sunbeltbayarea.net

Maintain Your Mental Well-Being

This week the US government revised the food pyramid — that diagram that's been with us for decades that is supposed to remind people how to eat well. The model needed a revision, and the new version, called Choose My Plate, is a big improvement.

However, there's a different epidemic happening out there that's getting less attention, perhaps because it is less obvious than the epidemic of obesity we're experiencing. It seems we may be entering an era of an epidemic of overwhelm. A time when too many people's mental well-being is being stretched through multi-tasking, fragmented attention and information overload.

The trouble is, we are short on simple, clear information about good mental habits. Few people know about what it takes to have optimum mental health, and the implications of being out of balance. It is not taught in schools, or discussed in business. The issue just isn't on the table. Businesses schedule time as if the brain had unlimited resources, as if we could focus well all day long. Every week I talk to an organization who says that their biggest problem is simply the overwhelm their people are feeling. Without good information about the mind and brain, we may be stretching ourselves in ways that may have bigger implications than poor eating habits.

This platter has seven essential mental activities necessary for optimum mental health in daily life. These seven daily activities make up the full set of 'mental nutrition' that your brain needs to function at it's best. By engaging regularly in each of these servings, you enable your brain to coordinate and balance its activities, which strengthens your brain's internal connections and your connections with other people.

The seven essential mental activities are:

Focus Time. When we closely focus on tasks in a goal-oriented way, taking on challenges that make deep connections in the brain.

Play Time. When we allow ourselves to be spontaneous or creative, playfully enjoying novel experiences, which helps make new connections in the brain.

Connecting Time. When we connect with other people, ideally in person, richly activating the brain's social circuitry.

Physical Time. When we move our bodies, aerobically if possible, which strengthens the brain in many ways.

Time In. When we quietly reflect internally, focusing on sensations, images, feelings and thoughts, helping to better integrate the brain.

Down Time. When we are non-focused, without any specific goal, and let our mind wander or simply relax, which helps our brain recharge.

Sleep Time. When we give the brain the rest it needs to consolidate learning and recover from the experiences of the day.

We're not suggesting a specific recipe for a healthy mind, as each individual is different, and our needs change over time too. And we're not suggesting that business suddenly changes everything and reorganized all of work. The point is to become aware of the full spectrum of essential mental activities, and just like with essential nutrients, make sure that at least every few days we are nudging the right ingredients into our mental diet.

Just like you wouldn't eat only pizza every day for days on end, we shouldn't just live on focus time and little sleep. Mental wellness is all about giving your brain lots of opportunities to develop in different ways. In organizations, from a practical perspective, this means allowing people to work from home more, to be more flexible, to give people more autonomy.

In short, it is important to eat well, and we applaud the new healthy eating plate. However as a society we are sorely lacking in good information about what it takes to have a healthy mind. We hope that the healthy mind platter creates an appetite for increasing awareness of what we put into our minds too.

Buyers--They are a changing!

In the past the private equity groups (PEGs) were only made up of a few strategic buyers and mainly were financial buyers who looked for undervalued companies to go in and build and sell in a few years for a nice profit.

This has changed. If you are planning on selling, you can expect primarily strategic buyers who are hoping that your company fits into their larger investment strategy. Also count on fewer buyers knocking at your door.

Hard Financial Times

If you have heard that there were fewer Mergers and Acquisitions (M&A) transactions completed in 2008 versus the previous year, you heard correctly. According to Piper Jaffray, there were $29 billion in M&A deals (212 deals) in the first quarter, compared with $219 billion (1,147 deals) over the same period the year before.

Access to capital is more limited, especially for smaller, less-capitalized companies. Issuance and trading are down in markets such as bank loans, mortgage-related financing, auction-rate securities and other formerly liquid sectors. Many major Wall Street institutions are avoiding making unwise choices right now due to what they saw happen to Bear Stearns.

Recession Proof Businesses? Do they really exist?

Yes, they do. People still need to buy things. The trick is finding the businesses that offer products and services that are always in demand or are necessary. These businesses can be solid investments during tough times. To make the chances of success even better, the business needs to offer a structured marketing and business model to help the new business owner get to a running start more quickly. Franchises offer the edge that other opportunities do not.

All the gloom and doom that we are reading about out there makes the idea of starting or getting into business for yourself sound a bit crazy. Still businesses have thrived during past recessions and many will flourish this year. Both Microsoft and Google either started in, or accelerated through downturns early in their lives.

A few ideas for recession proof franchises offered are:

Education is probably not going to change a lot even during a recession. Tutoring is still going strong because parents want the best for their children no matter what is happening in the economy.

Temporary Staffing Agencies- Historically a recession actually can help in the growth of temporary staffing. While companies are laying off hundreds of workers, they still need the jobs done, so this can be the stop gap measure to save money and still be productive.

Health and Beauty- This is a business that cannot be outsourced or done oversees for you. It is a needed service, and if a family can have it done economically, the business will thrive. Fitness centers are also still doing well. We know that staying healthy and exercise is the key to a long healthy life, so we don’t cut corners when it comes to that.

Home Improvement Companies- Most people are staying put and not moving to larger homes, so they fix up their existing homes. Home improvement companies continue to thrive no matter what the economy is doing.

Health Care Businesses- Health care companies generally do well because in a recession, people get sick just as much and sometimes more than boom times. Since there are more and more baby boomers having the responsibility of taking care of their parents, home health care and health care products have a very good chance of doing quite well.