The Sign Businesses For Sale Blog

The Top Four Reasons Why Deals Fall Apart

It takes a lot of work to buy or sell a business. When a once promising deal is not successful, this can be due to a wide array of reasons. However, understanding the reasons why a deal can fall apart in advance can serve to dramatically increase your odds of success.

Some of the reasons that deals fall apart are reasonable, while other reasons, to be blunt, are unreasonable. Let’s take a look at four common reasons that are seen in the world of business brokerage. 

Reason 1- Financial Issues on the Buyer’s End 

One of the most common reasons that deals fall apart is that buyers simply can’t find the needed financing. Working with a business broker or M&A advisor is a way to safeguard against this outcome, as an experienced brokerage professional knows how to pre-screen prospective buyers to increase the odds of success from a financial standpoint.

Reason 2 – Lack of Financials on the Seller’s End 

A second reason that deals fall apart is that the seller doesn’t have all of their financials in an up-to-date form. Sellers must constantly strive to put themselves in the shoes of a prospective buyer. Virtually no serious buyer would move forward with a deal without having a clear picture of the finances of the business. This is an issue that can be circumvented with the right level of planning and preparation. 

Reason 3 – Last Minute Surprises

A third common reason that deals fall apart occurs when a surprise happens at the last minute. It is almost impossible to safeguard against every possible surprise, however, an experienced business broker knows how to navigate the due diligence process so as to dramatically reduce the chances of unexpected problems. Again, brokerage professionals have tried and tested techniques which help reduce the chances of these unwanted surprises. 

Reason 4 –Business Issues Left Unaddressed 

Preparing a business to be sold isn’t something that happens overnight. Sellers should expect that any serious buyer will do more than “kick the tires,” but will instead have their experts go over every aspect of the business. Administrative, environmental, or legal issues that have not been properly addressed can serve to raise many red flags. Needless to say, this can scare prospective buyers away from a business. There is no replacement for proper preparation and meticulous due diligence months or preferably years in advance.

At the end of the day, there are many reasons that a deal can fall apart. Buyers and sellers simply can’t safeguard against them all. However, an experienced business broker or M&A advisor can often see problems on the horizon. Plus, when you work with an experienced professional, it can help keep emotions in check. It’s important to keep all parties involved focused on success. With the right team in place, it is possible to dramatically decrease the chances of surprise events ruining what would otherwise be a good deal.

Copyright: Business Brokerage Press, Inc.

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6 Critically Important Aspects of Due Diligence

Performing due diligence as a part of your company’s annual review is a smart move and one that can help your business in a range of ways. Through this means, if the day comes that you need or want to sell, then you’re ready to go. There are six key areas of due diligence that you’ll want to consider. These are aspects that most serious buyers will consider when buying a business.

 You can expect any savvy buyer to focus on the following during due diligence if they are truly interested in acquiring your business. Problems in any of these areas could spell serious trouble in the sales process.

  1. Legal
  2. Marketing 
  3. Environmental 
  4. Operational
  5. Management 
  6. Employees

Legal Issues

In terms of legal issues, you’ll want to carefully evaluate whether or not your contracts and agreements are all current. Issues such as copyrights, trademarks and patents should all be examined. Most importantly, if there is any pending litigation it would be best to resolve the matter if possible. Likewise, if there are any potential legal issues, such as lawsuits, looming on the horizon, those issues should be addressed as well. Try and think about what your own lawyer or legal team would want to see out of a business before recommending that you ink a deal. Obviously, these types of legal issues should not and will not simply be overlooked. 

Marketing Issues

Marketing issues should be dealt with as well. Business owners should understand not just their business, but the industry as a whole.

Consider the following questions:

  • Who are the industry leaders? 
  • What is the size of the market? 
  • Who are your current and future customers? 
  • What are the upsides and risks of your products or services? 

You should demonstrate to a prospective buyer that you understand the “lay of the land.” You should be able to convey a strong grasp of how the business is currently positioned and how it may be positioned in the future.

Environmental Issues

One serious environmental issue can derail a deal or even destroy a business. Prospective buyers are very wary of potential environmental issues. Identifying and addressing environmental issues, if possible, should be a key part of your preparation for due diligence.

Operational Issues 

Another key area to evaluate is operational issues. Your company should have an easy to understand program for how products or services are handled at every point of the process. How your goods or services are delivered to the customer shouldn’t be a mystery, but should instead be clearly defined to a prospective buyer.

Financial Issues 

As there is clarity in how your goods or services reach consumers, the same holds true for financial issues. You do not want your finances to seem mysterious. Everything from your inventory and supply chain to your accounts receivable and accounts payable should be well laid out, accessible and easy to understand.

Employees and Management 

Problems with employees or management can spell doom for any company. You’ll want to take steps to cover any potential issues in these areas well before selling.

Working to address these six key areas will help keep your business in a ready to sell posture. While you might not plan on selling today or tomorrow, there is no way to know what the future may bring. It’s best to be prepared.

Copyright: Business Brokerage Press, Inc.

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7 Important Questions to Ask Yourself When Selling a Business

There is no denying the fact that for most people, the decision to buy or sell a business is one of the most important professional and financial decisions that they will ever make. Let’s turn our attention to some of the key questions you’ll need to ask.

1. What is really for sale?

You’ll need to determine what is, and is not, for sale. If you own machinery or real estate associated with the business, are those items to be included in the sale?

2. What assets bring in revenue? 

One important factor to consider when preparing a business to be sold is what assets are earning money. If you have assets that are not earning money, then it may or may not be prudent to sell those assets.

3. What is proprietary?

Buyers and sellers alike will want to consider what is proprietary. Anything from software and patents to formulations can be extremely valuable. Sellers will want to give substantial thought to how to best frame any proprietary property that they have in the best light. Buyers will want to carefully evaluate proprietary property to try to ascertain an accurate value. Outside experts may be needed to make an accurate assessment.

4. What’s your competitive advantage? 

A business’s competitive advantage should be of importance to buyers and sellers. A seller should focus on understanding their competitive advantage, whether it is a certain niche, a superior manufacturing process or product, better marketing or a range of other factors. Properly framing your competitive advantage can help buyers see the full, and even untapped, value of your business.

5. What is your growth potential?

Buyers will want to consider factors such as whether or not the business has the potential to grow. If the business can’t be grown, then buyers should include this fact in their final decision and/or offer.

6. What agreements do you have in place?

Other factors such as employee agreements, non-competes, and the depth of management are all areas of concern for a prospective buyer. Buyers will want to consider if the seller has secured agreements from key employees and how dependent the business is on an owner/manager. 

7. What relevant financial information will a buyer want to know? 

Understanding how much working capital is needed to run the business and how financial reporting is undertaken are other factors that should not be glossed over.

If you are preparing to sell your business it is worth the time to pause and think about what your business might look like to a buyer. In short, what would you think of your business if you were the buyer and what questions would you ask? 

Buying or selling a business is complex. Every single business is different and that means there is no 100% standardized approach and route towards success. A seasoned, experienced and professional business broker or M&A advisor can help guide buyers and sellers alike towards optimal outcomes.

Copyright: Business Brokerage Press, Inc.

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