The Sign Businesses For Sale Blog
Understanding the Modern Buyer
A key part of the American Dream is the notion of being financially independent and controlling one’s own fate. While times have changed, the idea of the American Dream is alive and well. Entrepreneurs have long realized that one of the quickest ways of achieving this dream is to own a successful business.
The majority of today’s buyers are well educated and come from the corporate world; however, they are typically not versed in the business buying process. Since these buyers are coming from the corporate world, they are fact-driven, meaning that they want to see the numbers and will pay attention to details both large and small. You can expect these buyers to want to see all necessary supporting documents. They will want to verify everything themselves. Additionally, you can expect them to employ many outside advisors. Summed up, today’s buyer is not an easy sale.
Another key fact about the modern buyer is that they are often what can best be termed as “event driven.” These are buyers that not only want to control their own destiny, but also need to buy a business for some other practical reason. For example, perhaps their current job was downsized or they were transferred to a location where they did not want to move. It is common that people don’t have the courage to quit their current job and say goodbye to the safety of a steady paycheck in favor of a leap into the unknown. It is quite common that there needs to be an event to stimulate the change.
Business brokers and M&A advisors seek to protect their clients while moving them closer to their goals. One of the ways that they can achieve that is by working with only serious and qualified buyers. The process of matching the right buyer to the seller involves asking a series of important questions such as the following:
- Why is the person considering buying a business?
- How long have they been looking?
- What kind of business are they seeking?
- How much money do they have available?
- Have they ever owned a business before?
Every business is different. It should come as no surprise that each buyer out there has a different story and different goals. A one-size-fits-all approach to buying and selling a business simply doesn’t provide optimal results. Working with a qualified business brokerage professional is the easiest way for a seller to not only find the right buyer, but do so with the least stress possible.
Copyright: Business Brokerage Press, Inc.
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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.
The post The Top Four Reasons Why Deals Fall Apart appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
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.
- Legal
- Marketing
- Environmental
- Operational
- Management
- 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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