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Exit Planning Insights
The happiest business owners know what’s next
October 8, 2021 / in Exit Planning, Sell a Business / by Al Statz
I had the privilege of chatting with Bo Burlingham, former executive editor for Inc. magazine and author of several books, including Finish Big: How Great Entrepreneurs Exit Their Companies on Top. We talked about one of the key discoveries that led to the book, namely that so many business owners were unhappy after selling their companies. It didn’t really matter how much someone got for their business – some sellers were delighted while others were …
M&A Advisor Tip: Time Kills All Deals
October 8, 2021 / in Exit Planning, Sell a Business / by Al Statz
More than purchase price or structure, time is the most likely reason a business sale will fail. Time breeds frustration and fatigue. From irascible attorneys to disorganized brokers and licensing issues, plenty of factors can bog down a deal. Sooner or later one party or the other gets fed up and rationalizes, “It wasn’t meant to be.” Your advisor should have a reasonable client load (no more than four or five is ideal) so they …
M&A’s dirty playbook
September 23, 2021 / in Exit Planning, Sell a Business / by Al Statz
If you work in M&A, you can take a class on how to take advantage of people. It’s true! Buyers can go through mergers and acquisitions training, at some of the most prestigious universities, learning how to pay as little as possible for a family-owned business or privately held company. M&A transactions are complex, and it’s natural that buyers and sellers will have some competing interests. When both parties come to the table in good …
M&A Advisor Tip: Take a vacation to grow your value
September 23, 2021 / in Business Strategy, Exit Planning / by Al Statz
Build a strong management team and work on transitioning yourself out of the business. Buyers want to see that the business can run—and run well—without your constant attention. What would happen if you took the summer off? What would you come back to? If the answer is locked doors, then you’ve got some work to do. If your team might call you and have a meeting once a week, you’re moving in the right direction. …
Secure Your Final Exit
September 13, 2021 / in Business Valuation, Exit Planning / by Victor Vazquez
A significant concern for the seller of a business who retains a minority position after a sale, is how to sell the remaining shares if things do not work out as expected. This type of sale is commonly referred to as a majority recapitalization. There are many ways things can go wrong. But since the seller no longer has control over the company, they face the challenge of how to facilitate a final exit. Imagine …
Keep widening your moat
September 10, 2021 / in Business Strategy, Exit Planning / by Al Statz
When buying a business, one of the qualities buyers look for is barriers to entry. The harder it is for someone to get started in your business or take away your customers, the bigger the barrier. When investing in businesses, Warren Buffet talks a lot about moats. “In business, I look for an economic castle protected by unbreachable moats,” he says. “If you have an economic castle, people are going to come and want to …
M&A Advisor Tip: Stay Bonuses Add Value
September 10, 2021 / in Exit Planning, Sell a Business / by Al Statz
Confidentiality is important in a sale. But what do you do when critical employees must be informed? We recommend stay bonuses. A stay bonus provides an incentive for key employees to cooperate and assist with a sale. We see stay bonuses ranging from 20% to 100% or more of an employee’s salary. It’s common to allocate around 50% percent at closing and 50% six months or a year later. Buyers want assurances the management team will stick …
Can I retire if I sell my business?
September 7, 2021 / in Business Valuation, Exit Planning, Sell a Business / by Al Statz
Not every business owner wants to retire, but most do, someday. And in my experience as an M&A advisor, when an owner is ready, they want to move quickly. However, for business owners who have most of their net worth tied up in an enterprise that they personally manage, retirement planning is more complicated. If you are a business owner, obtaining answers to these two simple but powerful questions will bring clarity to your retirement …
How three private equity firms valued the same company
August 4, 2021 / in Business Valuation, Exit Planning / by Al Statz
As part of our annual State of the Market M&A conference, held virtually this winter, we invited three private equity (PE) firms to review and submit an offer on a hypothetical company. They revealed their offers at the conference, and we held a panel discussion on why they valued the company the way they did. We keep the invited PE firms confidential. They don’t know who else will be submitting “offers,” so there’s no collusion or comparing notes ahead of time. Because …
M&A Advisor Tip: Fix Gas Guzzler Before a Sale
August 4, 2021 / in Exit Planning, Sell a Business / by Al Statz
Working capital is like gas in a car—it makes your business go. So when buyers acquire a company, they expect some “fuel” to be included in the tank. But when business owners get successful and comfortable, they get lax about working capital. They establish a habit of fast payment, slow collections, and excess inventory, and they turn their well-oiled machine into a gas guzzler. Go into a sale in this condition and you’re basically giving away money. …