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M&A Advisor Tip: Drive Cash to the Bottom Line
March 4, 2020 / in Exit Planning, Sell a Business / by Exit Strategies
We all like to save money on our taxes. But hiding personal expenses in your tax return can do more harm than good. Most businesses are purchased as a multiple of cash flow (roughly EBITDA less capital expenditure needs, less increases in working capital as the company grows). If buyers and lenders can’t find your personal expenses in the financials or if the adjustments are so severe they border on tax evasion, they’ll be suspicious …
Three Questions to Ask for Growth
February 19, 2020 / in Business Strategy / by Exit Strategies
This is the time of year when business leaders make resolutions, update strategic plans, and generally take stock of their organization. I’m planning to do a similar assessment, but this year I’m going to look in the mirror. I’m going to reach out to 15 to 20 people and ask these three questions: What two things should I continue to do? What two things should I start doing? What two things should I stop doing? …
M&A Advisor Tip: When the Kids Don’t Want the Business
February 19, 2020 / in Exit Planning, Sell a Business / by Exit Strategies
Many business owners are surprised to find out their kids don’t want to take over. Maybe the kids never wanted it. Or maybe they changed their mind after working in the business for a while. Either way, some business owners get caught having to make quick decisions about transferring their company to a third party. Our advice: Talk to an M&A advisor, EVEN IF you plan to sell to your kids. It can take years …
M&A Advisor Tip: What Does It Feel Like When You Sell?
February 1, 2020 / in Exit Planning, Sell a Business / by Exit Strategies
“Immense satisfaction tinged with loss.” That’s how one business owner described selling his business. After putting years of hard work into building a business, many owners have a hard time letting go. Emotions run high, and those emotions can lead to some regrettable decisions. As advisors, part of our role is to help you make sound choices when it comes to selling your business. We can help you sort through your emotions and your goals …
Building Value Means Building Leaders
February 1, 2020 / in Business Strategy, Sell a Business / by Exit Strategies
It’s the New Year, that time when many business owners make a fresh resolve to develop their business. For some, that means updating equipment and driving sales. But others will focus on something more personal and possibly more pivotal: developing their leaders. GF Data shows that a solid management team will increase the valuation multiple. For smaller businesses, the quality of your management team can be an even bigger factor, influencing whether your business sells …
5 Ways to Make Your Business More Sellable, Right Now
January 22, 2020 / in Business Strategy, Exit Planning / by Al Statz
It was time. After 30 years running their small 25-employee company, Frank and Martha were ready to retire to the Oregon Coast. To their surprise, after a 12-month listing with a business broker, there were just a few interested parties and no offers. Instead of enjoying retirement, Frank and Martha are now a year older and no closer to retirement. For them, preparing to sell was an after-thought. Regretfully, this scenario plays out often. Many …
M&A Advisor Tip: Earnouts Break Valuation Deadlocks
January 17, 2020 / in Sell a Business / by Exit Strategies
Earnouts are often used to bridge a valuation gap between a buyer and a seller. It’s a compromise, of sorts, to break a purchase-price deadlock when the seller wants more than the buyer is willing (or able) to pay. In an earnout, a portion of the purchase price is paid out later, based on the company’s financial performance over time. Earnouts typically last from 1 to 3 years, subject to negotiation. Some earnouts include acceleration …
‘No Shop’ Protects Buyer Investment in M&A
January 17, 2020 / in Acquire a Business, Sell a Business / by Exit Strategies
A no shop provision is an important part of M&A transactions. Also known as an exclusivity clause, a no shop clause prohibits the seller from sharing information or negotiating with other would-be buyers for a specified time frame. Prior to this, the seller is negotiating with several buyers. The goal is to entertain multiple offers and figure out which buyer will ultimately provide the best deal for the seller. Once the seller has identified their …
How Key Employees Factor into a Business Sale
January 15, 2020 / in Exit Planning, Sell a Business / by Al Statz
One of the negotiations we get involved with as M&A advisors is retention of key employees. Nearly every private business in every industry has a few “indispensable” employees. Before taking a company to market, we work with clients to evaluate key-person dependence and develop strategies for retaining key employees. This article offers help in identifying key employees in your business. On one hand, having key employees is a selling feature of a business. But, when …
Secrets to Business Valuation – a Lesson from Curly
January 8, 2020 / in Business Valuation, Exit Planning / by Al Statz
Remember that scene from the 1991 movie City Slickers where Curly (Jack Palance) shares the secret to life with Mitch (Billy Crystal) shortly before he dies? Curly holds up his index finger and says to Mitch that the secret to life is to figure out his one thing and then stay with it. Channeling Curly today, I will share with you the three things that determine the value of any operating company, with rare exception. …
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