Around the Web: A Week in Summary
A recent article from Inc.com entitled “Why Every Small Business Owner Needs to Start Their Succession Planning Now” discusses the reasons why it’s important to have an exit plan in place even if you’re not ready to exit and what needs to be a part of the exit plan.
For many small business owners the most ideal exit is when they decide to retire. However, life can throw some unexpected curve balls at you, and your business. Having an exit strategy in place even before you’re thinking about retiring can make sure that if something unexpected does happen, your business continues to operate smoothly, the right people inherit the business and that you are able to exit under fair circumstances. Here’s what you need to consider when developing an exit strategy:
- Gather financial documents, proactively organize them and keep them up to date.
- Establish buy-sell agreements.
- Identify potential successors.
- Consolidate all account information.
Proper succession planning involves consideration and planning and should be started on day one so that when the time comes to exit your business it’s a smoother transition for everyone.
A recent blog post from Exit Promise entitled “Letter of Intent: Saving You Time & Money When Buying or Selling a Business” explains what a letter of intent is, why it’s important and what should be included in it.
An LOI is one of the first documents to formalize the first stages of a business transaction. It includes, among other things, the buyers intent for the future of the business, a price or a price range, transition agreements and a mutually agreed upon deadline for negotiations. Often, the letter of intent is a starting ground for negotiations and can have provisions added to it stating which portions of it, if any, are legally binding.
Because a letter of intent is founded on good faith, it can both afford the buyer and seller protections as well as end up as a trap for those who aren’t careful. For these reasons, it’s important to have legal counsel involved on behalf of both parties when negotiating an LOI.
A recent blog post from BusinessBroker.net entitled “Top Five Things to Review Carefully Before Buying a Business” details several key areas to examine when you are considering buying a business:
- Services or products sold: be certain that the product or service being provided by the business is one that you support and believe in.
- Finances: Make sure the business’s financials are accurate and in good standing. Walk away from any business that doesn’t provide complete and accurate financials.
- Quality of a Plan: Go over their business plan to make sure that the goals and accomplishments of the business align with your goals and ideas.
- Customers: Look to see if the current customer base has room for growth and is setting you as a potential new owner up for success or tough roads ahead.
- Performance and progress: Take a good look through the expenses, income and employee structure of the business and evaluate the efficiency level at which it is being run.
There are many things to look at when comparing businesses for sale and deciding which one to buy, but these are some key ones to help you get through the process.