Around the Web: A Week in Summary
A recent article from Inc.com entitled “Selling a Business in 2019: Three Important Things to Keep in Mind” discusses the factors that sellers should consider when developing their exit plan, according to small business experts.
While sales prices are rising and 60 percent of owners are confident that they would receive a favorable sales price if they sold their business today, it’s understandable that some owners would be tempted to jump into a sale. With the baby boomer generation fueling the market at a rate that is faster than ever, and GDP expecting to slow its pace as we approach 2020, entering the market now becomes even more enticing. However, experts warn sellers not to prematurely jump into a deal and to have a clear and well-thought-out exit strategy to guarantee an optimal sales price and a smooth sale.
Two critical parts of a well-thought-out exit strategy are investing in your business and preparing your financials. Once you’ve made the decision to sell your business, experts suggest determining any key items that will either motivate or deter a buyer from choosing your business over the other businesses on the market. Use these key items to invest in your business and make it more appealing on the market. 2019 is expected to bring multiple increases in the overhead expenses associated with running a business. When preparing your business for sale, make sure you address these concerns and clean up your financials. Be prepared to have a good explanation for any revenue declines.
A recent article from Divestopedia entitled “Position Your Business for the Exit” provides questions to answer as a business owner and resources to use to match your business with a buyer that will purchase your company for a premium.
Based on multiple factors, you have come to a point where it’s time to sell and the only option available to you is to sell to a third party. In order to sell your company for a premium, you need to know the answer to the question “Who will buy my company and what are they looking for in an acquisition?” So how do you answer this question? Focus on these three areas to get clear on your answer:
- Define your value proposition: Get extremely clear on what value your company brings to the table and be brutally honest when rating your company’s performance relative to value drivers. Focus on both strengths and weaknesses to get a clear picture.
- Identify Potential Buyers: There are four main types of buyers; the lifestyle buyer, the industry buyer, strategic acquirers and sophisticated financial buyers. Understand the reason each of these buyers enter the market and what they’re looking for in a business.
- Determine the best buyers for your business: Compare what your business has to offer with the different buyer types and what they’re looking for. Use this comparison to get a good idea who to match up with.
To get the clearest picture of where you and your business stands, you will need current and detailed information about the state of the M&A marketplace. Working closely with an industry expert can help you with this process.
A recent article from Entrepreneur.com entitled “3 Reasons Buying a Franchise Might Be Better Than Starting Your Own Business” explains how purchasing a franchise provides exceptional support and guidance when it comes to getting your business up and running. There are 3 key advantages to purchasing a franchise:
- Carrying the name of an already established business makes it easier to gain new business from startup.
- Cost Benefits: When purchasing a franchise you have to pay a franchise fee, which may increase your initial costs, but it gives you access to many resources that can help your business turn a profit faster than if you were to start up a business from scratch.
- The ability to sell at a higher price when it comes time to exit: A well-known brand and business operations consistency combined with a detailed transition manual provided by the franchisor allows for a smoother transition and a higher chance of profitability for the buyer.