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Selling Your Business to a Family Office
March 20, 2020 / in Exit Planning, Sell a Business / by Exit Strategies
Business owners looking to sell their business, or attract an investment partner, may want to add family offices to their outreach strategy. These private family firms, established by high net worth families to manage their wealth, can offer unique advantages. While family offices aren’t new, they have become more active in M&A in the last decade. In the past, family offices may have looked to private equity firms as a resource to grow their wealth, …
Company Size Matters in Business Valuation
March 9, 2020 / in Business Valuation / by Joe Orlando
According to well-known business valuation authority Dr. Shannon Pratt in his book The Market Approach to Valuing Businesses, “smaller companies in most industries tend to sell at lower multiples of most financial variables than larger companies in the same industry. This conclusion, reached from analysis of market data, is consistent with income approach (cost of capital) research, which shows that smaller companies have higher costs of capital (higher discount rates) than larger companies. Higher discount …
The Four P’s of Selling a Business
March 4, 2020 / in Exit Planning, Sell a Business / by Exit Strategies
Marketers sometimes talk about the four p’s (product, placement, price, promotion) of marketing. Known as the “marketing mix,” the emphasis a company puts in each area can have a direct impact on sales and profits. And while selling a business is not like selling a product, we can use this idea to think about how certain factors impact a company’s value and sale readiness. The right mix will make your company more desirable to buyers …
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 …