Exit Strategies Insights

Industry insights, knowledge base and announcements for business owners and professional advisors

The Seven Stages of Selling Your Business

Smart preparation and planning can help you build a business that’s ready to sell when you are. Ideally, you’ll start preparing for sale early in your business life-cycle. The more you know about what buyers want, and what you can expect from the market, the more options you’ll have to exit your business and maximize value upon exit. Seven Steps in the M&A sale process: 1. Status and strategy:  The first step is to check …

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M&A Advisor Tip: Organize Your Financials

Buyers that pay top dollar usually expect to see clear, well-organized financial statements prepared according to generally accepted accounting principles (GAAP) and reviewed by a reputable CPA firm. If your business has more than $10 million in revenue, you should probably start investing in annual financial statement reviews at least three years prior to selling. Or, have a transaction-oriented CPA firm complete a “quality of earnings” report prior to going to market. For a referral …

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Valuing a Business in Bankruptcy

According to data collected by the U.S. Bankruptcy Courts, business bankruptcies declined from 60,750 (or 4% of total filings) in 2009, just after the 2008 financial meltdown to approximately 22,750 in 2019 (or approximately 3%).[1]  With overwhelming challenges ahead as a result of the Coronavirus Pandemic, the question is not if these filings will go up over the next 12 months but by how much. Before I dig into valuing a business in bankruptcy, let’s …

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COVID-19 M&A Update: Survival Mode

As of 4/6/2020 The fact is, no one knows when this public health crisis will be resolved or when commerce will return to normal. The fact is, most businesses are struggling. They have scaled back or stopped operating. Leaders have taken quick decisive action to stem losses and preserve cash. They are taking advantage of government assistance. Luckier ones are less affected; some are thriving. Indeed, these are unprecedented times. Affected company leaders are taking …

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The Value of a Sell-Side M&A Advisor to Buyers

Strategic and financial buyers often tell me how they appreciate the value that experienced, ethical and professional sell-side M&A advisors (a.k.a. business intermediaries, investment bankers, or business brokers) bring to a deal; even when that advisor represents the seller! As a buyer, you can expect a sell-side M&A advisor to help by compiling, analyzing and serving up relevant business information, by bringing transparency to the process, by facilitating the process, by introducing funding sources and …

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Market Pulse: Selling Price vs Asking Price

How much do businesses actually sell for as a percentage of asking price?  The following chart shows the results of this survey question from the latest Market Pulse Survey. Presented by IBBA and M&A Source in Partnership with Pepperdine University The groupings in the chart are selling price ranges for deals, in US dollars.  It should be noted that most $5-50 million enterprise value companies go to market without a price. Each quarter, the M&A …

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M&A Advisor Tip: Know when it is time to sell.

When you no longer have the fight, get out of the ring. Burnout is the second leading reason business owners sell, after retirement. Many business owners hold on too long, long after their drive has gone. When that happens, the business stops growing or even starts going backward – and the value of the business declines. The best time to sell is when you’re energized and motivated by your work. If you see burnout on …

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Selling Your Business to a Family Office

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, …

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Company Size Matters in Business Valuation

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 …

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The Four P’s of Selling a Business

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 …

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