Set a fair price
Business owners have a tendency to set a price in their mind well before performing independent input. The price is the single most important issue to both the buyer and the seller. The goal is a valuation in which both parties obtain their objectives not one in which the other was hoodwinked. Seek the advise of a valuation professional and an M&A intermediary to obtain an informal market comparable, from their set the price range you are willing to work within.
Use outside Professionals
You are an expert at running your business-not selling it. Cashing in your hard earned equity takes preparation, introductions, networking, presentations, and negotiation so don't hesitate to leverage the expertise of other professionals (accountant, lawyers, financial advisers, brokers). Remember you are still running a business and you will add maximum value by making sure sales, operations and morale stay high.
Be proactive it's your company
Using outside M&A professionals makes sense but that doesn't mean you can divorce yourself from the process. You are the key in instilling the confidence in the buyer that operations will continue successfully with new ownership. Your interaction with the buyer will have impact on the success of the transaction. In addition the economy presents several issues that can cause a buyer to hold back. Anytime you can provide reassurance and a convincing road map for the future success of the business the odds of closing and closing at a higher multiple are increased.
Be convincing but!
You want to portray your company in the best possible light with the best possible future but don't exaggerate beyond reasonable salesmanship. You can restate financials but don't fabricate or distort projections or cover up problems, any miss representation will be a serious red flag when discovered during the buyer due diligence. Use your advisers to pre-screen all released information.
Do due diligence on any prospective buyer at the outset!
Early pre-qualification of a prospective buyer is absolutely essential and will protect sensitive information about your company from falling into the wrong hands. Your and that of your advisers due diligence up front will ensure that only qualified buyers have access to the key details of your company and potentially save you an enormous amount of time. Pre-qualification isn't an option it is a must!
Confidentiality
Confidentiality is very important, if word gets out that your company is on the market, it could adversely affect sales and your employees. Good professionals can actively market your business but keep that information away from supplies, competitors, customers and employees. Be sure to have an active discussion on who not know.
Tuesday, August 31, 2010
Tuesday, August 10, 2010
Exit Strategies for selling your business
Building a successful business does not mean that one has allowed for a successful exit, yet that is the reason entrepreneurs, owners or managers started on the private business path originally. It is not enough to build a business worth a fortune, at some point in time that fortune has to be realized. Successful sellers are building companies that run well without them and that will allow for easy transfer of ownership.
Lack of preparation is a common mistake that business owners make. Financial reporting, tax accounting, asset management, real property, employees issues and of course cash flow all have a significant impact on the pot of gold at the end of that well built rainbow. This preparation doesn't happen overnight the time to start preparing a business 4-sale is right now, the longer the preparation time the better. Focusing on EBITDA, improving ratios, consistent performance and a supportable business plan will add significantly to the earnings multiple obtained.
Lets say your ready to cash in some or all of your well earned equity value how should/could you go about it?
Milk the Cash Flows; I am sure you have heard the expression "Cash Cows" one good exit strategy is to turn your company into one. Stop investing in new equipment or technologies and instead pay yourself a high salary. What is wrong with a 30 hour work week and a 7 figure income? Besides since the company will most likely be valued on some form of adjusted EBITDA short term milking may actually produce your greatest total return via generating large cash flows prior to a sale of the company. Of course ordinary income is taxed at the highest rates and another negative of milking is, if prolonged, the company will eventually dry up and leave your valued employees out of a job.
Sell Part of the Company; It is surprising how many Owners fail to consider this option. There are many equity groups and investors who are willing to buy a portion of a business thereby enabling a nice payday (at capital gains rate) while retaining a share of a growing company in which to participate. Alas, the big problem here is that entrepreneurs are not likely to take kindly to someone else telling them how to run "their" company. It is unlikely that an owner would be cashed partially out without giving up controlling interest. That may be a small concession to make given the chips that get cashed in as well as "other peoples money" that is going to be invested to help the minority interest grow bigger and there is the transition period where the owner gets to stay at the helm with a nice salary and a 30 hour work week, not bad!
Sell All of the Company;
Management Resource, is a Merger and Acquisition Intermediary affiliated with The Gottesman Company we offer over 25 years of experience, integrity and support to middle market companies.
PH. 253-353-2725
Lack of preparation is a common mistake that business owners make. Financial reporting, tax accounting, asset management, real property, employees issues and of course cash flow all have a significant impact on the pot of gold at the end of that well built rainbow. This preparation doesn't happen overnight the time to start preparing a business 4-sale is right now, the longer the preparation time the better. Focusing on EBITDA, improving ratios, consistent performance and a supportable business plan will add significantly to the earnings multiple obtained.
Lets say your ready to cash in some or all of your well earned equity value how should/could you go about it?
Milk the Cash Flows; I am sure you have heard the expression "Cash Cows" one good exit strategy is to turn your company into one. Stop investing in new equipment or technologies and instead pay yourself a high salary. What is wrong with a 30 hour work week and a 7 figure income? Besides since the company will most likely be valued on some form of adjusted EBITDA short term milking may actually produce your greatest total return via generating large cash flows prior to a sale of the company. Of course ordinary income is taxed at the highest rates and another negative of milking is, if prolonged, the company will eventually dry up and leave your valued employees out of a job.
Sell Part of the Company; It is surprising how many Owners fail to consider this option. There are many equity groups and investors who are willing to buy a portion of a business thereby enabling a nice payday (at capital gains rate) while retaining a share of a growing company in which to participate. Alas, the big problem here is that entrepreneurs are not likely to take kindly to someone else telling them how to run "their" company. It is unlikely that an owner would be cashed partially out without giving up controlling interest. That may be a small concession to make given the chips that get cashed in as well as "other peoples money" that is going to be invested to help the minority interest grow bigger and there is the transition period where the owner gets to stay at the helm with a nice salary and a 30 hour work week, not bad!
Sell All of the Company;
- Friendly's - Family, Managers, Employees (ESOP) or partners, this is not the avenue to rake to get the maximum price but it may well be the emotionally the best. There are capital; sources available to fund partial management or employee buyouts.
- Strategic- Sell to a company within the same industry or similar customer base. The concept here is that synergies in management, sales and technologies will drive greater value (and thereby valuation) when combined.
- Private Equity Group-(PEG) there are numerous private equity groups looking to acquire good companies. But excellent preparation is the key to quickly instruct the PEG in the industry, niche and forward looking business plan. Most but not all PEG's are looking for continuation of existing management and would look to incentivize those who stay on. In addition many PEG's have portfolios of similar companies and by becoming part of the portfolio a company gains synergistic benefits.
- Individual- their are private investors who are looking to purchase and run a company and the color of their money is the sane as everyone else's.
Management Resource, is a Merger and Acquisition Intermediary affiliated with The Gottesman Company we offer over 25 years of experience, integrity and support to middle market companies.
PH. 253-353-2725
Friday, August 6, 2010
Welcome
Welcome to Management Resource. Our mission is to provide news, commentary and information on middle market mergers and acquisitions in the great Pacific Northwest. Our sweet spot are privately held companies with sales of $5,000,000 to $50,000,000. Our goal is to help the owners of those companies maximize their monetary exit when they have finally made the decision to cash in all or part of their chips.
Management Resource is associated with the Gottesman Group. We are a national group of over 100 independent senior professionals, working as one team uniquely supplying both a national reach and a local presence. With access to over 1000 registered buyers we have the contacts to maximize your equity. www.gottesman-company.com
Please contact me at dan@rtgmail.com if your are interested in getting some concepts on various exit or growth capital strategies always with no obligation or cost.
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