The purpose of these articles is to educate both buyers and sellers of the many different issues related to a business transfer. The subject matter includes things like the value of a business, the variables involved in a business transaction, financing and structure of a transaction, planning your exit strategy, etc.
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Tuesday, 22 January 2013
No Stinking Plan?
Without an Exit Plan, business owners could
end up with a “Value Gap”. Most retiring business owners
expect that their financial needs will be met when they sell their companies.
Unfortunately, that is not always the case!
Business owners should have a
business valuation performed by an independent professional and then create an “Exit
Plan” to close the value gap if one exits.
A well designed Exit Plan
should achieve the following objectives:
·The price you want – If the business’s current financial
picture doesn’t match the owners expectations, one or the other has to be
adjusted. Unfortunately, many businesses sell for a lot less than the owner
wants or needs. Positioning your business for as sale in 3-5 years will allow
you the time to properly execute the plans necessary to build value.
·A successful closing – It’s unfortunate but in the world of
business transactions, many business sales do not close. The reasons for failed
transactions are countless such as mistrust, miscommunication, due diligence, overzealous
advisors or simply a buyer or seller dislike for one another. The best
way to avoid these hazards, and many of the others standing in the way of a
fast and reliable close, is to become a highly valuable acquisition opportunity
·Produce multiple buyers - Don’t fall into the
trap of focusing all your efforts on a single potential acquirer for your business—no
matter how attractive they may seem.Attracting
a variety of buyers to a business acquisition is at the heart of maximizing
value. If a buyer knows he is the sole interested party, he can control
negotiations. But when there are a number of interested parties, the sale
process remains in the seller's control—which drives the price up.
·Protect legacy and loyalty – It’s usually not just about the money. A
buyer who is a good cultural fit, one who will protect the jobs of key
employees, provide key employees career building opportunities, and have similar
values are just of few things that owners consider when selling their
business.By strategically positioning
your business for sale you can effectively choose the best fit, which may not
be the highest offer.
The rewards are
high when you plan in advance.With an
effective plan business owners will dramatically improve the likelihood of future
success for the business.Plus, planning
helps protect owners from the things they don’t expect and preserves personal
wealth, estate and the business before a transfer is made. Building an exit
plan should begin the day you start your business, however, it’s never too late
Do you have a small business question
you would like answered about this article or others?
Bill Sivell is a Business Broker with VR
Windsor Inc. [www.vrwindsor.com]
519-903-7807, which sells businesses to buyers across Canada and around the
world. His 14-year career includes diverse senior management positions in
marketing, advertising, sales management and operations management. His blog
appears every Tuesday.