5 Tips for Successful Buying or Selling a Business from Experts
Older European anda Americans are selling their businesses, and younger ones interested in growing their own can buy them - but both sides should work to avoid major pitfalls in the transactions, experts say. In fact while 2022 might not be the banner year for merger and acquisition activity that 2021 was, it is still an active market for buying and selling businesses.
The owners can take advantage of this generational transfer to start or grow their own business. Prospective owners looking to acquire need to know what they lack. Do they need more employees? That could lead them to a fully staffed business whose employees can come with an acquisition. Or does the business want more customers? For business owners looking to sell, it means figuring out how the business will run without them, and making sure it runs smoothly if they sell it. That's one of the problems that we solve, transitioning these owners who are heavily involved in these businesses and transitioning them from an operator to an investor role.
 |
| Kylie Jenner with her own business (Kylie Cosmetics) www.BloggerPrice.com |
But many owners are aging out of their businesses, and their children are uninterested in running them, leaving them with no succession plan. Investors often overlook small businesses in favor of other more high-profile investments.
5 Tips for Successful Buying or Selling a Business from Experts. There are some basic steps, including, but not limited to:
- Getting an independent valuation of your business.
- Managing margins. Make sure the business is operating within industry standard gross, operating and net margins. About three to five years out, owners need to start looking at managing expenses while maximizing cash flow, which is most valuable to a potential buyer.
- Moving away from the business owner by working to make them less integral to the functioning of a business.
- Diversifying the customer base. Businesses want to avoid having their top five customers account for 40% or more of their revenue,.
- Getting your books audited.
The owners need to explore all their options for a potential sale. Sellers also need to consider all the options available to them, including a sale to a family member, a sale to a key employee, a sale to a strategic competitor (whether direct, vertical or horizontal), or a sale to their employees (via an employee stock ownership plan or a worker- owned cooperative). Each has pros and cons and can have a material impact on the net cash the sellers walks away with at closing.
Meanwhile, buyers need to ask lots of questions about the company. Once you sign a nondisclosure agreement, it's time to do your due diligence. Think about how you will structure the sale, and put yourself in the shoes of the seller to understand how sustainable the business is. But above all, both buyer and seller must understand it can be emotional. (Opinion of Sam Brownell, founder of Stratus Wealth Advisors).
Related Post:
Comments
Post a Comment
Thank you so much for visiting our blog,
Nice to know you. Your visit means a lot to us. So much love, sincerity and kindness from you that makes us very excited to share other interesting information every day.