Buying or selling a business is one of the most important financial decisions you will make. An M&A Advisor has the training and expertise to guide you through the process in a comfortable and efficient manner. M&A Advisors are team players team players who will coordinate the efforts of your professional advisors, such as attorneys and accountants. They have handled many transactions and understand the complexities of selling and buying a business.
Conclusive date shows that a seller who asks for all cash receives 70% of their asking price, while sellers who accept terms receive an average 86% of their asking price. That’s a difference of 16%! In many cases, businesses that are asking for all cash just don’t sell. With reasonable terms, the chances of selling increase dramatically and the time period from engagement to sale greatly decreases. Most sellers are unaware of how much interest they can receive by financing the sale of their business. In some cases, it can greatly increase the amount received. And it tells the buyer that the seller has confidence in the continued success of the business.
Run your business as if you are planning to keep the business for years to come, push out all the stops to generate as much revenue growth as possible, and in turn keep profits growing. The process of selling your business can take six to nine months or longer, and during that period you need to ensure that your business is in a stronger financial position than ever, so you are in a position of strength during final negotiations. It is important that all prospective buyers retain the highest opinion of you and your business
Typically, competitors are not the best buyers. They already have much of your infrastructure and knowledge of the industry. They are less likely to pay a higher premium for skills or assets they already possess. More often than not, a competitor is not prepared to pay you the highest price on the best terms
This is an individual decision that depends on your circumstances. At the same time, there is an optimum way to sell your business. Ideally, your managers are aware of your intention to sell. The buyer feels more comfortable if the management team has embraced your intention to sell. But the timing is a delicate decision and the way you present your intention to sell is very important. You may have reached a stage where you no longer want the responsibility or financial commitment of growing the business further. Your managers probably understand this and likely relish the idea of new growth prospects and development of the business by new owners.
The sooner the better. The ideal time to develop an exit strategy for selling your business is when you start or purchase a business. You may find that puzzling, but a business is an investment of your time, your money, and your blood, sweat and tears. The end result is to have a gain on that investment. Industry statistics indicate that 85% of all business owners do not have a defined exit strategy although, on average, 75% of their net worth is tied up in their business.
Because of the confidential nature of a business sale and the complexity of many businesses, the average time to sell a business is usually between six to eighteen months. There are always exceptions.
Financial buyers typically are looking to acquire your company and keep the existing management team in place. They will provide capital for growth and board-level support. Financial buyers typically have size ranges that they target, and are looking to acquire businesses with very strong profits and cash flow.
Strategic buyers (also known as company or corporate buyers) may have an interest in acquiring your company to expand geographically, to increase their range of products or services, to leverage your brand name and reputation, to access a new client base or for various other reasons. Many U.S. corporations still hold sizable cash reserves. Of the cash available at corporations, more is being used for strategic investment through acquisitions than anything else.
Individual buyers may include wealthy individuals, corporate executives and former business owners. Many buyers are driven to buy a business rather than start a business, theoretically giving them a better chance for success. Most individual buyers have little or no experience in operating the types of businesses they buy. Equity and debt capital for individual buyers come from their own equity funds, family members, financial institutions and seller financing.
Although an accountant can provide information pertaining to the financial aspects of your business, their expertise does not include selling businesses. Accountants do not have access to buyers or the knowledge specific to the process of selling a business. We prefer to work closely with your accountant to determine key factors when valuing your business. Your accountant will be an important advisor and contributor throughout the transaction of selling your business.
When revenues and profits are growing, there is continued upside and buildup of new business in the pipeline, a high proportion of revenue is EBITDA and there is positive cash flow, the industry business cycle is at or near the recent peak and when there is high demand for your products and services, and you are maintaining a competitive advantage and differentiation, which lead customers to prefer your products or services.