No business owner will be able to stay with their business indefinitely. For this reason, you will either have to eventually sell or hand your business off to the next generation. Let’s take a closer look at the concept of handing a business over to a family member and how you can make sure that the business is in optimal shape when the time comes. 

If you want your business to be prepared for succession and the next generation, you’ll want to repair any key problems before handing it over. Some experts advise putting your focus on evolving the business. One key recommendation is to focus on sales, marketing and distribution in the coming years, so that troublesome issues, such as sales plateaus, are properly addressed and hopefully circumvented.

Also, you’ll want to consider boosting communication with key employees so that current management understands where all the employees stand. Skilled and motivated employees are rare commodities, and they are absolutely critical to the future success of any business. For any business owner considering handing over their business to their children, employee skill level, motivation and commitment will be essential to the success of the business during a potential transition period.

Some people see their business as a form of job creation for their children, instead of being what it truly is, a business. For a wide variety of reasons, it may not be feasible for your descendants and relatives to take over the business. They may not be capable of the demands or they may simply have no interest. But if you are able to successfully pass it down, you’ll want to optimize their chances for success. 

Just as buying or selling a business involves preparation, the same holds true for handing the baton to the next generation. There is no replacement for advance planning. The sooner that you begin thinking about, and taking tangible steps to prepare for the next generation taking over the reins, the better off everyone will be.

Copyright: Business Brokerage Press, Inc.

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There are many different strategies that will likely be deployed during the sales process. In this article, we’ll focus on how to utilize the Confidential Business Review CBR and/or CIM. Frequently, the Confidential Business Review is also referred to as a Confidential Information Memorandum. But no matter what name is used, the CBR/CIM provides a pathway for obtaining the highest selling price possible.

It is important to understand that the CBR/CIM must be factual at its core. Yet simultaneously, the CBR/CIM can function as a promotional and sales tool. The CBR/CIM can be integrated with an Executive Summary in the document, which allows prospective buyers a way to learn more about the business.

Through the Executive Summary section of the CBR/CIM, prospective buyers can quickly gain insight into the key highlights of a given company. The outline should include key factors, such as an overview of the ownership and management structure as well as a description of both the business and financial highlights. The company’s products and services should also be covered in detail. Importantly, the CBR/CIM should include why the business is for sale and some information about the market.

A well-constructed Executive Summary helps to both guide and motivate a prospective buyer so that they become motivated to learn more and take action. The Executive Summary should grab hold of anyone who reads the high points and illuminate why your business is valuable.

Many variables can be included in the CBR/CIM. Everything from the history of your company and what it does for the markets it serves and the products it creates can all be found in this document. Other topics such as the current state of competition, your key customers, management, your growth strategies, various financial information and other important variables can all be included in a CBR/CIM.

The creation of a coherent and persuasive CBR/CIM, one that motivates a prospective buyer or their representative to take action, is an artform. Much like it is prudent to invest both time and resources to the creation of an excellent confidentiality agreement, the same holds true for the creation of a CBR/CIM.

Business Brokers and M&A Advisors are experts in the creation of key sales documents, such as the CBR/CIM. One of the quickest and easiest ways to create an excellent CBR/CIM is to work with an experienced Business Broker as they understand exactly what should be in an offering memorandum. This document may very well be the first important contact point with a prospective buyer. For this reason, it should be designed to work to your benefit in a variety of ways.

Copyright: Business Brokerage Press, Inc.

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There can be no doubt that the quality of your employees will directly impact the quality of your business and its long-term value. Employee quality and the success of your business are intrinsically linked. Unfortunately, far too many entrepreneurs learn this lesson too late, and their businesses suffer as a consequence. Employees who do not feel invested in a business and its long-term growth and success can damage your business on a daily basis. 

The quality of employees stands as one of the most important factors that entrepreneurs should consider before buying a business. With this fact in mind, it is critically important that business owners do everything possible to put together a great team. 

It’s important to keep in mind that your employees can be either an asset or a detriment to the success of your business. A dedicated and knowledgeable team of employees will help boost not only a business’s bottom line, but also its value when it comes time to sell.

Along similar lines, if you’re considering buying a business, you should take a careful look at how much work the current owner is responsible for and how well they are supported by the staff. If the owner is shouldering too much work and not relying on capable employees, then owner burnout can be a real possibility. Remember that the amount of work the current owner is doing could be what you’re facing down the line.

It is also important to consider the loyalty of employees and how likely it is that they may quit and join a competitor. Potential buyers should carefully evaluate employees and how they operate before signing on the dotted line.

At the end of the day, most businesses are only as strong as their employees and management. It should come as no surprise that employees who don’t feel invested and are just doing the “bare minimum” to not get fired are not the kind of employees that help build a successful business. 

A successful business is one with longevity, and the future of a business depends on employees that care about the business. In doing so, they will work to ensure customer or client satisfaction and loyalty. There are many variables that you must consider before deciding to buy a business, but buyers should never overlook the strength of employees.

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Deciding how the purchase of a business should be structured is no small task. If you are planning to help finance the sale of your business, you’ll want to tackle this issue very early in the sale process. When it comes to small business sales, a high percentage of deals include some seller financing. Here are some of the most important things you’ll want to think about beforehand.

Interest Rates

The simple fact is that interest rates cannot be overlooked. In an era where interest rates continue to climb, the future rates are far from certain. That’s why it is critically important to factor in interest rates to your buying decision. In the event that you find a buyer, you’ll need to decide what is the acceptable interest rate for a seller financed sale.

The Buyer and Debt

It is also quite important to know whether or not a buyer will assume any long-term debt or secured debt. Early in the process, you’ll want to address this topic and come to a conclusion regarding the optimal path forward. If there are favorable terms, this usually means a higher sales price.

Taxes

There will, of course, be tax implications to the sale. It is only prudent to work well in advance with a tax professional, to understand every tax implication. You should gain an understanding of how the taxes will work long before a sale takes place. You’ll also want to talk to an experienced attorney to understand the legal implications of seller financing.

Without a doubt, there will be tax implications that affect your sale. That’s why you’ll need to understand what those implications are and what it will mean for you.

Additional Costs

Just as taxes can throw a curveball into the mix, this fact holds true for additional costs. You’ll want to consider if there are any unsecured creditors that still need to be paid in full. Closing costs are another commonly overlooked issue. It is prudent to determine whether or not the seller plans on paying for part of the closing costs. Closing costs, just like taxes, can be sizable and should not be overlooked.

Knowing Your Lowest Price

Before walking into any negotiation, you need to know what is your lowest price. It can take months or even years for a business to sell. You need to know what your lowest price is for when the day comes that an offer is made. 

Working with a business broker or M&A advisor is a savvy way to address all of these issues well in advance. There are many factors that go into the sale of a business and having an experienced professional by your side is simply invaluable.

Copyright: Business Brokerage Press, Inc.

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If you’re selling a business for the first time, you might have a preconceived notion of the type of buyer that’s most likely to purchase your business. However, the truth is that sellers often get competitive and attractive offers from buyers that they were not expecting to have an interest in their business. Let’s take a look at some of the variety of buyers you might encounter on the path to selling your business.

Your Family Members

One common buyer would be a member or members of your family. One of the advantages to selling to family members is they already may have a deep understanding of what it means to own and operate your business. As a result, they may feel more prepared. 

On the other hand, just because someone is your family member does not mean they have the chops to actually run your business. Further, if you sell to a family member, you may end up dealing with someone who has less cash available to buy.

Competitors and Synergistic Buyers

You may not have warm fuzzy feelings towards your competitors, but the truth is that you need to be open to the idea of receiving offers from them. In fact, many competitors immediately look to their competition first when they decide they are going to expand their business. Your competitors make a lot of sense as good candidates because they understand your industry. Purchasing your business represents a viable way to rapidly expand their own offering with products and/or geographical reach.

Along similar lines, synergistic buyers acquire new companies in order to leverage their existing operations. You will find these buyers are typically larger entities in the same or related industries. In buying your business, their goal is to support and quickly add value to their current organization.

Individual Owner Operators

Many sellers end up with a deal on the table from an individual buyer. There are definite advantages associated with this type of buyer including the fact that it can streamline the sales process when you are dealing with one person rather than a group. Individual buyers oftentimes have corporate experience that helps them to effectively take over and manage a business. Another advantage to the individual buyer is that he or she oftentimes has a personal interest in the business and plans to successfully operate and improve it. 

Financial Buyers

A financial buyer is most interested in their ROI. They will zero in on finding out about the cash flow and long-term exit strategies. These investors are typically only interested in very solid companies that are generating solid revenue. They will be less likely to want to take the time to make changes and improvements, so they will expect healthy returns on their investment on day one. 

Your business broker or M&A advisor will help you understand the pros and cons of various buyers when it comes to your unique situation. Ultimately, you’ll find the type of buyer that is best suited to buy your business and that fulfills your needs and goals simultaneously. 

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