Archives for September 2017

Keys to Improving the Value of Your Company

The first key is to have your accountant take a look at your accounting procedures and make recommendations on how to improve them. He or she may also help in preparing financial projections for the coming year(s). Getting your company’s financial house in order is very important in establishing the value of your firm.

The second key is to review the reputation, image, and marketing materials of your company. Certainly, the quality of your product or service is paramount, but how your firm presents itself to customers, clients, suppliers, etc. – and the outside world – is also very important. The appearance of your facilities and customer services – beginning with how people are treated on the telephone or in the waiting/reception area – are the kind of first impressions that are critical in dealing with your customers or clients. Don’t forget about the company’s Web site; in many cases, it is the initial introduction to your company. Now may also be the time to update your marketing materials. The image of a company can help create a happy workforce, improve customer service, and impress those that you deal with – all of which can increase the value.

A third key is to get rid of outdated inventory – sell off any extra assets such as unused or outmoded equipment. The proceeds can be used in the business. If there are any assets that should not be included in the value of the company, such as personal vehicles or real estate, you might want to separate them from the assets of the company. This is especially important if you are considering placing the company on the market. A prospective purchaser expects everything they see to be included in the sale. If a portrait of your grandfather is your personal property, delete it from any list of company furniture, fixtures, and equipment; and if the business is for sale, remove it entirely.

Another important key is to resolve any pending items. For example, if the company has a trademark on any of the important products, and the paperwork for registering is sitting on someone’s desk, now is the time to complete the filing. Trademarks, patents, copyrights, etc., can be very valuable, but only if they have been properly recorded and/or filed.

Contracts, agreements, leases, franchise agreements, and the like should be reviewed. If they need to be extended, take the appropriate action. A contract with a customer has value and if it is scheduled to expire soon, why not get it renewed now? The same is true for leases. Favorable leases for a long period of time can be a valuable asset. Do your key employees have employee agreements?

The key factors outlined above not only build value, but they also increase the bottom line. If you are considering selling your company at some point, these key issues will come back many-fold in the selling price. A professional business intermediary can help with other factors that can influence the value of the business.

One other hidden benefit of building the value of your company is that you never know when the Fortune 500 Company will come “knocking at your door” with an offer that you can’t refuse. At that point, it’s probably too late to work on some of the issues mentioned above.

Copyright: Business Brokerage Press, Inc.

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Around the Web: A Month in Summary

A recent article posted on Business2Community.com entitled “How to Close the Deal and When to Walk Away When Buying or Selling a Business” explains the business sale process and how to differentiate between a good deal and a bad deal during the process. Closing a deal involves quite a bit of legwork, including producing a letter of intent, doing due diligence, acquiring financing, signing a purchase agreement, and actually closing the deal. These items can be easier with the help of a business advisor, broker, or attorney, but emphasis should be placed on the due diligence aspect: knowing the business inside and out is vital to a successful sale.

Walking away from a deal can be difficult for a motivated buyer, but is sometimes necessary to avoid emotional and financial disaster. The following red flags help to signify that it’s time to walk away:

  1. Inconsistencies
  2. Neglect
  3. Undisclosed Problems
  4. Poor Credit Rating
  5. The Industry is in Decline

Being prepared is one of the best things that a buyer can do in the business sale process. Whether preparation proves a business deal is worth it or uncovers red flags, it will be worth the effort.

Click here to read the full article.

A recent Axial Forum article entitled “3 Reasons an M&A Advisor is Worth the Cost” presents impressive statistics regarding the utilization of M&A advisors in the sale process. 100% of owners that used an advisor when selling their business stated that the advisor had a positive impact on the sale, with 84% of these sellers achieving a sale price equal to or higher than the advisor’s initial estimate.

While these types of statistics are expected among industry insiders, many business owners will still hesitate to hire an advisor for the sale of their businesses. As the article outlines, advisors can help to identify weak links in a business’ management team, find quick ways to increase cash flow, and whip financials into shape, among many other things.

Click here to read the full article.

A recent Forbes article entitled “The Question Every Owner Should Ask: Is Now The Right Time To Sell The Business?” explains why choosing to sell sooner is actually better in a lot of ways than putting off a business sale for a few years. The author goes on to explain how when exits are planned for some arbitrary point in the future, owners often never seem to make it there, ending up wanting to sell but never actually selling. The article goes on to explain five important reasons to consider selling now:

  1. You May Be Choking Your Business
  2. Money is Cheap
  3. Timing Your Sale is a Fool’s Errand
  4. Cyber Crime
  5. There is No Corporate Ladder

Being an owner gives so much power over the path a business takes, whether it’s a sale or acquisition or even the owner staying on to work on the business for an extended period. The beauty of this is that the owner has the choice over whether or not to sell, but also the choice on what to do after. Starting another business is a common route to take for successful first-time entrepreneurs after an exit, so the sooner a sale occurs, the sooner they can get started on another business.

Click here to read the full article.

A recent article posted on the Axial Forum entitled “7 Reasons to Perform Sell-Side Due Diligence” talks about why sell-side due diligence can be a useful and productive technique within the M&A process. While buy-side due diligence is much more common, sellers can take advantage of this practice to maximize the value presented to potential sellers so that they can ultimately get more out of the sale.

Sell-side due diligence can help to uncover and improve:

  1. Weak financial and operational data systems
  2. Overextended employee resources
  3. Unclear financial narrative
  4. Unhelpful “tax guy”
  5. Multiple entities and no consolidation
  6. Likely purchase price reductions
  7. Ineffective tax structuring

In the end, due diligence is part of any M&A process. But with so many things factoring into a successful sale, both buyers and sellers have a responsibility to know the business inside and out if they want to get the most out of a transaction.

Click here to read the full article.

Copyright: Business Brokerage Press, Inc.

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