What is the Best Time to Sell Your Company?
The old saying that “timing is everything,” usually applies to selling one’s business. Ultimately, every business owner will have to exit their business, and the sooner one prepares to sell, the better the final results will be.
With each passing year, more and more baby boomers are reaching retirement age. In many cases, this means that they have no choice but to sell their businesses. The time is now upon us where a simply massive number of businesses will be put up for sale.
Statistics and studies back up this claim. Studies show that people born between 1946 and 1964 make up 40% of small business owners, and about 10,000 baby boomers retire every single day. 1 Business owners who get out in front of this pending avalanche stand to benefit considerably.
There are many other good reasons to sell. Many business owners find that general burnout, and especially the burnout associated with operating a business during the pandemic, is prompting them to think about selling. Burnout isn’t just unpleasant for a business owner, but it can also be dangerous for the well-being and longevity of the business itself. An owner experiencing burnout is an owner who is unlikely to make the best decisions and seize on new opportunities. The results of burnout can be staggering and range from a loss of customers to getting caught off guard by new and existing competitors. In the end, burnout can dramatically decrease the value of a business or even destroy it.
The economy is bouncing back from the pandemic, and that can mean that right now is a great time to sell. If the covid pandemic reinforced any truism, it reminded us that the world and regional and global economies can change in a heartbeat. There are many complex variables on the table.
Simply stated, we are in a period of uncertainty, and that makes predicting the future of the marketplace harder than in recent decades. These facts, combined with the current strong economy, point towards now potentially being a good time to sell your business.
Most business owners have never sold a business before, but instead, they have spent a sizable chunk of their professional careers building up their business. As a result, most business owners don’t know what it takes to successfully sell a business. Working with a proven business broker, one with years of experience, is a smart way to evaluate your current situation and determine if now is the right time to sell your business.
Copyright: Business Brokerage Press, Inc.
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Why is Employee Satisfaction So Important?
Your employees are the heart and soul of your business. Therefore, if you want a thriving business, you need to put their satisfaction at the top of your list. After all, if your employees are not happy, this level of negativity will eventually spread to your customers and clients. Before you know it, you may see your level of profits and success decrease. Any time you spend thinking about positive changes in your workplace will be well worth your time and energy.
Hiring Processes
Be sure to pay careful attention to your hiring processes and the ways that you evaluate candidates. When you hire a new employee, this is the start of a relationship that will ultimately impact your business in a wide variety of ways. It’s worth the time to make the job attractive and be as accurate as possible when it comes to your job descriptions. Make sure that anyone at your company who is involved in the interview or selection process is professional and thoroughly coached on best hiring practices.
Steps to Ensure Employee Satisfaction
Once your employees are on board, it’s a good idea to take active steps to ensure that they are positive about their jobs. Oftentimes, business owners make the mistake of assuming that their employees will naturally be dedicated to their jobs and the tasks at hand. Unfortunately, this is not always the case. Therefore, you must take steps to ensure that your staff members feel motivated.
Here are some ideas:
- Offer competitive compensation
- Offer benefits
- Show appreciation for employee contributions
- Offer rewards such as praise and bonuses
- Offer days off for holidays, birthdays, and vacations
- Be respectful of all employees
- Ask staff members for their feedback and implement changes
- Provide opportunities for career development
- Help build relationships among staff members
When your employees are not happy, their stress and negativity will undoubtedly rub off on your customers. Further, their unhappiness will be more likely to make them miss days or work, whether it’s due to illness caused by stress or just the fact that they are unmotivated. Further, satisfied employees will be more likely to be productive and stay with your business for a long time.
Copyright: Business Brokerage Press, Inc.
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What Serious Buyers Look For
Obviously, serious buyers want to carefully look at the financials of a company under consideration and all of the other major aspects of the company. However, there are a few other areas that the serious buyer will investigate that sellers may overlook.
The Industry – The buyer will want to take a serious look at the industry itself, the customers, the suppliers, the competition, etc. This investigation will cover the strengths, weaknesses, threats from competition, and opportunities of the potential acquisition. With the growth of the “big box” retailers, much power has shifted from the manufacturer to the retailer. A manufacturer may want to increase prices, but if Wal-Mart says no, it’s a very powerful no.
Discretionary Costs – Some sellers will reduce their expenses in discretionary areas such as advertising, public relations, research and development, thus making for a higher bottom line. However, these cuts will hurt the future bottom line, and smart buyers will take notice of this.
Obsolete Inventory – This is another area that buyers take a serious look at and that can impact the purchase price. No one wants to pay for inventory that is unusable, antiquated or unsalable.
Wages and Salaries – A company may be paying minimum wages, or offering few or low-cost benefits, a limited retirement program, etc. These cost-saving devices will make the bottom line look good, but employee turnover may create expensive problems later on. If the target company is to be absorbed by another, compensation issues could be critical.
Capital Expenditures – The serious buyer will take a very close look at machinery and equipment to make sure they are up to date and on par with, or superior to, that of the competition. Replacing outdated equipment can modify projections and may affect an offering price.
Cash Flow – Serious buyers will take a long look at the cash flow statements and the areas that affect them. The buyer wants to know that the business will continue to generate positive cash flow after the acquisition (i.e.: after servicing the debt and after paying a reasonable salary to the owner or general manager).
Other areas that sellers overlook, but that the serious buyer does not are: internal controls/systems, financial agreements with lenders, governmental controls, anti-trust issues, legal matters and environmental concerns.
Copyright: Business Brokerage Press, Inc.
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