On John Foster’s radio program he discusses important factors to consider leading up to a successful business closing! Listen to: Just the Facts
Michael Schwantes of Creative Business Services / CBS-Global joined John Foster on his radio program, Just The Facts, on WOMT to discuss Important Considerations When Selling Your Business
Being a native of Wisconsin, I have grown up working on farms, building pole barns, cleaning stalls and milking cows. Being closer to the soil can really give you an appreciation for how products get to market, wrapped and on the shelf, especially when you represent an M&A firm. I specialize in industrial development and am closer to the market in lieu of the soil.
Wisconsin makes cheese and that’s who we are. Creative Business Services/CBS-Global has been in great support of the cheese industry. As local Wisconsin professionals, we have been bringing the right people together in the cheese industry helping companies grow and prosper in our communities. Our team has had many successful M&A acquisitions come together for the cheese industry for all the right reasons.
Long live cheese, beer, brats and football! Let’s see what we can do together…
Read the full article: New North cheese makers shine in national contest
The buyers in this market are trending to be very careful and diligent in their approach because the tell-tale signs of an economic slowdown are on the horizon. I have seen much more scrutiny from banks and lenders in their underwriting and the process for financing a deal is becoming more demanding in mitigating any risk. As a result, the buyers are looking for acquisitions of premium quality.
To the owners who want to sell their companies, it is strongly recommended to have a solid management team, other than the owner, that will stay on after the sale and is prevented from competing with the company, if they terminate their employment. Secondly, stability and predictability of revenue and cash flow, with low customer concentration. Also, it’s important to have state of the art operating systems.
It has been my experience that most companies are not camera ready for the market place because it takes time, planning and commitment to prepare a business for sale. Before a company goes to market owners and their advisory teams must have plans to enhance all aspects of the company to maximize value. It is also strongly recommended that the owners do not negotiate with potential buyers without the aid of a seasoned business broker and M&A attorney. These buyers are typically much more experienced, sophisticated and knowledgeable about the sale process and implement highly experienced M&A attorneys and investment bankers of their own. So, it’s critical that these owners level the playing field by being prepared with their own team of highly skilled professionals.
John Foster, Business Intermediary with Creative Business Services / CBS-Global has announced the sale of Mobil 310 Mart, 1108 State Highway 310, Manitowoc, WI. Scott and Tammy Engstrom have owned and operated Mobil 310 Mart for 22 years. The new owners, Busdev Adhikari and Shobha Sharma of Sheboygan Oil and Marketing LLC own many other convenience stores in Eastern Wisconsin and look forward to meeting their new customers.
The key question from this article is “Are you treating every minute of your day equally”?
The article explores and asks each one of us if we treat the minute we crawl out of bed differently than the minute we take on a challenge.
Do we stretch minutes or do we rush minutes?
As a business how and why do you expand your workforce? With that workforce expansion do we track if there is an actual increase in the work that is done?
Although academia, government and business may find the analysis beneficial and worthwhile, it is the personal side that benefits the most! The reason being one person can be held accountable if they are true to themselves over a much larger contingent of participants.
Please read full article: Get More Done by Applying This Obscure Economic Law
Already in February commercial real estate is off to a great start. Industrial real estate demand soared to new heights in 2018 and continues to grow in 2019 too fueled largely by ecommerce companies and an economy that’s healthier now than it has been in a long time.
Many are on the lookout now for signs of the next recession, as the economy nears its 10th year of expansion — its longest period of expansion ever.
Economists and analysts predict the economy will slow in 2019 due to continued short-term interest rate bumps by the Federal Reserve and waning fiscal stimulus from federal tax cuts.
Read about these and other trends here: 18 Commercial Real Estate Trends To Dominate In 2019
In 2018, BizBuySell.com, an online market for small businesses, reported a 4% increase in businesses sold since 2017, and a 31% increase over businesses sold in 2016. The number of businesses sold has been the highest the last 3 years since BizBuySell.com began tracking sales in 2007. This is attributed to a healthier economy and other factors discussed here: Small Firms Put Out For-Sale Signs
To learn more about National Business-For-Sale Trends and 2018 Transaction Activity read: BizBuySell’s Insight Report
Owners selling a business face two competing demands: the need to market the business to potential buyers via a compelling story and the need to protect sensitive data about the business from falling into the wrong hands. Key to this is developing a short list when you put your business is on the market. But how many names should you include? That depends on how quickly you want to sell, how sensitive your proprietary information is, and similar factors. Here’s a rough sketch of the options you have for selling your business while keeping the sale under wraps:
A Proprietary Deal With One Potential Buyer
There might be one very eager buyer. Or you might conclude that there’s only one natural choice. Acquirers prefer this because it creates a favorable negotiating climate for them. They can use this lack of competition to their advantage. Called a proprietary deal or prop deal, this option greatly reduces the chance that a sale will leak. It also makes it possible to negotiate and prepare without the assistance of intermediaries.
However, it can take much longer to close because the buyer knows they’re not competing with anyone else. Moreover, this lack of a competitive environment also means that the buyer can skew the deal terms heavily in their favor. If you don’t have a lawyer or other intermediary in your corner analyzing the fine print, you might not even realize this has happened.
A Small Group of Buyers
A slightly more favorable option is to build a short list of a dozen or fewer potential buyers who know you and your company. The acquirers already value what you offer, potentially accelerating the sale process. You can also create a more competitive deal landscape that can produce favorable deal terms and a better final sale price.
The downside is that competitors may use this as a fishing expedition to access proprietary data. Negotiating with peers within the industry also greatly increases the chances that the sale will leak to third parties.
A Large Market Debut
A third approach is to make a large market debut, trying to reach 100 or more potential buyers. You’ll certainly build an efficient market and a competitive bidding landscape. You’ll likely get a higher price and better deal terms. The time to closing may also be shorter. But a large market debut can be expensive. It’s difficult to protect confidentiality and even more difficult to assess which buyers are serious.
If you opt for this route, you’ll need to have a strategy for reducing the list down to a few dozen buyers. One option is to send an anonymous sheet detailing the business. Interested buyers can then sign an NDA to get more details. Those who sign an NDA and are still interested can schedule a call or meeting. This allows you to steadily narrow down your options until a single buyer signs a letter of intent.
Selling your business is a deeply personal decision. When the time comes, owners understandably want to maximize their closing value. After all, they’ve committed years and perhaps a lifetime to building a successful company.
One often overlooked driver of business value is the business model. Finding qualified buyers is a significant undertaking, and simplicity is your friend. You might know what your business does, but can you explain it to a potential buyer? An easily understood introduction to your business is key. That’s where your business model comes in.
Your Business Model: A Unique Value Driver
What’s special about your business? When you have to defend your answer to a buyer, it can be difficult. You must be able to show why your unique product, model, customer base, or service offers significant value that the buyer can get nowhere else. Ideally, you should make it easy for the buyer to envision a way to fit this model into their current operations. Some things you need to be able to address include:
- How you stay competitive when technology renders one of your products obsolete.
- How you stay competitive when someone else offers a similar product.
- Which aspects of your operations offer unique value.
Don’t be too vague, and avoid excessively technical explanations. The goal here is to sell a buyer on what’s working with your business. They shouldn’t think it’s so easy that anyone can do it, but they also should not think that your business is so complicated there’s no way they could take it over.
The Value of Intellectual Property
If your model includes intellectual property, this is a key part of your pitch. Stay simple at first, but help the buyer understand that your process or IP is an entry barrier.
Know that honesty is important, so don’t overstate the value of your IP. Know also that you don’t have to, and shouldn’t, give all the details away at once. The M&A process is one of progressive disclosures, and an NDA with a clear disclosure schedule protects everyone’s interests.
Is Your Business Model Trendy?
There are many effective ways to run a business. Investors prefer some to others. Subscription-based models, including auto-renewals and subscription boxes, are increasingly popular. Brick and mortar shops are less popular. So consider whether there are things you can do to capitalize on current trends, build new revenue streams, or set up automatic revenue. You don’t have to change your entire model. Merely making a few tweaks is often sufficient.
Keep it Simple
The old adage about KISS is popular for a reason. It works. Buyers don’t want to be slammed with a lot of complicated information. They don’t want a three-hour pitch. They want highlights. Then, if they want more information, they can ask. A few enticing highlights can build interest, create a sense of intrigue, and give buyers just enough information to help them decide whether your business is a good fit. Defining your business model is the perfect exercise for pitching your business to buyers.