SSooner or later, every business owner is faced with the question of whether or not to sell their business. If you own a business, there are a few important questions to ask yourself before considering selling:
what are your goals
Each party to a transaction is trying to achieve a goal, and that goal must be identified and prioritized before agreeing to any terms of sale; you can’t know what to negotiate for if you haven’t yet determined what you need. Some business owners seek to maximize profits and minimize taxes. Others are focused on maintaining the company’s location, culture and heritage for years to come. Still others have a benevolent calling and want a portion of what they receive from a transaction to go to a charity or foundation. Most business owners try to achieve a combination of these and other goals, and their relative weight and priority may change over time. There are steps (in some cases time-sensitive) that you should take from a legal and tax perspective before starting the sale process that can help you achieve your goals. Identifying your goals as early as possible in the process allows your team of advisors to help you achieve your goals most effectively.
Who is the buyer?
The seller isn’t the only one with goals, of course. Finding the right buyer whose goals will best complement your own is an important strategy for achieving your goals. Most often, business buyers include employees, family members, strategic buyers, and financial buyers.
employee: If the business is sold to one or more employees, often these employees may have the institutional knowledge to run the business, but may not have the funds to pay top dollar at closing for the company, which may require a large amount of seller financing and lead to delayed realization of the value of your business.
Family member: Selling to a family member can involve even more factors, such as family dynamics, support (or lack thereof) from non-family employees, and long-term succession and tax planning strategies that benefit both the buying and selling family members. the family.
Strategic Buyer: A strategic buyer is often a competitor, vendor or customer who sees the value of adding your business to their portfolio. Strategic buyers are often better capitalized, but they bring their own challenges to the table, such as protecting confidential information during due diligence and integrating two business cultures.
Financial buyer: A financial buyer usually has a single-minded goal of getting a financial return on their investment, but usually cannot pay as much as a strategic buyer.
Finding the right balance between your goals and those of your buyer can be a daunting task, but the earlier in the process you identify your goals, the easier it will be to find that balance.
Who is on your team?
It is extremely important for a business owner to have the right team in place when selling a business. A business owner must identify and engage a team of professionals with experience and expertise in buying and selling businesses. A typical seller’s team might include a CPA, a broker or investment banker, a financial advisor, and an attorney who specializes in mergers and acquisitions. Having experienced advisors is critical to a successful sale. One of the biggest mistakes a business owner can make when selling their business is using advisors with little or no M&A experience. The experience and expertise of a good team will help you assess your objectives, devise transaction strategies and execute a successful closing while minimizing risk and maximizing the return on the value you have built into your business. Assembling an experienced team is the best investment you can make to realize your transactional goals.
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Rhoades McKee’s M&A team can guide you through the key factors to help you identify and achieve your business goals.