Quitting Time
Closing down a business is never easy. Perhaps you started a business years ago and have been just barely eeking out a living. When is it time to give up, admit defeat and move on?
You finally realized your dream of owning your own business. But now several years have passed, and your dream is starting to feel more like a nightmare.
The company's inability to turn a profit is taking its toll, leaving you with the nagging question, "When is enough, enough?"
The simple fact is that many small business owners allow their companies to limp along for years before they finally pull the plug. Calling it quits can be an emotional decision for an entrepreneur and common sense often takes a back seat to a business owner's desire to see his business succeed. Even so, there are certain questions you just can't ignore when determining whether or not to press forward in the hope of a miraculous turnaround.
Why isn't my business successful?
When you started your business, you were convinced it was the best idea since sliced bread. If that's true, you need to ask yourself why your business still isn't a success. The problem could be as simple as overstaffing or poor cost management. On the other hand, the problem could also be that the marketplace isn't as enamored with your idea as you are. Either way, you need to identify the source of the problem. If it's correctable - great. Make the necessary adjustments and move ahead. But if the problem isn't correctable, maybe it's time to pack it in.
What is the cost of staying in business?
Another question you need to ask yourself is what it will cost you to continue to do business. Tabulating the financial cost of staying in business is the easy part. The hard part is calculating the intangible costs of doing business on a go-forward basis. Personal stress, strained family relationships, and loss of personal morale are factors that need to be carefully weighed against the possibility that your company may eventually experience a turnaround.
Something else to consider is how many other opportunities you will be forced to pass up if you decide to wait out another year of negative profits. It's not unusual for small business owners to use their entrepreneurial experience as a tool to re-enter the workforce or to attract investors for a new business startup in an industry with a higher probability of success.
Do I still like what I do?
The most accurate indicator that it's time to close the doors is when you no longer enjoy operating the business you once loved. And if you're not enjoying yourself anymore, there's a good chance your employees and investors aren't enjoying themselves, either. Although you don't want to disappoint the people who are counting on you, most of them will appreciate your willingness to call it quits now rather than dragging them through five more years of losses. So, if a trip the dentist sounds more appealing than a trip to the office, do everyone a favor and begin the process of closing up shop.
Saturday, August 9, 2008
Tips for Maximizing your Business Sale price
Five Tips for Maximizing Your Business Sale Price
Just as you market your products and services to attract customers, it's important to market you business in a way that maximizes its value in the eyes of prospective buyers. Here are a few tips for getting a great price when you sell a business.
Think you know what your business is worth?
There's no guarantee that you'll get what your business is worth when it comes time to sell it in the open market.
But with the right strategy, you can sell your business for what it's worth - and then some. To help you get started, here are five tips for maximizing the sale price of your company.
Have a Plan for Selling Your Business
Theoretically, selling a business would seem to be a lot like selling a home. You decide to sell, find an agent, put it on the market, and voila! - a buyer magically appears. In reality, selling a business and selling a home are two completely different things. To avoid being shortchanged, you need to start your preparations twelve to eighteen months in advance with a comprehensive timeline for due diligence preparations, the valuation process, and a marketing plan.
Create a Broad Customer Base
What's more attractive to potential buyers: A business with 100 customers, each representing 1% of the company's sales or a business with 1 customer representing 100% of the company's revenue? If your company relies heavily on a few key clients to make ends meet, you should consider making a concerted effort to attract new customers prior to the sale. A broad customer base means greater security for buyers, and in most cases buyers are willing to pay a little extra for the peace of mind that comes from knowing that the business won't fold if they lose one or two existing clients.
Book Contract Income
Guaranteed income streams are always more attractive to potential buyers than sales forecasts. If your business lends itself to the possibility of contracted income streams such as licensing fees, retainers, or other contractual arrangements, you should make a concerted push to lock-in clients before putting your business on the market. The result is increased leverage during the negotiation phase because instead of dealing with possible income figures, you're dealing with hard numbers.
Seek Professional Assistance
Although it's possible to sell your business without any professional assistance, a do-it-yourself approach is one of the surest ways to leave money on the table. For good reason, buyers have more confidence in financials prepared by a professional accountant, appraisals performed by a professional appraiser, and legal documents prepared by a professional attorney. You may also want to consider enlisting the help of professionals in preparing your business for sale and marketing it potential buyers.
Be Patient When Selling a Business
If you need a quick sale, there's a good chance you won't get top dollar for your business. It's not unusual for businesses to be on the market for months or even years before the right buyer comes along. However, if the process drags on too long, you may eventually need to weigh the decision to hold out for top dollar against the cost of holding on to the business for another six months or more.
Just as you market your products and services to attract customers, it's important to market you business in a way that maximizes its value in the eyes of prospective buyers. Here are a few tips for getting a great price when you sell a business.
Think you know what your business is worth?
There's no guarantee that you'll get what your business is worth when it comes time to sell it in the open market.
But with the right strategy, you can sell your business for what it's worth - and then some. To help you get started, here are five tips for maximizing the sale price of your company.
Have a Plan for Selling Your Business
Theoretically, selling a business would seem to be a lot like selling a home. You decide to sell, find an agent, put it on the market, and voila! - a buyer magically appears. In reality, selling a business and selling a home are two completely different things. To avoid being shortchanged, you need to start your preparations twelve to eighteen months in advance with a comprehensive timeline for due diligence preparations, the valuation process, and a marketing plan.
Create a Broad Customer Base
What's more attractive to potential buyers: A business with 100 customers, each representing 1% of the company's sales or a business with 1 customer representing 100% of the company's revenue? If your company relies heavily on a few key clients to make ends meet, you should consider making a concerted effort to attract new customers prior to the sale. A broad customer base means greater security for buyers, and in most cases buyers are willing to pay a little extra for the peace of mind that comes from knowing that the business won't fold if they lose one or two existing clients.
Book Contract Income
Guaranteed income streams are always more attractive to potential buyers than sales forecasts. If your business lends itself to the possibility of contracted income streams such as licensing fees, retainers, or other contractual arrangements, you should make a concerted push to lock-in clients before putting your business on the market. The result is increased leverage during the negotiation phase because instead of dealing with possible income figures, you're dealing with hard numbers.
Seek Professional Assistance
Although it's possible to sell your business without any professional assistance, a do-it-yourself approach is one of the surest ways to leave money on the table. For good reason, buyers have more confidence in financials prepared by a professional accountant, appraisals performed by a professional appraiser, and legal documents prepared by a professional attorney. You may also want to consider enlisting the help of professionals in preparing your business for sale and marketing it potential buyers.
Be Patient When Selling a Business
If you need a quick sale, there's a good chance you won't get top dollar for your business. It's not unusual for businesses to be on the market for months or even years before the right buyer comes along. However, if the process drags on too long, you may eventually need to weigh the decision to hold out for top dollar against the cost of holding on to the business for another six months or more.
Choosing an Investment Banker
Choosing an Investment Banker
Investment bankers can help you to sell your business, but not all investment bankers are created equal. Here are attributes to look for when you are choosing an investment banking firm.
Most business owners approach the task of selling their company in traditional terms, crossing their fingers and hoping for the best in the commercial marketplace.
If that approach doesn't sound appealing, you may have another alternative. But to get there, you're going to need the help of an investment banker.
An investment banker is an agent for an organization that helps private companies convert ownership equity into securities in the primary market. By issuing an IPO (Initial Public Offering), a good investment banker can be a godsend, raising significant capital for business owners and propelling the company into its next stage of life.
The process typically goes something like this: A company selects an investment banker, who in turn guarantees the company a specific amount of capital minus a fee. The investment banker then proceeds to raise the guaranteed capital through the IPO, but assumes all of the risk should the IPO fail to attract the necessary investors. Not a bad deal, right?
In reality, the success of your relationship with an investment banker will depend largely on two factors: Your company's stage of life and the quality of the investment bank itself. Investment banks are most interested in established, mature companies. Although younger start-ups can conceivably attract an investment banker, the pool of potential candidates will likely be substantially smaller and the deal will be less beneficial for the business owner.
If your company is well-established and mature, the only thing standing between you and investment banking success is the selection of a top-rate investment banker. Here are some of the most important characteristics to look for when choosing investment bankers:
Relationship - Relationships are built on trust, and a relationship with an investment banker is no exception. You've got a lot riding on the outcome of this relationship, so when screening potential investment bankers you need to take into account the candidate's likeability, communication style, and trustworthiness. If you don't mesh with an investment banker during the initial interview, keep looking.
Expertise - Investment bankers often specialize in certain industries and market sectors. It's important to find an investment banker who knows the ins and outs of businesses similar to yours, and is able to value your company for what is truly worth. Remember: The investment banker's job is to sell your business to potential investors. The more he knows about your business the easier it will be for him to attract investors, which translates into a higher amount of guaranteed capital in your pocket.
Experience - There is no substitute for experience in investment banking. Since the nature of investment banking is somewhat speculative, the person you choose to represent your company's interests needs to be confident in his ability to bring in the highest possible price in the IPO. Inexperienced investment bankers often lack the confidence required to fight for your last dollar.
Investment bankers can help you to sell your business, but not all investment bankers are created equal. Here are attributes to look for when you are choosing an investment banking firm.
Most business owners approach the task of selling their company in traditional terms, crossing their fingers and hoping for the best in the commercial marketplace.
If that approach doesn't sound appealing, you may have another alternative. But to get there, you're going to need the help of an investment banker.
An investment banker is an agent for an organization that helps private companies convert ownership equity into securities in the primary market. By issuing an IPO (Initial Public Offering), a good investment banker can be a godsend, raising significant capital for business owners and propelling the company into its next stage of life.
The process typically goes something like this: A company selects an investment banker, who in turn guarantees the company a specific amount of capital minus a fee. The investment banker then proceeds to raise the guaranteed capital through the IPO, but assumes all of the risk should the IPO fail to attract the necessary investors. Not a bad deal, right?
In reality, the success of your relationship with an investment banker will depend largely on two factors: Your company's stage of life and the quality of the investment bank itself. Investment banks are most interested in established, mature companies. Although younger start-ups can conceivably attract an investment banker, the pool of potential candidates will likely be substantially smaller and the deal will be less beneficial for the business owner.
If your company is well-established and mature, the only thing standing between you and investment banking success is the selection of a top-rate investment banker. Here are some of the most important characteristics to look for when choosing investment bankers:
Relationship - Relationships are built on trust, and a relationship with an investment banker is no exception. You've got a lot riding on the outcome of this relationship, so when screening potential investment bankers you need to take into account the candidate's likeability, communication style, and trustworthiness. If you don't mesh with an investment banker during the initial interview, keep looking.
Expertise - Investment bankers often specialize in certain industries and market sectors. It's important to find an investment banker who knows the ins and outs of businesses similar to yours, and is able to value your company for what is truly worth. Remember: The investment banker's job is to sell your business to potential investors. The more he knows about your business the easier it will be for him to attract investors, which translates into a higher amount of guaranteed capital in your pocket.
Experience - There is no substitute for experience in investment banking. Since the nature of investment banking is somewhat speculative, the person you choose to represent your company's interests needs to be confident in his ability to bring in the highest possible price in the IPO. Inexperienced investment bankers often lack the confidence required to fight for your last dollar.
Is your Business selling?(How to sell your business)
I read a mail from a reader here who was asking question about possible ways of selling your business and that came after she read the article titled ''IS YOUR BUSINESS SELLIN''.
Since she needed mpre insight as to how to sell one's business, I am attching this very brief write-up to that effect.
Selling Your Business
How to Sell a Business
Wondering how to sell your business? This article explains how to sell a business. It introduces you to the basic processes involved in selling a business and introduces you to key players (e.g. business brokers) that you may want to get involved.
For many small business owners, selling a business represents the culmination of their entrepreneurial career. You’ve worked very hard to build your business and make it what it is today. Now it’s time to slow down and enjoy the fruits of your labor.
Ironically, your final task – selling the business – can also be the most stressful. One way to minimize that stress is to take a deep breath and begin to deliberately work through a step by step process.
Step #1: Self-assessment
The first thing you need to do is to assess your reasons for wanting to sell the business. You have to be 100% sure about your decision because once it’s done there is no turning back. This is also the time to ask yourself what you hope to achieve in the selling process, i.e. what is the minimum amount you can afford to receive for your company.
Step #2: Valuation
Business valuation can be tricky. Discerning a fair and objective price for your company will require you to calculate its worth based on one or more generally accepted methods of business valuation. Do your best to set aside your emotional connection to your company. Otherwise you are likely to end up an inflated value for your company that is out of line with the market.
Step #3: Get your business ready for sale
When you sell a house, there are usually things that need to be done to prepare it for sale and make it presentable to potential buyers. The same is true when you sell your business. Potential buyers will want to examine assets such as buildings and equipment firsthand. But they’ll be even more interested in your business’ financial statements.
With the help of your accountant, prepare a packet of financial information that accurately reflects the financial condition of your business. Make copies of it to be used later when you begin to meet with potential buyers.
Step #4: Consult with a team of professionals
Once you have done what you can to prepare your business for sale, it’s time to bring in the pros – an accountant and lawyer for sure, and possibly even an appraiser and business broker. The pros may suggest may make additional suggestions regarding valuation and preparation. However, don’t feel the work you have done beforehand is wasted. By doing some of the work in advance, you gain perspective about the selling process. You might also save a little money.
Step #5: Screen potential buyers
Not everyone who expresses interest in your business will be a serious buyer. Some people shop for businesses like other people window shop for shoes. The problem is that showing your business to potential buyers takes time. Rather than waste your time with insincere customers, it is much better to screen buyers in advance and only meet with those who are truly serious.
Note: Do not give out any information about your business until you have pre-qualified potential buyers! It is not unheard of for competitors to disguise themselves as buyers in order to gain information about the competition.
Step #6: Finalize the sale
Once a deal has been negotiated it is up to the attorneys and lenders to finalize the sale. All you have left to do is sign a few papers and ride off into the sunset.
Since she needed mpre insight as to how to sell one's business, I am attching this very brief write-up to that effect.
Selling Your Business
How to Sell a Business
Wondering how to sell your business? This article explains how to sell a business. It introduces you to the basic processes involved in selling a business and introduces you to key players (e.g. business brokers) that you may want to get involved.
For many small business owners, selling a business represents the culmination of their entrepreneurial career. You’ve worked very hard to build your business and make it what it is today. Now it’s time to slow down and enjoy the fruits of your labor.
Ironically, your final task – selling the business – can also be the most stressful. One way to minimize that stress is to take a deep breath and begin to deliberately work through a step by step process.
Step #1: Self-assessment
The first thing you need to do is to assess your reasons for wanting to sell the business. You have to be 100% sure about your decision because once it’s done there is no turning back. This is also the time to ask yourself what you hope to achieve in the selling process, i.e. what is the minimum amount you can afford to receive for your company.
Step #2: Valuation
Business valuation can be tricky. Discerning a fair and objective price for your company will require you to calculate its worth based on one or more generally accepted methods of business valuation. Do your best to set aside your emotional connection to your company. Otherwise you are likely to end up an inflated value for your company that is out of line with the market.
Step #3: Get your business ready for sale
When you sell a house, there are usually things that need to be done to prepare it for sale and make it presentable to potential buyers. The same is true when you sell your business. Potential buyers will want to examine assets such as buildings and equipment firsthand. But they’ll be even more interested in your business’ financial statements.
With the help of your accountant, prepare a packet of financial information that accurately reflects the financial condition of your business. Make copies of it to be used later when you begin to meet with potential buyers.
Step #4: Consult with a team of professionals
Once you have done what you can to prepare your business for sale, it’s time to bring in the pros – an accountant and lawyer for sure, and possibly even an appraiser and business broker. The pros may suggest may make additional suggestions regarding valuation and preparation. However, don’t feel the work you have done beforehand is wasted. By doing some of the work in advance, you gain perspective about the selling process. You might also save a little money.
Step #5: Screen potential buyers
Not everyone who expresses interest in your business will be a serious buyer. Some people shop for businesses like other people window shop for shoes. The problem is that showing your business to potential buyers takes time. Rather than waste your time with insincere customers, it is much better to screen buyers in advance and only meet with those who are truly serious.
Note: Do not give out any information about your business until you have pre-qualified potential buyers! It is not unheard of for competitors to disguise themselves as buyers in order to gain information about the competition.
Step #6: Finalize the sale
Once a deal has been negotiated it is up to the attorneys and lenders to finalize the sale. All you have left to do is sign a few papers and ride off into the sunset.
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