As a business owner, you are your own Board of Directors, as all of your major business decisions are made by you alone. This can be a big job, especially because you may be an expert at running your own business, but you are not an expert at everything.

Who do you turn to when you need an expert’s advice?

For many small business owners, the answer is simple; you turn to your accountant or your attorney for help. Is this a good idea? It may be in some circumstances, but there are important caveats for using this advice.

What about my attorney?

Your attorney is probably very specialized as almost all attorneys are. They may be in family law or specialize in personal injury claims. This specialization in the legal field is only going to help your business if you are using the appropriate attorney for the appropriate reason. You should have a business law attorney as your primary counsel, and then employ a more specific attorney if necessary, like a business litigation attorney if you are party to a lawsuit or an attorney who specializes in labor laws for a labor dispute.

What if you want to sell your business?

If you are looking to sell your business, then you will need an attorney who specializes in business transactions.

Why not just use your primary business attorney?

There are a few reasons. First, business transactions require specific knowledge just like any other area of the law, so a business transaction attorney is going to be the most knowledgeable.

Second, selling a business, like all other business related decisions, comes with a bit of risk. The job of your primary attorney is to protect you from any and all risk, so they will likely be forced to advise you against your own business sale because of the inherent risk. Non-transaction attorneys kill business deals every day, deals that would have been fine had the appropriate counsel been sought.

Third, transaction attorneys are more efficient at negotiating and closing business deals than an attorney who has never closed a business deal before. It will mean less billable hours and more money in your pocket if you use a transaction attorney instead.

What about your accountant?

Accountants are different from attorneys because they are typically not as specialized, although you should really use as your primary accountant a CPA who has experience in your particular industry. Your primary accountant should be able to help you organize your financials and prepare your tax returns.

What your primary accountant should not do is give you a valuation for your business, or give you a valuation for any business you are looking to purchase.

Why? Business valuations are complex, and there are accepted methods for preparing a business valuation that an accountant who does not specialize in this field will not know. Typically valuations done by an unqualified accountant leave business owners with unrealistic expectations in the business market. Avoid this pitfall by hiring an accountant who specializes in business valuations.

What’s the lesson? Who’s advice is better, your attorney’s or your accountant’s?

The answer is neither if they are giving you advice outside their realm of expertise. As a business owner, you will need advice, but make sure that it is good advice. Hire a team of experienced professionals, and only use each for what they specialize in. In the long run, it will save you from suffering the consequences of uninformed advice.

Are you a small business owner who has dealt with the consequences of uninformed advice? Leave us a comment or question here, and we will be happy to assist with getting you more informed answers.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

If you are a business owner who has considered selling, there are a few things you can do to boost the value of your business long before (or even shortly before) putting your business on the market. Any exit strategy needs to include an element for building value if you are going to get the biggest bang for your buck when your business sells. Here are a few things you can do as part of your exit plan to boost your value on the market:

There are essentially three categories of value-building: generating growth, improving cash flow, and reducing risk.

Generating Growth

When you generate growth, you create future projections for your company that will mean future rewards for a buyer, rewards they will pay for by paying more for your business. Look for new products, new opportunities, and new markets. Revamp your marketing and sales approaches for what you currently offer. The price your business sells for is not just based on what you earned in the past; it will also be tied to future cash flow.

Improving Cash Flow

To improve your cash flow, you will need to efficiently manage your working capital. Make sure you are managing your finances properly, and constantly look for ways to cut costs. Also look for content within your business that could be proprietary elements.

Reducing Risk

One of the best ways to reduce risk is to diversify. Make sure you build a diverse list of customers. You also want to have multiple suppliers, eliminating depending on just one place to acquire what you need to keep your business running. Look within your operations for places to diversify as well. Do you have “indispensable” employees? Perhaps a diverse management team, each member of which only has partial responsibility, will protect your business value better than one all-important employee whose loss would be a big detriment to your bottom line.

Are you ready to consider selling, but want to boost the value of your business? Leave us a comment or question here, and we will be happy to assist you with business building techniques.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

You are ready to sell your business, ready to move on to the next stage in your life, but are you really ready to put your business on the market? Once an owner decides that it is time to sell, they frequently get a one-foot-out-the-door mentality, and the truth is without a good deal of prep work on your end, your business transaction will likely not end up like you hoped it would.

Why not?

You need to (1) decide on a price, (2) get together what will be required during due diligence, and (3) ready the business itself for sale.

How does one decide on a price? The best answer here is to hire good help. As a business owner you may have a golden price floating around in your head, but the reality of the market is a business is only worth what someone is willing to pay for it. Hire a good business broker, someone who has experience in your market sector. Bring all of you financial records (like the past three years of tax returns, your P & L statements, etc.) and have an open-minded conversation about where you should price your business so that it will actually sell. If a broker will let you list your business for whatever you want, steer clear. An overpriced business will sit on the market indefinitely. If you don’t have your financial records in order (like they’re all wadded up in a stack of boxes in the back), then now is the time to get them straightened up for part two, getting your due diligence material in order.

What is due diligence and why do you need to be prepared for it? Due diligence is a period of predetermined time that occurs after an offer or letter of intent is given to the owner of the business. This time allows the potential buyer to take a good look at the business, like checking on inventory and combing over the books. You do not want to have to scramble, leaving your business unattended while you are trying to get the paperwork together.  It will make you look unorganized to the buyer as well as potentially hurting the bottom line at a time when you are trying to get the most money from that bottom line. Say it takes you a week away from your normal business responsibilities to get what is needed for due diligence assembled, how much could the numbers falter in that time? If they do, then you can expect any potential buyer to want the price lowered accordingly.  You can avoid this pitfall by simply being ready before you business is even listed. Having everything ready will also give an added benefit of less stress for you in a potentially stressful time. If you are unsure of how to get your books in order and assemble what you’ll need for due diligence, ask your business broker for help.

The third part of business sales prep is readying the actual business for sale. This can be as simple as a good thorough cleaning, or as complex as renovation work. Your business needs to be in good shape. The most common complaints from prospective buyers about businesses are easily fixed cosmetic concerns, like “the place is filthy” or “the kitchen doorknob fell off in my hand”. If you want to get top dollar for your business, you want buyers to see your business in the best light, so repair what needs fixing, give rough looking walls a fresh coat of paint, and get the place clean. That all-important first impression will mean more money in your pocket at the end.

Are you a business owner who has decided to put your business on the market, but you are unsure of what to do next? Leave us a comment or question, and we will be happy to assist you with getting your business ready to sell.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

You’ve built your business from day one, worked diligently to make it a success, but all that work has burned you out and now you are ready to move on to the next stage of your life. What kind of options do you have for exiting your role as owner and leader of your business?

There are six ways out:

(1)    Sell your business to a family member.

(2)    Sell your business to your partners or employees.

(3)    Sell your business to a 3^rd party.

(4)    Make yourself an absentee owner.

(5)    Liquidate your business.

(6)    Death.

Some of these options are obviously more appealing than others. As a business owner, your exit strategy needs to be something you are thinking about even from day one. If you don’t consider or plan your exit strategy, then inevitably you will end up at one or both of the last two options, which would not be ideal.

Let’s look at option 1. Selling or handing over your business to a family member can be a great option, especially if they have worked alongside you in the business and know it inside and out. They key to success in a family transfer of ownership is the entrepreneurial drive. You might have spent countless hours working on your business, but will your son or daughter have the drive to do the same? Do they really want to own and run the business, or are they agreeing to a potential takeover simply because they feel obligated to do so? These are important questions to answer before you hand over your business to someone who is ill-prepared to take on the responsibility.

Option 2 can also be a fantastic option, as employees and partners are already very familiar with the ins and outs of day to day operations, and should have a fairly easy time transitioning to the leadership role. Here you will also need to ask questions like are they willing to stay on long-term, and do they have the same entrepreneurial spirit that has driven you. These questions are critical if you are taking payments and transferring equity over time, because the future of the business determines whether or not you get paid in the end.

Here we will skip to option 4, becoming an absentee owner, because of its similarities to options 1 and 2.  To be an absentee owner, you will have to have a fantastic relationship with the management you put in place, be able to trust that management to run the business without you, and know that the management will work just as hard as you have to maintain and grow the business. Absentee ownership works well in situations where a family member becomes the businesses’ leader, or where a trusted and knowledgeable employee can take over. Unless you already have this type of situation ready to go into place, it will likely not be the best option for you.

So what is the best option overall? Clearly it’s not the last two.

The best option, as far as getting the best financial return for your investment in the business is to sell to a third party. By selling to someone outside your circle, you are able to get fair market value, instead of feeling obligated to give your child (for example) a break on the price. Another major advantage to a third party sale is that you will not have any more personal responsibility to the business (unlike if you are an absentee owner with a former employee in command, or if your daughter takes over the business and occasionally asks you for help), leaving you free to pursue whatever the next step of your life has in store for you.

Are you ready to take the next step in life and sell your business? Do you have questions about which option would be the best for you and your business? Please leave us a comment or question, and we will be happy to assist you with your future sale.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

If you are a successful entrepreneur who has worked as a business owner, then you are likely accustomed to things happening when you want them to. You work on your own schedule, and you decide what gets done and when.

This entrepreneurial spirit may have made you a successful business owner, but it can be a real hindrance when it comes time to sell you business if you expect the time tables of the sale to revolve around you. The truth is you business will sell when someone else is willing and able to buy it. You need to be prepared for this reality.

On average, it takes around 9 months to a year to get a business from listing to closing. Unfortunately, some business owners wait until they have something that is pressuring them to sell, like needing to move by a specific date to take a job somewhere else, and this can be a big problem.

If you have a timeframe for when you want your business sold, you are going to have to let reality prevail and be flexible. Pushing yourself to sell by a certain date might mean that you feel pressured to take any offer that comes in, whether it’s a good offer or not.

There is a simple solution to this problem, plan your exit strategy ahead of time. Give yourself plenty of time to sell, at least a year, if not more, so you can be sure to get the best return on the investment you’ve made into your business. Have the business ready to sell, if you had to, at all times. Keep things in good shape, keep the business clean, keep your financial records up to date and easy to follow, etc.

This preparation will pay off if you do suddenly have to sell, as the prep work will be done. A bit of preparation and a good dose of patience will mean a successful business sale in the end.

Do you need to sell your business now, in the next 90 days, in the next six months? Do you have questions about a reasonable timeframe for selling your business? Please feel free to leave us a comment or question here so that we may assist you.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com