If you’re looking to leave the corporate world and start a venture of your own, buying an existing business can be a great option. The benefits are numerous! You don’t have the burden of creating a new business idea, dealing with startup costs, or establishing your brand. With a for-sale business, the current owner already cleared those hurdles for you. However, you do need to research certain aspects of the business to find a great fit. This article outlines three factors to consider before buying an existing business that will ensure you make a sound investment.

The Business Financials

Pay attention to tax returns and current profit and loss records. These will give you a clear idea of sales trends, expected income, and the overall health of the business. However, declining sales aren’t necessarily a sign of a poor deal. The owner may have intentionally slowed their business as they neared retirement or shifted their focus to other business ventures. They may also have invested in a new piece of equipment. If you work with a business intermediary, they will discuss the financials during your scheduled buyer meetings.   

The Existing Company Details

When researching a prospective business, consider the details of the company. Is it product- or service-based? Does it currently have inventory and working equipment? Your industry knowledge, working capital, and amount of time available to invest will determine if a business is a good fit. If you have more of the first and less of the latter two, a business that is turn-key ready is a better option. Beyond that, look into the management team. A capable and loyal team will allow for a smoother transition.

The Business Growth Strategy

It’s important to consider the growth strategy of before buying an existing business. You want to have a clear idea of both the current sales landscape and the growth opportunities available to you. Look into these four things to get a better understanding of the potential return on investment.

Current Client Breakdown

Firstly, what is the current client breakdown? You want to see diversified and evenly distributed accounts as opposed to a small handful of large accounts. On the off chance that the transition causes you to lose an account, you want the assurance that it won’t put too large of a dent into your bottom line.

Marketing Plan

Secondly, is there a current marketing plan in place for sustainable sales growth? A good plan outlines targeting efforts for existing customers , budget allotment for new customer acquisition, implementation of current initiatives, and any available growth opportunities you can capitalize on as you step into the role of owner.

Business Scalability

Thirdly, is the business model scalable? Put simply, if you add to your operating costs (i.e. utilities, marketing, administrative salaries, rent, etc.) at the same rate you grow revenue, then your business doesn’t scale. However, if further revenue requires relatively smaller and smaller additions to operating costs, then the business scales. Assess the business to ensure that it has the potential to multiply revenue with minimal, incremental costs over time.

Existing Business Reputation

Lastly, does the company have a sound reputation? If the company you’re looking to buy has been involved in scandals or has a history of treating its customers poorly, you’re going to have an uphill battle on your hands. Browse online reviews, check with the Better Business Bureau, and look at customer feedback for the company’s track record.

Conclusion

Purchasing an existing business has much less risk involved than starting from scratch, especially when you consider the number of businesses that fail within the first five years and the number of variables that cause their downfalls. Buying the business from an owner who has successfully navigated the pitfalls gives you a leg up on your new venture. Beyond that, you start with an established customer base, reputation, and cash flow.

Consider financials, company details, and the growth strategy before buying the existing business. Consequently, you will be sure to meet your financial goals and fulfill your entrepreneurial dream. If you want to start the process, you can view our current listings or contact one of our intermediaries. We can find the perfect fit for your next business!

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Many Baby Boomers left the grind of the corporate world to start their own businesses and live their version of the American dream. Now that those dreams have come to fruition, trillions of dollars worth of businesses are expected to transition within the next 10 years.

However, without an accurate plan for their exit, these business owners won’t receive the nest egg they need for transition into retirement. If you are a business owner thinking about selling, read our three tips to successfully prepare for your business transition.

Assemble your team

Few business owners, no matter how confident, can do all the aspects needed to successfully plan for a profitable exit. This lack of ability isn’t a jab at you; rather, it is a testament to the strong skill set that made your company successful. Your business thrived because you focused on what you do best, whether that is baking pies, manufacturing pipes for plumbing, or repairing residential roofs.

Throughout the life of your business, you gathered a team of experts around you. They counseled you on marketing tactics, kept your finances in order, and created operational processes and procedures. In the same vein, exiting your business is best done with a team. Gathering the right advisory team helps maximize the value of the business and achieve a top-dollar sale. This team is multidisciplinary, with specialists in law, accounting, tax, mergers and acquisitions, and wealth management.

These experts guide you through the selling process, place an accurate value on your business, secure and vet qualified buyers, and tie up all loose ends prior to closing. This lets you focus on your business with confidence, knowing that your trusted partners are working to secure a sale.

Iron out the details in advance

Advance preparation has several advantages. It minimizes risk around the transaction, generates a higher sales price, and optimizes the value of the business. Furthermore, it ensures that your sales strategy is aligned with your personal financial objectives. There are three areas you can focus on to help get your details in order.

Management

Firstly, establish a strong management team that will allow for a smooth transition with the buyer. A loyal, competent group keeps operations running optimally during the transition period. In addition, they provide assurance that the business will continue to thrive without you there.

The Back End

Secondly, take time to establish processes and procedures, ensure you have up-to-date financial statements, and generate reliable reports. In short, zip up things on the back end. The benefits are two-pronged: you have a better grasp on the overall health of your business, and potential buyers have more visibility into your business structure. As a result, both sides breathe easier during the selling process.

Growth Strategy

Lastly, develop a comprehensive plan for sales growth. Take time to develop a plan that maximizes profitability while keeping costs low. This shows potential buyers a clear path to sustainable growth once they buy your business.

Create a holistic plan

When it comes to planning for the transfer of ownership, there’s a tendency for business owners to neglect their exit strategy. Exit planning professionals agree that most of their clients don’t work on developing their plans until it’s too late. When business is poor, owners focus on keeping the doors open. On the other hand, when business is good, they work to capitalize on growth opportunities. It can be compared to estate planning- it’s something you know you should do to provide for your family, but it tends to get put on the back burner.

Creating a thoughtful, pre-transaction plan around the wealth that the deal will generate gives you better long-term results. It provides financial security for both your individual bottom line and your family’s legacy. The most successful outcome includes a well thought-out tax plan, a multigenerational wealth strategy and a comprehensive investment plan. Beyond that, it includes buyout terms, owner financing options, and payment details from the sale.

Utilize your team of experts to flesh out each aspect of the plan. Their knowledge will provide the best possible terms; plus, it will remove any question about your financial future.

Conclusion

In the end, deciding to sell your business is a big decision. As a business owner, the amount of work you put in on the front end will pay out on the back end. This applies to your company’s profitability as well as the payout you receive from its sale. The common saying, “if you fail to plan, you plan to fail” rings true, as only 20% of eligible businesses actually sell each year.

Start the process of transitioning into your next life phase by meeting with a confidential business intermediary. They will walk you through the selling process, assess the current state of your business, and work on your behalf to ensure a smooth transition. Contact a confidential business intermediary at the CBI TEAM today, or call our office at (479) 770-8989.

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By: Aspen Grams, Marketing Strategist

The baby boomer generation continues to age. As a result, we’re seeing a steady increase in the number of business owners choosing to exit their business and enter retirement. If you’re planning to sell your business, knowing the value of your business is key. It ensures you receive top dollar for the company you’ve put your heart and soul into over the years. If you aren’t sure where you stand, keep reading to learn how to add value to your business!

Over-valuing the business results in a stagnant listing. Buyers pass by your listing in favor of an option with higher-perceived ROI. Under-valuing results in a sale that leaves you with less money than you deserve. Therefore, it’s important to have a valuation completed by a professional. Working with a business intermediary, such as the ones at CBI TEAM, ensures the valuation is accurate and timely. In addition to valuations, these intermediaries work on your behalf to secure qualified buyers.

If the valuation presented is less than desirable, you can enhance your growth track and reduce risks to your business before you list it. In this article, we identify three key value drivers for both growth and risk reduction. These will position your business as a sound investment to a qualified buyer.

Risk Reduction

1. Stable, reliable financial information

Buyers look for cash flow that’s predictable and on a growth track; therefore, keeping comprehensive books is crucial. Buyers look at your financial statements to decide if their investment is solid. If you have recurring contracts and solid sales reports, it reassures buyers that they will receive stable return.

2. Diversity

Buyers want to know their investment is safe, so diversity among products, customers and suppliers is a great way to deliver assurance. Firstly, diversified products reduce competition within the market and provide barriers to entry. Secondly, a diversified customer base provides proof of company satisfaction as well as a cushion for any surprise account losses. Lastly, a diverse range of suppliers provides more stability in the face of potential market disruption, changes in quality or availability, and supply catastrophes.

3. Reliable operations

Buyers want to know the business can succeed without you. Having well-documented and functioning operating systems ensures the ship won’t capsize once you leave. Similarly, a company dependent on you will not succeed under new ownership. A quality workforce and a loyal management team are vital to a smooth transition and continued operation.

Growth

1. Documented growth strategy

A solid strategy shows buyers that the seller has a vision for the company and has implemented efforts throughout the years. In addition, it shows the buyer the value of future opportunities within the market.

2. Scalable business model

Buyers look for companies with strong growth potential. They want to see a sustainable product that can increase profits over time. In other words, a model that can multiply revenue with minimal incremental costs.

3. Unique fulfillment

If the way your company meets customers’ needs differentiates you from the competition, buyers will recognize the potential for higher profit margins and market domination. As a result, they’ll be more likely to invest.

In conclusion, your business is an investment. A buyer’s willingness to pay top dollar is dependent on their view of its potential. You can shape that view by presenting values that drive growth and reduce risk. If you want to transition into a new life phase in the near future, a valuation is the first step in the selling process. Contact CBI TEAM to connect with a confidential business intermediary and start securing your financial future today.  

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Until the sale of your business is finalized, your focus as a business owner should be sustainable sales growth. Not only is it a good feeling to have a thriving bank account, but a business with steady sales growth is extremely appealing to potential buyers. It’s much easier to convince a buyer that your company is worth investing in if your business review shows healthy financials than if it’s showing stagnant or declining revenue trends. Whether you’re in the early stages of business ownership or heading toward the final stretch, utilize the following tips to keep your business healthy and appealing to future buyers. 

DIFFERENTIATE YOUR BUSINESS

You can’t be everything to everyone, so stop trying! In a world of mass consumption, it can seem like the best course of action is to spin your business to fit into as many different-shaped holes as possible. Recent data across various industries is showing otherwise, highlighting the importance of brand differentiation.

One great example is Trader Joe’s, a quirky grocery store that carved out a niche market with private-label products, low price points instead of coupons, and a small, rotating number of offerings (think 3,000 SKUs vs 35,000 that fill the shelves of standard supermarkets). Trader Joe’s decided early on who it wanted its target market to be, and then dove into pulling those people in. Do they appeal to the masses? No. However, they generate industry-leading sales per square foot, beating out Costco, Whole Foods, Walmart and the like. They are proof that bigger doesn’t always mean better.

BUILD A NETWORK

When you think about your network, segment it into three areas: support, mentors, and referral partners. Each area plays a key role in the overall growth of your business.

Your support group consists of people who will both motivate you and talk you down from the ledge. They are your confidants- the ones you share company visions, milestones, and failures with. This segment has your back regardless, and that’s extremely important to keep you on track when things get hard.

Your mentors are people you want to learn from- people who have gotten to where you want to be and are willing to help you get there too. Find leaders in your field and then take inspiration from their keynote speeches, listen to their podcasts, read their books, and sign up for their business development courses. 

Your referral partners are trusted individuals who know you, trust you, and speak on your behalf to potential clients. These partners can be people in the same industry or people in your business community. 

STAY CONSISTENT

Consistency is key in all aspects of your business. Customer service, product quality, and marketing efforts are ineffective if they aren’t done well on a regular basis. You’ve invested your livelihood in your business, so take time to ensure your operations, finances, and marketing are zipped up. Staying consistent across the board (and holding your employees accountable to the standard you’ve set) makes for happy customers, and happy customers are loyal, repeat customers.

FOCUS ON 1%

When you think about growing sales, customers, traffic, etc., it can get overwhelming thinking about how to stay on track. Instead of staring at the large growth percentage you want and panicking, break down that number into manageable, bite-sized pieces.

Let’s say you want to see a 12% increase in sales this year. Divvy up that 12% by month- all you need to focus on is being 1% better than you were the month prior. 1% seems insignificant when you look at it by itself, but by that number compounding upon itself throughout the year, you will see significant growth!

BUILD A SOLID PLAN

The four prior points are great tips, but they don’t fully come to fruition until you create an action plan. Many a business have failed, not because the idea wasn’t good, but because there wasn’t a plan that pointed the owner in the right direction and laid out the steps to success.

Take points #3 and #4 as an example. If your goal is to grow your business by 1% each month and consistently gain new customers, what steps are you taking to make that a reality? A goal without a plan is just a dream! Create solid action items, implementation strategies, and then FOLLOW THROUGH to achieve your goals.

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Connect with a Confidential Business Intermediary

When it comes to selling your business, the end goal is to walk away with the most money in the least amount of time. A business intermediary is the best way to get to that goal. Firstly, they walk you through the sales process. Then, they help establish a value to your business. Finally, they  confidentially market your listing and screen qualified buyers.

A qualified intermediary works on your behalf. This frees you up to focus on running your business until the time comes to sell. Not only do they know how to find qualified buyers, but they will also negotiate on your behalf for the best price.

Focus on Your Sales

A discussion with your intermediary will include a financial analysis. They will evaluate your sales and make listing price recommendations based on that information. Buyers look at financials when deciding on whether to invest in your company; lagging sales don’t instill confidence in potential buyers. If your sales aren’t on an upswing, they will make the recommendation to focus your efforts on boosting sales and expanding your customer base prior to listing.

If your sales are solid, your business intermediary proves invaluable by initiating the next steps in the selling process while you focus on your business. Since selling your business can be time-intensive, the last thing you want is to see your operations suffer because your focus has shifted away from your company. Trust your intermediary to keep their eye on the prize while you keep your focus on the day-to-day.

Advertise Strategically and Confidentially

A good business intermediary is your marketing team, negotiator, and mediator during the selling process. They will confidentially advertise your business to their network of contacts and on business listing sites. Then, as interested parties reach out, they will screen and negotiate each buyer to ensure you get the best offer.

Confidentiality is crucial to successfully selling your business. It prevents your current employees from panicking and leaving you short-staffed. It also prevents your current customer base from abandoning your business for one of your competitors. Keeping your company information secure wards off any negative backlash onto your business while your intermediary searches for a buyer.

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In conclusion, selling your business can be intimidating and overwhelming. However, the right resources will give you peace of mind and a successful sale. Trust a professional business intermediary to handle the time-consuming aspects. Furthermore, trust them to utilize their network of buyers to ensure quality buyers see your business. We at CBI TEAM are those trusted, confidential intermediaries who work on your behalf to secure your financial future. Contact us today for a free, no obligation consultation and start the selling process.

The post How to Sell your Business in 2019 appeared first on Confidential Business Intermediaries.

A Changing Landscape

Since the implementation of federal tax cuts and spending increases in early 2018, US economic growth has seen a positive uptick. Furthermore, consumer spending trends increased as well. This is good news for both business owners and buyers.

This economic confidence makes it easier for small businesses to get a loan approved at a low interest rate. The reports coming out of 2018 show that small business approval marks and interest rates for loan applications match those previous to the recession. In November alone, lenders approved over half of all small business loan requests.

Impact on Buyers and Sellers

This is good news for you, regardless of which side of the business sale you are on. If you want to sell, increased financing opportunities means more qualified buyers for your business.

Do you want to buy a business? Banks are less strict about who they lend to, so you’re more likely to have your loan request approved this year than previous years. Plus, advanced data analytics play a big role in helping reduce lender risk. As a result, default rates on business loans are lower. Do you want to secure a business loan? The CBI TEAM’s Loans 4 Business Program has 99% success rate!

Take the First Step

Whether you want to buy or sell, the new year presents a fresh start to take action. Contact CBI TEAM to speak with one of our professional business intermediaries today. Our consultation gives you free, no-obligation introduction to the selling process. 2019 is your year, and we can make your business goals a reality.

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