Sell My Business Archives

Are you Emotionally Ready?

August 20, 2020 by Sun Acquisitions

We live in an Age of Entrepreneurship where more businesses are started, bought, and sold than at any other time in history. And one of the core beliefs of this Age is building a business whose exit plan is an acquisition. This buy-out is meant to be the “finish line”, the “ultimate goal” so one can cash out and live large right? However, over the years, as business brokers, we’ve seen many of the so-called “successful” entrepreneurs plagued by emotional turmoil and even severe bouts of remorse.

Sellers often have to struggle through a broad range of emotions that come about from the decision to sell. As an M&A firm that has facilitated hundreds of deals, we’re convinced emotional preparation on the part of the seller is fundamental and should not be overlooked. Here are five things you can do to help foster emotional readiness.

1. Develop your exit plan before you engage buyers

For the majority of entrepreneurs, the day-to-day operations of the business are so time-consuming they barely have a moment’s respite to think about the details of a potential exit strategy. Yes, perhaps in the back of their minds, they would like to eventually sell the business one day but they haven’t really taken time to think things through.

Unfortunately for most, life doesn’t always afford you the chance to sell when you want. Death of a loved one, divorce, disability, personal or business distress, and disagreement are the top factors that force many to end up selling. And selling under duress will only compound the emotional stress that’s already associated with such a process. Hence the very real need to set aside time when things are still well to develop a thorough exit plan.

2. Acknowledge the source of your current identity so you can build a new one

Many entrepreneurs find their identity in their work and have a strong attachment to it. In fact, according to a 2017 study carried out in Finland, by researchers at the University of Helsinki, MRI scans showed that entrepreneurs are just as emotionally attached to their businesses as parents to their children. This explains the deep sense of loss and period of mourning that often accompanies the sale of one’s business.

The emotional attachment to one’s business is also exacerbated where the business is a generational one that has been in the family for years. Letting go and selling such an entity can wreak havoc not just on you the seller but complicate family dynamics if the business was central to the family’s identity. However, if selling such a corporation is in the best interests of the company, the ensuing emotions will simply have to be dealt with as part of the process. This leads us to the next point.

3. Adopt hobbies and interests beyond your business

Post-sale it might be difficult to still meet up with partners who had become friends through business. Especially those who relied on your business to earn a living. You will probably need a new set of friends and acquaintances. Some of your friends from your current life just won’t feature much in your new state of life because you aren’t running in the same circles anymore.

At least a year before you plan to sell, you may want to start making personal adjustments to cushion what’s about to happen. Adopt new hobbies and pursue interests that you’ve always had but just never made time for. You will need a new community around you to hang out with while you transition into your new life. Joining a clubhouse, church, or volunteering within your community can provide you with a new network of people to get to know.

4. Establish what you will do after the business sale

The proverbial, “An idle mind is the devil’s workshop” rings true even after you’ve cashed probably one of the biggest checks of your life. This does not mean, however, that as soon as you sign the contract you should start on a new venture.

In fact, you should live a little à la former Minecraft Games founder Markus Persson enjoying your new wealth. Yes, travel to Ibiza on a whim if you so wish, throw spectacular parties if you’re so inclined, or outbid celebrities to buy luxury homes. Recover from the burnout.

BUT, you must have a post-sale plan otherwise like Persson, even after selling your business to Microsoft for a record $2.5 billion you’ll end up depressed and taking it to Twitter to reveal how you’ve “never felt more isolated”.

5. Find a trusted team of advisors and support system

This is probably one of the most important points to take note of. We’re not islands; we live in a community with others. Being able to express how we feel especially around such a life-changing event with people who’ve facilitated such deals and who specialize in this area in the form of M&A advisors is critical for your mental health.

Family and friends can offer a listening ear when things get tough – as they probably will over the course of the months. And their support will prove invaluable. Talk to your spouse and or children before the sale so they will know the stress you’ll be under and can offer the support needed as life transitions for all of you.

Finding business people who’ve been where you are and can talk to you about how they emotionally dealt with selling their business and moving on will be therapeutic.

Discuss selling a business with a professional business broker

Sun Acquisitions provides a host of business advisory service s to facilitate the buying and selling of businesses. From preparing for a divestiture, conducting due diligence reviews, to

analyzing target opportunities, and developing acquisition strategies, our expert team can assist in various capacities. Contact us to learn more about how Sun Acquisitions can help you during the buying and selling of a business.

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

Waiting Too Long to Sell

August 12, 2020 by Sun Acquisitions

When selling a business, what is the expected timeframe to complete the deal? While every transaction is particular, most businesses will sell within 6 to 12 months. It’s worth noting however, that the average time it takes to sell a business is dependent on a number of factors such as the selling price, whether the business is a franchise or not, and the type of industry the business operates in. If selling your business is your exit plan you might want to time things properly. Waiting too long to sell may have unfavorable consequences.

Defining the ideal time to sell

Perhaps you’re asking, “So, when is the best time to sell my business?” Is there such a thing as the right time to sell a business? As brokers who have facilitated scores of mergers and acquisitions, we attest to the notion that some moments are decidedly better than others.

For example, when the economy is enjoying a growth spurt investors are more inclined to consider buying a business. Additionally, when interest rates and capital gains taxes are low and financing is readily available selling your business might happen faster than when the economy isn’t doing as well.

In a nutshell, the right time to sell is when your business has enjoyed at least three great years, the economy is growing and your business is financially sound. However if selling is your intended exit plan don’t wait for the business to get into financial difficulties to try selling. And avoid attempting to sell during a recession. Here are more problems you may face if you wait too long to sell.

1. The business might sell for less than the asking price

How much your business is worth depends on a lot of variable factors which means that business valuation is not set in stone. The amount you believe your business is worth may fluctuate a great deal from month-to-month and year-to-year.

Business valuations are dynamic almost like the stock market – never stationary or static. The main force that dictates a business’s valuation is the Sellers’ Discretionary Earnings (SDE) which is a figure that is also never fixed but changes every year.

Additionally, your asking price isn’t always the one you end up settling for. Using data extracted from Bizcomps to illustrate this point, here is a comparison of the average time it takes for a seller to sell a business based on the final offer (and not the initial asking price):

Less than $100,000 – 6.3 months

$100,000 – $500,000 – 7.2 months

$500,000 – $1,000,000 – 8.1 months

$1,000,000 – $5,000,000 – 9.7 months

$5,000,000 – $10,000,000 – 10 months

2. Economic climates are unpredictable

The 2008 recession caught a lot of people off-guard. 43,500 businesses filed for bankruptcy while millions of people lost their jobs. Economists have a way of making economic recessions appear as if they are short-term events and yet in reality it often takes several years for an economy to properly get back on track.

In fact, if we study history we’ll discover that since 1900, the average recession has lasted 15 months. The economic downturn of 2008 spanned 18 months and became the longest economic decline in the United States since World War II. However, this may very well change since the onset of the COVID-19 pandemic that is wreaking havoc on the global economy.

Once again, millions of people and businesses were caught off-guard by the Coronavirus epidemic. Already more than 30 million people have been furloughed across the country and in the first six months of 2020, over 3,600 businesses have filed for bankruptcy including major firms like Neiman Marcus, Hertz, J. Crew, and CMX Cinemas.

Timing is everything when selling a business. You don’t want to be left holding onto a business you’re no longer interested in while you wait for the economy to gain traction again. So, if you plan on selling your business at any time, it’s worth it to keep an eye on the market conditions and what’s happening in the economy in order to find a suitable moment to sell.

3. Business valuation may continue to decrease

If you’re trying to sell the business because it’s taking a toll on your health and you’re burnt out then the faster you sell it the better. You see, the moment a business starts faltering and the results become evident in the company’s financials, the business’ valuation immediately declines.

This is a very difficult place to be in as it generally takes another three years of steady, positive results for the business to be valued favorably again. Before attempting to revive the business, it’s fair to put it out there that most businesses never recover – particularly if the business owner is already suffering from burn-out.

When you find yourself in this state, don’t make the timing mistake of thinking that you can turn things around before you sell. Remember, you probably need to make an additional investment of three more years or more to bring your business valuation up. This isn’t a task to be undertaken lightly. It can be very stressful and trigger mental health issues such as depression. Furthermore, you may actually cause the business to lose more value than it has already lost.

Get the help you need from an expert business broker

Sun Acquisitions is an experienced M&A business broker that can help you define the right time to sell based on your individual preferences and prevailing market conditions. We offer a range of business advisory services including preparation for divestiture, conducting due diligence reviews, analysis of target opportunities, and development of acquisition strategies. Contact us to learn more about how Sun Acquisitions can help you during the buying and selling of a business.

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

Understanding the Likely Buyer for Your Business

June 24, 2020 by Sun Acquisitions

Understanding Your Business Buyer — Photo by Adeolu Eletu on Unsplash

Are you thinking of selling your business? Do you think the business would fare better under new leadership? Or perhaps selling has always been your proposed exit strategy? Regardless of the reasons you’re selling your business, one thing is certain – you want the best buyer possible. For this reason knowing how to identify and distinguish between the different types of business buyers will go a long way in saving you both time and money. In order to better understand the buyer let’s take a closer look at the different buyers and the pros and cons of selling to them.

1. Selling to a competitor

Type of business buyer: Competitor

Sometimes a competitor may make an offer to purchase the business from you or you may initiate the conversation. If they approach you first they might be looking for a possible merger. One of the major reasons mergers and acquisitions take place is the desire for growth, expansion, and possibly monopolizing the industry. The advantages of selling to a competitor include peace of mind knowing that the buyer is qualified; potentially receiving a higher offer price and the buyer getting faster access to financing because they are already a proven business. Associated cons may be that your competition isn’t interested in ensuring business legacy or taking care of your employees and existing customers. Also, the competitor now knows you are thinking about selling and could use this information against you in the marketplace which could have a significant impact on the value of your business.

Selling to an investor group

Type of business buyer: Investor Group

When selling a business, you may be approached by an investor group. Investors by nature are looking for opportunities where they can make money while assuming as little risk as possible. Additionally, buying an already established business means immediate cash flow and eliminates the pressure of having to start from the ground up. By purchasing a financially sound and mature business, investors will have skipped the initial startup phase where little to no income is generated. These are the aspects you as the seller need to play up during your talks with an investor group.

3. Selling to a strategic buyer

Type of business buyer: Strategic Acquirer

Among the different types of business buyers you’ll come across are strategic buyers and financial buyers. According to a 2016 Private Capital Markets Reports, 57% of all businesses sold in 2015 were bought by strategic acquirers. Why is this? On average, strategic buyers tended to pay more when closing deals than financial buyers making them the preferred buyer. PriceWaterhouseCoopers (PwC) echoed the sentiments and encouraged sellers to seriously consider selling to strategic buyers because such transactions allow the seller to receive the most liquidity once the deal is closed. As with all things there are disadvantages to be had. The biggest cons of having your business acquired by a strategic buyer involve role duplication and possible dilution of customer and employee loyalty.

4. Selling to a private equity group

Type of business buyer: Private Equity Group

If you’re not ready to completely let go of the business and don’t mind staying on and helping to grow the company with the help of a backing partner then the type of business buyer you’re looking for is most likely a Private Equity Group (PEG). The PEG will purchase a portion of the business (probably a majority stake) leaving you as the seller with the remaining part. Done right, you can still exit lucratively in the future when you’re ready to let go completely. If you’re looking to sell but not ready for a full exit, then a PEG might be a good fit. 90% of PEGs will not involve themselves in the day-to-day operations of the business but will provide you with financial resources, human capital, ideas as well as experience to manage the firm.

5. Selling to your employees

Type of business buyer: Employees

Selling a business to employees is actually not very common but it can happen. Selling to current employees has many advantages which include the fact that they already have a good appreciation of the company’s ethos and brand identity. There will be continuity as the customers and vendors know the employees already. In addition, the employees will still have a job which is something that’s not guaranteed if you sell to another buyer. On the downside, because they are already privy to the dysfunctional aspects of the company you may need to negotiate a lower selling price. Probably the most imminent challenge for the employees will be getting the finance needed to buy the business from you. Proving they have a good enough credit score to lenders will be the major hurdle.

6. Selling to your family members

Type of business buyer: Family

Perhaps you don’t wish to sell the business to outsiders but wish to keep it within the family. In this case, you can approach family members and make the proposal that they buy the business from you. When it comes to the different types of business buyers, family can be the most difficult to deal with. It must be mentioned that selling a business to family members is not always the easiest route. Difficulties may arise if members cannot secure the necessary finance from lenders outright and alternative payment options like seller financing are entered into. Regardless of how well you trust your family, treat them like any other buyer. The only way to avoid future problems is to ensure you’ve sold the business by following the necessary state laws and got the paperwork to prove it.

Talk to a legal expert about selling your business

Would you like to discuss selling a business with an attorney? Get in touch with one of our advisors to learn more about how Sun Acquisitions can help during the buying and selling of a business.

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

Selling Your Business? Here Are The 4 Key Questions To Ask Your Business Broker

May 14, 2020 by Sun Acquisitions

“Are you interested in my business?”

This sounds a lot like you’re hocking your business on a street corner, but believe it or not, this question is often overlooked when business owners interview business brokers in order to list their businesses for sale. Does it seem a little obvious to you? I hope so; however when one’s thrust into the world of selling their business, it can be hard to see the forest through the trees.

A quality business broker will take the time to get to know the business intimately, from the obvious items like cash flow, balance sheet, and assets, to operations, employee stability and skill, vendors, and the strength of customer list.

But not all business brokers are interested in selling your business—they’re interested in the commission. So, how should a business owner select the right broker to represent their business?

1. “What do you need to know about my business to represent it?”

If the broker doesn’t respond with a laundry list or implied with a more or less tongue-in-cheek response of “everything”, a red flag should go up on whether or not the broker would be able to adequately value your business or source viable buyers.

A successful transaction begins with a thorough understanding of more than the books, but also the business’ inner workings. Is the existing team self-sufficient and are successful with a hands-off investor-owner or do they require a strong managerial leadership from a highly-present owner? Are any customer or vendor contracts coming up on expiration which need to be negotiated to maintain the same profitability?

2. “What is your experience representing businesses in my industry?”

The broker should have either industry or transferrable experience to be taking lead in the sale of your business for the same reason we don’t have oral surgeons performing bypass surgeries. Both are highly skilled doctors, however the tools and techniques are vastly different. While it’s great to give someone a shot, do you really want their first stab at it to be with your nest egg without experienced oversight?

3. “How many businesses for sale are you representing currently?”

This is less a question of ability and more one of time. Are you one of 20 or one of 5 he’s actively promoting and negotiating at the moment? Will you be leaving a message every time you pick up the phone to check in? Your business broker’s availability really comes into play as prospective buyers begin responding to marketing. You want to know for certain your business’ representative will be on their “A” game when the time comes to schedule deal meetings.

4. “What’s the average size business for sale you represent?”

Not necessarily a disqualifier, but certainly worth noting if you have a $5 million dollar business and her bread-and-butter deal is north of $15 million. You may not be as high priority to the broker as her other clients.

Flipping the script, if your business is valued at 4-5 times the average deal your independent business broker handles, is your deal out of her league? The response you should be after should this occur is learning about the additional resources and colleagues available to aid in marketing your business and structuring the deal. Having the rolodexes of a few more brokers is helpful when you’re looking for a bigger prospect pool than a single broker can provide.

At the end of the day, it’s experience that will sell your business. At Sun Acquisitions, our team of experienced business brokers have successfully represented business sellers and buyers in a range of industries and are eager to help you sell your business. Schedule your free consultation with one of our busines

5 Mistakes You’ll Make When Selling Your Business And How To Avoid Them

March 25, 2020 by Sun Acquisitions

Selling a business is complex and requires a great deal of planning to determine what approach works best for your company. How will you identify the best prospects? How will you get the word out without letting others know too soon? What is the value of your business, and how do you get back what you put into the business?

Many challenges can hinder the sale of your business, and doing it alone makes the process more drawn out and complicated. Here are the five mistakes you’ll make when selling your business and how to avoid them.

1. Not Getting a Business Valuation

You want the highest value for your business, but how can you achieve that ideal price when you did not receive the proper valuation?

Aiming too high can do similar harm as aiming too low. You will not win over lost buyers with a price drop. A business valuation shows you where your business stands and areas you may want to address before putting it on the market.

2. Not Seeing Flaws as Opportunities

No business is perfect, and flaws can present opportunities for investment and growth. Buyers want to purchase a sustainable business. However, many buyers appreciate a challenge and see potential where you may feel burned out dealing with the challenges.

You can take steps to refine your processes and policies now. Becoming re-acquainted with the ins and outs of your business will help you solidify and make the final deal stick since you will be ready to answer all questions.

3. Hiring the Wrong Advisers or None at All

You may think that hiring a general lawyer or accountant will be enough to take care of your legal obligations. It is not enough. Hiring expert mergers and acquisitions advisers will ensure that you get the right value for your business and conduct your due diligence thoroughly.

The right advisers will guide you through due diligence and any human resources hurdles. You hire an M&A advisory team to see you through the beginning, middle and end of a sale while the wrong advisers will not know how to handle obstacles and potentially harm the value of your business transaction.

4. Giving Away the Sale to Employees Prematurely

Never tell employees that you plan to sell your company until the deal is closed. The senior level staff that makes up your advisory team can accidentally disclose the fact that the company is on the market, so it is important to stress that all involved in the deal do not disclose information without your approval. This includes keeping data and paperwork away from prying eyes and only discussing the topic in private.

Corporate actions, such as quickly shutting down whole processes, product lines or departments, naturally send employees into a panic. Is the business shutting down or being taken over? What is happening? Your employees are a highly valuable asset, and the retention of your talent costs less than the new buyer having to replace them.

While some turnover can be expected in an M&A, strong businesses plan for transparent and supportive transitioning — but after the deal is made to avoid unnecessary panic. An M&A can create opportunities for employees, but giving away the details too soon can quickly disrupt the positivity of the deal.

5. Failing to Make an Exit Plan

Your exit plan is linked with your plan to sell the business. Would you like to be a consultant? Do you plan to start a new business or retire? Do you care or worry about the continuation of the company mission after the sale?

All of these questions factor into the type of buyer you are looking for and what you will do with your life once the deal is made. You can decide to sell your business and make an exit plan at any stage of your life and career. That said, it is best to sell a productive business with a solid reputation.

No business is perfect, but avoiding these five mistakes will make selling your business easier and better for you, the buyer and your employees. Start with a business valuation and learn to see flaws as opportunities. Don’t give away the news too soon to employees to keep up morale.

Hiring the right advisers will ensure a successful M&A and that you achieve the value that you put into your business. Value is linked with quality, and you should take every step with care.

Contact Sun Acquisitions to develop a plan to help you achieve your M&A goals. We can confidentially market your business to our extensive database of buyers and will stay with you when the deal closes.

Blog Posts

Breaking Barriers: Overcoming Challenges in Marketing Your Business for Sale

Closing the Deal: Finalizing the Sale of Your Business

Navigating the M&A Landscape: How to Maximize Return On Your Privately Held Business

Choosing the Right Path: Exploring Acquisition Strategies for Small to Mid-sized Enterprises

From Vision to Reality: The Art of Successful Mergers and Acquisitions for Privately Held Businesses