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Category: Business Broker Newsletter

Business Broker Newsletter, Business Brokerage Consultant, Selling a Business

How The Montana Group helps the business sell

Nov 6, 2018 by The Montana Group 0 Comments
How The Montana Group helps the business sell …………
As we have consulted in the sale of businesses since 1991 we have learned what is appealing and what is of concern to the potential buyers. This is why we believe we are best described as consultants who analyze a business from the perspective of the buyers and make recommendations that should ease concerns and increase enthusiasm for the acquisition of a business. Often these suggestions are not difficult to implement and have a short lag before there is apparent improvement in the company’s profit or simply eliminate some operational issues going forward that could negatively influence the buyers.

Additionally, The Montana Group will provide its accountant to review the balance sheets and income statements for the prior three years and the current year to date financial information. We will also construct a budget for the remaining fiscal year, as well as, the next one. The potential buyers will use this to determine their valuation so it is critical that this information is provided in a format that best positions the business. The experienced consultant should more than cover their fee with this part of the presentation.

The summary narrative of the company is necessary in order to gauge the initial interest of the buyers and the buyers’ motivations should be such that their enthusiasm for the company raises their offer. A well-written narrative can enhance this.

It is important that interested buyers understand the sellers’ representative’s past successes and ability to bring competition into the process. Of course, buyers prefer not to pay any more than is necessary so they need to feel that in order to acquire the company their bid must be competitive. A consultant with many completed transactions will know how to properly enhance the ultimate transaction price but also in additional seller benefits, which can be substantial.

“Selling a business is a once-in-a-lifetime and lifestyle change that often affects multiple generations. So, use a specialist with years of experience. While this can be done by the business owner in an attempt to be frugal, our 25 years with this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a success-based consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.
The Common Elements of our Clients
Business Broker Newsletter, Business Brokerage Consultant, Selling a Business

The Common Elements of our Clients

Oct 2, 2018 by The Montana Group 0 Comments

The Common Elements of our Clients

In the twenty-five+ business sales that The Montana Group (www.montanagroup.com) has consulted each were unique in their own way, but most share common components. The ultimate buyers share many of the same acquisition interests so it’s fairly predictable when we list a business that it will be sold but when, how much, and to whom is the unknown.

These businesses were in the manufacturing, distribution, and service sectors and were located throughout the US, with a concentration in the southern part of the country. They also fall within the size range, of $1 million minimum in pretax profits. These businesses have good growth trends that exhibit an increase in sales accompanied by a commensurate increase in pretax profits. There is also an opportunity to increase the business’ revenue in the future, either from internal growth from an increase in market share, an expansion in geographic territory, the addition of products offered, or through a strategic acquisition. The existing management, either the prior owner or newly elevated existing management, is involved with the business after the sale and often receives ownership in return for their future successes. These businesses have a niche that makes them desirable. These niches were a desirable geographic territory, a product with little competition which is reflected in desirable margins, a large market share of a small market, a specialized service that is difficult to duplicate, or simply a nimble company filling a need with a quality product.

The owners were often in a position in their life that selling their business allowed them to retire at the sale or gradually retire over a few years while the sale allowed them to make liquid their largest and most significant asset. By working with The Montana Group these companies were paired with the appropriate buyer who met the owners’ various objectives. Our clients appreciate the risk that we take when we are willing to work on the sale of their business and are only paid when the business is sold. This confirms that we are confident in an outcome that meets (or exceeds) their objectives.

“While we would like to assist all business owners in their quest for selling their business we must select those that line up well with our focus and experience. We have successfully guided our clients, the business owner, throughout the pre-sale issues until the actual sale, often our consulting has resulted in substantial increases in the sale price. We will gladly provide a complimentary assessment of the likely sale scenario and after engaged we will use our many years of experience to address the various issues that could improve the overall transaction.” says Emmett Barnes, President & Founder.

Sell a Business without an Advisor?
Business Broker Newsletter, Selling a Business

Sell a Business without an Advisor?

Sep 3, 2018 by The Montana Group 0 Comments , ,
Sell a Business without an Advisor?
Often a business is owned and/or run by a very good negotiator so; why not just sell it without a broker, especially when the competitor is knocking? After all, the fee can be saved and how difficult can it be? Don’t you really just photocopy the financial statements and wait for an offer? Can’t the company lawyer or CPA just take care of it as he/she has taken care of about any and everything up to this point?

The answer is yes the business owner can and often does complete the sale of the business without a broker. But, the goal is not just completing the sale. Isn’t the goal completing the sale with the best possible overall transaction? This means not only maximizing the after tax cash but also maximizing the “extras” such as deferred compensation, non-compete agreement, carried interest in the company going forward, and post-sale employment agreements. As a company’s balance sheet changes daily, these fluctuations during the time of negotiations need to be included. It’s a moving target! Plus, most (if not all) private businesses expense certain items that in effect reduce the company’s tax liabilities yet are not really necessary in the operation of the business. These obvious expenses plus more innovative ones that can be justified and added back in recast financial statements could have a substantial positive effect on the overall transaction. A good business broker is aware of these enhancements and a large percentage of the time the overall transaction increase from these “add-backs” is much greater than the fee paid the business broker. Also, a good business broker will know what information is normal to provide and in what format (e.g. Customer Lists). Would it be helpful to know if the buyer Is simply over the line in its requests?

Now let’s also be realistic. Even if this buyer is indeed the buyer of choice for the business (and ultimately buys it) does it make sense to sell the company under the market value to them? Will a competitor who thinks they are allowed to buy the company without other buyers to compete with really offer a full price? Would you? Then buyer will also get the financial benefits of the easy elimination of unnecessary expenses, not the seller.

There are many former owners who wish they had not been “penny wise and pound foolish”. As the owner will only be selling their business once isn’t it simply prudent to have someone driving the transaction that has many years of successfully negotiating transactions … not learning as they go along, as the business owner who has never sold a business would be.

“Selling a business is a once-in-a-lifetime and lifestyle change that often affects multiple generations. So, use a specialist with years of experience. While this can be done by the business owner in an attempt to be frugal, our 25+ years of this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.

Pre-Sale Perspective for Business Owners
Business Broker Newsletter, Business Brokerage Consultant

Pre-Sale Perspective for Business Owners

Aug 7, 2018 by The Montana Group 0 Comments
Pre-Sale Perspective for Business Owners

The prudent outlook of the Business Owners:

As is often the case, business owners are totally focused on the constant issues of running their business. However, if they are contemplating the sale of their company it is time well-spent to contemplate their business value in the eyes of the ultimate buyer.

The cash flow that the business generates is KING, as this almost single-handily determines the value. The “almost” comes from other considerations like the balance sheet, the barrier to entry, and growth opportunities, to name a few. Therefore, their cash flow needs boosting, if practical, and this, of course, comes from either increased sales or reduced expenses. The business owner may determine this will require some difficult changes (e.g. termination of an employee, expansion) and prefer that the new owner make the tough decisions. However, it should be understood that the transactional valuation will rarely include savings that have not been reflected on the income statement.

Irreplaceable business owners makes a business much less valuable to a buyer! It is imperative for business owners to understand that if after the sale there is no involvement in the business potential new owners will be concerned with who they will hire to take over. If the buyer is an industry buyer (strategic) there could well be someone within the buyer’s organization who can run the newly acquired company. However, if the buyer is a financial buyer this candidate can be more difficult to locate. Therefore, if the seller has an interest in running the company post-sale or if there is someone within the organization that is either now in-charge or is capable of running the company, then the buyer will more confidently move forward and enhance their valuation.

Growth opportunities that should positively affect the company’s revenue are exciting and powerful. In most cases, the potential buyers are buying based on a value derived from the business’ historical numbers but are using their own projections based on their assumptions for future growth. This growth fuels their optimism about the investment and therefore pushes the value upward. So, expansion opportunities such as additional products, additional sale territory, and additional sale force, as well as, improvement in overhead costs etc result in increased enthusiasm for the potential buyers. Enthusiastic buyers equates to better offers.

Bottom Line: “Business owners should look at their business as they would if they were the buyer so focus on improving the cash flow and be ready to discuss the future growth opportunities”, says Emmett Barnes, President of The Montana Group (www.montanagroup.com).