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Tag: Business Broker

Benefits of Working with The Montana Group
Business Brokerage Consultant, Uncategorized

When is a Business Best Positioned to Sell?

Sep 11, 2016 by The Montana Group 0 Comments , ,

Practically every business goes through cycles that are caused by competitive pressure, the economy, or other external reasons. So when the time is right to sell it’s best to start the process before a downturn reappears.

  • Have the sales increased yearly for a few years? Upward trends in revenue are very important as they reflect an increasing demand for the company’s product.
  • Have the operating margins remained constant or even improved over these past few years? If not, make sure to explain in such a way that the potential buyers are not as concerned with this indicator that often points to increased competition.
  • Do these increases above have a likelihood of continuing in the near future? A buyer wants to avoid buying a business at its peak.
  • Is there a concentration of business in a couple of customers? If that is the case it would be advisable to add other customers to the total revenue, which will dilute the concentration. If it is not, a buyer will appreciate this spread of business.
  • Buyers prefer to purchase the business assets as this provides an income tax benefit in the future and also this significantly reduces the issue of unknown liabilities surfacing after the sale. If the company has elected “S” or “LLC” then selling the assets rather than the corporate stock can be provided to the buyer without significant tax detriment to the seller.
  • If the real estate is not company owned make sure to have a lease that is or can be extended to continue the new owner in the location.
  • Are there any significant capital expenditures that soon need addressing? If so, determine the cost and the financial benefits of the purchase and reflect this in the financial projections.
  • Are there any unnecessary costs that can be eliminated or reduced? If so, a business is value on the cash flow that it generates so seriously consider making these changes or least add them to the financial projections.
  • What are the growth opportunities? This could include industry expansion, weakness of competition, or simply improved business practices. A buyer will want this desirable option.
  • Is there existing management that can continue the business on its current path of growth? If so, this expands the potential buyer list, which should increase the price offered.
“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.
Sell a Business yourself
Business Brokerage Consultant, Uncategorized

Sell a Business Yourself?

May 6, 2016 by The Montana Group 0 Comments ,

Sell a Business yourself?

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.