• 2870 Peachtree Road #504 Atlanta, GA 30305 USA
  • Free Consult(404) 816-7878 x205
  • E-Mail info@montanagroup.com

Tag: Business Sale Considerations

Business Valuation Factors
Business Brokerage Consultant

Business Valuation Factors

Dec 6, 2017 by The Montana Group 0 Comments , ,
There are many complex formulas in expensive business valuation software that spit out reams of data on the value of a private business. This data is certainly interesting and can be helpful in determining price expectations but this is an inexact science, at best.  While this valuation approach is necessary and helpful when there are estate issues or legal issues such as buy-sell disputes the only answer is that a business is worth what a buyer is willing to pay at the time the business is for sale.
To formulate a ballpark answer to this question the following would be helpful:
  • Who is the buyer?
  • What is the buyer’s motive?
  • What is the buyer’s experience in making acquisitions?
  • What is the buyer’s financial strength?
  • What is the buyer’s concern with their competition for this purchase?
  • The Buyer’s recent acquisition activity in this type of business.
  • Are there many similar companies available to purchase?
  • What are the future growth opportunities of the company?
  • Proprietary products?
  • Barrier to entry?
  • Management post-sale?
  • Is there competition or perceived competition on this acquisition?
Does the business’ representative have a large database of potential acquirers?
Of course, private businesses are not often publicizing their sale price so it’s rare that there is a comparative sale to review. Even if this information were available the question would be does this buyer want to buy another company? Is buyer more or less motivated to buy another company? How about the unsuccessful potential buyers – are they more motivated now to increase their valuation? Comparing a private business’ value to a public company in the same line of business seems a stretch as larger businesses trade at significantly higher multiple and the same can be said for publicly traded ones.
So, the answer…… “you need a good representative to properly present the company to facet of the buyer market that would likely have an interest in the company and wait and see. However, this representative should be able to provide an accurate complimentary valuation range that can be used to determine if the owner is now a seller”, per Emmett Barnes, President of The Montana Group (www.montanagroup.com).
Business Brokerage Consultant, Uncategorized

Business Sellers’ Contemplations

Oct 3, 2016 by The Montana Group 0 Comments

Use an Intermediary. The business sale process is probably very different from any sale process that you have attempted. Plus, it’s a once-in-a-lifetime occurrence. An experienced and successful consultant will represent the owners and the owners only. Sellers who represent themselves almost always leave money on the table as they have not prepared the business’ financials in the manner that promotes their business, something that very successful business broker adviser’s have a knack for recasting. This is expensive money to save. The experienced intermediary who has traveled this road many times will know well-qualified advisers to recommend as needed (e.g. accountant, attorney). This consultant will provide an almost limitless list of potential buyers that should be reviewed with the owners for their approval before any contact, confidentiality agreements for execution by potential buyers, a thorough and clear offering memorandum that presents a business in a manner that promotes it, provide financial data in a clear industry standard manner, and shepherd the process along to ultimately find the mutually beneficial buyer to acquire the company under terms to the satisfaction of the owners.

During the sale process continue to focus on the operations of the business, even if overburdened by the due diligence requests. If a business begins to lose its positive financial trends the seller is understandably worried and worries that this could be more than a temporary aberration. The value of a business is greatly affected by its perceive immediate and long-term future. Nothing increases the value like financial success.

Be prepared for a very detailed and beyond thorough due diligence. It is often stressful so hunker down and take a deep breath. It’s not fun and often beyond reasonable but it is unavoidable. The best advise is to keep a list and a copy of what was provided so when it is again requested it can be easily located. Remember, there is a pot of gold awaiting you, so hang in there.

“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.

 

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.
Thinking of Selling Your Business?
Business Brokerage Consultant, Uncategorized

Before Selling Your Business 

Apr 5, 2016 by The Montana Group 0 Comments , ,

Top 10 Considerations Before Selling Your Business

  • Are your company’s recent sales and earnings trends desirable? The ultimate purchase price is significantly increased if the sales and the earnings have been growing over the past several years.
  • If your business lost its two largest customers what percentage of its overall revenue would be lost? If there is a concentration of business with a single or a few customers and they have other options it would be advantageous to dilute this before selling your business.
  • If you, the owner, are involved in the business is there an interest in continuing in that capacity or even a reduced capacity after the normal 1-2 year post closing transition? Are there qualified management candidates within your company to take over once you, the owner, retire post-sale? If not, such a suggestion outside the company may be of importance.
  • If there is significant value in the company’s real estate it may be advantageous to distribute it to the stockholders before selling the company and have the company lease it back at market rates.
  • Understand that the purchase price takes into consideration that there will be no interest bearing debt to be assumed by the buyer.
  • What is the corporate structure and which would be preferred, selling the assets or selling the corporate stock?
  • Is the ownership willing to have their broker discuss the company with the company’s competitors? Often this is an easier sale and for more money but also there are additional risks (e.g. industry talk, customer information, product or service pricing) not found when selling within the unrelated private equity market. If a quiet sale is the goal then discussions with a competitor are usually not recommended.
  • Make sure the broker that you select is paid only when the sale is complete and with a fee structure calculated to incentivize an increased sale price. Only success is rewarded. Determine who within the brokerage company will actually be working on the marketing and the negotiations of your company. Associates are not senior partners.
  • Understand that for the time to complete a sale a reasonable target would be about 6 months. Is this a good time within your business’ seasonality or its industry cycle?
  • Is there someone within your company who can confidentially assemble the required financial data without disrupting the company’s business and without exposing the process within the company?
“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.