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Actual for You - 10 Crucial Exit Strategies Leading to a Successful Sale of Your Business
Buying or selling a business can be a very laborious undertaking, regardless of the size and profitability of the business. Fortunately, there are business brokers and business transfer agents who can help you find either a buyer or a seller. These business brokers are also very helpful in arranging the sale of a business to ensure that everything goes as smoothly as possible.If you are considering buying a small business, or if you have a small business and you wish to sell it, there are brokers who specialize in small businesses. For small businesses, finding the right buyer or seller can be difficult.A small business broker helps you gain access to a bigger group of buyers and sellers and increases your chances of success. Small business brokers work just like any other broker or transfer agent. They are similar to real estate agents in that they match sellers and buyers. Moreover, a good business broker can help your business achieve its maximum value. Not all business brokers, however, are right for small businesses. Thus, the trick is to find the best broker to handle your small business.There are some tips you
4. Create a dividend strategy with a publicly company (this strategy requires at least two years of audited financial statements).
5. Use succession planning techniques to install professional management in the company and structure the business to provide an ongoing annuity to the owners.
6. A variation on #5 is, to bring in key managers who can eliminate certain costs or accelerate sales performance.
7. Sell to a strategic buyer in your industry, or one with complimentary products/services that wants to get into your industry. One option most business owners do not consider is exiting through the sale of a larger company to a smaller company with the receivables of the larger entity and the assets of both providing the underlying basis for financing.
8. Sell to an equity buyer, or fund, with a portfolio of companies.
9. If you are a Boomer, recruit a team of Generation X types and allow them to craft a leveraged buyout.
10. Increase the intangible value of the company which in turn increases the overall value of the company, thus causing less dilution.
Bonus strategies:
11. If a family business, begin gifting ownership in the business to family members as early as possible.
Every once in a while you come across an individual who has an entitlement attitude. They feel that they’re blessed with unusual ability that far exceeds the rest of God’s creatures and that the people they’re forced to deal with are just mere servants that should be catering to them. If this sounds familiar to you, you’re not alone.This week I was calling upon a new customer and he had been used to dealing with our president and so speaking with me seemed to be lower than low. He cut me off in the conversation numerous times and kept telling me that I was making assumptions that weren’t correct. He was condescending and arrogant and I kept thinking to myself how his attitude wasn’t going to gain any bonus points with me!My tactic was to slow down and listen to his opinions with as much intensity and understanding as I could possibly muster up. But even before that, I apologized for stating to him that some of the information that I needed to gather from him was administrative in nature and that anyone could deliver it to me. That’s when the hairs on the back of his neck must have flown up because he came back to me and s
Good deals don’t just happen. They take preparation and work. Often a great deal of work and years of preparation are consumed before a sale can even be contemplated. Forging the transaction, itself, may take anywhere from four months to two years, and the payout, unless you sell at a discount, can easily be another five years. Good succession planning, and the development of viable exit strategies, are key to crafting the best deals.
No plan, no profit. What happens when there are no exit strategies?
Bruce Barren, Group Chairman of The EMCO/Hanover Group, international merchant bankers who have concluded more than $3 billion in financial transactions, puts it this way, “If you want to ensure a successful transition, you need to develop a package of exit strategies as part of your overall succession plan. Everyone in business has heard horror stories detailing what happened when there were limited or no exit strategies. The more exit strategy capabilities, the higher the success rate for transactions. Success is, of course, contingent on being realistic, particularly in relation to the reliability of financial projections.”
Some horror stories focus on owners selling out for too little because they did not know what their business was worth, had not developed the people and system infrastructures to demonstrate value to buyers, and were forced to sell at a discount or on compromising terms. A few stories tell of how sellers failed to identify, or provide for, all contingent liabilities. They were ruined when the claims later passed through to them. In instances where the founder sells out and remains with the business, poor deals can mean years of what can only be called “indentured servitude.”
Still other stories show how the lack of exit strategies either resulted in short-term cash flow problems (tax issues due to stepped up asset values) or lifestyle issues (annuity issues relating to the timing of payments from the business). In several instances, the lifetime legacies the sellers wanted to preserve were lost because they had failed to prepare for the future. Growth strategist and succession planning consultant, Aldonna Ambler, CMC, CSP, has observed, “Some business owners need to be constantly reminded that one of their major goals (if the THE major goal) is to increase the VALUE of the business. Not only will the business owner have the satisfaction of a job well done, he/she ensures financial security when there is a strong business to sell.”
How do you prepare succession and exit strategies that make you feel good about the deal and help the buyer feels good about signing your check?
Barren notes, “Preparation is everything.” Succession planning tools gets you in touch with your mortality, both physical and psychic. During the process of evaluating options and exit strategies, valuation tools give you a sense of realism about what your business is really worth. Unfortunately too many business owners have a psychic dollar value for their business that few buyers accept. Counting on receiving those psychic dollars at the time of sale, or as part of the transaction, usually results in frustration and disappointment. This is particularly true when the owner is expecting a certain amount from the annuity payments for the business sale to augment other financial planning elements. It’s a rude awakening when it just isn’t there.
Your business, tax and financial advisors need to work hand-in-hand on the company valuation and your personal estate plan, as well as the estate plans of all other principal owners’ of the company. In one of my cases, we postponed the sale of the company for several years to build up its value simply because one of the owners would not have received sufficient annuity value to meet his financial needs in retirement. Trying to force the transaction cold have derailed a deal (buyers usually uncover potential problems during their due diligence) or prompted acrimonious litigation at a later date.
Evaluating exit strategies also brings you face-to-face with the notion of letting go and thinking about what you can do with your life when you don’t have to go to the office anymore, or it’s no longer your job. With founders, it helps to develop a decision as to whether s/he wants the business sold or “adopted,” that is, found a good home under like minded ownership (usually at a below the best attainable price).
There are many exit strategies that you can consider leading to the eventual sale of your business, whether you plan to stay on with the company, or not. Good strategies provide win-win opportunities for both seller and buyer. Here are a “baker’s dozen” of the best:
1. Refinance the assets, or the cash flow, to bring in additional funds (equity and/or debt) to facilitate growth or provide for a change in equity.
2. Take the company public, either through an initial public offering (IPO), or by acquiring a clean public shell company, or by being acquired by a public company.
3. Establish an employee stock ownership plan (ESOP), whereby the employees buy the business over time. This option has become less attractive, or unavailable in the future as enabling legislation changes.
4. Create a dividend strategy with a publicly company (this strategy requires at least two years of audited financial statements).
5. Use succession planning techniques to install professional management in the company and structure the business to provide an ongoing annuity to the owners.
6. A variation on #5 is, to bring in key managers who can eliminate certain costs or accelerate sales performance.
7. Sell to a strategic buyer in your industry, or one with complimentary products/services that wants to get into your industry. One option most business owners do not consider is exiting through the sale of a larger company to a smaller company with the receivables of the larger entity and the assets of both providing the underlying basis for financing.
8. Sell to an equity buyer, or fund, with a portfolio of companies.
9. If you are a Boomer, recruit a team of Generation X types and allow them to craft a leveraged buyout.
10. Increase the intangible value of the company which in turn increases the overall value of the company, thus causing less dilution.
Bonus strategies:
11. If a family business, begin gifting ownership in the business to family members as early as possible.
Talking and circling to see if there is any business out of a new contact is all part of the game. Sometimes it takes several meetings either in person or over the phone to discover whether the relationship will go anywhere. Once that examination of discovery is over, business should be conducted or it is time to move on. The ideal, of course, is that business is conducted. The question is, "How long should you keep the discover phase going before cutting off the conversation?" Many sales managers suggest cutting it off after a couple of calls before it becomes a big waste of time. I tend to agree. You should have a process in place (or a check list of items) to qualify potential business and through the meetings and discussions, compare notes to the list. I have worked on potential projects that never materialized for far too long. When I think back, I realized that I was concentrating on the potential and not looking at the real facts. I had not used a checklist and was not qualifying my contacts. Therefore, I was losing business in other areas because my time was spent chasing and talking to the potent
Some horror stories focus on owners selling out for too little because they did not know what their business was worth, had not developed the people and system infrastructures to demonstrate value to buyers, and were forced to sell at a discount or on compromising terms. A few stories tell of how sellers failed to identify, or provide for, all contingent liabilities. They were ruined when the claims later passed through to them. In instances where the founder sells out and remains with the business, poor deals can mean years of what can only be called “indentured servitude.”
Still other stories show how the lack of exit strategies either resulted in short-term cash flow problems (tax issues due to stepped up asset values) or lifestyle issues (annuity issues relating to the timing of payments from the business). In several instances, the lifetime legacies the sellers wanted to preserve were lost because they had failed to prepare for the future. Growth strategist and succession planning consultant, Aldonna Ambler, CMC, CSP, has observed, “Some business owners need to be constantly reminded that one of their major goals (if the THE major goal) is to increase the VALUE of the business. Not only will the business owner have the satisfaction of a job well done, he/she ensures financial security when there is a strong business to sell.”
How do you prepare succession and exit strategies that make you feel good about the deal and help the buyer feels good about signing your check?
Barren notes, “Preparation is everything.” Succession planning tools gets you in touch with your mortality, both physical and psychic. During the process of evaluating options and exit strategies, valuation tools give you a sense of realism about what your business is really worth. Unfortunately too many business owners have a psychic dollar value for their business that few buyers accept. Counting on receiving those psychic dollars at the time of sale, or as part of the transaction, usually results in frustration and disappointment. This is particularly true when the owner is expecting a certain amount from the annuity payments for the business sale to augment other financial planning elements. It’s a rude awakening when it just isn’t there.
Your business, tax and financial advisors need to work hand-in-hand on the company valuation and your personal estate plan, as well as the estate plans of all other principal owners’ of the company. In one of my cases, we postponed the sale of the company for several years to build up its value simply because one of the owners would not have received sufficient annuity value to meet his financial needs in retirement. Trying to force the transaction cold have derailed a deal (buyers usually uncover potential problems during their due diligence) or prompted acrimonious litigation at a later date.
Evaluating exit strategies also brings you face-to-face with the notion of letting go and thinking about what you can do with your life when you don’t have to go to the office anymore, or it’s no longer your job. With founders, it helps to develop a decision as to whether s/he wants the business sold or “adopted,” that is, found a good home under like minded ownership (usually at a below the best attainable price).
There are many exit strategies that you can consider leading to the eventual sale of your business, whether you plan to stay on with the company, or not. Good strategies provide win-win opportunities for both seller and buyer. Here are a “baker’s dozen” of the best:
1. Refinance the assets, or the cash flow, to bring in additional funds (equity and/or debt) to facilitate growth or provide for a change in equity.
2. Take the company public, either through an initial public offering (IPO), or by acquiring a clean public shell company, or by being acquired by a public company.
3. Establish an employee stock ownership plan (ESOP), whereby the employees buy the business over time. This option has become less attractive, or unavailable in the future as enabling legislation changes.
4. Create a dividend strategy with a publicly company (this strategy requires at least two years of audited financial statements).
5. Use succession planning techniques to install professional management in the company and structure the business to provide an ongoing annuity to the owners.
6. A variation on #5 is, to bring in key managers who can eliminate certain costs or accelerate sales performance.
7. Sell to a strategic buyer in your industry, or one with complimentary products/services that wants to get into your industry. One option most business owners do not consider is exiting through the sale of a larger company to a smaller company with the receivables of the larger entity and the assets of both providing the underlying basis for financing.
8. Sell to an equity buyer, or fund, with a portfolio of companies.
9. If you are a Boomer, recruit a team of Generation X types and allow them to craft a leveraged buyout.
10. Increase the intangible value of the company which in turn increases the overall value of the company, thus causing less dilution.
Bonus strategies:
11. If a family business, begin gifting ownership in the business to family members as early as possible.
You fill up your mug, jump in your car and head onto the dreaded commute of the day. Once you get to work chaos and more chaos surround you. Those half-an-hour breaks really don’t cut it anymore. By the time you get home late into the evening you really don’t have much time for anything but eating and sleeping which seems to keep adding to your waistline like your boss adds to your in box.When you were just starting your career the conventional wisdom stated that young professionals were expected to work, work more, and work like crazy until they grew that corporate ladder. The problem is that once you were promoted the work and responsibilities never stopped ending. The situation has become so unbearable that you don’t find the meaning in work anymore.If you are like most middle-aged professionals you begin to question the purpose of your life. Were you given life to work or is work designed so that you have some means to live? How we answer that question depends on our own personal backgrounds. What can be said with a level of certainty is that without a proper balance you won’t be very productive at work or in your life.
How do you prepare succession and exit strategies that make you feel good about the deal and help the buyer feels good about signing your check?
Barren notes, “Preparation is everything.” Succession planning tools gets you in touch with your mortality, both physical and psychic. During the process of evaluating options and exit strategies, valuation tools give you a sense of realism about what your business is really worth. Unfortunately too many business owners have a psychic dollar value for their business that few buyers accept. Counting on receiving those psychic dollars at the time of sale, or as part of the transaction, usually results in frustration and disappointment. This is particularly true when the owner is expecting a certain amount from the annuity payments for the business sale to augment other financial planning elements. It’s a rude awakening when it just isn’t there.
Your business, tax and financial advisors need to work hand-in-hand on the company valuation and your personal estate plan, as well as the estate plans of all other principal owners’ of the company. In one of my cases, we postponed the sale of the company for several years to build up its value simply because one of the owners would not have received sufficient annuity value to meet his financial needs in retirement. Trying to force the transaction cold have derailed a deal (buyers usually uncover potential problems during their due diligence) or prompted acrimonious litigation at a later date.
Evaluating exit strategies also brings you face-to-face with the notion of letting go and thinking about what you can do with your life when you don’t have to go to the office anymore, or it’s no longer your job. With founders, it helps to develop a decision as to whether s/he wants the business sold or “adopted,” that is, found a good home under like minded ownership (usually at a below the best attainable price).
There are many exit strategies that you can consider leading to the eventual sale of your business, whether you plan to stay on with the company, or not. Good strategies provide win-win opportunities for both seller and buyer. Here are a “baker’s dozen” of the best:
1. Refinance the assets, or the cash flow, to bring in additional funds (equity and/or debt) to facilitate growth or provide for a change in equity.
2. Take the company public, either through an initial public offering (IPO), or by acquiring a clean public shell company, or by being acquired by a public company.
3. Establish an employee stock ownership plan (ESOP), whereby the employees buy the business over time. This option has become less attractive, or unavailable in the future as enabling legislation changes.
4. Create a dividend strategy with a publicly company (this strategy requires at least two years of audited financial statements).
5. Use succession planning techniques to install professional management in the company and structure the business to provide an ongoing annuity to the owners.
6. A variation on #5 is, to bring in key managers who can eliminate certain costs or accelerate sales performance.
7. Sell to a strategic buyer in your industry, or one with complimentary products/services that wants to get into your industry. One option most business owners do not consider is exiting through the sale of a larger company to a smaller company with the receivables of the larger entity and the assets of both providing the underlying basis for financing.
8. Sell to an equity buyer, or fund, with a portfolio of companies.
9. If you are a Boomer, recruit a team of Generation X types and allow them to craft a leveraged buyout.
10. Increase the intangible value of the company which in turn increases the overall value of the company, thus causing less dilution.
Bonus strategies:
11. If a family business, begin gifting ownership in the business to family members as early as possible.
A recent survey by The Economist Intelligence Unit ranked South Africa as highly cost effective (10th out of 31 countries surveyed).South Africa's exchange rate makes it one of the least expensive countries in which to do business - particularly one with a first-world infrastructure and high living standards. Even though stronger local currency has strengthened against other major currencies in recent years, the rand exchange rate still makes commercial and residential property, quality hotels and restaurants inexpensive by world standards.South Africa's energy costs are also among the lowest in the world. Eskom supplies most of Africa with electricity, and is known for its superior supply quality. The country also compares favourably for petroleum prices, with private sector and multinational oil companies refining and marketing nearly all imported petroleum products in southern Africa.The licensing of a second fixed-line operator is expected to bring down the cost of telecommunications in South Africa. The new operator is due to begin operating by the end of 2006, giving state company Telkom its first taste of real
Evaluating exit strategies also brings you face-to-face with the notion of letting go and thinking about what you can do with your life when you don’t have to go to the office anymore, or it’s no longer your job. With founders, it helps to develop a decision as to whether s/he wants the business sold or “adopted,” that is, found a good home under like minded ownership (usually at a below the best attainable price).
There are many exit strategies that you can consider leading to the eventual sale of your business, whether you plan to stay on with the company, or not. Good strategies provide win-win opportunities for both seller and buyer. Here are a “baker’s dozen” of the best:
1. Refinance the assets, or the cash flow, to bring in additional funds (equity and/or debt) to facilitate growth or provide for a change in equity.
2. Take the company public, either through an initial public offering (IPO), or by acquiring a clean public shell company, or by being acquired by a public company.
3. Establish an employee stock ownership plan (ESOP), whereby the employees buy the business over time. This option has become less attractive, or unavailable in the future as enabling legislation changes.
4. Create a dividend strategy with a publicly company (this strategy requires at least two years of audited financial statements).
5. Use succession planning techniques to install professional management in the company and structure the business to provide an ongoing annuity to the owners.
6. A variation on #5 is, to bring in key managers who can eliminate certain costs or accelerate sales performance.
7. Sell to a strategic buyer in your industry, or one with complimentary products/services that wants to get into your industry. One option most business owners do not consider is exiting through the sale of a larger company to a smaller company with the receivables of the larger entity and the assets of both providing the underlying basis for financing.
8. Sell to an equity buyer, or fund, with a portfolio of companies.
9. If you are a Boomer, recruit a team of Generation X types and allow them to craft a leveraged buyout.
10. Increase the intangible value of the company which in turn increases the overall value of the company, thus causing less dilution.
Bonus strategies:
11. If a family business, begin gifting ownership in the business to family members as early as possible.
Cold drink vending machines are one of the simplest ways to generate money in the well-known vending machine business. On the other hand, just like all other vending machines that are used and made available, you need to offer the customers a selection of different choices such as soda, beverages and other cold products which you can use for the vending business.A cold drink vending machine will always be a good way to sell because during a stressful day, people want to be refreshed with cold drinks. They might be too lazy to drop by a grocery store and the only alternative is the cold drink vending machine.Some of the soda bottling companies provide the cold drink vending machine for free. Of course, they will exclusively use their products in the machine.You will need to sign a contract that you will only sell products from them including all the beverages for the cold drink vending machine from their company. This is how they promote their products and add to the bottom line. When you buy from the company, you will receive a commission from the sale of their products.You can also buy used cold drink vending
4. Create a dividend strategy with a publicly company (this strategy requires at least two years of audited financial statements).
5. Use succession planning techniques to install professional management in the company and structure the business to provide an ongoing annuity to the owners.
6. A variation on #5 is, to bring in key managers who can eliminate certain costs or accelerate sales performance.
7. Sell to a strategic buyer in your industry, or one with complimentary products/services that wants to get into your industry. One option most business owners do not consider is exiting through the sale of a larger company to a smaller company with the receivables of the larger entity and the assets of both providing the underlying basis for financing.
8. Sell to an equity buyer, or fund, with a portfolio of companies.
9. If you are a Boomer, recruit a team of Generation X types and allow them to craft a leveraged buyout.
10. Increase the intangible value of the company which in turn increases the overall value of the company, thus causing less dilution.
Bonus strategies:
11. If a family business, begin gifting ownership in the business to family members as early as possible. Make sure some next-generation family members exhibit strong leadership, then structure the transition around them.
12. Orderly liquidation. In some instances the exit strategy can involve shutting down the business and liquidating, or licensing, the assets. This can be effective when there are no clear successors, the business is based on a technology that is dying and/or, current and potential business volume, do not justify continuation on a stand-alone basis.
13. Cut costs to increase cash flow, particularly if you have restrictive loan covenants.
“To determine which exit strategy, or strategies are best for you, consult with multiple sources, in addition to your attorney and CPA, in order to gain a true independence of opinion and a testing of those opinions rendered,” Barren notes. A solid team of advisors, working with you and under your direction, is what you need to complete a full succession process. Succession planning has few shortcuts, and it usually takes about 4-6 months to craft the plan. Other forces may require faster action, such as a cash flow crisis, or the need to fund R&D or other needs at a critical point.
Compromises are part of every sale but often multiply when succession planning has not been in place for long. In such instances sellers often bear most compromise costs. One last note on advisors -- choose advisors who are familiar with the market in which you are dealing, both in terms of revenue and industry. The advisor with the international imprimatur may not be your best choice for certain deals.
If you allow yourself to get bored, or weary with the process, it will cost you, perhaps dearly. This happens all too often with women business owners. Ambler notes, “Women owners are 5 times more likely to dissolve their businesses than their male counterparts. It is so sad to witness a hard-working woman business owner close the doors in exhaustion still wondering what she could have done differently.”
Solid preparation gives the power of perspective, allowing you to consider your best exit strategies and find your best successors. It’s that simple and exit strategies are that important.
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