Selling to an Owner Operator
In a prior post, we identified that there were different types of buyers with disparate profiles and needs. Here, we examine some of the intricacies of selling a business to an owner operator.
Three Types of Buyers
Once a business owner knows the most logical type of buyer for the company and their needs, they can make strategic operating decisions that optimize the company for sale.
Working Capital is a Business Asset
Negotiations around working capital are one of the more misunderstood and often contentious parts of a business transaction.
State of the M&A Market as of 2Q20
The 2nd Quarter 2020 Market Pulse Report was released, giving us a glimpse into the impact of Covid-19 on the market for business transactions.
Understanding the Difference Between Asset & Stock Transactions
Business transactions can be structured as either asset deals or stock deals. There are both legal and financial implications to the buyer and seller that may impact the desirability of the structure and drive it one way or the other.
Importance of Documentation during the Covid-19 Pandemic
When things ultimately improve, business owners will want to be valued according to the monthly run rate of the business exclusive of external effects of Covid-19 mitigation. This will minimize the valuation penalty that would otherwise occur if the good recovery months are lumped with the bad into an annual performance analysis.
Landlords Impact Deals
Dealing with landlords in transactions has been so pertinent as of late, especially in the frothy California Real Estate market. Most business owners think of negotiating the term and price of their lease, but several other issues and clauses in a lease become extremely relevant upon a sale.
Mind Your Balance Sheet
Most business owners have a good sense of their profit and loss statement and want to make it a focal point of conversation. However, they don’t seem to grasp the importance of the company’s balance sheet. The lack of understanding or poor quality of information on the balance sheet can dramatically impact a transaction.
Know Your Business
The financials of a business usually tell a story. Does your discussion of the business history, trends and reason you are selling align with the story the financials are telling? Knowing the key metrics and variables that are impacting your business will not only help in a sale, but in your day to day decision making.
I’m Buying Your Future, Not Your Past
We all know the old cliché, don’t judge a book by its cover. The analogy in business is, don’t judge a business solely by its financials. When exploring the acquisition of your business, buyers will inevitably dig into the many variables that could negatively impact the future profitability of the business.
Getting Your Financial House in Order
Even though business is humming and you’re ready to move on, the business may not be ready to be shown in the best light. Just as you would stage a house for sale, certain aspects of the business should be staged in order to reduce the apparent risk and show the best true profitability of the operation.
Tax Consequences of Selling a C-Corporation
When considering a sale, the number that is most relevant is the after-tax number. Yet, most business owners seem to think that their tax consequences cannot be controlled. That is far from the case, especially when dealing with C-Corporations.
“I Want,” I Need,” and “My Friend Said” Are Not Valuation Methodologies
Most business owner find that their business is worth less than they expected. This can be a rude awakening when an owner’s mind is set on retirement and the travel agent has been added to speed dial.
Selling A Business Is A Process, Not An Event
Most business owners operate for decades and don’t begin to plan for an exit or speak with advisors until months before they are hoping to sell. These individuals are setting themselves up to leave money on the table, pay more than they should in taxes, or create unnecessary challenges in a transaction.