Many people will say, ?I want to sell my company?, and yet they have no idea the amount of legwork and research that must go into this transaction. Selling a business is hard work and demands that a team of professionals is on board. There are thousands of businesses for sale all over the world but only a handful will ever sell. The keys to exit a company with a successful sale are not so much in the asking price but in the health of the company and the financial reports that need to be up to date. Just as you would never leap into a pool without first looking for a landing place, you must never jump headfirst into a sale without first doing your due diligence. Not only is this a legal term but it is a practical piece of advice. Examine the health of your company and then proceed to?the next step.
From a legal position, there are many hurdles and bureaucracies that need to be handled before the sale of your business can take place. Issues associated with taxes and pensions must be addressed. You must take the time to have the business properly audited from top to bottom. Every account must be looked at and every penny must be accounted for in the company before exiting. In addition, there are tax issues that must be understood. Whether it is a shared sale or an asset sale, the tax implications are enormous and they must be met. This is why a knowledgeable attorney should be sought out. It is preferable to seek out a lawyer that has experience in handling acquisitions. If proper due diligence is not carried out it will only serve to hinder the sale, slow the sale, or it could cost the sale altogether.
Taxes are always a part of life and they are always a part of a business. There is no escaping this fact. Embracing the reality will make the transition much easier. Simply saying, ?I want to exit and sell my company?, will not make the tax collectors go away. As tax laws are ever changing this is another reason for you to seek out the help of a skilled tax lawyer as well as an accountant. This will also be the time when an accountancy review of the business should be handled as it will establish the baseline price of the business in the future.
When you exit a company?there could also be?implications on your retirement plans or pension plans. These laws and requirements are also changing every day and you need to have a properly trained associate that can lead you through this process. There are no simple answers and there is nothing ?sexy? about the process. Selling your business is hard work and it demands proper care and attention.
?I want to sell my company!? that is a great idea to have but there are practical implications that must be dealt with first. The best approach to take is to start your business with an end game in mind. Make yourself replaceable and make sure that you have a healthy business before you try to sell. Following through on this will make the process much less complicated and it could result in a much higher payout for you in the end.
Over 250,000 businesses change hands every single year. The majority of these businesses are small but a few are mid to large companies. The small business sales never make the news but we tend to hear about the billion dollar acquisitions of the fortune 500 firms. You do not have to be a billionaire to become involved in the buying and selling business, but you do need to be driven, competent, and willing to work. Here are a few examples of things to keep in mind if you are interested in selling your business, buying a business or simply flipping a business for a profit.
Purchasing a Business
The purchase of a business can be a very daunting task. There are thousands of papers to look at and untold amounts of time with the lawyers. No matter what kind of business you have or may be looking at there is always someone interested in buying. However, actually buying a business requires much work behind the scenes. A reliable team of business experts should help to decipher the legal notices, disclaimers and purchasing documents. There should be a clear delineation of process and expectation as well as timelines for both the buyer and seller.
It is also important to determine whether or not you are interested in a franchise or a stand-alone business. Buying and selling a business is all about managing your risk and your reward. Franchises have inherited benefits but they come with strings attached. Stand alone businesses are much more prone to failure but they have a potentially higher ceiling in the long term.
Selling a Business
If you are looking to sell a business, then you too have much work to do. Lawyers call this due diligence. This process will require that you understand the ins and outs of your business. You are going to be asked for all financial records and to disclose all clients. When selling your business, you should consider it a very thorough medical examination. The prospective buyer wants to know all the gory details before they sign the dotted line. Take the time to prepare all the paperwork beforehand and be able to justify your asking price for the business.
Selling and buying business models or businesses all together can be a very rewarding and profitable venture if you have the ability to spot a good deal, as well as the foresight to see how you can improve an established business. Many of the success stories that we have heard are very rare. While it can be possible to sell your company for millions or billions, this typically does not happen overnight. Success is possible but it rarely happens in an instant. The Self Employed has a great article on flipping a business.
If your long term goals include buying and selling in the business world then you need to familiarize yourself with those that are already in the business. Take the time to network and grow relationships. These relationships will benefit your career and they could make it much easier for you to do business in the future. The buying and selling business can be yours if you put the work in.
Many business owners and entrepreneurs have found themselves asking the question of should I sell my company? It is a hard question to answer because so much goes into the building, growing, and structuring of a company. When it does come time to sell your business there are so many variables that the process can often become very murky and very difficult to traverse. There are multitude of reasons that a person could sell their business but there are only a handful of good reasons. This advice is only going to list 3 of the most common reasons that are given for selling a business. So the next time you are wondering if you should sell, think back to this and see how it stacks up.
The Time is Right
Timing is important in everything. If a car is not timed correctly it will not run. If a baseball player does not time a fastball they will strike out. If an owner does not time their business sale perfectly they will miss out on a great payday. The markets typically dictate when to buy and when to sell. If your business has been established and you have a great reputation, you are halfway home to a great sell off. Timing is key due to the amount you receive but also based on risk. The longer your business is in operation and the larger it becomes, the more risk is involved and it becomes more likely that a spectacular fall could occur. Remember, a business has great value but it has no liquidity until a transaction has been completed.
The Risk is Too High
Another reason CEO’s and founders give for selling the business is that they are simply tired of the risk. Running a successful business is a very risky venture. You are attempting to judge the markets and seek to fill a demand before it actually becomes a demand. The chances of failure are sky high and the number of failures versus successes is staggering. Many business owners are simply tired of the grind and the worry associated with the constant risk taking. Much like the blackjack player has to know when to walk away, so must the company owner. Should you sell your business? Only you can answer this question, but if you have been paying close attention to your business the chances are you will know when the time is right to remove the risk from your life.
Perhaps the most commonly used reason for selling the business is that the owner/founder simple ran out of steam. Many business owners invest 15, 20, maybe even 30 years in their business. At some point, retirement begins to sink in and they start looking for a way out. For others, they simply realize they are bored or that they need to follow another opportunity. This is very common.
Ultimately you need to remember that you are the owner and you have the final say. If you are considering selling the company do not simply ask, should I sell my company. Be prepared. Have a plan. Make sure that you are the one dictating the terms of the engagement and not the buyer.
Today digital technologies are influencing the evolution of successful business models.
Digital disruption is the change that occurs when new digital technologies and business models affect the value proposition of existing goods and services.
Digital disruption has already happened and will continue happening; changing the way business interacts with customers and each other.
Here are some instances of business models evolved from digital disruption:
* Most popular media owner creates no content (Facebook)
* Worlds largest taxi company owns no taxis (Uber)
* Largest accommodation provider owns no real estate (airbnb)
* Largest phone companies own no telco infrastructure (Skype, WeChat)
* Worlds most valuable retailer has no inventory (Alibaba)
* Fastest growing banks have no actual money (SocietyOne)
* Worlds largest movie house owns no cinemas (NetFlix)
* Largest software vendors don’t write the apps (Apple & Google)
Check out this video
Digital Disruption: Unleashing the Next Wave of Innovation
Investor’s investment criteria in rough order of importance for all investors
Source – Harvard Business School Division of Research
Enthusiasm of entrepreneur
Trustworthiness of the Entrepreneur
Sales potential of the product
Expertise of the Entrepreneur
Investors liked entrepreneur upon meeting
Perceived financial reward
Growth potential of the market
Quality of the Product
Track record of the entrepreneur
Angel groups expose entrepreneurs to a wide set of potential investors. At NewGate Capital Partners, our structured process facilitates a relatively quick and efficient investment decision. We provide insight through ongoing coaching and mentoring from seasoned entrepreneurs and executives.