Author: BBP

• They neglect to run their business during the sales process. – The owner of a business with sales under the $20 million range can get so involved in the selling process that they neglect the day-to-day operation of the business.

• They don’t understand the “real” value of their business. – A business may actually command a higher price than the value determined by an appraiser.  The business may be worth more than the sum of its parts.  A professional intermediary, along with other advisors, can answer the question of real value and help determine a “go-to-market” price.

• They aren’t flexible in structuring the transaction. – In many cases, how the deal is structured is more important than the price or terms.

• They are not looking at the business from a buyer’s perspective. – Buyers may look for different aspects of a business than those the seller looks for.  For example: growth potential, management depth, customer base, etc.

• They start with too high a price. – Sellers obviously want to maximize the price they receive for their business, but today’s marketplace is difficult to fool.  A good buyer may just elect to pass because of an overly aggressive starting point.

• They are impatient. – Sellers have to understand that it can take 6 to 18 months to find a buyer and proceed through the sales process, which includes due diligence, the legal and accounting issues that must be handled, and ultimately the closing.  However, on the flip side, the longer the deal drags, the more likely it is to fall apart.  As the saying goes: Time is of the essence!

• They have insufficient or inadequate documentation. – Sellers should have current real estate and equipment appraisals at the ready along with any documentation a buyer might want, such as projections, business forecasts and plans, and environmental studies.  Having all the documentation and financial records readily available will not only speed things along, but might also provide for a higher price or, even more important, save the deal.

The deal is done and you have completed the closing.  Now what do you do?  You help the new owner because chances are that you have some vested interest in the new entity, and it is in your best interest that the new owner is successful.

For example:
– there may be an escrow account due you.
– the buyer may have given you a note.
– you may be the landlord, and the buyer the tenant.
– your name remains on the company letterhead, and your personal reputation continues to be associated with the business.
– your former employees depend on you to have made the right decision in selling to the particular buyer, thus preserving their jobs.

One of the most frequently-asked questions by those looking at the independent business scene is: “How many are for sale?” Right on the heels of that question comes another: “How many actually sell?”

To determine how many of these businesses are for sale at any one time, and what percentage of these get sold, it is necessary first to define terms by business category. The industry groups that account for the majority of small to mid-sized business sales are: manufacturing, wholesale trade, retail trade, business and personal services, and household/miscellaneous services. Using these categories as components, the total number of businesses that apply to our “survey” is approximately 6.3 million.

Of this total, businesses that are for sale at any one time account for roughly 20 percent. There is naturally going to be a higher percentage of businesses for sale that employ four or less workers, but some independent business experts feel that fewer of these businesses–at least percentage-wise–sell than do the larger ones. Of those businesses with four or less employees, one expert’s estimate is that one out of six actually sells; with five to nine employees, about one out of five sells; and the trend continues.

Why is the actual-sale percentage lower for very small businesses? Many factors operate to affect this tendency. For example, the much smaller business may suffer more from unsubstantiated income or inaccurate financial information. Some owners may not be realistic in their pricing or simply aren’t serious about selling (problems that can threaten the sale of a business at any level). Still others may simply pay the bills and close the doors.

However, no matter what the percentages show, a business owner considering putting a company on the market should remember this: most businesses are salable if the seller is realistic in assessing value and is aware that the marketplace is the final arbiter of the selling price.

Use the following criteria to separate the serious buyers from window-shoppers. (Add up plus points, subtract minus points. The serious buyer will rate a 6 or above.)

Minus Point Factors

• -4 needs outside financing (excluding home equity)
• -4 been looking for 6 months or more
• -3 no available cash
• -3 still working in corporate world
• -2 spouse not supportive of buying a business
• -2 uses a legal pad or clipboard and takes too many notes
• -2 feels leisurely about finding the “just-right” business
• -1 now renting (although has lived in area for some time)
• -1 under 25 or over 62

Plus Point Factors

• +3 does not have a job or has just resigned
• +3 understands that books and records are not the only indicators of value
• +2 has enough money to buy a business
• +2 no dependents
• +2 family member or close relative has been a business owner
• +2 willing to take the time to look without a lot of notice
• +1 location is not a prime consideration
• +1 age 25 to 62
• +1 skilled worker or professional

Your first question may be, “Just what is Corporate Social Responsibility (CSR)?” We see CSR demonstrated in a variety of ways in areas such as:

THE COMMUNITY:
o Contributing to local community programs through financial support and personal involvement

THE ENVIRONMENT:
o Using packaging and containers that are environmentally-friendly
o Recycling
o Using low-emission and high mileage vehicles where possible
o Seeking more efficient manufacturing processes, etc.

THE MARKETPLACE:
o Utilizing responsible advertising, public relations and business conduct
o Exercising fair treatment of suppliers/vendors, contractors and shareholder

THE WORKPLACE:
o Implementing fair and equitable treatment of employees
o Upholding workplace safety, equal opportunity employment and labor standards

Actions such as these not only uphold today’s business standards, but they also pave the way for future generations. In years past, many of these elements were considered almost anti-business and some had to be enforced by governmental regulation.

Successful companies such as Tom’s of Maine (producer of natural personal care products) and Newman’s Own have practically been built on CSR. More and more companies – public and private – are following the elements of CSR. Google is a desired workplace because of the way they treat their employees: great benefits, great food in the employee cafeteria, exercise equipment – you name it, Google provides it.

Recognizing CSR in today’s business climate not only increases shareholder/investor interest, but also increases value. Socially-conscious companies are considered sound investments.  They attract buyer interest and acquire higher selling prices when it comes time to sell. After all, most buyers want to find a business with the following attributes:

• Good relations with the local community
• Products and/or services that are meeting the current trends in the marketplace and are positioned to meet future trends
• Positive relations with employees and low-turn-over
• Excellent customer loyalty
• Good relationships with suppliers and vendors
• No “skeletons” in the company closet

In addition, good environmental practices reduce costs, create efficiencies and provide excellent public relations. Good employee relations make for happy workers, which translates to higher productivity and lower absenteeism. Good relationships with customers and suppliers eliminate, or greatly reduce, the possibility of legal entanglements.

All in all, Corporate Social Responsibility not only creates additional value and helps in creating a higher selling price when that time comes – it is also very good business for now and in the future.