Posts

exit-planning-abc

5 Things Outside Your Conrol That Will Impact Your Ability To Sell Your Business

Hope For The Best, But Plan For Those Things Outside Your Control

We often hear business owners state the specific year when they will sell their business, such as “I will sell the business next year,” or “I will sell the business in the year 20XX….” While it is good to have specific goals, when selling a business the outside world plays a surprisingly large role in determining how many potential buyers may be interested, and the price and terms you may ultimately receive. Selling your business for the maximum value involves careful timing.   Thank you to Patrick Ungashick for much of the content of this article.

There are five external factors nobody can control, but any or all of them may play a significant impact on your success at sale:

1. The Availability of Financing. When money is tight and buyers lack access to cash at attractive rates, generally this depresses business prices. For example the graphic below from the U.S. Federal Reserve Bank* shows the surge in banks tightening their commercial and industrial (C&I) lending standards in the midst of the recent US “Great Recession.”
2. The Overall Economy. When the overall economy is strong, business sales prices generally rise. In the reverse, during a weak economy business sales prices tend to fall. A rising tide lifts all boats, and a falling tide lowers all boats. The chart below shows median EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) multiples paid for U.S. companies purchased over approximately the last ten years.** As the economy has cycled through recessions and expansions, the chart shows median multiples have changed by 25% between highs and lows.
3. Your Geographic Region or Country. In many cases, different regions of the country (and different regions of the world if your business operates internationally) will be growing at different rates. If your area is experiencing difficult economic conditions relative to other locations, than can reduce your business sale price. Of course the reverse can be true as well, raising a business’s sale price.
 
4. Your Specific Industry. Industries go through hot and cool spells, where demand for businesses in that industry will rise and fall. These cycles can greatly raise or lower business sale prices and favorable terms.
 
5. Tax Policy. Known or anticipated changes to relevant tax rates can impact business sale prices, both gross and net. For example, several years ago in the U.S. federal long term capital gains tax rates increased by about 20% for most taxpayers, a change everybody knew was coming. We witnessed multiple business owner clients sell their businesses earlier than planned, before the tax rates increased.
exit2

     Exit Planning Is Rarely Linear 

All five of these external factors change with time, sometimes quickly. To sell the business for the top price, owners need to build timing flexibility into their exit planning, and carefully monitor these outside factors. Owners also must start seriously planning their exit years prior to the actual event. An owner who wishes to exit anytime within the next five years or less needs to realize that it’s crunch time.

When you sell your business is not likely to be determined by the year you choose, but rather by whenever a willing buyer shows up with a price and terms that you are willing to accept.
If you would like learn more about how you can increase the likelihood you will be able to sell your business at the price you’d like to receive call Coach Michael Stelter at Advanced Business Coaching, Inc. (262) 293.3166.
“12 FATAL MISTAKES YOU CAN MAKE WHEN TRANSITIONING YOUR BUSINESS”
1-1 small

Is Exit / Transition Planning For You and Your Business?

Entrepreneurs want to exit or transition their businesses with health, sanity and fair compensation for what they’ve created.

The information be shared is intended for a singular group of entrepreneurs Business Owners of companies with less than 50 employees that want to find a way to exit or transition their business and plan for a new life in retirement.   There are many around us and they are a special group of people that we’ve had that privilege to work with and help through these past 25 years.

Do these things describe you?…

  • The owner/part-owner of a closely held business with less than 50 employees.
  • You want to exit your business over the next 3-10 years.
  • You’re part of the baby-boomer generation born between 1946 and 1964.
  • You’re not sure, but think you’d like to transition the business to a family member(s) or Key employees that have expressed interest in being ‘the owner’.
  • You know the business is worth something, but not sure how much?
  • You have no idea how to get the money out of the business and into your hands so that you can use it for your ‘golden years’
  • You’d like to business to continue to grow.  So you can leave a legacy and ensure that your employees and customers will be well cared for in the future.
  • You’d like to have a retirement that will allow you to be away from the business and have the confidence that it will be management well and continue to grow.

If the points above don’t describe you, or the situations/emotions you’ve found yourself, then the information we will be sharing is not for you.    You may be a the C-Suite executive of a bigger company, or a branch manager of a larger operation, an independent contractor, a real estate or insurance sales person, independent financial planner or a solo-entrepreneur with no employees.  All of these are wonderfuil accpmplishments and your achievements are legitimate and should be honored, but the information we will be sharing will have very little impact on your current situation.

But, If the bullet points above resonate with you and you’ve experienced the things that create the special envioroment of the small business owner, then read on and we look forward to sharing this journey with you.

If you haven’t gotten your copy of the FREE REPORT… “12 Fatal Mistakes You Can Make When Transitioning Your Business”

I wish you all the insight and wisdom need to set your plans in place.  Until next week.

Health, Happiness and Abundance

Michael Stelter

Advanced Business Coaching, Inc.

“We help entrepreneurs leave their businesses with health, sanity and fair compensation for what they’ve created”

Watch the video and download your Free Report to learn how we can help!

Michael@ABCBizCoach.com

262.293.3166

#9 of the Top 10 Reasons Businesses Fail… Lack of a Succession Plan or Exit Plan

man-with-doorThere are many reasons why businesses fail.  One of the most common is that the business owners rarely plan the details of developing someone to replace themselves and how they will get out of their business.  Without those plans in place well in advance, the likelihood that their succession plan / exit strategy that will meet their needs or expectations is extremely poor.  And, it is very possible that the business may die, or will not yield the financial return that the business might expect.  But it doesn’t have to be this way…
When an owner starts on their path to start or grow a business, there is rarely a plan on how they will get out of the business.  Why? … working with business owners over the last 25 years,  here are the most common reasons…
  • They are too excited about building something – why would they plan to get rid of it?
  • They are passionate about the products they produce or the service they provide and feel like they will always want to do it
  • They like serving their customers needs, wants and desires – that’s why they went into business.
  • There is a ‘movie’ going on in the back of their head that they will grow this amazing empire.
  • There will always be time to think about how to exit.  There is just too many other things to think about to grow the business  
When an exit strategy is not determined in advance, there are some big challenges that develop. 
  • The growth of the business may not be balanced. Systems development is a powerful tool that will enhance the value of any business.  Most new businesses don’t invest the time to create those systems thinking that there will always be time later.
  • Succession plans to move the business to a family member or key employee are undefined, unclear and confusing.  You run the risk of loosing good people
  • The measures of Success are part of that exit strategy – and how do we know when we achieve success if we don’t know what to look for?
  • There is a significant change in perception when you know you’re only going to be doing something for a specific period of time – as opposed to ‘forever’
No matter what stage you are in the growth of the business, every owner should answer this question…”Will I want to exit my business”.  Most business owners will immediately say “Yes”, but few ever take time to consider the criterion that would lead to a transition to the next generation – like health issues, , a strong team to take over and run the company, family issues; or to actually sell the business – like, a great offer to purchase, achieving profit goals, changes in your industry, or economic conditions.   If your answer is “Yes” to this question – then you need to develop a transition plan and an exit strategy
 
Who should be involved in an exit strategy?  There are a number of thoughts about who should be part of your exit planning strategy, but here is a starting list for you to consider…
  • Key Family Members
  • Key Employees
  • Accountant / CPA 
  • Business Consultant
  • Executive Coach
  • Business Attorney
  • Financial Advisor
  • Business Insurance Agent

The process of successfully planning a succession plan and an exit strategy requires time, the right team of advisors, and the focus on achieving your goals.  A simple process, but not always easy.  But making the decision as far in advance of the transition date as possible will increase the likelihood of achieving the exit plan.

If you’d like to know more, please contact me at michael@abcbizcoach.com or call Advanced Business Coaching at 262.293.3166