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How to Prepare Your Business for Sale

Posted on August 2nd, 2021

There are many reasons why small business owners decide to sell their companies. They want to move to another city or state, sales are down, they’re looking for a new challenge or it’s time to retire. There are others but these are the main reasons.

Whatever the reason, once you decide to sell, you can’t just hang up a “for sale” sign and wait for the offers to come rolling in. Selling for the right price takes time and preparation. It also helps to talk to the right advisors. There are business broker and there are investment bankers who offer a variety of services to ready your business for sale and to the highest bidder.


The more time you take to properly assess, prepare and market your business for sale, the higher the probability of maximizing the transaction’s success. Timing is everything and best not to rush into an agreement but discuss with a strategic advisor. They will be able to give you guidance on when is the right time and what to expect from buyers.

Deciding to sell

The reason you’re selling your business is the most fundamental question you need to answer — for yourself and for buyers — since it’s likely this will be one of the first questions a potential buyer will ask. Define why you are selling and what you would consider a successful outcome. Define who your ideal buyer would be….a strategic or financial buyer from the industry or outside, maybe its a PE group. Narrowing down your buyer group will set expectations on what you may receive as an offer.  Assemble a team of advisors when you are contemplating a sale, including your family, trusted friends and the professionals (accountant, lawyer, business transaction advisor), etc. This will be your team you will heavily rely on throughout the process and pre and post transition.

Preparing for sale

When a buyer is evaluating your business’s price/value, they likely will use standard industry methods such as multiples of earnings and sales to arrive at a purchase price. If you’re thinking of selling in three or so years, start reporting your earnings with this in mind. Yes, you may have to pay more taxes now, but if your business is getting bought at 2-3x earnings, it’ll likely be worth it. You should have considered having a professional benchmark your business or even provide you with a business valuation.

Increase profitability

Investors want to buy profitable businesses, so look for places where you can reduce costs and create efficiencies. Then consider creating additional revenue streams. Acquiring a competitor now will add to your bottom line and potentially increase the value of your business to strategic buyers.

Establish processes

Creating and documenting regimented processes, which enable the company to function without your involvement, puts buyers at ease. You need to convince potential investors the business will continue to run smoothly long after you’re gone.

Cultivate a loyal workforce

New owners don’t want to deal with employee turnover. Experienced workers bring stability and help generate sales and profits.

Identify and highlight tangible and intangible assets

As you get closer to your targeted sales date, list and price all your business’s physical assets, including furnishings, fixtures, equipment and inventory. Also, consider the value of your intangible assets — things like contracts and agreements, customer relationships, brand recognition and more. Every non-material asset that contributes to your company’s profit line has the potential to boost its price.

“Be” the buyer

Price is important to the seller; terms and conditions are important to the buyer. You may be able to get a higher price if you provide the terms and conditions the buyer wants.

Put yourself in the buyer’s shoes. Do whatever is possible to enhance your company’s value. Make sure your financial records are current and accurate. Is your store/office/restaurant/facility looking its best? Tie up any loose ends. Buyers prefer businesses that come with low risks and high rewards.

5 Reasons You Need A Business Valuation

Posted on July 28th, 2021

Many business owners do not know the value or their company nor have they consider any reason to have one completed.  They have worked very hard to create this going concern that brings them employment, wealth and a certain lifestyle yet they do not know its worth.  Here are ten reasons you need a business valuation, whether you want to acquire a business, plan for succession or sell your company.

  1. Understand your current business. Create a baseline value for your company to know where you stand in the marketplace. Know how far your company has come since its inception. Understand how your company competes in the now. When you measure this data, you can quantify it in a more meaningful way that motivates both you and your employees toward future growth.
  2. Understand Potential for Growth. A business valuation helps establish a baseline value which enables you to create more informed financial goals, business strategies and marketing objectives. Annual business valuations allow you to understand your company’s potential for growth and innovation.
  3. Plan for Retirement or Post Exit. As with anything in business, you need a plan. Waiting may mean that you end up rushing to close or sell your business and get less back than you put into your business. That is not fair to you, your employees or your business. Make sure those years are golden, not tarnished. A business valuation helps you plan your exit strategy with less worry for all.
  4. Ensure Proper Protection of Your Asset. Knowing the real value of your most prized asset allows you to protect it best. You need to protect your business as it operates, but life can also get ahead of you. You must protect your business in case of taxes, legal challenges, death or divorce, and in divorce, the appraisal of the business as an asset will come up.
  5. Develop a Succession or Sale Plan. Plan ahead before you make your succession or sale plan — a pre-plan if you will. Succession is all about planning for success. Many business owners have a 3-5 year timeline to exit their business. Its best practices to have a business valuation at the end of each year to make sure you are on track to sell your business per your pre plan.

Start Planning Now for Possible Tax Law Changes

Posted on July 23rd, 2021

The elections are over, the dust is now settling and there talk of new unprecedented tax reform that will affect not only how we do business but also will affect our personal tax planning going forward. One of the biggest potential changes is the estate tax exemption amount.
The current amount you can transfer tax-free to the individuals of your choosing (usually spouse, family) is $11.7 million. This exemption can be given away during your lifetime, at death, or some combination of both. The anticipated proposal is to reduce this amount to $3.5 million. Even if this proposal is not enacted, the estate & gift tax exemption is already slated to be reduced in 2026 to $5 million (adjusted for inflation).

The next potential tax law change includes stepped-up basis. The Biden campaign proposal included elimination of a capital gains tax break known as “stepped-up basis”. It allows the person who inherits an appreciated asset to sell the asset and only pay capital gains tax on post-death appreciation, not the appreciation that occurred during the deceased’s lifetime. Some have speculated whether this elimination might be partnered with some type of stepped-up basis allowance that you could allocate to the inherited assets of your choosing so you would get at least a partial capital gain tax break when the asset is sold, in order to make it more middle-class taxpayer friendly.

Another proposed change is raising the tax on long term capital gains from 20% to 39.6%.  M&A activity is reaching an all time high in 2021 as business gear up to sell this year rather than wait.

Lastly, one of the biggest potential tax reform changes could hit real estate investor by eliminating the 1031 exchange. This rule allows investors to shift any gains from one asset to another without paying any taxes on the gains. This can be done with like kind exchanges. Eliminating this would adversely affect larger real estate transactions.

Start planning now, reposition your investments, sell any appreciate capital assets now, shift income and expenses and rethink your business structure.



The Benefits of Benchmarking Your Business

Posted on July 21st, 2021

How many times have you asked yourself how well is your business doing compared to your competitor? What could it be worth?  Many have wonder but few take the steps to compare….some will hire a professional to benchmark their business, others will ask industry veterans. This is a common problem facing small to midsize businesses.

Gaining an accurate sense of how well your company is performing against similar businesses can be an incredibly difficult task. While benchmarking is easy for larger retailers who have vast resources and public companies as competitors, it can be tough for SMB(small to midsize business) retailers to assess their business’s performance. And yet, it’s arguably even more important for SMBs to develop reliable, competitive benchmarks than it is for big-box retailers.

As a small business, you may have a pulse on your financials and sales metrics, but do you really know how these numbers compare to your competitors.

Five Steps to Benchmarking Success

The first step in growing your business is to benchmark how your sales and operational efficiency compare to similar companies. Wouldn’t it help  you to see what your competitors are achieving when setting up year end goals for your business? how many sales channels they are creating, How their e-commerce is performing. You have to get in the mindset of keeping score with your closest competitors. Benchmarking can also help identify where the best opportunities are for market expansion and operational improvements. To establish a competitive benchmark, a company must

  1. Determine key metrics.  What key data points are most important to your business? Focusing on key metrics like revenue, order volume, and cost of goods sold makes researching competitors and measuring success much more clear. This will help you set up initial goals. A good business plan and forecasting will lead you.
  2. Identify competitors. It’s important to know who your current and future competitors are and how they’re operating within your market and any marketplaces in which you hope to expand. It’s important to know the barriers to entry in your industry in case a bigger fish tries to enter or acquire a competitor.
  3. Research and assess competitors. How are your competitors differentiating themselves in the market? What different sales channels and retail technologies are they utilizing? These are the types of questions you need to answer and competitor actions you need to anticipate.
  4. Leverage benchmarking tools. Aside from costly industry analyst reports, data that can provide a competitive analysis about how you’re performing against your competitors is sparse. Hire a professional services company to perform annual benchmarking reports for you and the management team. This firm should have experience in your industry and be able to create a report that’s easily readable and have actionable plans.
  5. Develop an actionable plan. once you’re clear on what your competitors are doing and what changes you need to implement to drive business success, it’s time to determine key goals for the year and start developing tactical plans to achieve those goals. Track your plan and compare, make sure its consistent with your goals and meeting your milestones.

With quick and easy insights into other companies, you can effectively improve your operations, boost productivity, and ultimately increase your business’s revenue.



Do I Need An Accountant For My Small Business?

Posted on July 17th, 2021

You should hire an accountant for your small business when you need help with the collection, analysis and reporting of financial information. Accountants can interpret your financial data in order to help you make better business decisions when it comes to your company’s money. Its also helps if there is a need to present your financial statements to a 3rd party such as a lender or someone who may want to invest in your company. I believe the most important part of financial reporting is giving the reader a snapshot of your business. An accountant can help you with this.

An accountant is not only needed at tax time. There are many ways a small business owner can benefit from an accountant’s advice. An accountant can analyze financial data, make recommendations that improve the overall health and advise on where to increase profitability.

Below are some of the duties an accountant will carry out.

Data Management

Your accountant would be responsible for ensuring that your financial data is properly stored, updated and managed. This is so the information can be reported on accurately to the business owners, investors (if you have them) and the government. The accountant would also ensure that proper procedures are in place for data entry and that the accounting software system being used is modern, secure and backed up regularly.

Financial Analysis and Consultation

Ever been in a meeting and someone said “how about we get the bean counters in here for their advice before we make a decision?”. There’s a reason for that. When it comes to decisions involving the future of your small business, your accountant may sometimes be your best resource.

Perhaps you need some simple tips on how to proceed with spending in the next quarter, or perhaps there’s a situation regarding a big expenditure and you want to discuss options for credit or tax deductions, or maybe you just need help interpreting some of the financial jargon in a document. An accountant can help you with all of that, as well as troubleshoot the day to day activities of managing the finances of your company.

Financial Reports

Ever heard of a “Cash Flow Statement” or a “Profit and Loss Report”? These are the types of reports that allow you to keep updated on the company’s money. You or your investors are going to be making decisions based on the reports your accountant provides, so he/she needs to make sure they are up to date and accurate.

Regulatory Compliance

Are there lots of rules and regulations affecting your small business? Perhaps your business is going through an audit? Or it’s tax time? Well, an accountant can handle these headaches and ensure that your income and expense reporting follows applicable state and federal laws. Your accountant will guide you through the hurdles and interpret what is planned and needed.

Its not necessary to hire an accountant but if you plan on using accurate data or delivering information to third party users, it would be recommended to use a reputable accountant to help you facilitate financial reporting.

What Professionals Can Help Me With My Finances?

Posted on February 9th, 2021

When it comes to your finances, going at it alone can be daunting but if you want professional help, make sure you are consulting the right expert. How does a financial advisor differ from a wealth manager? Who is more qualified to give me the guidance I need?  What credentials should I pay attention to?  What fees should I expect to pay upfront? How does a financial advisor differ from a wealth manager? Wealth managers are just one kind of financial advisor who work with a specific clientele: those with a high net worth. However, you don’t necessarily need to be wealthy to work with a wealth manager, so you may want to consider their services even if you don’t have that much to invest. You can compare wealth managers here.

What is a Financial Advisor?

The term financial advisor is very broad. It could refer to different professionals. A certified public accountant(CPA) could be a financial advisor. They would give professional advice on a number of different practice areas, one being on income tax and advice on exiting a business. Some advisors also work with particular clients, such as professional athletes or business owners. You can get an idea of what specialties an advisor has by looking at his or her certifications and licenses.

What is a Wealth Manager?

Wealth managers are just a subset of financial advisors. The thing that sets them apart from other advisors is their clientele. Wealth managers primarily serve high-net-worth and ultra-high-net-worth individuals. And as the title implies, they usually manage large amounts of wealth for these clients.

Wealth managers are just a subset of financial advisors. The thing that sets them apart from other advisors is their clientele. Wealth managers primarily serve high-net-worth and ultra-high-net-worth individuals. And as the title implies, they usually manage large amounts of wealth for these clients.

Some larger firms provide a broad range services that overlap. Some will include financial planning as part of taking a fee to manager your money, others will charge a fix fee or offer a value proposal inclusive or filing your tax returns, offering financial advise and managing your money.

Financial advisors provide financial planning and investment management services for their clients. A wealth manager is one kind of financial advisor who typically works with high-net-worth individuals. The services of a wealth manager are very hands-on and comprehensive, so that a client can work with just one advisor for all of his or her financial needs.


Start Your Succession Planning Process By Knowing The Gaps

Posted on February 2nd, 2021

Start your succession planning process by knowing the gaps. The three gaps are referred to as Profit, Value and Wealth. These three numbers every business owner should know to meet their goals. The succession planning process is not about the now….selling your business for a profit is important but will it maintain your lifestyle for the next 2..5..20 years?  Will you receive market value for your business?  Will the wealth created in your business survive you and maintain the legacy you created in your children’s future?  These are all important aspects of succession planning.

The Profit Gap

The profit gap you are sacrificing by not operating at a best in class level also known as best in class profit less your profit level. Now you may think your company is operating at best in class however unless you have a valuation completed or the very least benchmark your company’s financials against peers in your industry. Most businesses trade at a multiple of EBITDA or earnings before interest, taxes, depreciation and amortization. Profit or EBITDA is a key metric used by most to come up with a value. It is your profit. EBITDA tends to be adjusted or normalized for extraordinary one time events, discretionary expenses tied to the business owner and expenses that are currently above or below market rate such as rents.

The Value Gap

The value gap the gap you are sacrificing by not operating at best in class. This is also referred to as best in class sales less your actual business value. We discussed EBITDA above, value gap is focused on the multiple times your profit when selling your business. Best in class will typically command the highest multiples at sale.


The Wealth Gap

The additional wealth you need to accumulate to meet your goals. This is your net worth goal less your current worth worth not including your business. Two simple questions to determine your net worth goal…what do you want to live on for your remaining life and what do you want. We do not include the value of the business because we want to think of assets that are easily convertible to cash.


How will you bridge the gap?

Selling Your Business For Maximum Price

Posted on January 26th, 2021

Have you thought about selling your business. Many owners like yourself have thought long and hard about this decision. It probably keeps them up most nights. They ask themselves over and over again, should I sell or keep the business for my children? After all, selling a business is a life impacting decision. It takes a systematic approach, a process that begins before you actually market your business for sale. Sure we were advised to keep the end in mind but what does that really mean?

Primary Reasons to Sell Your Business


Liquidity or Diversification of Wealth

Succession Planning

Health Concerns

Estate and Tax Planning

Strategic Move


When Is The Best Time To Sell

Business Is Performing Well

Solid Macroeconomic Conditions

Company Performance

M&A Activity is high

Abundance of Capital Flow

How Much Is My Business Worth?

For public company, the trading market dictates value. What about the private markets. We look to competitors and perform a valuation base on market comps. We analyze cash flow and normalize earnings. Hire a team of experience advisors. Start with an exit planning advisors, obtain a valuation from a certified value analyst, bring in a merger and acquisition banker who specializes in your market. They will help guide through the process of getting your company for sale. The process is a long one and the business owner must stay discipline to see it through, with the help of experts, will reach their business and personal goals and secure generational wealth for their family.



Preparing your business for an exit

Posted on December 14th, 2020

Preparing your business for an exit, succession or transition…at the end of the day does it really matter? Change is coming and time waits for no one.  Make a plan that is filed is both fluid and flexible with standard processes in play.  Some tasks will evolve over time and change will happen but having a plan that will still achieve your goals and and objectives is crucial. This plan will be the guide to helping your client achieve their goals and objectives. The process of transitioning the business purposely does not preclude the owner from improving the business and positioning it better for a sale or other options.

Your clients may have been through some of these pieces, in part, as you have worked with them through other projects in addition to your own thoughts and perspective. At some point in time if you work on transition planning projects, you will formally go through these steps, targeting the specific tasks needed to meet the owners’ goals and objectives. Some of the tasks may change a bit based on the discussion as well as discussions with transition team members and various groups of investors or companies. In addition, some of these steps and processes will run simultaneously.

There are several choices involving possible beneficiaries, buyers, outside financing, seller financing, and of course terms of the sale or transfer. Also give consideration to wealth management, insurance consideration and tax issues. The goal is to make sure you understand all the options and assist in developing an approach and strategy that makes sense for your client, given their personal goals.

Additional FAQ’s from the Exit Planning Institute.  Hiring a certified exit planner will help you navigate your planning. The following is an outline I have used to help guide the process:

  1. Establish Goals and Objectives
    • Align personal and business goals, including timing.
    • Assess readiness, given goals and timing.
    • Understand alternative transition options (e.g., family, employee, third party).
    • Understand transition process given different options (gift/sale, financing).
    • Include family and other “trusted” stakeholders in process.
    • Establish key advisory team (attorney, CPA, financial advisor, valuation professional, others to fill in gaps in experience/skills).
  2. Valuation/Appraisal
    • Business, across alternative transition options.
    • Real estate, including market rent if needed.
  3. Develop Strategy
    • Integrate goals/objectives with valuation/appraisal results.
    • Prioritize exit options.
    • Establish milestones and specific process/actions for exit options chosen.
    • Develop contingency plan.
    • Develop post transition strategy.
  4. Strategy Implementation
    • Ensure transition team fully understands goals and their responsibilities.
    • Schedule regular status updates.
    • Review, adjust, repeat.
  5. Contingency Plan
    • Developed as part of strategy.
    • Review and adjust as progress is made through primary strategy until goals are reached.
  6. Post Transition Strategy Implementation
    • Adjust transition team to be in synch with post transition strategy.
    • Maintain relationships with key transition team members throughout post transition period.
    • Enjoy next phase of life.

Below are some of the challenges you may encounter with your client. Not everything is perfect but being flexible is important!

  1. Do as I say not as I do: There is a lot going on with the whole process and it is easy to have the owner get caught in the weeds. Remembering the ultimate goals is important. Each step should be able to be tied back to and support the end game. Just saying they will do it does not ensure it gets done whatever the task is. Gentle reminders to demonstrate and model the behavior and action needed to all is important, especially the next leaders.
  2. Know what you do not know: Many business owners have become successful because they could and did it all. Knowing when to marshal what resources is another critical skill for the owner to have. Help them figure out what they do not know and support the path to finding out what is needed. Too often we all have seen business owners who take everything on themselves. This increases inefficiency and, in many cases, limits the business’s growth.
  3. Knowledge is power: Now they just must share it. Our job is to help harness the power of the owner and help make sure the transition happens intellectually. It is one thing having the papers signed; quite another for the intellectual and mental shift to take place and allow the next leadership team really to take the helm.
  4. Lack of commitment: While the plan is meant to be flexible to accommodate changes in personal and business circumstances, there still needs to be a firm timeline and certain trigger and decision points. If this is not clear, the plan meanders and never really gets executed, other leaders get frustrated (perhaps some leave). Once the plan is in motion, keep it moving barring any true dramatic game changing events.
  5. Communication, communication, communication: While there are certain things that must purposely be held close to the vest, so to speak, much of the plan should not be secret to the main players—the ones it will impact the most should know. And if done properly, there will be good ideas and thinking that emanate from engaging more rather than less.



The Basics of Small Business Valuation

Posted on December 10th, 2020

Before we dive into methods of business valuation, we should start with a basic discussion about what value means and why we can, or even want to, rely on business valuation methods. Once we are comfortable with what value is and why we should wonder about it, we will go over the mechanics of classic valuation approaches. We’ll focus on the ones that are typically used by a variety of market participants, including corporations, banks, portfolio managers and venture capitalists, buyers or sellers alike.

What is Value?

Value can mean different things to different people, depending on the circumstances, interpretations and role played in a transaction. For example, value means different things when we buy an asset versus when we sell it. We simply feel whatever we own has a higher value than normally perceived.  People tends to assign a higher value to something earned as opposed to something gained. As a result, we assign less value to winning the lottery as opposed to building a successful business over our lifetime. Makes sense?

Lets introduce some of the common terms in valuation

Fair market value: the price at which a business would change hands between a willing buyer and a willing seller  when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts;

Investment value: the value of a business in the hands of a particular buyer based on its own specific attributes.

Taking some liberties with the interpretation, we can think of Fair Market Value as the going concern of a business that either continues to be operated by its current management or is sold to a new owner who will continue to manage the business efficiently, without any substantial changes. In other words, the buyer is an average market participant, therefore value is not dependent on who operates the company, but on the uniqueness of the assets. Conversely, Investment Value assumes the combination of the subject company with one or more businesses and this creates synergies that are peculiar to every single potential acquirer. The motivation and/or special characteristics of the buyer will translate into different types of value (value follows the buyer)

Valuation Techniques

Income Approach: The most common used method, takes into account the present value of expected cash flow

Market Approach: Assumes the relative value of an asset can be measured by looking at how the market prices similar or comparable assets

Cost Approach: Value is based on the replacement cost of each of the individual assets.

Business valuation does not provide indisputable results because it combines both art and scientific components. Despite its limitations, it is very useful in establishing a base case, whose idea can be well captured by the notion of Fair Market Value. Under these conditions, valuation will illustrate what the value of the business is if bought by an average market participant. Presumably, this is the price that its current owner should be willing to pay if he or she did not own it already.

What business valuation is not very good at is helping the seller identify the highest possible Investment Value in the marketplace. This is because it is almost impossible to know all of the assumptions, potential synergies and motivations of each and every single potential acquirer in the marketplace. Nonetheless, let’s not forget that before deciding what to pay for a specific company, buyers typically go through a comprehensive valuation exercise where the assumptions reflect their own view of the world. Needless to say, that to their advantage, buyers have to care only about their own set of assumptions. If the buyer does use the methodologies illustrated above, it can be a good idea to do the same thing on the sell side, simply to challenge the assumptions or price ranges proposed by the acquirer. Think of business valuation as a safety guard. It doesn’t tell us the exact price of a company, but it can give us a pretty good idea of what a company is certainly not worth.


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