The Emotional Side of Selling Your Business
It is easy to get lost in the numbers when it comes to selling your business, but it is important to remember that the numbers only tell one side of the story. Both buying and selling a business come with significant mental and emotional ramifications.
Why is this so critical to understand? Sellers who are not emotionally ready might subconsciously take steps to interfere with the sales process. Typically, sellers have invested a great deal of time and effort into their business, and as a result, they may simply not be truly ready to sell. Before the day comes to put your business up for sale, pause and reflect on whether you are 100% onboard.
Let’s take a look at some of the questions to ask yourself so that you can decide if you are truly ready to sell.
Do You Have Future Plans?
Topping the list of emotional factors that you need to consider when selling are your plans for the future. If you don’t know what your plans are for after selling your business, you may encounter difficulties post-sale.
Far too often, business owners discover that they don’t know what to do with themselves after a sale has taken place. All the mental and emotional effort put into running a business has to be redirected once the business has been sold. It is crucial that before you sell your business, you have something new and exciting to work on in the future.
Do You Have a Strong Support Network?
A second emotional factor to consider before you sell your business is whether or not selling it will lead to social isolation and stress. It is very common for business owners to form long-term friendships and bonds with numerous employees.
Quite often, business owners begin to feel as though their employees are something like extended family. Suddenly not working with that extended family can bring with it a fair degree of social isolation.
It is not uncommon for business owners to have many of their social needs met at work. Once those friendships are gone, many business owners can feel isolated, and isolation can lead to stress and a sense of regret. It is prudent to make sure your social network is robust enough that selling your business doesn’t lead to unexpected mental and emotional stress.
Selling a business is a massive decision for most business owners. It is a prudent move to be sure that you actually do want to sell. Once your business has been sold, there is no turning back.
The last thing any business owner wants is to sell their business only to discover that they regret the decision. Don’t simply focus on the profit to be gained when selling your business, but also on the ramifications of that sale on your life and future happiness.
Copyright: Business Brokerage Press, Inc.
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What Should You Expect from Your Business Intermediary?
Eventually every business owner needs to sell or think about who will take over their business when they retire. Working with an intermediary is an easy and streamlined way to jumpstart the process and learn what mistakes to avoid. A business broker or M&A advisor can help you to understand what steps to take to achieve optimal results.
Teamwork Makes the Dream Work
First, it is simply critical to understand that selling a business is a team effort. No seller should begin working with an intermediary with the idea that the intermediary will do “all the work.” The reality is that in order to achieve a successful sale, it is necessary for the seller and the intermediary to work closely and engage in a good deal of communication.
Other key people such as executives and advisors will also have to work closely with your business broker or M&A advisor. Without a doubt, selling a business is a group effort that will need cooperation from many parties. For example, you’ll also need the cooperation of key management and team members when a prospective buyer visits the business.
Prepare for an Extended Process
Another essential point to remember is that selling a business can take time. It is common for the sales process to take between six months to a year, but it can also take even longer than that. Sellers should enter the sales process realizing that they will be working closely with their chosen intermediary for a considerable period of time. That means that you’ll want to be sure to keep your intermediary well informed regarding any developments with your business for an extended period of time.
Be Open to Ideas
Third, remember that your intermediary has invaluable experience and that you hired them to guide you through the process. It is not necessary that you blindly follow all their advice; however, it is essential that you be receptive to all their suggestions.
Your intermediary may have years, if not decades, of proven experience selling businesses just like yours. It only makes sense to take advantage of that experience as much as possible. Your intermediary may have suggestions about what type of buyer you should be targeting or they may even have ideas as to how you can change your business to make it more attractive to prospective buyers. When intermediaries know that they have a receptive audience with a given buyer, they will feel more comfortable providing valuable suggestions.
The time to contact an intermediary about selling your business is now. Getting a business ready to sell takes time, effort and preparation. The sooner you begin working with a business broker or M&A advisor, the sooner you can begin charting a path to eventual success.
Copyright: Business Brokerage Press, Inc.
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The Importance of Quality Negotiations
When it comes to finalizing deals, successful negotiations are at the heart of the matter. It only makes sense to think about how to improve your communication skills and to choose a Business Broker or M&A Advisor who is well versed in the art of negotiation.
Cultivating Win-Win Situations
Achieving a win-win for all parties is essential, and there are many components involved. It’s essential to understand what the other party is seeking and to help them also feel as though they succeeded in the deal.
One tried and tested strategy is to lead people through a series of “yeses” by starting with topics and points that can be agreed upon and then working forward. In the beginning of this negotiating strategy, the yeses may come from getting others to agree on what may be seen as trivial things. However, this step works to create the right climate for moving forward so that yeses can be obtained on more important issues.
Maintaining the Flow of Information
The flow of information is a critical aspect of the negotiation process. For this reason, it’s best for negotiations between buyers and sellers to go through their brokerage professionals, rather than conducted directly.
The simple fact is that otherwise there are too many variables and opportunities for something to go wrong, ranging from egos getting in the way to miscommunications. When you choose a qualified Business Broker or M&A Advisor, you’ll be able to place trust in that person to achieve optimal outcomes.
Understand One Another
It is important to keep the other side talking and show that you understand their perspective and the issues they may have. It is in this way that you can encourage cooperation and diffuse resistance in advance.
Ultimately, great negotiations stem from proper strategy, preparation, proper education, enhanced communication, and understanding the other party’s needs. When you and your Business Broker or M&A Advisor foster good communications with the other party, it will enhance the chances of achieving the kind of cooperation you are seeking. This in turn, dramatically increases the chances of achieving win-win outcomes.
Copyright: Business Brokerage Press, Inc.
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Market Trends Reported in the IBBA and M&A Source Market Pulse Survey: Second Quarter 2021
Created in 2012, the IBBA and M&A Source Market Pulse Survey was created to provide business owners and their advisors with a clear understanding of ever-changing market conditions.
Through this survey, it is possible to gain clarity on businesses being sold in Main Street (values $0-$2MM) and the lower middle market (values $2MM -$50MM). Scott Bushkie served as the originator of the Market Pulse Report with IBBA and M&A Source and has continued to play a key role since the report’s inception.
A core finding of the IBBA and M&A Source Market Pulse Survey for Q2 was that there has been a big shift between the turmoil of 2020 and the climate of 2021. Across the spectrum of sizes and price ranges of businesses, sellers now have an advantage or are at least in a better position to sell their business. This is quite different from the situation in 2020.
The market has shifted towards being a seller’s market for a variety of reasons including the fact that many private equity groups are now looking for ways to grow their money. Acquiring an existing business has become an increasingly attractive option to buyers due to the current labor pool conditions.
Buyers are now looking at existing companies as a way to bypass attracting talent. Instead, they can secure that talent via acquiring a new business. In short, many buyers are looking to buy versus organically build to meet their talent needs.
Another reason that now is a good time for sellers is that many buyers are looking to leave corporate America. This situation has likely been accelerated by the pandemic and people seeking to control their own destiny. The increase in global uncertainty has made the idea of becoming a business owner increasingly attractive.
The shift in climate from 2020 to 2021 underscores the value of the IBBA and M&A Source Market Pulse Survey. Through this revealing survey, it is possible for business owners and their advisors to gain a clearer understanding of market conditions and what to expect.
Copyright: Business Brokerage Press, Inc.
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Important Points for Selling to a Family Member
Eventually every business owner will have to turn over control of their business to someone else. There are many options for how this can play out. They range from selling the business to a prospective buyer or selling to a competitor, to turning your business over to a family member. It is key that you start thinking about these options years before you end up in a situation where you actually have to sell.
Working with a Business Broker or M&A Advisor is one way to determine what sales options are optimal for you based on your specific situation. Let’s explore some of the variables you’ll want to consider when you decide to transfer your business to a family member.
Tax Advantages
There are some significant advantages to transferring your business to a family member. No doubt topping the list of advantages of going this route is the fact that the transfer can be considered a gift. One advantage of this approach is that you’ll reduce your real estate taxes. Depending upon how the agreement is written, you also may be able to maintain some control over the business. For many business owners, this factor can be a big advantage.
Seller Financing
One issue you’ll want to explore when opting to transfer your business to a family member is seller financing. Seller financing is a common practice when it comes to buying and selling businesses in general. This type of financing is even more common where transfers to relatives are concerned.
Seller financing opens up the versatile option of implementing a private annuity. A private annuity can serve to spread payments out across a long period of time. This could be a win-win situation for both you and your relative. You would receive a long-term stream of income as a result of ongoing payments. In turn, this decision may very well make ownership more financially realistic for your relative.
Legal Agreements
Keep in mind that if you sell your business to a relative, this in no way negates the need for a buy-sell agreement. Even when you are dealing with your most trusted family members, legal agreements must be firmly in place. A buy-sell agreement is an invaluable tool that protects everyone involved.
This contract clearly outlines all aspects of the arrangement. Your buy-sell agreement should include such key information including the value of the business, amount being paid, information on which employees will be retained, the current business owner’s level of future involvement, and much more.
Working with Professionals
Ultimately, there are a range of potentially powerful benefits associated with transferring a business to a relative. While it is true that you can expect the IRS to closely evaluate the sale, this should not dissuade you from considering this option. Business Brokers and M&A Advisors are experts at buying and selling businesses, and they understand the specifics of transferring a business to relatives. Working with professionals early in the selling process can help you gain tremendous insight into the best way to proceed.
Copyright: Business Brokerage Press, Inc.
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