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Why Successful Business Owners Sell Out

October 10 2009| Filed Under » M&A, Private Equity, Small Business, Venture Capital In the world of mergers and acquisitions, there are typically several hundred transactions per week. While many of the multibillion dollar, cross-border transactions attract most of the press coverage, a vast majority of deals involve micro- and middle-market companies. These transactions involve mergers, acquisitions, leveraged buyouts, management buyouts, or recapitalizations, and involve companies with enterprise values between two to several hundred million dollars.

There are a variety of reasons why owners sell their companies or explore strategic and capital raising alternatives. A vast amount of deal structure possibilities exist to accommodate varying objectives. The owner (normally with the advice of an experienced M & A advisor) will seek out a structure that best meets one or more of his or her objectives.

Read on as we explore the motives behind M&As from the seller's perspective. Understanding this process can be an important step for investors in researching a company they own or are considering buying into. What happens to a company once it's acquired is often determined in the details hashed out in the merger/acquisition process.(To learn about the other side of these transactions, see The Buy Side Of The M&A Process.)

Why Owners Sell Owners who agree to sell their companies may be tired of running the business and seek either a full or partial exit. If an owner wants to liquidate 100% of his or her equity, acquiring investors will usually offer a lower acquisition price. This is partly a result of the greater difficulties that are anticipated in running the business after the transaction if the owner is not available to help with the integration process.

A recapitalization, where the exiting owner retains a minority equity stake in the business (typically 10-40%), is a more common structure. In this case, the exiting owner has incentive to help increase the value of the business (normally through part-time effort). The exiting owner will still benefit from a gradually diminishing role in the operation and the freedom to enjoy more leisurely pursuits. Once the owner is out of the picture, the combined entity will have a go-forward plan in place to continue to grow the business, both internally and through acquisitions. In addition, the exiting majority owner will see the value of his or her equity increase if performance benchmarks are reached. It is important to remember that large companies receive higher valuation multiples from the market compared to smaller companies, partly due to lower enterprise risk.

. or additional geographic reach. (For related reading. but a lot of this value is often value tied up in the business. This is because many business owners have considerable net worth. This is especially true if the exiting shareholder's accountants readily provide yearly and monthly financial statements. and if the acquiring equity group already has the accounting and legal due diligence team ready to move in. A reasonably well run mid-market company can be acquired within three to six months if both parties are genuinely invested in the deal. advertising.  Finance an expansion. the owner may wish to:  Gain market share. increasing the operational footprint of the target. or an owner who may be getting too old to effectively run the business. The acquiring entity has the cash to fund new equipment. Such situations often necessitate the need to quickly find an acquirer. For example. A seller may seek to sell his or her company for operational or strategic purposes. and thus illiquid. large companies often do not respond quickly enough because they are hindered by a number of bureaucratic processes that cause delays (ex. private equity appears to be better suited to quickly engage the owner. While business development officers of strategic companies can move the M&A process rapidly. A larger acquiring company has complementary distribution and marketing channels or a recognizable brand and goodwill that the target entity can leverage. assess the business and complete the acquisition.The Hottest Penny Stocks! An exiting owner may also wish to convert his or her equity into cash. Family disputes are also a common driver for an acquisition. A spouse or close relative may be abusing company assets for personal gain.) Buyer Motivation In the acquisition marketplace. resulting in poor company performance and low morale. Incoming investors can get rid of dysfunctional individuals and restore good management practices in the business. Unlocking this equity through a liquidity event may reduce the seller's risk by diversifying his or her portfolio and allowing the seller to free up more cash. managerial and board approvals). see Owners Can Be Deal Killers In M&A and How The Big Boys Buy. Another common exit scenario involves an elderly owner who is experiencing material health problems. as well as provide peace of mind to the seller.

it can acquire a series of smaller competitors and help to consolidate an industry. Customer concentration significantly increases enterprise risk because the business can go bankrupt if it loses one or more of its key customers. The acquired business can then be professionalized (have better IT systems. economy has pushed up acquisition prices. The addition of complementary product and service offerings into the target business allow it to capture more customers and increase revenue. equipment maintenance. A diversified customer base . Raise capital for an acquisition.) Other Factors The macroeconomic environment can also be an impetus to sell. acquirers (particularly private equity) have become flexible in structuring deals in order to accommodate existing shareholders' preferences and objectives. . However.  Secure leadership succession. (For more. they risk blowing up the deal and losing millions of dollars. product expertise. In other words. Regardless of the reason. seeEvaluating A Company's Management.). A business owner may not have invested time and effort into identifying and grooming a successor. As such.)  Diversify a relatively focused customer base.  Place better management. if owners get too carried away from reasonable and fair prices for their companies. The target operates with fewer competitors in an industry. an owner needs to pause and ask if now is the right time to sell the business.). Thoughts of selling can be stimulated by a variety of factors. With vast amounts of cash competing for acquisitions. etc. When is the Right Time to Sell a Business? From time-to-time many owners find themselves thinking about selling their business and cashing out. The parent company has superior management that can unlock value in the target business. Small companies often have a large percentage of their revenue base coming from a single or a relatively small number of customers. owners often look to take advantage of a "seller's market" and hire advisors to market their businesses for higher multiples. see How To Create A Business Succession Plan.S. increasing the company's value. The acquiring entity has the capital or debt capacity to execute an accumulation play. necessitating the sale of the business in order to ensure that it continues to operate effectively. (For more insight.lowers the volatility of its cash inflow. etc.  Diversify product and service offerings. and has access to its former competitors' resources (management talent. accounting controls.presumably with a diversified revenue stream . while a seller's market provides such perks and benefits. The vast pool of capital available in the U.

(ii) is reasonably confident about the chances of meeting his or her objectives through the sale. divorce. In some cases. (ii) investment reasons. there are a variety of motivations to sell. It is difficult for an owner to raise cash by borrowing money using stock as collateral. the lack of heirs. an ownership interest in a privately held company is not immediately convertible into cash. retirement of the owner or a key manager. and required yield or return on investment. Yield: To the owner. . in time the owner may grow uncomfortable with the risks of ownership.How does an owner determine if the time is right to sell? Is there a systematic approach? How important are instincts and gut-feelings? Should an owner wait until approached by a prospective buyer? What needs to be considered when determining if it’s the right time to sell? In general terms. The sale of the business. the dissolution of a partnership. can provide the owner with needed liquidity. For example. (ii) Investment Factors include the owner’s need for liquidity. and must sell whether or not the timing is right. a desire to try something new. In such cases the question is not whether to sell. health problems. and the inability to quickly convert the asset into cash. and (iii) strategic business reasons.” When a privately held company borrows money. divorce. yield represents the expected return on the investment. there are three conditions which indicate that the time is right to sell. an owner might elect to sell the business and then invest the proceeds into a more diversified portfolio or another investment perceived to have less risk. The time is right to sell if the owner: (i) has a compelling or motivating reason to sell. and. Liquidity: Unlike the stock of a publicly traded company. increase the owner’s degree of risk. These three factors apply whether the business is closely held or operated as a subsidiary or division of another company. (i) Personal motivations are essentially non-economic and non-business reasons for selling and can include major disagreements with co-owners. Yield or return can take many forms including dividends. Risk: The biggest risks that an owner of a privately held company faces are bankruptcy. A Compelling or Motivating Reason Occasionally an owner has no choice. In order to eliminate the stress and uncertainty associated with a personal guaranty. or the untimely death of a major shareholder can necessitate a forced or involuntary sale. Assuming that an owner is not forced to sell. interest payments to owners. For many owners. family problems. desire to minimize risk. some owners decide to sell. exposures under personal loan guaranty. the owner simply feels emotionally burdened by the business. above-market salaries. if a personal guaranty is required. the lending institution will frequently require that the owners sign a personal guaranty. The personal guaranty places the owner’s non -business assets at risk. negatively impact the company’s balance sheet and credit position. a leveraged recapitalization may raise tax concerns. but rather how to make the best of an unfortunate situation. or the death of an owner. their business represents their largest and most significant asset. Such motivations fall into three general categories: (i) personal reasons. the possibility of relocation. and (iii) is psychologically prepared to relinquish ownership control. The rate of return is usually expressed as a percentage of the owner’s actual investment in the company. a condition frequently referred to as “burn-out. whether effectuated through the sale of assets or stock. In addition. At first an owner may be very tolerant toward risk. however. and appreciation of the company’s value. To reduce their level of risk.

(d) Maturity Stage: A mature company is primarily concerned with maintaining its share of the market and may experience: (i) a leveling off of sales. tested. a situation which supports a higher valuation. (ii) operating at break-even or slightly better. As a given company matures and passes through the initial development and early growth stages. (d) maturity. (b) Introduction/Early Growth Stage: Once a company has progressed beyond the initial development stage. early growth companies are not prime candidates for acquisition. At this point in the company’s development. (iii) Strategic business factors include raising expansion capital. (ii) high operating margins. and are seldom sold as going concerns. (v) the possibility of increased competition. As traditional banks become increasingly stringent in their lending practices. expansion capital or credit enhancement. the owner may choose to sell their company in order to achieve a higher yield in another investment opportunity. (iii) working capital consists of trade credit and the founder’s initial investments. (iv) the company is expanding beyond the capabilities of existing management. The right buyer can provide a mature company with the spark it needs in order to return to growth. and (v) still concentrating on entering th e market and securing distribution. and expansion into new markets. opportunities to increase facility utilization. (a) Initial Development Stage: The force behind a “start-up” company is usually an entrepreneur with a vision. . sales and earnings are still on the upward side of their curve. Companies at this stage are regarded as unknown quantities. a fresh managerial perspective. (ii) some erosion of operating margins. owners may contemplate selling all or a significant part of their companies in order to raise additional expansion capital. management expertise. and (e) decline. (iv) having a “home grown” management team. there are five discreet stages through which a company may pass: (a) initial development. (v) a sense of systemic managerial complacency. As with companies in the initial development stage. (iii) excessive leverage. and securing needed management expertise. (iv) under-valued or nonperforming assets. and a strengthened competitive position. (iii) working capital and credit lines that are being exhausted by the cash required to fuel the growth. The venture is very dependent upon the entrepreneur. and/or (vi) more extensive competition. gaining access to technologies or distribution channels. (b) introduction/early growth. and ready for market. improved operating margins through combined operations (economy of scale). it can be characterized as: (i) experiencing an increase in sales. competitive strength. (c) growth/accelerated development. although it is possible for strategic alliances to form in the early stages of development. The buyer can provide much needed working capital. and/or (vi) having difficulty entering certain segments of the market. Companies in the accelerated development stage make attractive acquisition candidates.In some cases the yield on the investment may fall belo w the owner’s minimum requirement. Under one model. The buyer may be able to provide more effective channels of distribution. The company’s focus is on getting the product or service designed. The right buyer can provide a company in the accelerated growth stage with the resources needed to sustain growth. As a result. (c) Growth/Accelerated Development Stage: A rapidly growing company is primarily concerned with developing its market and may experience any one or more of the following conditions: (i) dramatic increases in sales. can be very difficult to value. various problems and challenges can arise which can sometimes be addressed through the sale or merger of the company. Each company has a life-cycle through which it passes.

How likely is it that the sale can be consummated? How reasonable are the owner’s objectives? The probability of successfully completing the sale of a given company increases when: (i) the company is properly marketed. (i) Proper Marketing: A properly orchestrated marketing plan for a given business will protect sensitive information and keep the identity of the company confidential. If an owner is not sure that he wants to sell or that his objectives are capable of being fulfilled. If the estimate is below the owner’s objectives.Companies in the maturity stage also make attractive acquisitions even though they may lack the appeal of a growth company. Obviously. the owner’s chances of success are decreased accordingly. If the estimate of value meets the owner’s objectives. (ii) at a realistic price. and provides a foundation on which to build with the assistance of the right buyer. has a record of earnings. it is important that the owner be motivated. Confidence in Meeting the Owner’s Objectives Whatever the owner’s motivations. and (4) the quality and adequacy of the facility. (iii) under favorable external and internal conditions. A sound marketing plan also: (a) identifies and targets the ideal buyer. (iii) difficulty servicing debt. (ii) Realistic Price: If the owner’s minimum acceptable price is considerably higher than what the market is likely to pay. identify and address the cause(s) for decline. Companies in the declining stage can be attractive to turnaround specialists with a special set of skills and sufficient resources to effect the turnaround. (ii) marginal or break-even operating profits. favorable internal and external conditions increase the probability of success. Regardless of whether an owner decides to sell for personal. it’s prudent to proceed. investment. (v) difficulty retaining talented personnel. (c) identifies and manages potential risks. The sale of a business is not something to be approached halfheartedly. the chances of a sale are dramatically increased. and defend the company’s share of the market. (e) Declining Stage: A declining company is primarily concerned with maintaining its customer base and may experience: (i) a decline in sales. (b) External Influences: External factors which affect the probability of success include (1) the general performance of the national and local economy. (iv) a pressing need for capital to fuel a turnaround. if business is priced below market. (b) effectively and credibly communicates the advantages of ownership to prospective buyers. In addition. The right buyer can provide a declining company with the time and resources needed in order to effect a turnaround. (2) the market outlook for the company’s products or . (2) the quality and stability of management and personnel. the right buyer can help provide a sense of direction and stimulate renewed commitment on the part of key personnel to help them face the immediate challenges. The company has established itself in the market. or strategic reasons. and (d) minimizes barriers and obstacles to agreement. but at the owner’s expense! The company’s market value should be estimated before deciding to sell. (a) Internal Influences: Factors within the business which affect the probability of success include (1) the overall sales and earnings performance of the company. he or she should be reasonably confident that their objectives are achievable. The declining company will likely need an infusion of capital and managerial talent. he may want to defer the sale or reconsider his objectives. Conversely. then he should think twice about putting the company on the market. (iii) Favorable Conditions: Conditions which affect the likelihood of the owners achieving their objectives can be found (a) within the business and (b) within the environment in which the business competes. (3) technology and proprietary property. This tends to narrow the field of buyers. and (vi) intensive competition.

The owner should consider the likely impact of selling on his or her lifestyle. For some owners. and productive purpose to one’s life. If we own a business.services. the process of “letting go” is generally oriented toward business issues. It can bring recognition by the community. Psychologically Prepared to Sell After an owner has determined that there is a compelling reason to sell and is reasonably confident that their objectives can be realized. especially if they had expectations of one day buying or inheriting the business. If the owner plans on remaining active in the company after the sale. his attention is diverted to emotional issues—a situation could obscure the owner’s view of the process and lead to errors of judgment. For the most. an owner may find that instead of focusing his full attention on the substantive aspects of the negotiations. the owner needs to take some time and make certain that he or she is emotionally ready. If the owner sells the business. The best time to come to terms with these issues is before engaging in active discussions with buyers. (4) the company’s competitive position within that market. Some members may be disappointed that the business will not remain in the family. the family will be impacted. the owner is going need to face the emotional reality of severing his or her ownership-bond with the business. An owner should consider the impact of selling on the family. Take an inventory of the emotional benefits of ownership. and (iv) financial security. it is natural to think of ourselves as “owners” and entrepreneurs. and (5) the legislative and regulatory environment. (3) the performance of the company in relationship to the performance of the market. or a larger operating company. part the issue of emotional readiness to sell is a concern for individual owners. at some point in the process. The ownership-bond encompasses issues of (i) identity. After the sale. He’s his own boss. and feeling of control. he will have to adjust to being an employee and the time demands placed upon him by the new owner. pride. venture capital group. (i) Identity Issues: In our culture. If the seller remains with the company as an employee. Ownership can provide a sense of focus. The emotional bonds of ownership can be strong. the emotional benefits of ownership or the anticipated benefits of selling? (ii) Lifestyle Issues: An owner enjoys a sense of independence and self-reliance. When the ownership group consists of a holding company. It can provide a general sense of self-esteem. The business can provide opportunities for family members and help keep the family together. how will he spend his time? (iii) Family Issues: A successful business can provide many benefits to the family. Otherwise. what we are is often defined by what we do. How will those family members who relied on the business for a living be effected? What will replace “the business” in the family system? . Opportunity or higher-paying jobs may be lost. direction. Ownership pays certain emotional dividends. While the seller’s motivations may act to carry the deal forward. is he prepared to account for his actions and report to the new owner or his representative? If the owner exits from the business. What is more important. The bond of the “family business” will be broken. (ii) lifestyle. the owner may find that they are suddenly retired or working part-time on a consultant basis. Being an owner can become part of how we define ourselves. An owner needs to ask himself if he is prepared to let go of the business and open a new chapter of his life. (iii) family relationships. their business and social lives are interwoven. part of our self-image. making letting go all the more difficult.

you need to pause and take an inventory of the situation. owners and entrepreneurs are resourceful and resilient people. the owner should ask himself if he’s ready for the change and what will his new life look like? If he is comfortable with the anticipated change and has a clear vision of “life after sale. Do you have a compelling reason or motivation to sell? Do circumstances within the company and the general business climate favor selling at this time? Are you emotionally prepared to sell? Although the above outline is not all-inclusive. Why Sell Your Company? Selling one’s business can be a traumatic and emotional event. Recent News and Successes Why Sell Your Company? The time to prepare to sell is the day you start or take over the business. In addition. the owner will need to adjust their financial plan. (iv) Financial Security Issues: A successful business can provide an owner with a generous income frequently structured to minimize tax. The time to begin developing a new financial plan is prior to the sale. Selling is going to change the owner’s life. Facing the emotional realities of selling should pose no great challenge. you’ll get the best price and most favorable deal.” Burnout – This is a major reason. An owner should consider the possible effect of selling on family finances. the business may just become boring – the challenge gone. Before starting the process. If the sales price is paid as a lump sum amount. the selling owner needs to recognize that future income may be derived from investments rather than the company. The long hours and 7day workweeks can take their toll. then turn your attention to building your business and increasing its value so that when the day comes that it is right to sell. While a revision of the owner’s financial plan can address these matters. the value of the business remained within the owner’s estate. you can use it to help you arrive at a decision. and perks will no longer be available. Losing interest in one’s business usually indicates that it is time to sell. The owner may have built it from scratch or bought it and made it very . according to industry experts. In other cases. then perhaps it’s a good time to sell. The steady income previously derived from the business through salaries. dividends. why owners consider selling their business.” then he is probably emotionally ready to let go of the company and move on to the next chapter of his life.It is important that the family be given an opportunity to discuss the sale as a family and work through the individual issues involved in order to minimize unnecessary and potentially damaging conflicts. If the answer is no. “seller’s remorse” is one of the major reasons that deals don’t close. will that require a change in spending patterns? By and large. How does he plan to use the proceeds from the sale? How will the money be invested? Will earnings on the invested proceeds be the owner’s primary source of income? If so. The business may have been in the family for generations. In fact. Summary When you are thinking about selling. If the answers are yes.

the business may just become boring – the challenge gone.  Outside pressure – Successful businesses create competition. Other than borrowing against the assets of the business. and partnership issues do occur and many times force the sale of a company. Family members often wish to move on to their own lives and careers.” "Why Sell Your Business?" The 5 main reasons for selling a business may be diverse but they are also the most common we encounter. It may be building to the point where it is easier to join it. A business may be standing still.  Personal problems – Events such as illness. an owner’s only option is to sell it. while larger companies are moving in. However. And consider an old law that says. Here are a few of them. “We would like to buy your company. The paramount issue is that they should not be placed on the market if the owner or principals are not convinced it’s time. and now it’s time to cash-in. Proper planning and documentation can preclude an emergency sale.  Burnout – This is a major reason. “The time to prepare to sell is the day you start or take over the business. a forced sale does not bring maximum value. An owner answers the telephone and the voice on the other end says. Losing interest in one’s business usually indicates that it is time to sell. Unfortunately. there are times when selling is the best course to take. according to industry experts.  Cashing-out – Many company owners have much of their personal net worth invested in their business. In other cases. but someone or some other company may see an opportunity. This can present a lack of liquidity.  No one to take over – Sons and daughters can be disenchanted with the family business by the time it’s their turn to take over. why owners consider selling their business. 1. Lifestyle change . They have spent years building. one cannot predict such events.” There are obviously many other reasons why businesses are sold.  An offer from “out of the blue” – The business may not even be on the market. than to fight it. The long hours and 7-day workweeks can take their toll. and too many times.successful. divorce.

Common Reasons Owners Sell Cash out while the business is successful. It rarely allows business owners the luxury to take extended breaks away or the care free option of simply working 9 to 5.O. 5. At this point a decision is made to sell the business and allow a new owner. Business Life Cycle and Exit Strategy A typical business life cycle sees rapid growth in formative years as each business develops from ‘start up’ status into a sm all and then medium sized company. However all businesses inevitably require adherence to policies. if ever. business owners often yearn for a more relaxed lifestyle with time and thoughts dedicated to family and leisure pursuits. Many business owners experiencing such an approach take advantag e of BCMS Corporate’s Negotiation only service. For many owners. with greater financial resources and commitment to ensure the continued expansion of the business. For this reason many business owners choose to reap the rewards of their labour and sell their business. Entrepreneur Versus Manager Many owners of privately owned companies have a strong entrepreneurial spirit and building a business. Rarely. All this consumes an ever increasing proportion of the day for each business owner. the motivating elements of growing and running a business becomes far less evident. Once the business reaches this size it is often necessary for the business owner to inject a considerable quantity of capital into the business to maintain the level of previous growth.B. or semi-retirement . is there the opportunity to leave the office at 5pm without a further thought given to the next day’s workload. Approaches are typically made either from an external organisation or from the internal management team (commonly known as an M. Because of this. or Management Buy Out). Time Building and running a business often requires considerable commitment. take equity out of business Retirement.Running a successful business requires considerable levels of commitment and responsibility. 2. After living with the burden of such responsibility for many years. Why Business Owners SellThe Number 1 question asked by Buyers is If the business is so good then WHY does the owner want to sell? The truth is that businesses sell everyday for numerous reasons. operational challenges or the future of the business. At this stage many business owners have a stable and profitable business and feel less inclined to make a major financial commitment in the business which may take many years to be fully realised and start planning their business exit strategy. there is little time left for family and social activities and holidays. although time consuming and extremely hard work. procedures and legislation during day-to-day operations. An Approach An approach from a potential acquirer can be the catalyst required to change a business owner’s mindset from running and developing a business to enjoying the often considerable proceeds of a potential company sale. increasingly pulling them away from the exciting and dynamic environment in the early years of the growing company. is also an exciting and dynamic time. 4. using the proceeds to regain lost time. 3. whilst business owners develop and expand their businesses. The following are some of the more common reasons for owners to sell.

or in the owner's family No family or heirs to succeed present ownership Lack of capital or vision to expand the business Lack of capital to fund the continued operations of the business The business is unprofitable Partnership or Shareholder Issues. generally too tired to run the business any longer Pursue other interests Other reasonsEmotional freedom from weight of responsibility Health & age issues Bored. .. What we do You decide to sell your business. We manage the process to accomplish this infrequent and complex task. or to acquire another business…these decisions bring into play many complex factors that must be considered and properly handled in order to ensure success. or of key employee. no longer satisfied.Burned out. partnership disputes.. losing interest Entrepreneur versus manager…management duties stifle entrepreneurial spirit Change in lifestyle…the same reason that Buyers quit their jobs Relocate to another part of the country Death in the ownership. How we help. split in partnership Divorce Family disputes Raise capital to start/buy another business Willing strategic buyer opportunity…buyer suddenly makes a good offer Difficulty addressing current business challenges Succession: implementing a succession plan Legacy…ensure business continuation Pass ownership to next generation. from beginning to end.

we work with private equity firms to present them with businesses in their target industries. Our search includes: Individual buyers . Basic steps in the business transfer processMaintaining Privacy and Confidentiality General Collection of Business & Financial Information Pricing and Evaluation Preparing the Business for Sale SBA Qualification or Other Financing Strategy Marketing and Advertising Qualifying Buyers Presenting the Business Negotiating the Business Sale Transaction Due Diligence Closing and Transition Whatever the reason you chose to sell your business.wealthy individuals who seek absentee ownership Private equity .Arrow Acquisitions serves Louisiana businesses with sales of $1 million or more. we serve privately-owned middle market businesses nationwide. In addition. we are able to assist you in achieving your goals.current business owners who can gain a strategic advantage by buying your business Financial buyers . Our goal is to provide multiple buyers/sellers for each client. WHO ARE THE BUYERS? We seek out and pre-qualify the most favorable buyers. or acquire another one.who want to "buy a job" Strategic buyers . Finally.an investment firm that purchases businesses to grow through a cash infusion and management expertise . We are able to attract the attention of qualified buyers and sellers nationwide through our joint-venture relationships with other brokerages and through extensive use of the internet. and therefore its maximum value. we perform deep industry research to locate prospective strategic buyers and sellers in related industries. those to whom your business represents its highest and best use. In addition.

. We represent you professionally in the marketplace. or Divorce One or more partners wants to be “cashed out. employees. while implementing initiatives that we suggest in order to prepare for a sale. frequently overlooked source of buyers Your privacy is kept intact throughout the process. Why Would I Want to Sell My Business? At one time or another. You run your business as usual. managing employees. Death or Illness An owner or partner has suffered death or a serious illness. or keeping the books. We work behind the scenes. equipment. and his or her interest needs to be cashed out to cover expenses or to settle the estate. and receivables all factor into the value of your business. and vendors. Sometimes owners need to get out of the business because they have taken on a business that does not fit well with their skills and abilities. discretely. owners are tired of handling the day-to-day responsibilities.Competitors . Poor Management Small business owners must wear many hats. Dispute with Partners. Burnout Even the best of businesses can drain our energy.if you allow. protecting your relationships with customers. and rarely are they master of all aspects of their business. Often. and it will require a significant capital infusion to take the business to the next level.” or a partner has lost his or her interest because of divorce or a dispute. Confidentiality is maintained. Upgrading to a Bigger Business Successful owners often sell their current business to step up to a bigger opportunity. most business owners consider selling their businesses for such reasons as these— Under Capitalized You've taken the business as far as you can. Top What Is My Business Worth? The value of your business is determined by many factors. Providing high-quality service in a spirit of excellence. furniture. Mercury Business Brokerage will provide free consultation to give you a “broker’s opinion of value” based on such factors as these— Tangible Assets Such tangible assets as inventory. Relocation Some other event necessitates a major move that will prevent you from continuing with the business. fixtures.

worse.to mid-sized businesses. markets. requirement to move the business) may greatly reduce the value and price of the business. Quantity and Quality of the Income Stream The key factors of sales. current conditions. the greater the value to the buyer. Private business owners operate their businesses to minimize taxes. retention of key management. Top Why Use Mercury Business Brokerage? Knowledge and Experience Our experience can shorten the selling process and bring you a higher price. training. and expected growth potential all add value to the business. business location and the economy (among other factors) to determine a broker’s opinion of value. whereas unfavorable terms or inability to transfer (or. financial history. assets. Higher risk for the buyer usually results in a lower selling price. Market Comparables Recent sales of other businesses in your market are considered. a real estate sale is characterized by: a public process value based on real property many comparables available . the value can be estimated at two to three times the annual discretionary cash flow of the business. Lease Agreement The terms and transferability of the existing lease agreements can be a critical factor in selling your business. experience. Risk Vs. or understanding to value or sell your business the right way. we will evaluate all these and many other factors at no cost to you and help you arrive at the right sales price. cash flow. Most real estate agents do not have the training. Why not use a real estate broker? A business sale is very different from a real estate sale. Our brokers have received specific training and use sophisticated tools and analysis to establish the value of your business. Consider some of the differences — The sale of a business is characterized by: a confidential process value based on cash flow few comparables available a complex transaction On the other hand. we take into account cash flow. exclusive markets. and positive business trends all help support a greater value. no-obligation consultation with you. Favorable terms and easy transfer increase the price. competition. Price Risk factors are evaluated and considered. gross profit margins. For many small. non-compete agreements. Free Consultation In a no-cost. At Mercury Business Brokerage. established suppliers. Local and national economic conditions are evaluated along with many other factors. The greater the chance of your business continuing and growing without you. and lower risk for the buyer usually results in a higher selling price.Intangible Assets Intangible assets like time in business. We know how to present the true benefits of your business. quality of records. established customer base.

We do the analysis to show you what your business is worth. Marketing. Reasons why people sell their businesses. or customers to know they are considering selling. Mercury Business Brokerage specializes in business sales and in real estate sales that are associated with business sales. We take away that burden and shorten the process. Documentation. competitors. and Exposure We prepare all the marketing materials to be released only under a confidentiality agreement to qualified buyers. Most business owners do not want their employees. We have walked in your shoes and owned and bought and sold our own businesses. Let us focus on selling your business. and others. we prepare the business presentations to show prospective buyers. . It takes owners several years to successfully sell their businesses on their own and often at a drastically lower price than could have been achieved. Selling your business is our only business. In addition. We know what it takes and how to get the job done the right way. Time Most owners who sell their own businesses take several years to find a buyer. competitive ordeal that can be a big distraction. Confidentiality One of the big benefits of using a business broker is confidentiality. Our professional efforts allow you to continue to grow your business and maximize its value. we aggressively pursue the buyer without compromising your negotiating position. then a real estate agent would work just fine! If you want to keep the sale of your business confidential while still maximizing your exposure to potential buyers. BizBuySell. IBBA.a simple process Would-be business sellers are often reminded that if they wanted a “FOR SALE” sign posted out front and their financial statements posted in the window and published on the Multiple Listing Service. and one or two of them make offers. StartupJournal. As an intermediary. Your business will typically be shown to about fifty potential buyers. We can help ensure that these buyers are capable of completing the transaction—before interrupting you in the operation of your business. We advertise locally and nationally. Success! We bring our expertise and experience to work on your behalf. Why not sell it yourself? Because you’re at a disadvantage. You as the owner should focus on what you do best—running your business. suppliers. Selling a business is a grueling. both in print and on the World-Wide Web in a confidential. such as USBX. as such knowledge could damage their ongoing business. Then five to ten of those buyers look closely at the business. we advertise and market your business to buyers and qualify them before interrupting your work. Mercury Business Brokerage maintains confidentiality so your business can move forward without interruptions. the distraction of selling their business on their own actually causes the value of the business to drop as the owner is distracted from the day-to-day operations. Your listing will be posted not only on Mercury Business Brokerage web site but also on several other national sites. generic manner. Negotiation and Follow-up Mercury Business Brokerage can help structure the deal and get the right offer for you. then see a business broker. Qualifying Mercury Business Brokerage will match qualified buyers to your business.

but we will discuss some underlying factors that influence a business owner to sell. Cash flow is the major player in business success. The seller can not handle the responsibility of operating his/her own business. A business that expands too rapidly can consume all the available cash and force the owner to sell. A new competent owner can revitalize the business. One or more partners of the business wish to withdraw from the partnership. This can be due to poor management practices. Business owners can find that the business he concentrates on performs beter than the business he spends less time with and visa versa. Some business owners bought the business for the wrong reasons and find that the business does not meet their expectations. . Alcohol abuse has been reported in a liquor related business. Financial reasons. The owner`s drinking habits will influence his management style and business decisions. The owner has reached retirement age and wish to call it a day. The owner is tired. The seller is emigrating. Divorce. Personal financial reasons of the owner. The owner has too many business responsibilities or can not cope with more than one business. If the cash flow of a business is negatively influenced the owner might be forced to sell a perfectly profitable business.There are numerous reasons why people want to sell their business. The partnership is failing. Ill health of the seller. The seller can not operate on his/her own outside a formal corporate structure. Sometimes the true reason is not clear. The business is running at a loss. An overworked owner who has worked for years in his business without a break can reach a stage where fatigue can influence his/her decision to sell. Death of the owner or spouse. The economic climate is right to sell the business.

there might come a time when your industry or vertical simply stops interesting you. retirement might mean that you need to sell the business. a day will probably come when selling the business crosses your mind. the prospect that you might one day sellthat business is probably the furthest thing from your mind. however. as satisfying and rewarding as business ownership often is. you can ensure that you have as many options available as possible. it is something that even brand new entrepreneurs ought think seriously about. 6 Reasons Why Business Owners Sell When you launch a new business. These are the times in which your mind might drift to the thought of selling. The reality is that. Adverse Market Conditions . A business that has failed can be taken over by the new owner and made very successful. so that you can sell as efficiently as possible and attend to these family needs without hindrance. The opposite is also true. or an elderly parent need looking after. Also. there are several common reasons why business owners sell. to spend more time with family. Should a spouse fall ill. According to wealth analyst Randy Siller.From experience we have learned that the business owner plays a major roll in establishing the success of a business. and to feelings of exhaustion. one day. Running a business can lead to stress. or to take up golfing! Whatever the reason. you may decide that you want to retire—to take it easy. you can ensure that the sale process is as seamless as possible. Again. to fatigue. Six of the most common ones are listed here. by starting the exit planning process early. Of course. Therefore is some cases the true reason for selling may never be established. Start your exit planning process by acknowledging that. either because you need to do so to support yourself financially. you will probably wish to put the enterprise up for sale—and if you start planning now. In fact. when the time to sell comes. or because you have not adequately prepared for succession. to travel. Burnout The single biggest reason is simple burnout. advance planning is important. yes. Retirement One day. it may prove prudent for you to sell the company. Family Dynamics The reason for selling may have something to do with changing family dynamics.

of course. Perhaps such an opportunity will come knocking on your door—a chance to sell for a tidy profit. from the beginning. Sticking to Your Plan Finally. you may decide to sell your company because that was the plan all along! In many ways. and all but take over your industry. . to sell at a certain point in the business’ life. a quick sale may prove the answer. This is especially true if strong new competitors arise. If you face a battle that appears unwinnable. you may face opportunities to capitalize on favorable market trends.Your industry is ever-changing. you might think seriously about selling. Putting such a plan into action is not always easy. Should such an opportunity present itself. and market forces could conspire to make selling the company seem like your only option. this is the best circumstance under which to sell: You sell because you prudently planned. Favorable Market Conditions On the other hand. which is why working alongside a wealth analyst is usually recommended.