Category

Negotiation Strategy

Category

How should you assess the 10 skills that make a qualified  seller for your business ? Nowadays, there are many small-sized business owners who eventually make a decision to sell their business. The reasons for them of their business selling are quite various.

Some of them have a wish to enjoy their retirement life out of those hectic business activities. Meanwhile, other business owners want to sell their business because they could not wait any longer to discover their business prospect.

Selling your business cannot be considered as a simple task to do. Instead, it is a quite tough and complicated one, especially if you do not know about the steps that you need to do, or you might do not have any skills that you need to have in business selling.

Well, if you are listed in those business owners who are aiming to sell your business, no matter what your reason is, you need to consider some important things that you need to practice on your business selling process.

To help you out in this case, below are the 10 skills that make an awesome business seller for you to check out. But before that, there is one thing to ease your mind, all of these 10 skills are learnable if you really want to transform yourself become an awesome business seller and get the highest profit of your business selling as well.

An awesome business seller needs to be fluent in timing the sale

Your business’ history, along with its financial performance is considered as the main essential aspects in measuring the price of your business at selling time.

A business seller who decides to sell its business after steady developments over the years would naturally request a bigger price rather than a business seller who chooses to sell the business right after 2 or 3 years development.

An awesome business seller would be able to measure the business environment

The business environment where your company is running the business is absolutely also considered as an essential skill in measuring the requesting price for your business selling.

If your company is running the business in a market industry that struggling throughout a recession, then as a business seller, then you would need for a better time in selling your business.

Some companies might able to lowly the flow when the market industry that they running their business in is stuck in a slow cycle. Plus, there might even some industries that would never able to create any recovery.

For this reason, an awesome business seller has the skill to determine whether the recessions are only an unpredictable part of their business cycle, or whether the recession could be a warning signal for the business.

An awesome business seller would be able to evaluate the stock sales and asset sales

An awesome business seller has a skill when he or she would able to decide previously whether to sell out the stock or assets of their business. In terms of a stock sale, the business seller would receive an agreed-upon price designed for his or shares in the business. Once the stock would be transferred to another owner, then the buyers would step in and running your business.

Usually, some business selling in the context of stock would give the buyer not only the entire assets of your company, but it would also give the right for the buyer to possess the entire liabilities of your business as well.

This type of arrangement is frequently attracted the business seller due to they could get some benefits from its tax.

On the other hand, in terms of asset sale, the stock is not a part of the image. Instead, partnership and single proprietorship should be transferred to the new owner.

In this arrangement, the business seller would hand over the entire business inventory, equipment, patents and trademark, trades name, the “goodwill” of the business, along with some other valuable assets for an agreed-upon price. Then, the business seller would use that money to pay for any debts.

An awesome business seller has the skills to prepare the business for sell

When you are going to sell your business, then you need to gather a large variety of your business’ information to be provided for the potential buyers.

Thus, an awesome business seller would have the ability to collect all the business information such as mentioned below.

  • Financial information about the business

An awesome business seller would still need to prepare the financial statements, along with other important financial documents to be presented for the potential buyers.

This financial information will include a balance sheet (completed with detail information on both accounts payable and receivable, business inventory, liabilities, mortgages payable, and so on), and income statement, as well as a valuation report.

  • The Legal Information

An awesome business seller has the skill to prepare the essential information regarding the legal issues which belong to the company.

These type of documents would be like partnership agreements, bylaws, supplier contracts, franchise agreements, the status of stock, and more.

  • The Marketing Information

Smart buyers would definitely want to know the detail marketing information on your company, as well as the information on the main market field of your business, the market share, along with your business’ marketing expenditures.

For this reason, an awesome business seller has the skill to prepare all the information needed to be viewed by the potential buyers.

  • The Business Activities Information

Lastly, an awesome business seller should be prepared to deliver a piece of complete information on your business’ daily activities. This would include the company policies, personnel schedules, organizational chart, rates of payment, the job description, and also the benefits as well.

An awesome business seller has the skill to locate the prospective buyers

Almost all of the business owners would sell their companies to the external buyers, which are the buyers who are not their current partners or employees.

An awesome business seller would make an attractive advertisement of their business selling, use his or her personal contact lists as the reference, or engage the mediators.

An awesome business seller realizes properly on the value of their business

This skill is a must-have one to make a business seller become an awesome one. An awesome business seller would able to realize properly on the value of his or her business.

With this ability, an awesome business seller would be able to make a correct price which worth the company. It is obvious that all of the business sellers who are aiming to sell their business are definitely want to get the accurate price which also represents the value of their business as well.

For this reason, this skill must be learned by the business owners so that they would able to not only predict, but get the accurate price of their business.

This can be done by doing the evaluation on the profit that the business has been making in the market, the number of customers, the reputation of the business itself in the market, and so on. Thus, this is an essential skill that would able to lead a business seller to become an awesome business seller.

An awesome business seller can sign the agreement for earn out

The earn out is the agreement for the sellers. The seller must choose a portion of the price for the selling annually for the decided or defined period of time in the agreement for the company underneath the new ownership of the company.

This agreement shows the more detailed aspects of business including the fixed period of time out for earnings under the new ownership of the company. It also show the business selling as well as the generated profits of the company with in the time that will decided between agreement parties.

Sometimes these kind of agreements employs while the seller may not get the particular price due to the concerns of the potential buyer. Furthermore, the earn outs may be calculated on the agreed figures.

An awesome business seller can sign the agreement on installment sale or payment

Many seller sell their product to those shopkeeper or the customers in the market who are not able to pay the full payment or those customers can not lie in the condition that they can pay whole payment.

At this stage, the seller can sign an agreement with customers to pay their payment in the decided time that are agreed upon on the specific condition.

The customer will pay the down payment and he can pay remaining balance amount the specific decided time that will provide the relief to the customers from the buyers.

An awesome business sellers agreed upon the Leveraged buyout

The leverage buy out is also purchasing agreement that shows and enlighten some aspects of the agreement. company or the customer can purchase the products by taking loan from the seller whenever the company want to purchase the products in bulk form.

The seller gives loan because company has to purchase the products first and then the company will start the process on the products. This kind of strategy to perform some kind of process on the products require more money for that thing. So that’s why the seller will provide the loan to the company.

When the company sells those products then the company pay the loan taking amount to the seller. If you take a look on this strategy then you will get more benefits by taking the loan amount. But this strategy will responsibility in the sense of burden on the company.

This skill is considered dangerous for the company business because if the company or products of the company will not be sold then the company can be bankrupted. I personally recommend you to not take loan for your business.

An awesome business seller can close the deal

The most interesting thing is that whenever the deal  struck under some kind of  issues you will have to notify the second party before closing the deal.

You will close the deal when the contradiction occurs with the buyer with the penalty which is decided in the agreement including the financial statements, license for the transfer, and the other conditions verification.

In addition, you will need to compile many documents to complete the transaction with the buyer.

Selling business is not an easy task in the current time frame. So seller or owner of the business has to follow different techniques and methods to sell its business in a most attractive way to the buyer of the business so that business is considered as most sufficient for purchasing in the current situation. Here we are going to discuss some related articles belong to the selling of the business;

Selling business is the most important part of every business industry. Seller wants to sell its business in most reasonable prices that give him benefit and also maintain the reputation of the business. Proper estimation of business is also very important to estimate the price of the business and also helpful in determining how much business is profitable for the buyer and how to make attractive for the buyer. Here are some steps that help to determine the price of the business that helps to prepare the real attractive business for the buyer and that attractive business provide profit to seller and buyer.

Tips related to market attraction:

Few tips for making the real attractive business are; make in order all the financial statement of the business, it means that must maintain the income statement, balance sheet, cash flow statement and discretionary earnings statement of the business. Properly estimate the tangible asset and determine their accurate value that includes all inventory, equipment, fixture, and furniture because the tangible asset worth is important for seller and buyer because it will affect the current market value and purchase price of the business. (DOYLE, 2019) Seller discretionary earning statement must be prepared with complete details. The income statement is completely different as compare to this statement because it presents the full earning power of the owner and also shows all the discretionary expenses, non-recurring purchases and one time adding back that are part of the business.

Determine the price of business:

When the price of the business is going to estimate then earnings multiples must be determined that include different elements like the recent performance of the organization, what policies, procedures, and system are used by the owner for the transition facilities. How the business manage the accurate, complete and clean financial record, maintain the customer list with complete contracts, complete description of the product that is manufactured in the organization, determine the recurring revenue of the business and all the approaches that help in managing the business income, explain the staff details of the business, and then explain the brand and reputation of the product of the business in the market. (Handelsman, 2019)

Right time for selling the business:

Proper calculations must occur that is helpful for the estimate the price of the business for better purchase and must do some business price checking as compare to other business in the market and its conditions. (Smallbusiness.wa.gov.au, 2019)Further key points related to real attraction business is that sell the business for the right reason at the right time in the market so the seller will get a good price of the business, seller must determine the worth of the business and determine the actual price of the business, seller must be clear about its selling business and determine all the terms and conditions in an effective manner.

Professional help:

Proper professional help must be required for the selling of the business so must hire the professional to get better advice for the selling the business and also help the seller to select right and better policies for the selling the business so the seller can get more benefit and the buyer also get more attraction for the business. so seller uses different techniques and methods to make the real attraction business for the buyer and also make more beneficial for the seller to sell the business and make a beneficial reputation for the business in the market.

It is quite tricky to balance the questions of buyers and retain the confidentiality of your business selling process. Creating a plan can help in setting when and what to information to release. Sometimes, revealing information at a wrong instance can adversely impact both the integrity and confidentiality of your business. Thus, you have to be careful about what information you must provide to your buyers.

Once you begin your business marketing, you will be able to observe changes in your sale. It is quite normal to feel these changes because business sale can reach anywhere you want. However, you should keep your ideas and thoughts only to yourself. A bit of important advice is that you should never reveal too much. It can come back to bite you in the end if you don’t plan beforehand.

Confidentiality is more than just a little important in the sales of both small and medium businesses.

It is also vital in reaching your own exist aims and goals. And it is significant for post-sale success of your business, particularly if you offer seller financing and also agree to receive a minor portion of the purchase price in the form of future payments. But you should keep it in mind that this portion is not substantial. If you do then any delay in future payments will not negatively affect you.

Letting the information out is harmful in several ways. Premature exposure of information can affect the business adversely. Following are some of these ways:

  • Employees, creditors, competitors, and customers become hesitant when a business is being sold. It often triggers reactions which can weaken the momentum of your business. It can even affect the value of business.
  • The hesitance of prospective buyers increases while purchasing a business if they feel it has no confidentiality. It would affect their decision of purchasing it if they feel that others know sensitive information about it.
  • Letting even confidants know about some secrets can launch a chain of gossip. Even if it is unintentional, it will still influence the integrity. If every person tells his close relative or a friend, it can spread the information about your sale intentions. This information can spread even quickly if the word reaches out to your competitors or employees.

Following are the actions which you should take for protecting your sale hopes and business:

Step 1. Advertising your business through listings and blind ads

  • You should not share your business or personal name until you have the commitments of your buyers. Until you don’t know whether they are trustworthy or not, you should not share even the minor details. Moreover, you should not offer your own name in for sale advertisements.
  • Advertise the strength and nature of your business rather than its name. For instance, you should only tell that the business has a strong base of customers. For starters, this information is more than enough.
  • You should direct all responses to an address which will not reveal your business or personal identity. When you are placing advertisements in traditional media, you should use the given P.O. Box. Other than it, you should use the email options which maintain your confidentiality. This will help in ensuring that you are not revealing anything significant. When you are utilizing sites for selling business, use the feature of the site which protects your identity. Otherwise, it can be quite messy to keep your integrity in check.

Step 2. Buyers should be pre-qualified before sharing important and sensitive information.

Actually, if you are feeling awkward in asking a buyer for the business and financial information before giving your business name, you are not unique or alone. However, you should remember:

  • Real buyers expect you to conduct screening before you share important information.
  • They also seem to care about the confidentiality of your business information. After all, they wish to know that their future business has proper trade secrets or not.
  • Buyers with proper qualification are serious shoppers. And they are also ready with the important information for taking the next steps. s

In accordance with the business brokers, only one out of ten buyers is serious. Only one of them has the qualification for making the purchase. That is the reason why pre-qualification has such significance. Without it, you can forget about sharing any type of information. It is better if you learn who is serious enough to purchase the business and who is not. It will do magic in saving your time.

An efficient way of pre-qualifying prospects is describing your response and business requirements. You should explain them in a way which assists unqualified buyers in opting themselves out.

Through the explanation of purchase size and business size, you will have a good chance of hearing from those who really have an interest in it. You can increase the chances if you ask buyers to explain their possible purchase capabilities.

In each and every advertisement, you must ask parties to respond with the information which explains:

  • Just what they want from a purchase
  • Their timeline of purchase
  • An explanation of their related experience
  • Their ability and interest in buying your business

In one sentence, you can relay this request. Please respond by explaining your investment capability, size and type of business, your experience, and your interest in this purchase.

Step 3. Make a system of inquiry response which shares information in phases.

There is no need for you to give all important information at once. In fact, providing important information in advertisements can reveal your identity. This way you cannot mask your identity even if you don’t reveal your business name. You can see below how and when to phase the delivery of your information.

Delivery Stage-Business-for-sale ads

A short description of price, size, strength, and type of business.

Request to all interest parties to respond by explaining their purchase qualifications and intentions.

Direct all responses to a blind media collection point, email address, or a P.O. box. Make sure that they don’t reveal your or business name.

Confidentiality Request

You can set up an online listing for requesting confidentiality. For instance, before offering further information, a confidentiality agreement must be signed by the party.

All brokers need buyers to offer non-disclosure agreements and financial capability before obtaining additional data.

Delivery Stage-Email or phone replies to ad respondents

Additional information and personal introduction do not reveal the business name and sensitive information.

You should confirm the timeline, purchase interests, and financial capability.

Provide to fax or email your short-selling summary. However, you should remove references to the identity of your business.

If capability and interest are high, you should request a meeting providing more data.

Confidentiality request

You should shake hands with the buyer before sharing information. In other words, it means a hand for a hand. Only offer information after you get buyer information.

Delivery Stage-Face-to-Face meeting

You should confirm the capability and interest of the buyer again. It will serve to strengthen your bonds and will also erase your suspicions. After the promise of confidentiality, provide buyer with the selling memo. Before making a promise, you should keep the memo under the table.

Confidential request

Hold an off-site meeting for protecting the identity of your business. Both of the parties should also sign the confidentiality agreement. Your attorney should prepare the agreement beforehand as it will prove to be helpful.

Delivery Stage-Providing selling memo

During this stage, you will provide your selling memo.

Confidential request

You should give the memo to the buyer only after the agreement has been signed. If you are unsure, you should only release the summary of memo.

Due Diligence

You should reveal business operations and financial records.

In addition, you should also release a copy of the memo with numbers on all pages.

Confidentiality request

You should not be jumping around reveal the information. Provide the information after receiving the formal letter of the buyer regarding the purchase of your business.

Step 4. Maintain confidentiality.

You should take the following steps for maintaining privacy during the process of selling:

  • Have an agreement of confidentiality ready for presentation to qualified buyers.

It is important to have a confidentiality agreement ready. You can make your attorney prepare it for you. You must make sure that you are including a clause which details about expiration data and mutual confidentiality. Normally, it is only after two years.

  • Create a private account for use with buyers.

You should create a separate account for talking with buyers. Otherwise, you face a risk of tipping off workers and causing concerns in the workplace. Instead of it, invite your buyers to offer a confidential email to address of non-business. You should not use the personal name because it can be traced easily. Rather, you should create one which masks your identity. Create an email with a completely different name.

  • You should direct calls to a non-personal number and the phone should be answered. Or you can record a voicemail for conveying greetings to business buyers.

You should remember that your personal number may not be right here. After all, you cannot let your competitors, employees, or vendors recognize who you are. Otherwise, it will be enough to wreak havoc on your firm.

  • Even after the agreement of confidentiality, don’t share financial details, client lists, trade secrets, and proprietary processes until you have an intent letter in your hand.

It is likely that your sale offering has the cash flow of owner and annual revenues. It might even have the asking price. You should refrain from sharing financial information until you know that the buyer really is going to purchase the business.

  • You must be ready for questions from associates and workers.

It is possible to tell the truth without having to spill the beans. It is really easy to say that you are creating an exit plan for ensuring the business’s future stability. You can also say that you are communicating with potential successors or partiers without announcing that they will replace you in the near time. Whenever someone asks you about your decision, you should be clam while ensuring that you are actually telling the truth.

Facing people can be quite difficult but you have to keep your composure. Practice how you reveal the information before actually providing enough data.

Getting into the game with your business can be both inspirational and anxiety-inducing. If you are trying to give your budding company some legs, reaching out to an investment banker is one of the next steps.

However, it’s important that you learn more about why investment banking can be a valuable tool for you.

Consider these tips so that you can get the most out of your company through the assistance of an investment banker.