Spring Cleaning: 4 Quick Ways to Ready Your Business for Sale in 2016

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Are you starting to think about selling your business? Maybe you’re hoping 2016 is the year to make it happen. If so, there’s no time like now to get started on the process. Here are four things you can do to get started.

  1. Spiff yourself up.
    If you’re selling a home, you think about curb appeal, right? If it doesn’t look good from the outside, you won’t attract any buyers. So you might give the front a fresh coat of paint, hang a wreath on the door and trim up the yard.You need to do the same for your business. How’s your website looking? What’s your social media presence? Does your location look nice from the street? If you don’t provide a positive first impression, you could turn a potential buyer off before he has a chance to look inside.
  2. clean upReport your revenue and expenses accurately.
    Some small business owners under report revenue or inflate expenses to improve their tax situation. Those practices may save $5,000 or $10,000 in the short run, but they could affect the business value by $90,000 to $120,000.We talked with a seller the other day who was under-reporting revenue by $150,000 to $200,000 a year and was hoping to sell for around $3 million. We’ll be surprised if the seller is able to sell at all, given the inaccuracy of the books.
  3. Clean up your assets.
    Do you have equipment or other assets that don’t work or aren’t providing value to your business today?If so, sell them off before looking for a buyer. Streamlining your business will help buyers understand what’s really necessary to operate.
  4. Engage an advisor.
    Advisors typically charge just 10% of the deal, and they can vastly improve what you earn on your business. We recently talked to an owner who was so concerned about the cost of an advisor that he literally gave away a business and real estate worth $350,000!He left $315,000 on the table based simply on his fear of paying too much for help. Any advisor worth his or her salt will make the terms of the deal clear from the beginning, so you can make an informed decision about whether to engage.

We often talk to sellers who think they’re ready but who are missing these important basics. When that happens, it can take several months to straighten out.

Best of luck with your spring cleaning and tax reporting!

If you or someone you know is interested in buying or selling a business, please call us at 913-383-2671 or contact one of our Apex Business Advisors today!

2016 Bodes Well for Buyers AND Sellers

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Most experts say the U.S. economy will stay fairly stable in 2016, with performance similar to 2015’s. Dave Seitter, a partner with Spencer Fane LLP, and Doug Hubler, with Apex Business Advisors, teamed up to fill you in on how the year looks for business buyers and sellers.

M&A market will stay strong

Dave: This year’s economy is probably going to be similar to last year’s. So there’s still a lot of money sitting on the sidelines looking for places to play. Venture capital and private equity firms are driving up demand.

Doug: The uncertainty in the stock market and the volatility in oil prices also make business transactions more attractive investments.

Dave: But it also means those business buyers are looking for a pretty healthy return. They’re taking on more risk than they would in the market, and they expect to be rewarded for it. I’d say they’re seeking deals that can return 25% or more.

businessHigh retirement rates support business transactions

Dave: People are working to more advanced ages these days, but we’re still going to see more people retiring each year than ever before. And that means a higher rate of transition among small and medium-size businesses.

But business owners who are planning that transition don’t have to look at it as an “all-or-none” prospect. They may want to start planning for a gradual transition – reducing the hours they work or turning over pieces of the company to someone who may be ready to take over later.

Doug: Selling a partial interest and planning a transition over time is a good strategy and can be a comfortable one, especially for private equity groups. They like keeping a trustworthy, competent leader in place who can help their investment grow.

Selling or buying a minority interest has pros and cons

Dave: I agree that selling a minority interest is a good way for the owner to realize some liquidity while maintaining some control. But it can come with a price!

Doug: I would caution sellers to be careful about picking the right partner for that kind of transition. Interview past acquisition partners about how smoothly it went. And make sure the buyer has the capital necessary to make ongoing investments in the business.

It’s never too early to start talking

Doug: If you are even thinking about selling part or all of your business this year, now’s the time to start talking to your advisor. We can help you consider tax implications, improve the business value, prepare your books and consider how to position your company with potential buyers.

Altogether, the year ahead looks favorable, whether you’re looking for a business investment or wanting to transition out of your ownership role. The opportunities are there for the taking!

If you or someone you know is interested in buying or selling a business, please call us at 913-383-2671 or contact one of our Apex Business Advisors today!