Episode 110 – Selling a Business: Owner’s Metrics vs. Manager’s Metrics

/in /by

Doug and Andy’s schedules did not align for them to record this week, so we’re using the audio from a brief portion of a webinar that Andy was a presenter on a few weeks ago. His part centered around the concept of Owner’s Metrics vs. Manager’s Metrics. We hope you enjoy this special edition of the podcast, and we’ll be back next week with Andy and Doug.

The owners metric is the value of your company and that’s where savvy entrepreneurs obsess. Your friends from school, your peers, even your family probably want you to grow your revenue at all costs, right?  Because that’s the way we judge companies, right? Bigger companies are more important. How many employees do you have? How much revenue do you have? That’s the way we judge each other as entrepreneurs and it’s misguided. People that focus on value know they’re going to get a whole lot more value by putting their head down and focusing on doing one thing for 25 years better than anybody else.

Better than a Side Hustle: Buying and Scaling a Business

/in /by

Better than a Side Hustle: Buying and Scaling a BusinessMany Americans have come to realize that the economy of today moves lightning-fast and can change in an instant. Because of this, many workers have started looking for alternative methods of making money, and one of those methods is to start a small business as a side hustle.

What many Americans do not realize, however, is that a side hustle can only be life-changing if you can convert it into a full-time focus. It takes a bold person to walk away from the stability of a career and move into working for one’s self as an entrepreneur.

But what if you don’t want to walk away from a career to build a business from the ground up? Then, you might buy an already successful business and add your skills to take it to the next level.

Get to Know the Market

So, what are the types of businesses that are doing well? What are the brands that are getting a lot of attention but might be overhyped? What are the underrated buys no one is talking about?

Research on the Internet is helpful (that’s where you found this article, after all), but this is also where getting to know a business broker can pay off. Reaching out to those who specialize in helping individuals or companies both buy and sell businesses is a smart first step into finding the right kind of business. You can get their inside knowledge of current buyers who may be looking to buy up small businesses and identify what their key purchasing points may be.

Making those connections early is like finding a map when you are lost in the wilderness. It can guide you to safer areas.

Set the Foundation

Once you know what buyers are looking for in a small business, you need to consider your skills and interests. Sure, if you have a degree in accounting, that’s an obvious skill set, but think about all the things your colleagues praise you for that don’t fit neatly into a resume and, thus, aren’t top of mind when you think about skills. Are you great with communicating ideas to outsiders, or are you the person people look to in order to shepherd a project from start to finish, or are you the detail person everyone counts on to pick up that missing line of code or catch that typo? These sorts of skills are invaluable for business ownership.

Buying and scaling a business will be something that consumes a lot of your time and energy, so going forward with something that interests you will help sustain you through those moments that break other business owners. Being a great accountant won’t get you through back-to-back 16-hour days unless what you are doing provides you with satisfaction or engages your sense of wonder throughout the process.

Find the Right Fit

You’ll want to stay patient through the process. You need to find the right fit for your skills and your budget. You might be looking to slowly replace your full-time income or you might be ready to jump in and scale the business to the moon. Excitement and motivation won’t be enough. You’ll need to look at opportunities.

Some of these opportunities include:

  • Areas of internal improvement the seller didn’t explore sufficiently (or at all)
  • Products and services the seller didn’t have capital to create and deploy
  • Basic best practices in digital marketing that the seller never implemented

Ultimately, diversifying your income through buying and building a business is a smart way of insulating yourself from a rapidly evolving and fluctuating economy. Once you have the right partnership and the right systems for building and scaling, you can put them to work making sure your time on the economic roller coaster of today is a joyful and rewarding experience.

If you are looking to skip the start-up and buy into a business that has already proven itself, give us a call. It’s what we do.

Episode 109 – Selling a Business: The Dangers of Add Backs

/in /by

On today’s episode of the Apex Business Advisors Podcast, Andy and Doug are talking about extreme add-backs. These aren’t just any add backs, these are the add backs where a seller has pushed it past the line. They also share the example of tax savings versus lost value at sale.

Interested in learning how the market would view your business today? Take the survey.

Case Study #84: Selling a Small Consultancy Firm to One of the World’s Largest Airport Operators

/in /by

Case Study #84: Selling a Small Consultancy Firm to One of the World's Largest Airport OperatorsIt’s often said that entrepreneurs and founders start companies to prove somebody else wrong, and Kiran Merchant is no exception. He spent decades as a consultant to the aviation industry, and when his boss refused to give him a $8,000 raise, he decided to leave and start his own firm.

18 months later — yes, less than two years — Kiran sold Merchant Aviation (MAV) to Aéroports de Paris (Groupe ADP), one of the world’s largest aviation companies, for a high single-digit multiple of EBITA.

Begin with the End in Mind

As author of The 7 Habits of Highly Effective People Stephen Covey once said, “Begin with the end in mind.”

When Kiran started MAV, he did just that. He had no idea what kind of company he wanted to start, but what he did know was that he wanted to sell it eventually. He always had a dream of becoming a filmmaker, and so wanted to be able to pursue that after selling MAV.

He built the company from the ground up, first working on his own as a consultant on airport infrastructure development. He soon realized that he needed help and recruited some old coworkers to join him. They made up a team of 12 employees at the time of the sale.

For Kiran, the idea of selling wasn’t to become rich or make a ton of money. It was to pursue a higher purpose in life that would make him happy and give him the freedom to do whatever he wanted to do. The thought of this type of future is what propelled him to approach the deal with Groupe ADP so fiercely — he couldn’t stop thinking of that “end” he had been dreaming of.

Keep Things Personal — or Not

When Kiran created the company, he initially didn’t give much thought to including his surname in its name – he simply thought it had a nice ring to it.

Groupe ADP expressed their concerns — the company was so intrinsically tied to his goodwill and reputation, and they were worried about how it was going to survive without him.

What’s more, Kiran did not want an earnout. He was very clear in that he wanted to agree on a price, and the buyers were to pay it 100% upfront. There was a fear on ADP’s side that if Kiran wasn’t in the picture — as well as his personal relationships, his personal way of doing things, and his personal knowledge — then the business would fall apart.

So they struck a deal: if Kiran could get them $30 million in revenue for the next 30 months, he would get a hefty bonus. It gave him an incentive to stick around and gave the buyers a sense of confidence. He says the deal worked like magic. They started looking at the growth potential instead of the potential of losing business.

After weeks of deliberations, Kiran was finally close to getting the “yes” he was hoping for.

Sticking to His Guns

When Kiran decided he wanted to sell MAV for 10 times EBITA, everyone looked at him like he had two heads. An engineering architectural consultancy firm had never gone for that much. A friend stepped in to help. He urged him to stop talking about what the company was currently doing. Rather, he had to start talking about what it could become.

As such Kiran shifted the conversation away from what MAV does year after year and toward how it could open doors for a potential buyer to get into a very lucrative market. And that’s exactly how he finally sold Groupe ADP on MAV. They’re one of the world’s largest airport operators, yet somehow didn’t have an “in” to the US yet.

After some more discussions, they decided to partner with MAV to see what Kiran was all about. Within three months of working together, they approached him with a Letter of Intent. The initial offer was the industry standard: two times the EBITA, with 50% up front and the other 50% as an earnout. Kiran was clear, again. He didn’t want an earnout. So he had a private conversation with the owners and explained his point of view. Somewhat miraculously, over dinner, they said yes.

Key Lessons

  • Start with a clear vision: From day one, Kiran knew he wanted to sell his company to pursue his passion for filmmaking. By keeping this goal at the forefront of his mind, he was able to shape his company’s growth strategy and navigate the path to a successful exit.
  • Stand your ground: Despite facing skepticism from others in the industry, Kiran remained firm in his belief in MAV’s potential value and refused to settle for less than what he deemed fair. This determination ultimately paid off in securing a favorable deal with Groupe ADP.
  • Focus on future potential: Kiran’s ability to shift the conversation from current performance to future potential played a pivotal role in convincing Groupe ADP of his company’s value. This serves as an important lesson in emphasizing future growth prospects when positioning your company for acquisition.

MAV sold for what Kiran hoped (a high single-digit multiple of EBITA), and he still works for the company as the Vice Chairman of the Board. He only had a two-year contract after the acquisition, but he decided to stay because he still cares about his team and his clients.

He isn’t sure when he’ll step down, and for now, is busy working toward that dream of becoming a filmmaker.

If you have an end (and an exit) in mind that you need help pursuing, we can help. Give us a call today to talk about your options.

Episode 108 – Know Your Broker: Tom Bailey

/in /by

Doug and Andy are joined by one of our newest brokers, Tom Bailey. Hear how Tom’s background as an engineer and entrepreneur led him to Apex and what he plans on accomplishing while he is here. Welcome aboard, Tom!

Want a sample of the businesses we’ve sold? Check out the Sold page on our website, then get in touch for a Free Consultation.

Choosing the Right Exit Strategy for Your Business

/in /by

Choosing the Right Exit Strategy for Your BusinessAs a business owner, you’ve put in years of hard work to build your company. Now, you’re contemplating the next step: your exit strategy. Choosing the right one is crucial for ensuring a smooth transition and maximizing the value of your business.

Many entrepreneurs may be ready to sell, but it’s important to come up with a well-thought-out plan before you can cross that finish line. There are various factors you must consider to make an informed decision that will benefit you, the employees you’re leaving behind, and the new owner.

Understanding Exit Strategies

Exit strategies come in different shapes and sizes, each with its own set of pros and cons. From selling your business to a family member to considering an Initial Public Offering (IPO), there are plenty of options to choose from.

  • Sale to a third party: Selling your business to an outside buyer can provide a substantial injection of cash and allow you to exit the business entirely. However, it requires careful planning and due diligence to find the right buyer and negotiate a fair price.
  • Passing on to a family member: For some business owners, keeping the business in the family is a top priority. This exit option in particular can be emotionally rewarding. That said, it requires open communication, clear succession planning, and addressing eventual conflicts among family members. As with most things that involve relatives, it has the potential to get messy, quickly.
  • Management buyout: This exit strategy involves selling the business to key employees or management team members. It can be a win-win situation and provide continuity for the business while allowing the management team to take ownership. Though, financing and structuring the deal can be complex.
  • IPO: Taking your company public through an IPO can unlock significant value and provide access to capital markets. The cons? It involves strict regulatory requirements and high costs. You’ll also have to come to terms with the fact you’ll no longer have control over your company’s direction fairly quickly.
  • Liquidation: As a last resort, liquidating the business involves selling off assets and winding down operations. While it may not yield the highest returns, it can provide closure and minimize losses in certain situations.

Factors to Consider

Now that you know the different types of exit strategies, it’s time to take into account several different factors.

Firstly, your timeframe matters — are you looking for a quick exit? Or are you willing to invest your time (and potentially money) in a long game? Financial goals, personal preferences, and market conditions should also play a significant role in your decision-making process.

  • Is your business ready? You may be ready to move forward with an exit strategy, but it’s essential to determine whether or not your business is too. Consider its financial health, operational efficiency, and legal compliance. A thorough understanding of your business’s strengths and weaknesses will help you make an informed decision.
  • Have you sought out professional advice? Navigating the complexities of exit planning can be daunting. That’s why it’s crucial to seek professional advice from experts in the field. Business brokers (like us), financial advisors, legal counsel, and tax experts can provide invaluable guidance.
  • Have you planned for the future? Beyond choosing an exit strategy, you must consider your post-exit plans. Whether you’re retiring, pursuing new ventures, or simply taking a well-deserved break, having a clear vision for the future will help you transition smoothly from business owner to whatever comes next.
  • Have you thought about the tax implications? One critical aspect often overlooked is the tax implications of your chosen exit strategy. Understanding the tax consequences can significantly impact your financial outcome. Again, consult with a tax advisor to explore strategies for minimizing tax liabilities and maximizing after-tax earnings.
  • Are you emotionally prepared? Exiting a business may cause some emotional strain. It’s essential to prepare yourself mentally for the transition. Take the time to reflect on your achievements, acknowledge any feelings of loss or uncertainty, and envision your life beyond the business.
  • Have you thought about your family? For those of you who are considering passing the torch to family members or key employees, succession planning is key. Develop a clear roadmap for transferring leadership and ownership that will ensure a seamless transition and preserve the legacy of your business.

Choosing the right exit strategy is a critical decision that requires careful consideration, planning, and professional guidance. Ultimately, as it’s your business that you’re exiting, you have to be the one to decide which path to take.

If you need help determining what exit strategy makes the most sense for your unique situation, give us a call today. No matter which method you choose, the key to a successful exit is preparation and foresight.

Episode 107 – Selling a Business: Exclusive Listing with Chuck Campbell

/in /by

Andy and Doug are joined by Chuck Campbell today to discuss a recent deal that Chuck just closed. The deal had a lot of wrinkles that Chuck expertly navigated. You’ll hear about the challenges presented by the Exclusive Listing Process, Buyers that had separate legal representation, dealing with a small town business, and how those were overcome.

Wondering how your business would fair on the market today? Download our latest eBook, The 8 Key Drivers of Company Value, for Free.

Valuation Reports: Which One is Right for Your Business

/in /by

Valuation Reports: Which One is Right for Your BusinessAs you gear up to sell your business, you’ve likely been asked to produce a valuation report. It’s important to note that you can’t use a one-size-fits-all approach when determining the value of your organization — there are three distinct types of valuations and each one serves a specific purpose.

Whether you’re gearing up for a major merger, planning your exit, or simply curious about your business’s worth, knowing these valuation types can make a significant difference.

Valuation Type 1: Certified Appraisal

The best valuation report you can receive is a certified appraisal — an in-depth, independent evaluation conducted by a certified appraiser. This type of valuation is certainly the most intense. It’s typically reserved for transactions such as mergers and acquisitions, detailed estate planning, and other scenarios where legal standards demand as close to perfection as you can get.

In other words, certified appraisals leave no stone unturned. They involve a meticulous examination of every aspect of your business, ensuring the valuation can withstand the scrutiny of the most complex transactions. This level of precision comes at a price — certified appraisals can be both time-consuming and costly, especially when expert witnesses are needed, such as disputed valuations during legal processes.

Valuation Type 2: Independent Valuation

Independent valuation reports are also conducted by experienced appraisers, albeit not “certified” ones. These types of valuations serve a crucial role in business and exit planning and offer a detailed snapshot of your business’ worth within the current market landscape. They’re particularly helpful for organizations that are gearing up for the market, and consider factors like comps, benchmarks, trends, and in-depth financial analysis.

One advantage of independent valuation is that they are the most up-to-date valuation you can get. When entering the listing process, having a recent appraisal ensures that those benchmarks and comparisons are as fresh as possible. An independent valuation, like a certified appraisal, is also usually bankable for SBA loans.

Something else to note about this type of report: your business can benefit from regularly updated independent valuations, even when you’re not actively looking to sell. Use it as a strategic planning tool that will help you identify areas for improvement and other ways forward.

Valuation Type 3: Broker’s Opinion of Value

Finally, sometimes all you need are some quick insights and ballpark figures to help you make informed decisions. This is where a broker’s opinion of value comes in. While not as detailed as certified or independent valuations, it provides a quick and cost-effective starting point for businesses to determine where they’re at.

A broker’s opinion of value offers a broad range of information based on comps and industry averages. It’s a low-cost tool that can help align expectations and initiate conversations about your business’s value. It may not provide the precise figures found in other valuations, but it can set the stage for further exploration and eventual refinement.

As a token of our appreciation in Q1 2024, we are offering a free broker’s opinion of value. This is not just a gesture but an opportunity for business owners to gain a quick overview and range of their business’s value. To take advantage of this offer, simply send us an email at . One of our brokers will guide you through the process, ensuring you provide the necessary information for a well-informed broker’s opinion of value.

Key Takeaways

  • Tailor your valuation approach to your business’s unique needs: The type of valuation your business needs depends on its current stage, goals, budget, etc. Whether aiming for an in-depth certified appraisal or seeking a quick, cost-effective broker’s opinion of value, understanding your business’s needs is essential.
  • Regular valuation reports can become strategic tools: Regularly updated valuations help you see where your business can improve, compare it to industry standards, and plan for the future to make your business more valuable. Think of it as a tool for your long-term planning.
  • Align expectations early to avoid misunderstandings: Remember to use the broker’s opinion of value as a starting point for aligning expectations. This tool provides a broad range rather than precise figures. Initiating conversations based on this ballpark figure helps avoid misunderstandings later on, especially when selling.

Understanding the nuances of each type of valuation report is crucial. Certified, independent, and broker’s opinions of value each serve their own distinct purpose, and cater to different needs and situations. When choosing the right valuation for your business, remember to keep your specific needs in mind. Your business is one-of-a-kind — shouldn’t its valuation approach be too?

If you’re interested in obtaining a broker’s opinion of value, don’t hesitate to reach out. It can help set the scene for setting strategic goals and ensuring that your business is on the right financial track.