Sellers are in the Drivers Seat

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DriverSeatWe at Apex are very familiar with the tension between securing the highest price for a business, and not getting it sold. 2013 Survey results* indicate that one in three businesses will not sell within a year of listing.  Further, business brokers indicate that 40% of the time these businesses do not sell because sellers:

  • assign unreasonable valuations
  • make unreasonable non-price demands

What can you do to avoid this trap?

  • Get a market valuation before you intend to sell; it will help to set realistic expectations and suggest a roadmap on how to reach your financial goal.
  • Examine how your business performs relative to industry benchmarks so you can boast your excellent results, or work to improve them.

Oftentimes seller’s expectations are not far from the marketplace reality—except for some critical variables.  Let one of our Apex Advisors help you to navigate through the details of a selling strategy. The investment that you make today to plan your exit is likely to pay off when the time comes with a timely sale at an optimal price.

*A more complete discussion of the Pepperdine University research findings have been published by Forbes.

Paul Temme
Senior Advisor

Sell or Shut Down or A bird in the hand…

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bird in the handIf there is ever an opportunity to sell a business, the business owner should take a serious look at the options. Every year we will have one or two business owners that refuse to accept a reasonable offer (based on their current situation), and within a few months the owner will just close the doors.

There was a clear advantage to taking tens (or hundreds) of thousands of dollars in a sale.  The owner could have paid off existing debt, had a buyer  take over the lease, kept the business alive, kept people employed, and had a little left in his/her pocket.

Instead, the business shut down with all debt still in place, employees were laid off,  and  the owner has zero money in his/her pocket. Maybe it was pride that got in the way of taking an offer, maybe the owner felt they were being taken advantage of, but whatever the case he/she refused to consider the risks and potential result.

When buyers put offers on the table, it is a serious move and should be analyzed completely. If the business is in a distressed position, it leaves little time for multiple buyers to review the business, assess the risk and hopefully submit offers.

After an offer is accepted, it could still take 30 to 60 days to complete a deal. If you are considering a sale, involve your advisors and have an open and honest discussion about all the options. We usually have a good sense of the buyer market and the attractiveness of any given business.  Contact an Apex Business Advisor if you would like to learn more about buying or selling a business.

Doug Hubler
President

Wished-For-Pricing

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Business Valuation 1-15-14When selling your house, would you research the market, check neighborhood listings on the MLS, verify that your Realtor is educated on the marketplace, then analyze all of this information to determine an asking price? Or would you just list your home at the Wished-for-Price?

When selling a car, would you check want ads and online to compare your vehicle to others on the market to determine a price that makes sense? Or would you just put a For Sale sign on your car and list it on Craig’s List at a Want-to-Have price?

I’ll bet that you would put some research and effort into selling either your house or car, perhaps even seeking the advice of a professional to ensure that you are neither leaving money on the table nor pricing too high to create interest. Why, then, would you not want to do the same when pricing your business? It is probably the largest asset of your portfolio, so you do not want to make it guesswork!

I recently sold a business for about 15% more than what the seller expected because an independent appraisal determined and substantiated a higher enterprise value. Both the buyer and the bank were able to confirm the financial history and were comfortable proceeding with the transaction. This is just one of many such examples.

Too many people have the impression that an independent business appraisal is an expensive and painful process.  It is not.  The basic process requires the business owner to complete a questionnaire and supply three years’ tax returns.

Your Apex advisor will assist you to ensure that the information is accurate, complete, and presents the business in the best possible light. If you want to make sure that you receive full value for your business, see our Business Valuation page.

Doug Hubler
President