All recent economic statistics point to the retirement of our Baby Boomers as a pivotal fact that will create an elongated "buyers market" for selling a business.
Louisville, KY (PRWEB) April 11, 2012
Just as there are “buyers markets” and “sellers markets” in real-estate, the same exists in the corporate world and American Fortune Mergers and Acquisitions CEO, Brian Mazar believes a buyers market in the business brokerage industry is just around the corner. “All recent economic statistics point to the retirement of our Baby Boomers as a pivotal fact that will create an elongated “buyers market” for selling a business,” quotes Mazar. “This is due to the large number of Baby Boomers in the 1960s and 70s who chose to start their own businesses and who are now, with retirement in sight, hoping to cash-in.”
In fact, so many Baby Boomers started businesses (and soon intend to sell) that it is predicted 40% of US family-owned businesses will experience a leadership change in the next five years. Translated to monetary significance, this means almost $5 trillion in liquidity is expected to be created by 2015 as a result of business owners transitioning out of their business and into their golden years.
So how are our Baby Boomer owners preparing for these changes in ownership? Unfortunately, they’re not. According to a recent survey in M&A Today, 65% of small business owners don’t know what their company is worth and only 15% of them have an exit strategy. With all of the variables that impact the sale value of a company, it’s disappointing so many owners leave much to be dealt with “when they get around to it.” As a business broker, this is a large indicator that an increasing number of business owners are positioning themselves to leave money on the table.
The good news is that all this statistical information provides a clear understanding for how Baby Boomers can succeed when selling a business. The focus is simple: extensively plan and prepare your exit strategy. Exit planning gives those selling a business a significant advantage over others.
Having an exit plan and knowing a company’s true value are two big advantages when considering selling a business. For Baby Boomers, every little advantage is going to help in their soon-to-be saturated market. One other way a Baby Boomer business owner can gain an advantage over their competition is to know what mistakes the common seller makes and avoid them. The following is a list of what these mistakes are;
Not knowing the value of the business - Private Business owners minimize profits to reduce taxes. Thus, their company's financial statements often don’t reflect the true profits and value of the business. They don’t properly prepare recast statements which bring out the total benefits that the business provides.
Selling at the wrong time - Many sellers wait too long to sell their business, not understanding that one should sell a business when the market is ready. Conversely many business owners spend a lifetime building their businesses but spend little or no time in preparing their business for sale thus failing to maximize the value of their business.
Trying to rush the sale - Once an owner has decided to sell, she or he understandably wants the process to be over quickly. But preparation and selling a business including finding the best buyer can take several years.
Negotiating with only one buyer - Although business owners may feel more in control when dealing with a single suitor, generating interest from multiple buyers can significantly increase the probability of selling the business at or close to the asking price.
Not understanding the buyer's motives - Rather than emphasizing the business' growth potential, sellers often dwell on the past performance. Buyers, however, are looking for future revenue projections, return on investment, growth potential, and synergy.
Inadequate documentation - Buyers expect documentation in the form of 3-5 years financials as well as documented procedures, policies and systems, including recast financial statements and five-year pro-formas, backed by solid research and analysis that shows the potential of the business for new owners.
Assessing and negotiating offers - Businesses usually do not sell for all cash. Most businesses are sold with some seller financing, earnouts or stock in the acquiring company. Negotiation skills are vital in many areas including terms of the transaction, personal, legal, tax and financial issues.
American Fortune Mergers & Acquisitions, LLC is a nation-wide firm that provides services in the areas of growth-to-exit planning, mergers and acquisitions and business valuations for businesses with revenues between $3 million and $100 million. American Fortune was founded by industry veteran Brian S. Mazar who developed a unique buying process that is sell-side driven. This process makes American Fortune different from most merger & acquisitions firms.
Advisors at American Fortune are not business brokers, they do not represent both sides of a deal and they refuse to follow industry standards just “because.” Their results are different too. Those who sell a business through American Fortune receive better terms, higher selling prices and a true advocate when they sell a business. Due to this, American Fortune successfully sells their businesses at an average of 98% their listed price.