As a Business Broker based in Florida I spend ample amount of time prospecting/marketing for prospective business sellers and prospective business buyers. I use various marketing methods to market to both buyers and sellers. While in the process of prospecting for business owners considering the exit or sale of their business it is not uncommon to hear “I would be interested in selling my business if I can get the right price”.
Business For Sale – The Right Price
Recently I engaged in such a discussion- the owner told me he would very much like to sell his business and start a new somewhat unrelated business if the could get the right price for his business. I then asked what he felt may be the right price and he followed up with “I don’t know”.
The “right price” may not equal to the business value, or the price a qualified interested buyer is willing to pay.
For an actual transaction to be consummated, the right price needs to resemble actual business value. If the “right price” is actually 2-3 times what estimated value of the business is, it is probably best for all parties involved to spend their time elsewhere.
But is every business for sale? What if a “sweetheart deal” is presented to a small business owner in Florida? If you had a business that is not “For Sale” , and you know it to have an approximate value of $500k and someone walked in and made you a cash offer of $800k cash is your business now for sale to that party?
Is now the time to Sell My Business?
From my personal experience of business ownership, I think yes most businesses are for sale if the “price is right”. But not all businesses. While owning my previous business in the 10th year I had gotten a significant offer for the business, but I had long terms plans and aspirations for the business. At that point in time I had made several acquisitions and made several other offers on other related businesses and was comfortable with valuations, synergy calculations, and felt I knew what the value of my business was.
There was a lot of merger and acquisition activity that was occurring in my industry at that point in time and I was presented with a cash offer from a very strong company, and was at about a 25% premium to what I and my CPA viewed as current value. So I had a very strong cash offer from a well qualified business- do you take the money and move on.?
Business For Sale – The Value
In my opinion business values are affected by both macro and micro economics. What is the state of the economy, what is the state of the merger acqusition economy and what is the state of your industry/your business? These elements effect what sort of multiple of cash flow your business may be worth. If the economy is such that valuations were/are running high do you look to exit your business because valuations, and or those high multiples may not come around again?
In my situation I consulted with my “trusted advisers” around me my CPA, my attorney, my wife. Yet ultimately the decision was mine. My CPA did tell me something that strongly influenced that decision. He had told me “You,ll know when you are ready”. It was a great price great offer, but I wasn’t ready and ultimately sold my business 10 years later and got fair value for the business. So is every business for sale if the “right price” comes along. I think that most businesses are for sale if the right price comes along, but not all businesses.
Selling your business requires you to prepare your business for sale. One of the important steps in preparing your business for sale is a well designed web site that produces results. Below is information from the perspective of an SEO Web Design firm.
Tampa SEO is a full service web design and SEO agency in Tampa, FL. Here’s an article they wrote regarding web design and SEO prior to selling your business.
Why You Need SEO & a New Website Before Selling Your Business
So you have decided to sell your business and are making moves to get top dollar for your baby. Being a good business owner you understand that although your business means the world to you in the business world it is about proving the dollar amount from both an appraisal and sales perspective.
Whatever your business may be, the prospective buyers want to see the purchase and new ownership process go as seamlessly as possible. This means all your records are in order, the permits or licenses are all up to date, and most importantly the business will continue to be as or more successful than it was with new owners. Tampa SEO highly recommends that a new website and SEO campaign can help you with the latter.
Your business website represents your professionalism
When it comes to business success most owners will agree that the online market is one of the most important. Your website is the representation of your products and services, your image, your authority in your industry, and a way to provide potential customers information in a day and age where the Internet is the first place people look. Basically, having a well-designed website will help build business, retain business and represents everything you have worked so hard for when you yourself can’t make a live impression.
Tampa SEO knows that a modern website helps businesses before, during, and at the end of their operation so that they can showcase their professionalism and utilize their website as an additional marketing tool. Although having a great website will help with conversions your business will still need a way to attract customers and PROVE that it is a great marketing tool before its sale. This is where search engine optimization (SEO) comes into play.
Photo (c) topseopicks.com
SEO is simple, easy, and fast way to get increased market share prior to selling
While a website can be the source and reason you convert leads, SEO is the reason these leads are finding you. A new website and SEO campaign helps customers or clients who are already looking for your products or services find you quickly and easily. When a customer goes on to Google and searches for a generic phrase related to your business SEO makes your website come up high in the rankings and improves the chances that that customer will make a purchase from you.
This relates to the sale of your business because with SEO all the website activity is quantifiable. When you can prove to potential buyers that you have X amount of traffic and X amount of conversions you have proved your market share and ability to sustain business in the future. This is a great selling point as most other marketing campaigns- TV, radio, Yellowpages, etc. are difficult if not impossible to measure.
Shows new buyer you have continued to improve the business while selling
Every business buyer wants to know that the risk they are taking by purchasing your business is justified. What better way than showcasing to them through your new website and SEO analytics that your business is sustainable and can continue to grow through attracting new customers online. You have showcased the effort to improve marketing before you sell your business and have begun the process of attracting a bigger clientele through SEO.
It seems that websites and Internet marketing are a piece of every business plan these days. When selling your business make the decision easy for the buyer. Showcase to them that you care about the success of the business even after ownership has been transferred by investing in a website and SEO campaign that will continue to be successful even after you are gone. It is a huge buying factor and can improve the bottom line you can charge for your business as it is all justifiable.
Scott M Messinger is a business broker based in Florida. I work with both business owners and individuals in the process of buying and selling businesses. I normally write my views and perspectives from a small business owners standpoint. The above article is helpful information provided from the perspective of an SEO Web Design Company.
I just had a birthday. Yeah I know- So What…. But celebrating a birthday when you are “Middle Age” by most definitions and or “old” by my teenage daughters definition a little introspection is done. Fact is Im not getting any younger. As a business broker based in Florida it also makes me think of all the business owners that are getting older and maybe are or have been ready to sell their business but the bad economy has delayed that decision. Another year passes, the “recession” is still with us and it really looks like it will be with us next year and maybe beyond.
How Long Can A Business Owner Wait To Sell Their Business?
What if this down economy last 2,5, 10 years. I am generally an optimistic person. I started and owned a business for 20 years and during the lean years I continued to see the glass as half full, and fought thru some difficult years and successfully sold my business when I was ready.
I believe there are many business owners that had planned to have exited their business by now. Maybe they planned to sell their business and begin enjoying “that retirement thing” they have heard of, but had to delay those plans due the the reduced value of their 401k and other investments, the reduced equity in their home, and the lower revenue and profit of potentially their biggest asset- their business. Its easy and common to say ” I want to sell my business but I don`t want to sell it now when my business is down”. I understand that thought process.
Things To Consider When Deciding To Sell Your Business
But I think from here is where the thought process becomes more difficult. Considerations should include:
What if we remain in a prolonged recession- can I wait 3-5 plus years?
What happens in our world of supply and demand. Is a pent-up supply when released, going to affect prices/values downward as the increased supply hits the market?
Is there really this large number of baby boomers looking to exit businesses and move into retirement to further flood market and affect supply/demand price?”
Maybe I’m told I should wait… Ive been working for 20-30 years towards this “end game”, do I really want to wait?
Photo (c) apptivo.com
As a business broker in Florida, maybe some day I will go to a meeting of business owners and not hear stories about a foreclosure that one is going thru or their friend is going thru. Maybe I will attend a seminar or educational session put on by bankers or SBA bankers that doesnt sound empty and completely disconnected by thier purported audience- the small business owner , that needs financing or entrepreneur that wants to buy a business. This may happen, but its not going to happen tomorrow. But how many tommorows is it going to take. How many more birthdays will pass before the time is right to sell your business.
As a business owner for 20 years I was involved in an industry that was expanding and rapidly growing. The size of the “pie” my competitors and I were competing over was getting larger as the industry grew and we all sought to get our share of this bigger “pie”. So we increased our customer base as the market grew, and we also grew our customer base by buying competitors which resulted in many successful synergistic acquisitions.
In today`s economy in so many industries people are needing to spend less, cut back and therefore the “pie” is staying the same size or the “pie” is getting smaller. So you have business owner competing for their piece of a smaller pie . As you have the same amount of competitors competing for a smaller pie either all get less, some get more by pricing or efficiencies, but those getting more, results in other competitors getting less and or so much less that they no longer exist.
Today as a business broker based in Florida. I am working with several business owners looking to keep afloat and looking for exit strategies that meets their needs. Selling their business and going to work for the acquirer is an interest I have heard on several occasions as an exit strategy that they would welcome. (Also work with several business owners that have solid business models that are doing well).
Buying A Competitor
A fast and often cost effective way to gain a bigger piece of the pie is by buying a competitor. Growing your customer significantly “overnight” by buying a bigger “piece of the pie”. Buying a business in a growing industry and or economy is a solid and effective way to grow a business. I had utilized this approach on multiple acquisitions to add to our own organic growth. Buying a business, or buying a competitors business in a recession can also be an effective means to grow your customer base and grow it fast.
Often most business owners dont consider acquisition as a possible way to grow a business because they feel they do not have the funds or resources to make such acquisitions. But:
1)possibly you can find a struggling competitor that may welcome the opportunity to escape the burden of trying to run a struggling business
2) possibly you can buy a business of a competitor that offers Seller financing.
3) possibly part of the purchase price can be the assumption of debt on trucks and or equipment that may be assumable and may be affordable thru the synergistic cash flow of the business
4) possibly offering the owner of the business you may buy long term employment. A small struggling business that may have a few employees- who may be the last person to get paid?- the owner. An owner may welcome the premise of steady and consistent compensation.
5) Possibly you can secure outside financing- An approach I always used as my last choice but may fit your situation
Furthermore, would you be “just buying a failing business”? No. Syngergies that can be realized can be plentiful and the cost saving that follow may help or completely finance the acquisitions.
Cutting The Costs When Buying A Competitor
You have an office space or shop so does the competitor. Can you and your competitor both operate under one roof? When you eliminate the need for 2 spaces you also eliminate so much of the lease cost, utilities, insurances, phone, internet and other Fixed Overhead cost associated with that space. Also by adding these customers your customers, density may increase and you may be able to increase efficiencies in service and maybe you need 1 less employees or more, along with the benefit cost that goes along with the employees.
Advertising does not need to be duplicitous, maybe some equipment of vehicles are also puplicated and can be potential cost savings. As a business broker I try to look at buying selling a business from the perspective of a business owner and see that during this recession improving your position thruacquisition may have many long term beneficial results.
So what do you do when you are trying to keep your piece or get a bigger piece of a smaller “pie” ?
Buy another piece of that pie it may not cost you as much as you had thought.
Running a business, owning a business, buying a business, or starting a business requires a whole toolbox of skills, efforts, attributes, timing and possibly some good fortune. It is well documented that to successfully own a business buy a business or start a business requires skills such as:
a “Do whatever necessary” attitude
Willingness to experience failures but not accepting failure as an option
Leadership skills, sales, marketing, the list can go on an on.
There is a new requirement that a small business owner needs to be part of his/hers skill set- the ability to tread water.
New Business Skill – Treading Water
Running a business over the last several years has required the small business owner to attain the skill of “treading water”.- And for this discussion I am defining treading water as the ability to “hang on” to the businesses until the economy recovers. And when one looks at our economy from a Main Street perspective in lieu of a Wall Street view, the need for one to be able to tread water for a couple more years may be needed.
My definition of a small business is not how the government defines small business, rather the millions of businesses with 50 or less employees (and the many with 5 or less employees), that currently are working harder to end up with less and essentially try to hang on until the economy turns around. Recessions don’t last forever?- right?
Photo (c) illustraconsulting.com
A Rising Tide lifts all Boats…. I recently had been on an Alaska Fishing trip , and fishing up there is all about the Tides, and you plan and your time your fishing activities around them. But the tide you can count on. The boats and the docks are floating piers which allow the boats to move up and down with the Tide. Every whatever hours, tide comes in a raises all the boats about 15 feet higher, tides leave all boats go lower. One day the economy will improve and the vast majority of businesses will benefit (rise) from this improved situation.
But for how long can the small business owner tread water until the economy improves overall consumer spending, a beat up housing market, and significant unemployment problems. As a business broker I engage in confidential discussions with business owners and hear the stories of small business owners using the high rate credit cards to help finance the business.
I talk with the small business owner that “owns” the building he operates , yet is so upside down on the building that turning that “asset” back into an asset is a remote possibility at best. Most all payroll cuts have been made, some have moved into small leased spaces, others have long since made adjustment to personal and business expense spending to adjust to these difficult times.
Treading Water…. How Much Longer
How long will the small business owner need to tread water for? We all know it is prudent to have savings/reserves for backup and or down days, but how long can reserves hang on for. “Business Owner A” may be able to “tread water” for 1 year yet”Business Owner B” may be able to tread water for 2 years- then what? The previous business I had owned for 20 years did go thru multiple recessions. If you own a business for any duration of time you will experience the economic cycles that do occur. This recession is so very different.
As a small business owner currently working as a business broker in Florida, I continue to look at newer/better ways to conduct my business activities in this environment.hings that worked 2 years ago, may not work now. It will be nice one day when the tide comes in and raises all boats, but in the mean time I focus on improving my situation.
I expect no help from government, banks, or others, waiting for help from those entities, to me is like waiting for a tide on a land-locked pond. People and business are still buying and selling businesses but at a much slower pace than several years ago. So like all the small business owners I work with, I have to work more for less. How long can these small business owner tread water until conditions improve- I see and talk with so many that are getting very tired.