How much thought do you give to the
continuation of your business beyond
yourself? What if someone expresses an interest in buying your business? What
is your plan if a freeway or some other
project displaces your business? These
questions could go on for the rest of this
page.
None of us live forever. We should be
thinking of all types of contingencies. And
we should know what our business is
worth.
“Every business owner should be planning for how the business will continue
beyond the founder’s dreams,” says Lara
White.
The senior vice president and diversified
commercial banking manager for SunTrust
banks, Inc. says, “Selling a business is usually a very emotional event. It is best to
remove all emotion from the process of an
eventual sale.”
Smart Business talked with White for
more of her insight on what business owners should consider as they evaluate their
business.
When should business owners start considering the value of their businesses?
Early and often. All business decisions
should be based on the future of the business. You want to be prepared for any
opportunities that come up throughout the
life of a business. An excellent opportunity
might be missed because you were not prepared. You have to look at all options based
on your goals. You might plan on working
for 40 years and cashing out. Maybe your
goal is to operate the business as long as
you can and then turn it over to your children. You might want to merge with another business to optimize your combined
strengths. Whatever your goals, you need
to define them and plan in order to meet
them. You need to make sure that you are
positioning yourself for any and all options.
What are the steps in determining the value
of a business?
The first step is to find and select a professional to assist you. You need people who are familiar with your market. They
also need to know the ins and outs of mergers and acquisitions. They need to know
the valuations of businesses similar to
yours.
The next step is to gather the appropriate
information. You need to have good, accurate financial records. You need to know
how to tell the story of your business. You
need to describe the business potential.
You need to know how to present the numbers. You must know how to explain why
you are entertaining options. You need to
find out who might want your business. All
of this will help you determine the right
time to sell.
How do I know that I am getting the most for
my business?
The experience of your professional will
help provide the assurance. He or she can
help you understand the buyer’s approach.
The professional can provide good advice
on negotiating with different types of
potential buyer.
Strategic buyers and financial buyers are
going to have different approaches.
Strategic buyers are interested in buying
your business, with little or no changes.
They plan to continue operating it as is or integrating it into their existing business.
Financial buyers would plan to make any
adjustments they want to make the business more attractive and sell it at a profit.
Either can be the right fit depending on
your objectives.
What are the different ‘currencies’ used in
acquisitions and what is the ‘value’ of each?
These include: cash, seller notes, earn-outs, equity, ESOPs and any other that
might fit the situations and any combination thereof. Much will be determined by
what the buyer, the business and the seller
can do. Besides the asset value of the business, all of the intangibles must be considered. The currency used will be based on
all of the various financial considerations
of the acquisition.
How are professionals compensated for their
expertise and time?
They typically receive a flat fee for their
services. It is also common practice to pay
a percentage of the proceeds above an
agreed upon minimum sales price. These
details are worked out during the
exploratory discussion.
Another important discussion point is
determining your objectives. Price, time
and confidentiality are three important
ones.
Once you have determined what is most
important to you, your professional can
help you keep the process focused and on
track.
Your professional should also do all negotiating with the potential buyer’s representative. While you have put your heart and
soul into your business, it is better to keep
that emotion out of the eventual selling
process.
LARA WHITE is senior vice president of SunTrust Banks Inc.
and diversified commercial banking manager for SunTrust banks,
Inc. Reach her at [email protected] or (813) 224-2465.