Here's a link to the article: The 9 Things You Must Do After You Sell Your Business
The following Axial Market article describes things a business owner should do after they sell their business. I agree with the points in the article but many of the things the author suggests doing, such as "get an estimate of the taxes owing and when", should be considered well BEFORE a business sale is completed, not after. The writer has more than 30-years of M&A experience, so I don't think he meant that you should wait until after a business sale to do any of this planning. Rather, he is speaking about the unfortunate reality that many business owners haven't done pre-sale planning. If you are considering a business sale, these are great things to think about or do during the exit planning process. Don't wait.
Here's a link to the article: The 9 Things You Must Do After You Sell Your Business
"Exit Planning: Maximizing Wealth and Avoiding Common Pitfalls" Panel Discussion in Portland, Oregon on Jan 21, 2015 @ 7:30 am
Are you a business owner or a professional who serves business owners? If so, please join us for a presentation and panel discussion about exit planning including common pitfalls and ways to maximize wealth. The event will be held in downtown Portland, Oregon on January 21, 2015 starting with a continental breakfast from 7:30 - 8:00 am, followed by the presentation from 8:00 - 9:00 am, with a Q&A panel discussion from 9:00 - 9:30 am.
The panel of experts includes: Frank Dane and Dan Jackson of B2B CFO; Nick Mesirow of the law firm Moomaw Mesirow & Godfrey; Brad Buchholz of Banner Bank; Mark Baker & Lisa Brumm of AXA Advisors; and Eric Williams of Codiligent.
Advance tickets are required ($10). All attendees will receive the book "The Exit Strategy Handbook" a $17.99 value. For location details and to reserve a space use the following link: Buy a Ticket
Ever wonder how candy canes and chocolate Santas are made? Watch this video factory tour of Haven's Candies, a company that's been producing confections in Maine since 1915. Whether a company manufactures chocolate, grows and sells Christmas trees, or designs toys, and whether it is located in Portland, Oregon or Portland, Maine - every business owner will eventually need to transition out of their business. Codiligent business brokers is a resource for business owners who want to better understand their exit options - contact us to discuss your particular situation.
As a business broker I've found that small and medium size businesses are much easier to sell if owners / managers treat employees well and, as a result, have good retention of positive and motivated staff members.
Here's Starbucks founder Howard Schultz on the importance of treating employees well . . .
Every business owner should be thinking about an eventual exit whether that means a sale to a key manager, transfer to family members, an ESOP, a sale to a third party, or even just the practical mechanics of winding it down. Clark County PubTalk is having a panel presentation on issues that business owners may not have considered related to exit planning. Panel members include: Rafik Fouad of First Pacific Financial wealth managers; Ryan Greer of Frumenty Lander & Wallace CPAs; Matthew Bisturis of Schwabe Williamson & Wyatt attorneys; and Eric Williams of Codiligent business brokers.
For more details and to register use the following link: December 16 2014 Clark County PubTalk
There are a variety of pros and cons for which type of legal organization a business founder may want to choose (S Corp, C Corp, LLC, Sole Proprietorship, Partnership) - so I'm not suggesting that there aren't some excellent reasons to choose to organize as a C corporation rather than as a S corporation (I'll cover pros and cons in another blog post). However, one of the negative consequences of choosing a C corporation is when you are ready to sell the business if the sale is structured as an asset sale you may experience double taxation of proceeds. The C corporation will sell the assets and it may be taxed on that sale, but then the proceeds will be trapped in the corporation unless they are distributed as dividends to the shareholders of the corporation. Once they are distributed as dividends the shareholder will be taxed on those dividends at the individual level, as well.
Many people are aware that they may be able to make an S corporation election, whereby they can change the organizational structure from a C corporation to an S corporation. As an S corporation they will be a pass-through entity, where profits of the corporation will not be taxed inside the corporation and instead will only be taxed on the shareholder's tax return. So, some owners of businesses that are organized as a C corporation rationalize that when they are preparing to sell they can simply make an S corporation election before they sell and avoid the risk of double taxation. Unfortunately, that may not be true unless the S corporation election is made well in advance of a business sale. Generally, if a C corporation is changed to an S corporation a business owner will have to wait for ten years before selling in order to avoid the double taxation of the proceeds of an asset sale (see 26 U.S. Code § 1374 - Tax imposed on certain built-in gains). Of course, the tax code is ridiculously complex and at Codiligent we are not CPAs, so we'd strongly encourage you to seek expert advice from your CPA and/or tax attorney to verify this and discuss your particular situation.
PR can help you sell your business. I'm not talking about PR as a method of promoting that your business is for sale. I mean if you are doing PR as a marketing activity to generate interest in your company, products, and services that this will ultimately help you sell your business.
When you see an article about a product or service do you generally find it more credible than a print ad for the same product or service? It's stating the obvious that research shows that most of us do. An article in a respected publication has more credibility because we know that generally it has not been paid for, and while a reporter may have based the article on a press release from a company the reporter will discern whether the story is news worthy, verify facts, look at the information critically, and often seek out independent supplemental information.
However, getting TV and radio interviews or articles written about your company, product, or service don't usually happen serendipitously. Most companies that get attention in the media do so because they proactively promote this coverage. This can be through submitting press releases to the media, media kits, and building relationships with members of the media. Is your company doing this? If not, why not? Is it because you lack the time or expertise? I'll let you in on a secret: most of your competitors that get more press don't have that expertise, either. They outsource this to PR firms.
Magazine articles, newspaper stories, TV & radio interviews, and third party blog posts can all have a significant marketing impact for your business, and if, as a result, your business generates more business and profits, it will increase both the value and marketability of your business. However, from a business broker's perspective there's another more direct way that this can increase the probability of selling your business for a higher price. When I help sell a business, my confidential information package includes a section on publicity the business has received. Having press from credible third party news organizations that mirrors what the business broker says about the company gives a business buyer greater confidence in the business, decreases uncertainty, and lowers their perception of risk.
How much might the greater publicity be worth? Let's assume a business last year had $5 million in revenue and a 20% EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) margin. If business attributable to greater press resulted in a revenue increase of 5%, that would equate to $250,000 more in top-line numbers and an increase in EBITDA of $50,000. To keep things simple for this illustration, let's assume that nothing else contributed to an increase in revenue, so overall the company had $5.25 million in revenue this year. Let's also assume that businesses in this sector sell, on average, for 5x EBITDA. This means the value related to the direct increase of revenue from the PR efforts contributed $250,000 of value to the business. However, what if, through a perception of lower risk and greater comfort with the business as a result of press the company received, a business broker was able to get the buyer to pay a price that was just 3% higher? It would add an additional $187,500 of value ($1.25 million in EBITDA X 5 X .03). So in this hypothetical illustration the business owner would receive $50,000 in additional EBITDA this year, $250,000 in additional value related directly to the increased level of EBITDA, and $187,500 in overall increased value due to greater confidence in the business by the buyer, for a total of $487,500.
If you are not engaging a PR firm but would like to consider doing so, Codiligent business brokers would be happy to make a referral.
Do you know what information business buyers will want to review when considering buying your company? When Codiligent provides business seller representation part of our service involves helping you prepare for a business sale - we gather and review the most commonly requested types of information that we then use to analyze, value, and package your business. We then retain the more detailed information which will be requested by a business buyer during formal due diligence after a Letter of Intent has been agreed upon.
So what type of information do buyers want to see? Every buyer has its own due diligence list - and some are more detailed than others - but often there are many commonly requested types of information. Following is a link to a site that will allow you to download a fairly typical due diligence list:
Axial Market Due Diligence List
Axial Market's Forum has an article that I'd recommend to anyone considering a business sale: "9 Things Every Business Owner Needs to Know Before Selling" by Mason Myers, general partner at Greybull Stewardship, an investment partnership of business owners investing in exceptional businesses with $1 to $3 million in operating profit.
In particular, there are four points he makes that I wish every business seller would consider - let me share my thoughts on them:
Are you burnt out on running your business? Does going to work feel like drudgery? Are you bored? Feel like you've lost meaning in life?
If so, perhaps you've wondered if it may be time to sell your business, but then have second thoughts because you are not sure how you'd ever replace such a high level of income? And, after all, life isn't that bad - anyone else in your shoes would be happy, right? Right?? Right?!?
Maybe not. If you are feeling this way, you are not alone. Perhaps it's time to make a dramatic change - you only get one chance at life. The video below is about a former neurologist who felt trapped and unfulfilled, and then made a radical change to find meaning and happiness through an unconventional lifestyle as "Slomo". If you are ready to make a dramatic change, please contact Codiligent to discuss your dreams and how we can help you exit your business. We'd love to assist you with discovering fulfillment through a transition into a new stage of life.
As the British playwright Tom Stoppard said "Every exit is an entry somewhere else."
Buy and Sell Well
Codiligent Business Brokers' blog on entrepreneurship, capitalism, and successfully buying and selling businesses.
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