Ask Julie!
America’s Business Broker
Weekly Syndicated Column, February 21, 2012

Question: Why would a buyer want to buy MY business?

Answer: There are 5 reasons why there will ALWAYS be a buyer for your business (whew! :):

1) To avoid the Risks of Start-Ups or Organic Expansion
Experienced entrepreneurs know how difficult it is to start a business from zero. You probably remember that it takes hours and hours of dedicated thought, implementation, mistakes, and correction. If a buyer has started a business and failed, or started a business and sold it, they understand the value of an established entity. They will value all elements of the infrastructure you have created and will pay you a fair price for your enterprise. They also have the ability to perform, or as brokers like to say “pull the trigger,” and make an offer if most of the information they learn about your business fits their criteria.

2) To achieve Growth More Rapidly by Acquiring New Products, Technology or Markets
Once a business has achieved the milestone of a million dollars in sales, owners begin looking for ways to grow faster and easier than it took them to get to the first million, so acquisition often becomes a key strategy. By acquiring a new product line, technology, or market share, a similar business with a strong cash position can be an attractive buyer candidate.

3) To acquire an Established Presence or Strengthen Market Position

We are now getting into competitor territory, so qualify the buyer thoroughly and advance information slowly. If you have a business that serves the western region, regional players in the central or eastern states may be interested in growing their market share with a synergistic purchase of your company. These buyers are competitors, so they are professionally qualified, but make sure that they have a strong balance sheet (a lot of cash and a small amount of debt). You should also be prepared that you will probably be asked to stay on in a management capacity to continue running the region after the merger. This is a big decision because if you sell and merge your business, you will become an employee of your own company!

4) Acquire Undervalued Assets
At the writing of this post, we are experiencing the worst economy since the depression era. With so many businesses with declining revenues, there are bottom-feeding buyers with cash to burn and an appetite for acquisition. Be sure you are sitting down when you read their offer, but really, can you blame them? Don’t throw in the towel just yet—if you are willing to participate in the financing and help grow the company back to profitability, there just might be a pot of gold at the end of the rainbow.

5) To achieve the American dream of being self-employed.
You know this one from personal experience. Enough said. :)

Do you have a question or comment for me? Just leave it below and I promise to reply!

Talk to you soon and remember...

Your Exit Journey Began the Day you Started Your Business!
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Julie Gordon White, CBB, has worked with hundreds of business sellers and buyers over the last 10 years as a Certified Business Broker, and is the bestselling author of “EXIT! 12 Steps to Sell Your Business for the Price You Deserve”. Julie is a trusted resource for Inc. Magazine, Entrepreneur, Bloomberg BusinessWeek, San Francisco Business Times, and Enterprising Women; the Current Past President of the California Association of Business Brokers; and has been a member Women Presidents’ Organization since 2007. Discover more EXIT! info + videos at www.TheExitBook.com.

Ask Julie!
America’s Business Broker
Weekly Syndicated Column

Question: I heard that a lot of businesses never sell. Why is that?

Answer: When you finally make the tough decision to sell your business, you deserve to achieve the highest market price for your company, and to do so, you must plan your exit strategy with the same amount of thought and detail that you used to to grow the darn business in the first place!

But what if you don’t plan? What might your fate be? Instead of a smooth and painless transition out of your company, you may be forced to exit your business by one of the following unfortunate scenarios:

1) Closing the Business
This is obviously the most painful option. To be forced to close a business that you have put your heart and soul into developing is a sad misfortune and could have likely been avoided with proper planning. To receive any cash at all, the owner will probably need to have a fire sale for any remaining assets.

2) Receiving an Unsolicited Offer from a Competitor
I get called in frequently to assist a business owner after a business owner has been approached by a competitor seeking to buy them out. In this scenario, the owner rarely understands what the market value is for their company, let alone how and what to communicate (or hold back) from a buyer that is probably a close competitor.

3) Succession Without Adequate Tax Planning
So your daughter decides that she is having a midlife crisis and wants to buy your business and just before you present her with the Asset Purchase Agreement, she tells you that she was hoping that you would just give her your company (she is your daughter after all!). However, you must proceed with caution! If you are not aware of the tax consequences of a parent “gifting” a business to a child, you need to find out ASAP.

Selling to a child without adequate tax planning isn’t the only way to end up giving your business proceeds to Uncle Sam. If you are a C Corporation and you sell only the assets of your corporation and not the stock, you may be subject to paying taxes on the consideration (consideration is cash, loan payments, etc.) received for the sale at the corporate level and then again at the personal level when you take the cash. There are ways to mitigate your tax burden, so spend the time and money to review and understand your options as they relate to the tax consequences of the sale.

4) Accident, Illness, Divorce or Death
Dependence on a key employee without documented systems in place is very risky.
Equally devastating, a sudden illness, divorce or death of a key employee or partner will have the same effect or greater, so plan for the best but prepare for the worst. Treat your business as if you were planning to franchise it and document every single step just like McDonald’s. There’s a reason why every burger tastes the same no matter where you go, so take heed and write everything down.

Now that you understand what you don’t want to happen, you can now see why planning your exit is so important. Simply put, exit planning or lack of, can either make you, save you, or lose you, thousands (if not millions) of dollars!

In part two of this series, we will talk about the positive side of the equations- 6 Reasons Why Businesses DO Sell, visit again next Monday to discover how you can secure your pot of gold at the end of your entrepreneurial rainbow.

Talk to you soon and remember, your Exit Journey began the day you started your business…

Cheers and keep emailing me your questions at Julie@TheExitBook.com!
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Julie Gordon White, CBB, has worked with hundreds of business sellers and buyers over the last 10 years as a Certified Business Broker, and is the bestselling author of “EXIT! 12 Steps to Sell Your Business for the Price You Deserve”. Julie is a trusted resource for Inc. Magazine, Entrepreneur, Bloomberg BusinessWeek, San Francisco Business Times, and Enterprising Women; the Current Past President of the California Association of Business Brokers; and has been a member Women Presidents’ Organization since 2007. Discover more EXIT! info + videos at http://www.theexitbook.com/.  Use policy: This column is available for re-print if used in its entirety including the author bio and contact information for non-commercial purposes without any editing whatsoever unless approved in advance by the author.

@BizBuySell: Tip Tuesday: When deciding to sell your business, know the various paths to a successful business sale. Read them here: http://t.co/Ai4aho9n