Why Now is the Right Time to Sell Your Company

www.allcapcorp.com 

Are you considering selling your business? Don’t let the kick-yourself moment turn to regret.

The current political climate and pressure to balance the federal budget are driving tax increases that will have a dramatic impact on middle-market business owners. Capital gains taxes are expected to increase at the end of 2012 from 15% to 20%, and owners will be keeping less of a company’s sale price beginning as early as 2013. The cost basis for privately held businesses is typically very low, and the resulting tax burden means that a business owner selling their company for $50 million will pay an additional $2.5 million in taxes alone.

Distressed Mid-Market Private Companies Looking for Investment Bankers Advice

In difficult economic times, companies may face many challenges. Many mid-market companies may be interested in business consulting or even simply buying and selling a business.

·         Declining sales

·         Shrinking profit margins

·         Stretched-out receivables

·         Inventory build up

·         Insufficient capital

·         Sub-optimal financial structure

Any of these situations can lead to cash flow problems. What's more, an unmanageable debt burden may affect the company's ability to survive, let alone prosper.

Knowing When to Sell Your Business

Article Written by Jeff Gross

When should an entrepreneur sell his business?  Most entrepreneurs think it is never a good time; most M&A advisors think it is always a good time.  Unfortunately, this question is never given the consideration it deserves at the appropriate time.  I have come up with a simple test of when you should seriously consider selling your business.

If a business’ market share is not growing, an entrepreneur should consider selling the company.  This test is based on finance theory (portfolio and efficient market theory), good business principles, and years of observation.  In 8 out of 10 cases, a company that is not gaining market share should be sold.  When faced with that situation, a good business person should analyze a sale with his professional service providers and board as part of a strategic planning process.

Let’s be clear about market share…it is not the same as revenue growth.  Market share is all about growing faster than your industry average.  If you are not growing faster than your average competitor, you are maintaining or losing market share.

There are a number of reasons to sell, but the reason I am focused on is that it is in the entrepreneur’s financial interest.  Entrepreneurs forget that they have the most valuable human skill, the ability to start and grow a company.  If the company is not growing, the entrepreneur is not using his most valuable skill and not maximizing the value he or she can create.  Conversely, approximately 15-20% of the entrepreneurs I have worked with have lost everything late in their careers because they hung on to their business too long.

Let’s consider a few examples:

·         Growing industry, declining market share – When the industry stops growing, a better-run, better-capitalized company who was growing market share, is going to turn its attention to taking your business.  Better to partner with that company on the way up than hold on to your company too long.  Typically, sellers in growing industries receive out-sized premiums regardless of performance.  After the market has matured, the market leader is more likely to compete for the business than pay for.

·         Stable industry, declining market share – It takes different personalities and skills to succeed in a zero real growth (no more than inflation) industry, than it does to start and build a company.  Entrepreneurs generally are better off to sell, diversify the proceeds, and start another company.  It will increase income and reduce the risk of losing everything.

·         Declining industry, declining market share – Declining industries lead to industry consolidation where market leaders emerge with the recovery of the industry or economy.  Those market leaders can create significant value for a failing company in a distressed environment.

Declining market share and the sale of a business are not perfectly correlated, that is why I recommend considering a sale.  An honest financial professional can help you make the right determination for your business.  This is a great time to also look internally at personal factors (please refer to Is It Time to Move Your Own Cheese?).  However, do not use the imperfection correlation as an excuse to do nothing.  As an entrepreneur, you will be wrong greater than 80% of the time and you will pay the price for it financially.

Allegiance Capital Corporation own Private Investment banks in Dallas and M&A advisory's in Chicago that help business owners buy and sell their business. This article is also visible on  titled Knowing Whend to Sell Your Business and direct link to www.allegiancecapital.com/blog

Is Business Valuation Necessary?

When you are selling your company, the marketplace determines the true value of your business. Business Valuations provided by business brokers and consultants as a rule, they are academic exercises that are out of date the day they are produced.

Valuations can be useful when one needs an objective appraisal of what a business is worth at a specific point in time, one that can stand up in a court of law. Examples would be estate planning purposes or forced redistribution of assets due to divorce.  But otherwise valuations are not worth the $30,000 to $50,000 a business owner pays.

Why? Shifts in market, economics, and competitive landscapes make valuations obsolete. Additionally, your business will be worth more to the right acquirer or acquirers. If you identify several acquirers that can benefit by adding your product lines, client base or plant locations, you drive your price higher.

For business owners seriously considering the sale of their life’s work, time and money is wasted by buying a valuation. An estimated range that is based on research and confidential discussions with acquirers that are looking for companies like yours should be made a part of the M&A process, rather than an expensive precursor to it.

5 Tips for Selling Your Business in Dallas and Chicago Markets

The sputtering economy is actually a benefit for those business owners with growing profits and an interest in selling. This is because there are fewer attractive companies for buyers to acquire in Chicago . The M&A market in Illinois is heating up and good companies that come to the market now are receiving high valuations if they can connect with the right buyers. The following information contains 5 key tips to consider in the process of selling your business.

1. Deciding to Sell- First and foremost, you must be fully ready and determined to sell your business in Illinois. Ask yourself, “Why do I want to sell?” and “What will come out of this Sale?” If you have a definite answer to these questions, then it may be the time to sell your business.
2. Determining the right time to sell- Keep a keep a keen eye on the market. If your business is doing reasonably well in spite of the economy, then it may be an excellent time to sell.
3. Choosing the right investment banker Chicago - Choosing the right investment banker will enable you to meet your personal and financial goals and achieve a premium price. Past performance determines future success.
4. Identifying potential buyers- Work to find buyers that align with your culture and vision. Your investment bank should take the lead and create demand among several acquirers to ensure you achieve a premium price for your company.
5. Preparing the collateral- You have made your final decision to sell your business. To finalize the details and begin implementing the sale of your business, prepare all documents, reports and research that must be needed. Remember that you’re selling your life’s work and the collateral should represent that.

Now that you have the first five steps of selling your business and you have decided it is a good time to sell your business, it is important to do your research and find a quality Private Investment Bank to help you find and meet the right market for your business. Your business is a personal investment and a company you chose must know the market in and out to help connect you to the right buyers.