What kinds of insights about selling a business might come from experts at private equity firms?  This article includes advice for sellers from industry veteran Lamar Stanley.  Stanley is a Director at Gen Cap America, which is a lower middle market private equity firm in Nashville, Tennessee.  Since 1988, Gen Cap America (GCA) has made 60+ investments across seven committed private equity funds. 

Before joining GCA, Stanley was with the Nashville based private-equity strategy group, Diversified Trust Company.  Stanley holds a B.A. degree from The University of the South and an M.B.A. from The University of Chicago. 

Understanding Small Business

Over the decades, Stanley has amassed a considerable amount of knowledge and expertise.  He points out that it is easy for people to lose sight of the fact that many so-called “overnight successes” are actually the result of ten or twenty years of hard, thankless work.  It is through these years of laser-like focus that entrepreneurs are able to bootstrap their business.  Additionally, these business owners need to not only have a vision, but also the insight to bring on great people to help build their business.

The Benefit of a Deal Attorney

Stanley feels that working with a deal attorney can make a tremendous amount of difference, as it can increase the chances of a successful transaction taking place.  Deal attorneys understand the deal process, which can make all the difference when it comes to streamlining the process. 

“Deal fatigue” can derail what would otherwise be a good deal.  This term applies to how deals can sometimes drag on for months.  Working with an experienced deal attorney can help expedite the entire deal process.  In turn, it can help to avoid the dangers typically associated with deal fatigue.

Preparing in Advance for a Sale

Stanley believes that it is critical for a business owner to think about selling as soon as possible.  Ideally, a business owner should be thinking about selling when they start their business.  He realizes that most business owners can’t hope to prepare for selling as soon as they create the business.  But the point is clear, the sooner they begin the process the better.  Business brokers and M&A advisors can best serve business owners by helping them understand that they shouldn’t wait until a month or week before they are ready to sell their business to get their respective houses in order. 

There are so many important factors involved in getting a business ready to sell.  They range from customer concentration and diversifying suppliers to preparing financial statements and working capital estimates well in advance. 

In particular, Stanley points to the danger of business owners having to deal with preparing their business for sale while continuing to operate the business during the sales period.  What must be avoided is for business owners to essentially have two jobs at the same time, as this increases the odds of deals falling apart from deal fatigue.  The sooner a business broker is involved in the process, the better.

Copyright: Business Brokerage Press, Inc.

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More than likely, selling your business is one of the biggest decisions of your life.  Unless you own a business, it is impossible to understand just how all-encompassing of a process it can be.  With that stated, it is important for business owners to step back and seriously reflect on whether or not they are truly ready to sell.  The psychological aspects of selling are not trivial.  Various aspects must be taken into consideration before initiating the process to sell.

There are many reasons why it is vital to step back and think about whether or not you are really ready to sell your business.  Far too many business owners believe they are ready to sell, only to discover (much too late) that an executed sale is not optimal for their plans. 

Selling When There is No Other Choice 

Selling a business because there is no other choice, such as situations concerning failing health, personal issues or problems with a business partner, isn’t a true choice at all.  In this situation, the psychology of selling is essentially irrelevant, as you have one option, namely, to sell.

The Case of Burnout 

In other cases, owners eventually hit a brick wall and have no choice but to consider selling.  As burnout sets in, owners may feel that the time is right to “hang up their hat” and put their business up for sale.  However, as the process evolves, even those experiencing some level of burnout can discover that they are not emotionally or psychologically ready to sell.  In many cases, people make this realization only once it is too late.  

Take the Time for Self-Reflection

Quite often, a company becomes interwoven into a business owner’s sense of self, sense of place in the world and even, to an extent, sense of self-worth and identity. When business owners are unaware of this fact, it can be something of a shock to their system to begin the sales process.  Many people simply are unaware of the strong hold that their business has on them. 

Owners need to invest some time in self-reflection and ask four key questions: Do I really want to sell?  If the answer is yes, then why do I want to sell?  Will I regret selling once my business is sold?  What will I do after I have sold my business?  Answering these questions involves far more than evaluating your business.  They also involve diving into emotional issues that could be central to your future.

Are You Really Ready to Sell? 

One of the best ways of determining whether you are ready to sell, and preparing your business for that potential sale, is to work with a business broker or M&A advisor.  Business brokers are experts at helping business owners deal with every aspect of the process of selling a business.  They can act as experienced guides that can use that experience and expertise to help you determine if you are truly ready to sell. 

If it turns out that you are indeed ready to sell, a brokerage professional can help you prepare so that you can achieve the best price possible once your business hits the market.

Copyright: Business Brokerage Press, Inc.

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There are many reasons why small companies are put up for sale.  Some of the more common reasons can actually have little to do with the company’s general performance.  For example, many small business owners discover that they need to sell for health reasons or personal concerns, such as divorce or partnership issues.  While a business downturn or fear of a larger competitor looming on the horizon might prompt many business owners to sell, economic drivers are not the only issue.  Owners may want and need to sell, but often it isn’t always that simple.

Many business owners are looking to retire, but are unpleasantly surprised to learn that they simply can’t afford to do so.  Still yet, many business owners don’t truly want to retire or sell, but instead they just want more freedom in their lives.  The day-to-day responsibilities of owning and operating a small business can take their toll.  Many business owners are looking to make a change and would love to be free of this burden.  This class of owner has already “checked out” mentally, and this can have profound negative consequences for their businesses.

When an owner wants out but discovers that he or she simply can’t afford to sell or retire, it will come as no surprise that there is usually an accompanying drop off in enthusiasm.  Ultimately, the vast majority of owners will start to lose focus.  Often, we find that they stop investing the capital necessary to continue the growth of the business, which can trigger other events, such as the loss of key staff members and/or customers.  Losing a top customer to a major competitor can further accelerate the downward spiral.  The failure of the business to maintain its footing and competitive advantage can lead to a more aggressive posture by existing competitors or even encourage a new competitor to move into the market.

In time, the owner may come face-to-face with the harsh realization that they have no choice but to sell if they are to salvage any of the business’s value.  The best way for a business owner to safeguard against this situation is to sell when his or her business is doing well, as this helps to ensure an optimal price. 

Working with a business broker, even years before one is interested in selling, is one of the single smartest moves any business owner can make.  The time to think about selling your business is now, as no small business owner knows what life or the market will bring.

Copyright: Business Brokerage Press, Inc.

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The simple fact is that most of us want to control our own fate.  This fact is especially true for entrepreneurs and business owners.  However, the truth of the matter is that for most business owners, their fate isn’t completely in their own hands.  For example, a variety of forces can prevent businesses from establishing their own prices. 

Knowing whether or not your company has pricing power is essential and can influence a range of decisions that you may make.  Let’s take a closer look at what steps you can take to control your own pricing.

What is Pricing Power?

This economic term describes the effect of a change in a product price on the demanded quantity of said product.  Your company’s pricing power is linked to the demand for your products or services.  If you have a high level of pricing power, you can raise your prices over time and maintain your customers. 

Who Has the Greatest Pricing Power? 

It is no great secret that the Amazons, Apples, Wal-Marts and auto manufacturers of the world exercise a tremendous amount of power.  Part of this considerable, and seemingly ever growing, power resides in the fact that the size of these companies now rivals and even surpasses many nation states.  This grand level of power is unique in human history in many ways.  Along with it comes the ability to exercise an almost god-like authority over suppliers. 

Today, these ultra-powerful companies commonly dictate to vendors what prices they are willing to pay, and the quasi-monopolistic nature of these companies often leaves vendors with no choice to comply.  In short, these 900-pound gorillas are telling companies both large and small exactly how much they will pay for a given number of bananas. 

Step 1 – Providing a Branded Product or Service

If you discover that your company doesn’t have pricing power, there are steps you can take.  One step is to produce a branded product or service.  In this way, you are able to offer something of greater value than your competitors.  Through having a branded product or service, it is possible to create a higher perceived value in the minds of not just the Amazons of the world, but in the minds of consumers as well.

Step 2 – Innovating 

Another path towards achieving pricing power is through innovation.  A great example of leading the way in innovation is Apple.  While few companies have Apple’s almost ethereal resources, that is not to say that you cannot find ways to innovate within your own sphere or industry.  Small innovations can often have an outsized impact and help a business stand out from a crowded playing field.  Innovation that leads to patent production is an excellent way to gain a degree of pricing power.

Step 3 – Offering Exceptional Service

A third option for achieving a degree of pricing power is to provide what could be called “mind-blowing” service.  By providing service that is truly a cut above what the competitors can match, your company is positioned to achieve pricing power.  Providing your customers with something they simply can’t get elsewhere is a key way to setting a price that is more in line with what you desire.

There are many marketplace variables that your business can’t control.  The trick is to evaluate your business, your business’s potential and the concrete and practical steps you can take starting today to achieve pricing power. 

Copyright: Business Brokerage Press, Inc.

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John Warrilow is the founder of The Value Builder System and accomplished author.  While not a business broker himself, Warrilow has gathered considerable knowledge and expertise on the industry.  His previous book Built to Sell was listed as one of the best business books of 2011.  In this article, we will explore some of the key points in Warrilow’s latest book, which is entitled The Art of Selling Your Business: Winning Strategies and Secret Hacks for Exiting on Top.  This book was released on January 12th, 2021 and is proving to be invaluable for business owners. 

Selling When the Time is Right

One key focal point of the book is that business owners should skip trying to find the perfect “magical time” to sell their business.  Additionally, Warrilow notes, “I make the strong recommendation in the book that the best time to sell your company is not during some mysterious macroeconomic environment.  It is when someone is willing to buy it and you get an offer.  And that is because at that point, you’re in the position of strength.”

The DIY Approach 

This book reinforces the fact that business owners truly need to work with an intermediary if they are to achieve optimal results.  Warrilow even includes his six reasons for why every business owner should hire a business broker or M&A advisor.

Many business owners think that they can simply handle selling their business on their own.  But the simple fact is that business owners usually have no experience in selling a business.  Add this to the fact that selling their business is likely to be the most important financial decision the business owner ever makes, and it quickly becomes clear that business owners are doing themselves a considerable disservice when they opt to handle everything on their own.  

A Business Broker vs. a Lawyer

As Warrilow points out, oftentimes business owners think that rather than working with a business broker or M&A advisor, they can turn to a trusted lawyer who has served them in the past.  But this thinking is flawed when it comes to successfully selling a business.  As Warrilow states, “a lawyer, almost by default, is going to be very conservative as everything exposes a lawyer to risk.  And that is why using a traditional attorney is almost always a mistake.” 

If you are planning to sell your business now or in the future, a book like Warrilow’s The Art of Selling Your Business: Winning Strategies and Secret Hacks for Exiting on Top can serve as a uniquely valuable tool in your toolbox.

Copyright: Business Brokerage Press, Inc.

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No two companies are quite alike, and this also means that there are many reasons why companies can fall into trouble.  While the number of variables involved in operating a company are practically endless, there are a handful of reasons why companies can fall on hard times.  Let’s take a closer look.

Lacking Focus

Companies that lack focus can often run into considerable trouble.  Not understanding their customers and what they need or want can lead to endless problems.  It is vital that companies frequently stop and assess who their customers are and whether or not they are properly servicing their needs.

Management Problems

Not too surprisingly, many companies can run into trouble because of poor management.  Management problems are not one-dimensional, but instead take a variety of shapes.  Management that isn’t focused, is incompetent, or simply doesn’t care about the business can translate into a business’s premature death. 

Under the umbrella of “management problems” also falls such missteps as poor financial controls, quality control problems, operational issues, and/or not keeping up with technological advancements.  At the end of the day, many of the problems on our list have at least some management issue missteps at their heart.

Loss of Key Employees or Clients

The loss of a key employee or a key client can spell serious trouble.  Of course, no management team can predict every eventuality.  However, when there is a loss of a key employee or client, and there is no plan for replacement, then management does shoulder at least some of the blame.  The savviest companies take steps to ensure that there are ways to replace the most important employees and clients.

Failure to Compete 

More than one business has been buried by the competition or failure to see a new wave of competition coming.  For example, countless mom and pop video rental stores were absolutely bludgeoned by the introduction of Blockbuster Video a generation ago. 

While it is true that sometimes market forces are so aligned against a business that survival is almost impossible, that is normally not the case for most businesses on a year-to-year basis.  The most effective and competent management can see the competition out on the horizon.  Or at bare minimum, they have an emergency plan in the event that the competition becomes more intense.

All too often by the time a business realizes that it is in trouble, it is already too late.  If the problems can’t be fixed, then it may be time to consider selling the business.  But such decisions must be made quickly in order to prevent additional bloodletting.

Optimally, a business is sold while it is doing well.  Regardless of whether a business is thriving or experiencing difficulties, a business broker or M&A advisor can be an invaluable ally in helping a business reach its full potential.

Copyright: Business Brokerage Press, Inc.

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