Posts Categorized: Sellers

3 Things to Consider When You Hit “The Freedom Point”

When was the last time you calculated the percentage of your net worth tied to your company’s value?

When you started your business, its value was probably negligible. Unless you purchased or inherited your company, it wasn’t worth much when you opened your doors, but over time, the proportion of your assets tied to your business may have crept up.

Let’s imagine a hypothetical business owner named Tim, who starts his company at age 30. He has a little bit of equity in his first home and a small retirement fund. When he starts his business, it’s worthless, so it doesn’t yet factor into Tim’s net worth calculation.

By the age of 50, Tim has built up $600,000 worth of equity in his home, his retirement nest egg has grown to $400,000, and his business has blossomed and is now worth $4,000,000. Tim’s company has crept up to represent 80% of his net worth.

Tim knows the first rule of investing is to diversify, which he is careful to do with his retirement account. Still, he has failed to achieve overall diversity given the success of his business.

What’s more, he may have unknowingly passed something called “The Freedom Point,” which is when the net proceeds (i.e., after taxes and expenses) of selling his business would garner enough money for him to live comfortably for the rest of his life. Your lifestyle determines your Freedom Point, but when you pass it, it’s worth considering the risk you’re taking.

If this pandemic has taught us anything, it is that nothing is for sure, and a thriving business one day can turn into a struggling company overnight. When your business makes up most of your net worth and selling it would garner enough money to retire, there’s no financial reason to continue owning your business. You may enjoy the challenge, the social interactions, and the creative process of building a business, but keeping it may be unnecessarily risky.

When you’ve crested the Freedom Point and want to diversity—but still don’t want to retire—you have some options:

  • Sell a Minority Stake: In a minority recapitalization, you sell less than half of your shares. Often sold to a financial investor such as a private equity group, a minority recapitalization allows you to diversify your net worth while continuing to control your business.
  • Sell a Majority Stake: In a majority recapitalization, you sell more than half of your shares to an investor who will most likely ask you to continue to run your business for many years to come. You get to diversity your wealth, keep some equity in your business for when the investor sells, and continue to run your company.
  • Earn-Out: When you sell your company, you’ll likely have to agree to a transition period of sorts. One of the most popular is called an earn-out, where you agree to continue to run your company as a division of your acquirer’s business for a specified period of time. Your earn-out may be as little as a year or as long as seven, but the average is three years. Therefore, if you’re past the Freedom Point and can see yourself wanting to step down in the next three to five years, an earn-out may be worth considering.

Building a successful business is rewarding, but when your personal balance sheet gets out of whack, it may be worth considering the risk you’re shouldering and the options you have for sharing some of it.


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VR Business Brokers Facilitates Sale of Knowles Wholesale Florist

September 25, 2020 – VR Business Brokers of Dallas TX, a leader in the sale of privately held companies, recently facilitated the sale of Knowles Wholesale Florist, an “institution” in the wholesale floral business in North Texas for over 55 years.

Knowles Wholesale Florist provides the retail floral sector with the highest quality products and the most professional and efficient service in the industry!  Knowles services a large area of North Texas, extending just across the border into Oklahoma.  Tim Knowles, the second-generation owner of Knowles Wholesale Florist, has been associated with Knowles Wholesale for over 45 years, and has decided that is long enough!  He is ready to enjoy retirement after a fantastic and enjoyable career!

The business has been purchased by Lone Star Bloom, a real force in the retail floral industry, encompassing over 30 retail floral locations across several states.  Through leveraged volume, proprietary analysis, and diligent cash flow controls, Lone Star Bloom is the fastest growing florist in the country.

Kyle Brown, a principal in Lone Star Bloom, says “When coupling our attributes with an ability to provide our team with a full range of performance based benefits not usually offered by most privately held florists, we are able to establish the highest quality of service and performance for generations of customers.  Knowles Wholesale has been providing this same level of products and service on the wholesale side for decades, so it fits right in with what we are building!”

Lone Star Bloom is actively seeking acquisitions in the retail floral sector, providing owners with unique and timely exit strategies.  Visit their website at

VR Business Brokers of Dallas, TX handled all aspects of the transaction, from initial business valuation to marketing the opportunity and providing support through the closing process.  Terms of the transaction were not disclosed.

About VR Business Brokers, Dallas, TX

VR Business Brokers of Dallas is part of the worldwide franchisor organization that has been servicing small to medium size privately held companies since 1979.  VR Business Brokers of Dallas handles transactions for companies with revenues ranging from $200,000 to $20,000,000, and assists business owners with exit strategy planning, business valuations, packaging and marketing of the opportunity, and full negotiation services through to closing.  For more information about VR Business Brokers, please call 214-733-8282, or visit

Exit Strategy Options

There are a variety of options when it comes to an exit strategy, depending on the size of your business and your desires regarding future participation in the business. Please see below a quick summary of the benefits of the more common options that one may wish to consider.

1. Merging with another company

a) The merged company should be able to benefit from economies of scale between the two organizations that would result in greater profitability.
b) This is an ideal way to quickly capture much greater market share.
c) Merging with another company may also provide a way to diversify offerings.
d) A merger may be a way to bring complimentary skills together making for a stronger overall employee base.

2. Strategic Acquisition by another company

a) This may the best way for a seller to fully exit business in the event the company is too large for the average individual buyer.
b) May offer employees additional opportunity for growth.
c) This approach may offer the seller a future opportunity to stay on with the company after having cashed out from the sale. Perhaps the Seller wants to reduce the burden of ownership but isn’t ready to fully exit the business.
d) There may be tax advantages when it comes to stock exchanges.

3. Private Equity

a) This option often offers sellers the best of both worlds – take “chips off the table” and also have future upside earnings if only selling a percentage of the business.
b) Capital can be provided for growth plans.
c) The Seller’s Management team may be an integral part of the future of the company.
d) Most private equity firms have specific criteria for the size of companies they desire to acquire.

4. Outright Sale to 3rd Party individual

a) This may be the best viable option depending on the size of your company.
b) This option typically provides the Seller with the cleanest and quickest “exit” from the business.

VR Business Brokers will be happy to meet with you and discuss these various options to help you assess the most viable for your circumstances.

What Buyers Look For In A Business Opportunity

by Peter C. King, VR Business Brokers/Mergers & Acquisitions, CEO

You have built a great business with love and care. It has grown larger than you’d ever imagined, and generates a nice profit that has allowed you and your family to live comfortably. Now you’re ready to sell. You assume there’s a buyer out there who will pay you a fair price and then nurture the company with the same attention you have. What’s more, selling the business is a major part of your retirement plan.

Needless to say, buyers look at businesses differently than sellers. So to achieve the outcome you want, it’s important to think like buyers and understand how they evaluate a business.

What Buyers Look For?

There are many types of buyers: strategic and financial, individuals, companies, and private equity funds. Despite differences, all buyers consider how much they’ll invest to acquire a business, the amount of risk they’ll bear and the potential return on their investment. To evaluate an opportunity, buyers focus on three major areas:

1. Cost and terms
What will it take to acquire the business? How much cash and how much debt? What are the deal’s terms and conditions?

2. Continuity
Will the business continue to operate similarly after the sale? Much of the risk of buying a company relates to continuity. For example: The current owner has personal relationships with
customers, distributors or vendors that the new owners may have to struggle to maintain, the owner has special expertise that is undocumented and difficult to learn, Key personnel aren’t committed to staying, or outside competition looms. Sellers armed with solid responses to these types of continuity concerns are more likely to get their desired price. Even if you don’t want to sell your business for a few years, take steps now to ensure it can run smoothly without your personal involvement. That independence could be worth millions when you sell.

3. Growth
Are there unexploited opportunities? You may have focused your sales efforts in one geographic region, but there may be many opportunities to take the product national or international. A buyer that believes it can increase revenues substantially will pay more for the business than one that believes the current owners have already maximized opportunities. What sellers should do?

It may seem counter intuitive, but the things you may be most proud of can work against getting the best price for your company. Not many entrepreneurs like to boast that their company could run just fine without them or that there are plenty of opportunities they’ve failed to exploit. Yet these may be the very factors buyers seek, along with lower cash requirements. Please call us for help in understanding how to best present your company for sale.


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Reality Check – What is Your Business Really Worth?

This is the age-old question that just about every business owner asks themselves at some point – and of course, the short answer is “whatever someone will pay you for it”!

I’ve been dealing with business owners for over 30 years and many owners feel their business is worth considerably more than the market suggests it is. Occasionally, I find an owner who has under-estimated their business value, and it is very pleasing to inform them that I think we can get more for their business than they anticipated.

How should you determine a realistic value for a business – the answer is “statistics”! While there are multiple formulas that can be used to complete a business valuation, in the end, statistics from past transactions will be a major part of the process and will usually provide considerable influence on a buyer’s ultimate decision.

DealStats (formerly Pratt’s Stats) is a platform that boasts the most complete financial information on acquired companies in both the private and public sectors. Every transaction in DealStats is rigorously reviewed by a dedicated team of financial analysts in real time. Whether you are valuing a business, deriving a sale price, benchmarking performance or conducting fairness opinion research, you won’t find more complete and trustworthy comparable data in any other source.

DealStats reports on a quarterly basis cumulative results of this extensive analysis, providing users with the most current information available on business transactions. Additionally, as a user of the software platform, VR Business Brokers of Dallas can access specific transactional data to find comparable transactions to one we may be valuing at the time. We are also able to eliminate “outliers” on both extremes of the value scale to ensure a realistic assessment.

We have provided below summary information by DealStats on transactions reported as of the 3rd quarter of 2019. The statistics reported are based on the “Median” value within each sample grouping.

Annual revenue

Final Selling Price

$0 to $1M
$1M to $5M
$5M to $10M

3.50x EBITDA, or 2.0x SDE as reported
4.10x EBITDA, or 2.8x SDE as reported
4.20x EBITDA, or 3.7x SDE as reported
6.70x EBITDA, or 4.0x SDE as reported

EBITDA – Earnings before interest, taxes, depreciation, amortization

SDE – Sellers Discretionary Earnings using industry standard add-back principles. This process is also referred to Normalized EBITDA.

The above results are inclusive of transactions within all industries and are based on privately held company transactions only.

As mentioned, the selling price multiples represent the “Median” value, and as one may expect, within each sample grouping there are significant ranges of multiples achieved, both from the EBITDA as well as SDE assessment. So, what are the most common factors that affect the ranges of multiples achieved?

Level of EBITDA or SDE attained – as a general guide, the higher the EBTIDA and or SDE attained above the median level within each grouping, the higher the multiple to be realized as the final sales price.

Trends in revenue and profits – businesses that have positive trends in revenue AND profits will generally attain a higher multiple than a business with equal or even slightly higher EBITDA or SDE but is experiencing negative trending.

Maturity of the business – as a general guide, a business with longevity of several years will attain a higher value for similar performance than a business that is only two to three years old. Additionally, buyers will look at the “average” performance over a two to three-year period rather than only focusing on the most recent annual performance. The point is that as a seller of a relatively new business, don’t expect a huge “spike” in your most recent year to result in maximum value for your business based solely on that year. There are exceptions to this – such as technology related companies with a recurring revenue business model.

Quality of Financial Accounting – the “cleaner” the books, the easier it is for a buyer to evaluate the business, therefore usually resulting in a higher valuation. And remember, there are likely two audiences assessing the Accounting quality – the buyer and the banker! The quality of financial accounting can be a major factor when it comes to attaining bank financing for the transaction.

There are many other factors that can affect the valuation of a business – condition of asset base, quality of management team, employee tenure, diversified customer base, industry training availability, just to name a few.

VR Business Brokers can assist you with the valuation of your business. Whether you are considering selling your business now, or several years in the future, it is important to understand the factors involved that can affect the overall value. We will help you assess EBITDA and SDE and guide you on the other elements that will affect the overall value of your business in the future.

About VR Business Brokers, Dallas, TX

VR Business Brokers of Dallas is part of the worldwide franchisor organization that has been servicing small to medium size privately held companies since 1979. VR Business Brokers of Dallas has handled transactions for privately held businesses with revenue ranging from $200,000 to $60,000,000 and assists business owners with exit strategy planning, business valuations, packaging and marketing of the opportunity, and full negotiation services through to closing. For more information about VR Business Brokers, please call 214-733-8282, or visit


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How to Reduce Owner Dependence Before a Sale

Article written by Meghan Daniels and provided courtesy of

CEOs: What would happen if you went on vacation for a month and left your business to run itself?

If your answer is “everything would fall apart,” or “what’s a vacation?” chances are good that your business is highly dependent on you. This may not seem like a problem now, but when it comes time to think about selling your business, it may well be.

“Contrary to popular belief, buyers are highly risk-averse,” says Steve Raymond, Managing Director of New Jersey-based investment bank The DAK Group. Owner dependence (or dependence on any key person) is a major driver of risk, and as such can mean sellers don’t get the price or terms they want during a transaction.

Robert Rough, Managing Director of Dallas-based investment bank Telos Capital Advisors, says that smaller companies tend to be more owner-dependent. There are also certain types of businesses — e.g., dentists’ offices, insurance agencies, or law firms — where “the owner is almost always a major rainmaker. It all comes down to what role the owner plays, for example how involved he or she is in customer relationships and sales,” says Rough.

If you’re thinking about selling your business, here are a few suggestions to help mitigate the risk of owner dependence.

1. Make moves well in advance of a desired sale.  
When Jim O’Keefe, the founder of Wisconsin-based commercial millwork manufacturer O’Keefe, started thinking about planning for an exit, he had a clear life goal of being completely out of the business by the time he was 65 years old. “He’d started the business when he was in his early 20s and built it out of his garage,” says Dan Mulvaney of Sunbelt Midwest Business Advisors, which advised O’Keefe. Five years out from his desired sale timeline, “he brought in professional management and went from running the business to being an absentee owner, which added a lot of value to the business.”

O’Keefe ended up selling to Ninth Street Capital Partners, a middle market private equity fund based in Cleveland. The connection was made on Axial. The process was highly competitive in large part due to Jim O’Keefe’s prudence in stepping back early. “When we bring a business to market that has a management team in place that will stay post-closing for a long time, that broadens the market dramatically amongst buyers. A lot of buyers have the cash, but they don’t have the talent or operator who can jump in full-time and take over for the business owner,” says Mulvaney.

2. Bring in an independent board.
“Generally speaking, if you’re going to be selling a business within a year, you don’t have enough time to bring in a board,” says Raymond. But for those with enough lead time, creating a board is a great way to mitigate risk for a potential buyer by ensuring long-term business continuity. Board members also bring in outside perspectives and experiences that can improve business practices and help owners and existing management identify and address any challenges in the company. While there may be resistance to the idea, independent boards can be particularly helpful for family businesses, where long-established dynamics and a lack of outside experience can sometimes obstruct a business’s full potential.

3. Build out the management team.
“A lot of privately held businesses operate without a true CFO, somebody who understands treasury and sophisticated financial reporting. Bringing in a CFO is an easy step that can be done in a short time frame,” says Raymond. Bringing in a COO is also an option, although sometimes that can be done concurrently with the transaction. “Buyers, particularly PE buyers, will sometimes want to bring in an outside expert as part of the deal to help mitigate the risk, usually referred to as operating partner.”

In some cases, the business may not be large enough to justify bringing in either a CFO or a COO. In these cases, Rough recommends working on addressing areas of the business that will directly impact revenue first. “Customer relationships and sales are probably the most worrisome areas for a potential buyer,” says Rough. “Most buyers will be able to find someone to manage the books and keep the trains running on time. But they want to make sure that they won’t lose revenue. You want to make sure that there’s someone in the company who will be staying and can ensure continuity for key relationships.”

In general, think about delegating and distributing responsibilities. “If the owner just decides to replace themselves with a younger version of themselves, that doesn’t necessarily solve the problem,” says Rough.

4. Document key information.
Business processes shouldn’t just live in your head. If you go to Tahiti for two weeks, your team should know how to keep things running and have all the information they need to make informed decisions. Prospective buyers will want to see that these processes are well-documented to make knowledge easier to transfer post-close.

Owner dependence is just one issue in a business, but it’s often tied up with other risks that buyers discover in due diligence — lack of a true management team, a shaky handle on financials, intellectual property concerns, problematic legal agreements with customers or vendors, etc. As a seller, the more you think through these problems and take steps to address them in advance of a sale, the more likely you are to achieve the valuation and terms you’re looking for. Consulting with an investment banker or advisor before you want to bring your market is the first step and can help you evaluate where you are and what areas you should address first. “The more a company professionalizes their business and looks internally before a sale, the more interest they’ll get from buyers and the more likely they are ultimately to close a deal,” says Raymond.


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Big Players Love the Lower Middle Market

Written by Danielle Fugazy and provided courtesy of

The M&A environment continues to be as competitive as ever. Looking for relief from high valuations and hotly contested auction processes, many private equity firms and strategic acquirers are moving down market.

It’s no secret that companies purchased at lower entry valuation generally achieve better returns because of their potential for multiple expansion. This is not lost on many of the largest players in the private equity industry. The venerable KKR has taken an interest in smaller technology, healthcare, and industrial businesses — some generating as little as $25 million — and is currently raising a middle market fund. Two years ago, another giant private equity firm, The Carlyle Group, raised $2.4 billion to pursue middle market buyouts in North America. The fund targets control investments requiring equity capital of as little as $20 million to $200 million per transaction.

As the larger private equity firms move down market, so do the lenders. “The larger lenders compete for smaller deals when their sponsor relationships come down. They follow their clients, but it’s not necessarily where they focus,” says Joseph Burkhart, a managing director with Saratoga Partners.

Impact on Traditional Lower Middle Market PE Firms

The impact of larger players moving down is twofold: first, traditional lower middle market private equity firms are pursuing additional strategies so they can continue to compete as the larger players come in to the space while others are working harder than ever to win deals today. For example, earlier this year Sentinel Capital Partners, which was already investing in the lower middle market, closed on Sentinel Capital Partners VI at $2.15 billion, and Sentinel Junior Capital, a $460 million fund that gave the firm a presence in the mezzanine financing market. Also early this year, Huron Capital closed on its inaugural non-control fund The Huron Flex Equity Fund with $142 million, which gives the firm flexibility to make non-control investments that are  smaller than their typical deals.

Watervale Partners, a private equity firm that spun out of Linsalata Capital Partners last year, is looking for deals pretty far down market in hopes of escaping some of the competition in the larger markets. Unlike Linsalata—a private equity firm focused squarely on the middle market—the Cleveland, Ohio-based Watervale is looking to make control investments in companies with less than $6 million of EBITDA. The typical transaction value for Watervale will likely be less than $50 million.

“There’s no question that firms are moving down market in general, but at some point—we think around $6 million in EBITDA—the economics call for a different model and all of your support systems change,” says Bacon. “One of the advantages of larger firms is their ability to absorb dead deal costs or spend more money before exclusivity; that isn’t as prevalent to these smaller deals where the company really can’t handle multiple bidders simultaneously.”

In today’s frothy market one of the biggest impact of larger firms coming down market is the lack of exclusivity on potential deals. With bankers asking multiple parties to do the proper due diligence on a company, many lower middle market firms are at a disadvantage. While the larger firms can afford to spend with no exclusivity it’s not easy for smaller firms to that.

Dan Ryan, a partner at lower middle market private equity firm Milestone Partners, says his firm recently submitted a letter of interest to acquire for a tech-enabled solutions platform. When the process started the company’s valuation was a little higher than $100 million. A firm with a $2 billion fund wound up as the winner and by the time the deal was closed the valuation has risen by 33 percent. When the deal was closed there were seven parties that had undergone  extensive due diligence without exclusivity. “A larger firm can more easily afford to spend significant dollars with attorneys, accountants and other vendors to conduct preliminary due diligence without exclusivity. It’s over $100,000 spend all-in. For a lower middle market firm, $100,000 is meaningful. We can’t expose ourselves and our LPs to that risk without real confidence in our ability to close the deal and add value,” says Ryan. “We really need to pick our spots.”

Additionally, buyers are competing on speed to close and larger firms typically don’t have a financing contingency, which gives the larger firms an advantage.

While these dynamics have made it tough for lower middle market buyers, conversely, it’s a great time to be a seller in the lower middle market. Case in point: Inverness Graham is squarely a lower middle market firm investing out of its $283 million third fund. When the firm recently sold a business with $23 million in revenues, they got 74 letters of interest on the business. Fifty percent of them were from firm with funds north of $750 million; some of those firms had funds of more than $1 billion.

However, Matt Moran, a principal with Inverness, notes that sector focus does make a difference when it comes to the larger players’ appetite. Moran says you can expect to see more firms pushing into the lower middle market around sectors like healthcare services, vertical software, and industrial technology that have large consolidation play opportunities.

Saratoga Partners’ Burkhart agrees. “I have a relationship with an owner of a nurse staffing business with less than $2 million in EBITDA and people are clamoring to look at the business — but nursing is one of those hot sectors right now.”

In hopes of looking more unique sellers many lower middle market firms have turned to specialization. “There’s a huge trend toward specialization. Firms are changing their entire hiring, fundraising, and sourcing strategies. It’s staggering,” says Moran.

““Being a generalist fund isn’t viewed as favorably as it once was. Sector specialization in the lower middle market has become a differentiator,” says Burkhart. It’s important to note, that although more firms are heading toward specialization the returns aren’t proving out to be exponentially larger. According to research done by RCP Advisors, a limited partner that invests in lower middle market private equity firms, the likelihood of earning an outsized return on a transaction executed by a manager whose strategy is characterized by sector specialization is only about 100 basis points higher than a deal that is executed by a generalist fund.

How to Win

The increased competition has made it hard but not impossible for traditional lower middle market firms to win. The market dynamics has forced these firms to stay true to their strategies. “You can’t let what others are doing change your process. Our best deals are when we stick close to our knitting. There is more noise out there and that probably won’t change, but you still have to go after what you want with certainty and conviction,” says Moran.

Milestone’s Ryan says his firm has lost more deals than it’s won. Many of the deals they have won have come down to operating expertise and/or relationships. In one case the firm’s operating partner had specific operating experience in a company’s niche and was able to make a strong connection with the company’s CEO as a result. In another case, as a result of a longstanding relationship with Capstone Headwaters, the investment banker on the deal, Milestone got to meet the team ahead of the process, which was extremely helpful. “This doesn’t happen all the time. But Capstone Headwaters understands our approach and our industry focus and what we get excited about, and they called us early. It was really helpful,” says Ryan. “It’s these kinds of things that allow the smaller firm to win deals in today’s market.”


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Setting Up for Selling Your Business

JoAnn Lombardi, VR Business Brokers/Mergers & Acquisitions, President

How to Develop a Successful Exit Strategy

Recently, many entrepreneurs fulfilled their life-long dreams of buying a business. Others have seen their businesses grow gradually over the years. They are pursuits these business owners have enjoyed and cherished. However as a business owner, you have to remember there will be a time you will have to pass your dream along to somebody else – owning the business you have started.

Whether you’re selling the business because of burnout, retirement or the desire to move on, when the time arrives to do so, do it right and receive the optimal sales price.

Often when you contemplate, plan or pursue the opportunity to sell your business, you discover the selling process doesn’t give you the flexibility needed to make the best deal. But you don’t need to fear, feel manipulated by or go through the resale process alone.

You will be at an advantage as an owner if you start thinking about selling the business before you actually proceed. You will easily be able to identify the important elements of the resale process, and have some control over them in the future. Preparing to sell before you move forward will help you better understand the business transaction, your needs as an owner and be in a better position to develop a strategy to make it through the resale efficiently and profitably.

There are five obstacles in the resale process you will have to examine as you proceed. With each one, there are some helpful tips every VR business intermediary will recommend to you. This will assist you in understanding the process better and successfully sell your business.

  1. Position Your Business for Sale.
  2. Determine a Fair Listing Price.
  3. Running Your Business during the Marketing Period.
  4. Finding the Qualified Buyer.
  5. When to Consider Selling Your Business.

Position Your Business for Sale

The day you purchase the business is the day you start positioning your business for resale. You might not think so, but thinking about building long-term value for your business is just as important as making money in the short term.

You want to maintain detailed records of finances, permits, licenses, equipment and inventory through your ownership. This will be critical when you are trying to sell your business, so don’t neglect this part!

Determine a Fair Listing Price

There are many methods you can use to price your business. The most common method includes a multiple of cash flow – normally, 1 to 3 times annual cash flow, depending on the type and size of the business. Also included in this method are value of equipment and inventory plus one year’s cash flow, 3 to 12 monthly gross sales and book value of assets.

There are many factors contributing to pricing your business:

  • Financial terms.
  • An earnout.
  • Non-compete clause.
  • General attractiveness of the business.
  • Future potential.
  • How the business fits with the buyer’s strategic plan.
  • Size of the business – larger businesses bring a higher multiple.
  • Rarity of the business.
  • Whether the business is a service business tied to the seller’s relationship with customers, retail or other type of a business with a skilled staff in place.

Any VR business intermediary will help you determine the right method to use, given our 40-plus years standing as a contributing innovator of business sales, understanding the marketplace, taking into account the various ways a business can be sold and a comprehensive database of comparable sales.

Running Your Business during the Marketing Period

Just because you are planning to sell your business doesn’t mean you neglect it during the process. You have to continue to personally attend to the business and not place too much time and effort in the selling process. If you do, a deterioration of revenue and ultimate the resale value will happen.

This is where your VR business intermediary will be beneficial in assisting you in finding qualified buyers, while you concentrate on managing your business to ensure you maintain the maximum resale value possible.

Finding the Qualified Buyer

Not every potential buyer is qualified to take ownership of your business. Your VR business intermediary will attempt to find a qualified buyer through examining their capital and source of that capital, motivation to buy, needs and expectations, background and skills. Your VR business intermediary will sit down with the buyer, asking all the pertinent questions to determine if the business will transition successfully to them.

When to Consider Selling Your Business

The right time to sell a business will vary from one owner to another. You may have a complete realization it’s time to move on. Thinking and planning the sale of your business before you decide will be much more satisfying and profitable; whether it’s when the business is doing well, in a non-seasonal downward trend, hitting its peak of growth, deciding it’s time for retirement, family issues, health issues or simply tired of being the owner. This question can only be answered by you.


Is now the time to consider selling your business?

Complete the “Value Builder” questionnaire today in just 13 minutes and we’ll send you a 27-page custom report assessing how well your business is positioned for selling. Take the test now:

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Preparing Before Presenting

Follow the Necessary Steps to a Successful Business Sale

Most business owners, who are looking to sell, make the mistake of not preparing early enough. This can result in not receiving the maximum dollar amount for your business.

The selling process should start when you buy your business. You should know the return that you are receiving on your investment so when the time comes to sell you will not leave any money on the table. In order to consummate a successful sale with a qualified buyer, each VR business intermediary has been trained to help you take the necessary steps. Most business owners should be preparing to sell long before they make the decision to move forward. The following are some helpful ways that will keep your business in good shape, and prepare you for when the time’s right to have your VR business intermediary search for a qualified buyer.

Evaluate Your Business Before the Buyer Does

If you want the buyer to avoid finding anything that could jeopardize your chances of successfully selling your business, you should perform due diligence before they do. A qualified buyer will perform a comprehensive evaluation that goes beyond financial records; therefore, it’s a smart decision to make sure everything is accounted for before presenting the business to them. Make sure that the due diligence covers a variety of different areas such as:

  • Operations
  • Marketing
  • Personnel
  • Technology
  • Legal
  • Regulatory
  • Environmental
  • Insurance
  • Contractual, credit and accounting issues

Every buyer has specific criteria that they are not going to compromise on such as their return on investment. Depending upon the industry, current economic climate and the type of buyer that walks through the door, it’s important to understand what their needs are before negotiations take place. As the seller, you will be able to maximize the likelihood of completing a successful transaction.

Cleaning Up the Balance Sheet

Buyers will always examine balance sheets first after they sign a confidentiality agreement so they can start reviewing the business. You want to avoid revising a balance sheet after this point. By doing so, you will raise concerns from the buyer about the legitimacy of the business’ financial documents, and increase the chance of the deal falling apart. If there is real estate, equipment, copyrights or patents or excess cash that you do not want included in the balance sheet, remove them before a qualified buyer reviews.

Have Your Financials Audited

As a seller, you will put your business in a better position for sale if you have financials audited. This will help add both legitimacy and value in the business to a qualified buyer. They will want to make sure everything financially is accurate and correct through their due diligence, and this will help move the process along. At the very least, a seller should have a credible CPA observe the year-end inventory and file it away if you can’t afford an established auditor. The cost will be minimal, and this often makes a retroactive audit possible if all other financials are in order.

Stable Management in Place

Many businesses have managers assist the owner in its operation. Unless your business is a oneperson show, you must make sure that you have no loose ends when it comes to management. Businesses that appear to operate “fly by night” will not look appealing to prospective buyers. Stable management that has been in place for more than 90 days is important. Many buyers in the market for a business consider management to be one of their top priorities.

Using Comparisons to Better Position Your Company

If you’re shopping in a grocery store, it’s natural to compare different brands of foods to decide which one you’re going to purchase. The same analogy can be used for buyers when it comes to businesses for sale. They will compare similar businesses with yours, so you should maintain a comparison of your financial and operating statistics against those of your competition.

Review sources such as trade associations and bankers’ industry profile books. If you own a business in the middle-market, seek out annual reports. A VR business intermediary will assist you in documenting the facts on your competition and doing an objective comparison of what are the similarities, differences, strengths and vulnerabilities. It should be both understandable by someone not familiar with the industry and believable to one that’s well versed in it.

Publicity Generates Value

Having good and credible publicity clippings will not only help visibility for your business but create value for qualified buyers. In addition to using local and regional press, you can also put yourself in national publications such as Business Week. Many businesses will employ a PR firm or consultant that knows how to generate publicity.

Through VR Business Sales, you will be able to work with advisors who have decades of experience in working with both buyers and sellers in all industries worldwide. We will be able to facilitate the selling process from start to finish, providing you with counsel you can trust.


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Complete the “Value Builder” questionnaire today in just 13 minutes and we’ll send you a 27-page custom report assessing how well your business is positioned for selling. Take the test now:

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5 Predictions for Manufacturing in 2019

Article written by Kay Cruse of Strategex and Anthony Bahr, and provided courtesy of Axial

On November 1, Strategex and Axial brought together a diverse group of private equity investors, family offices, lenders, and advisors in Cleveland for a manufacturing-focused event. Over lunch, the group discussed today’s most prevalent topics in manufacturing, and the direction in which they see the industry heading in the short term. Here are the top-five takeaways from this conversation.

1. An economic contraction is coming, but the short-term outlook is strong.
While the group unanimously agreed the next recession is matter of “When?”, not “If?”, the consensus was that leading indicators are overwhelming positive and the economic expansion — now in its ninth year — is expected to continue through 2019 and potentially 2020. However, acquirers are beginning to place more value on targets which have the ability to weather a downtown. For example, targets with a healthy aftermarket business, which tend to be countercyclical, are increasingly attractive to buyers.   

2. The labor supply is the dominant challenge in manufacturing today.
A near-record low unemployment rate, increasing minimum wages, more restrictive immigration policies, and an aversion to manufacturing jobs among younger cohorts are just some of the factors which have resulted in a severe shortage of qualified candidates. Furthermore, the ability to retain productive employees is becoming more difficult as fewer see manufacturing as a viable long-term career. In response, manufacturing firms are investing heavily in the employee experience, flex benefits (tuition reimbursement, gym memberships, paid parental leave, etc.), and workplace culture.

3. Industry 4.0 is on the horizon, but implementation will be slow.
Deal professionals see the advent of “Industry 4.0” as a potential solution to the labor and talent delimma, but the timeline for implementation is unclear. One component of 4.0, the utilization of computerization and robotics, is starting to take hold, but most don’t see a complete overhaul of traditional manufacturing taking place anytime soon.

4. Increasing interest rates are both a threat and an opportunity.
Many manufacturers are experiencing growing pains such as severe backorders, over-utilized facilities and equipment, and obsolete information technology infrastructure. Recent interest rate hikes have deterred some from borrowing to finance capital expenditures and capacity building, putting their ability to sustain growth at risk.

On the other hand, many lenders have seen a spike in originations as borrowers attempt to lock in rates given the expectation they will only increase in the short term. On the private equity front, the increasing aversion to debt has led to an increased demand for growth equity investments.

5. The lack of stability is the new norm, and agility is essential for success.
Above all, markets seek stability, but current socio-economic conditions are anything but stable. Volatility is everywhere, including tariffs, regulations, trade agreements, tax policy, and fluctuations in government spending (particularly infrastructure spending). Those involved in running manufacturing businesses, however, have come to accept volatility as business as usual. Rather than deferring action in hopes of tides turning, and rather than proactively embracing change to get ahead of the curve, managers agree nimble planning and rapid execution is key to succeeding in this new reality.


Is now the time to consider selling your business?

Complete the “Value Builder” questionnaire today in just 13 minutes and we’ll send you a 27-page custom report assessing how well your business is positioned for selling. Take the test now:

Sellability Score