Call

(949) 629-2520

CEO Advisor® Newsletter
October 2015
Start Now to Prepare to Sell Your Business Next Year

Are you seriously considering selling your business next year?  Do you believe valuations have peaked and the recent stock market volatility, commodity prices collapse and rising interest rates will bring an end to the current seven year economic cycle?


My recent email to our many CEOs approximately two weeks prior to the start of the recent stock market pull back stated that business valuations have peaked and this is the time to sell if you are seeking a liquidity event (partially as in a private equity play or a 100% sale).


The bad news is that if you want to sell right away for the maximum value, you should have started the selling process nearly a year ago when valuations were rising and starting to peak.  The reality is that it takes time to prepare for and sell a company, especially a smaller company as there are far fewer potential acquirers of a small company of $5 - $10 million in sales than a slightly larger company over $10 million in sales.  Other factors are critical in the viability of selling such as size of the market, growth rate, industry niche and expertise, management team, gross profit margins, EBITDA margins, etc., but size does matter.


The good news is that a lot of sales are occurring right now with very inexpensive money available to make those purchases, coupled with a lot of money still on the sidelines looking for solid transactions provided you have a realistic grasp of valuations.


Provided you start the sale process today, you are a couple or several months in preparation, six months to sell the business realistically, and two plus years working with the acquiring company to fulfill your commitment and receive the balance of your money.  If the economic cycle ends with a major pull back in valuations and buyers, you may then be ten years away from an economic recovery coupled with the sale of your business and your two year commitment to the buyer.  If you can't wait up to ten years for that cycle, then you need to seriously considering selling your business.

Provided you take the time to work with a professional business advisor to actually prepare for the sale of your business, you will undoubtedly jump to the top of the buyer's short list as an easier and more efficient sale process, and you will certainly fetch a higher purchase price.


Here are 3 proven steps to set yourself up to win when selling your company:


1. Get Your Advisory Team in Place


Your team should consist of a professional business advisor with mergers and acquisitions (M&A) experience and expertise, a corporate and transaction attorney and a CPA/tax advisor also with mergers and acquisitions expertise.


A business advisor with deep M&A experience is critical to:


  • Developing an exit strategy
  • Creating an effective Executive Summary and 3-year Forecast
  • Creating a PowerPoint presentation and 30-second pitch
  • Identifying a complete list of potential buyers with the proper contact information (100 - 200 buyers in order to attract  5 - 7 interested parties and 2 - 3 letters of intent)
  • Updating the capitalization table, organization chart and sales forecast
  • Initiating telephone and email contacts with the many prospective buyers multiple times
  • Negotiating and formulating letters of intent
  • Advising you through the arduous due diligence process and legal documents
  • Keeping the sale on track by working with your attorney, tax advisory and buyer, while you continue to run your business effectively and contributing to the sale.


Mark Hartsell, MBA, President of CEO Advisor, Inc. has thirty years of experience in the preparation and sale of small to mid-market companies, including being certified in Mergers & Acquisitions from the Wharton Business School, University of Pennsylvania.  Your transaction attorney will focus on preparing and advising you on the legal documents for a stock or asset sale and internal compliance documents, and your CPA/tax advisor will provide upfront advice and estimates on tax issues and navigate the best path for the least tax burden.


Clearly your advisory team is paramount as you should not be sacrificing your business where your expertise lies, and trying to handle the approximately one hundred tasks above if this is not your expertise.  Additionally, your business advisor needs to be a negotiator and bad cop, while you remain the good cop and close the transaction as a key (likeable) player in the acquiring business going forward.


2. Start Your Preparation Game Plan 


Your business advisor will be the most instrumental in working with you to get your business to optimal value.  The length of time this preparation takes depends on your preparedness at the start of this process, but don't waste time trying to do the preparation on your own if this is not your specific skill set or expertise.

Having an understanding of the selling process is key, understanding valuations, what your role will be, having your strategy, accounting reporting, sales reporting, forecasting and other aspects of your business on track and complete are critical.  Your business advisor will work with you on all of these areas of your business and more to ensure the optimal opportunity to complete a sale and maximize your valuation.


3. Valuations, Tax Issues and Other Non-starter
 
Have your business advisor research recent valuations and comparables in the market to make sure everyone is on the same page and expectations are realistic.  Of course, your company is unique and has its competitive advantages, but buyers are sophisticated and have a fairly rigid process in how they value and acquire companies so you need to understand the sale process, as well as, realistic valuations and terms in today's market.


No one is going to pay you 100% cash up-front and send you to Tahiti for the rest of the year.  Price and terms are critical to every deal and your business advisor will play a key role in negotiating both price and terms throughout the sales process. Tax issues are also critical so discuss a realistic sale price with your tax advisor, explain your corporate structure and whether you are a C corporation, S Corporation or LLC and gain input on the tax burden scenarios as a stock sale vs. an asset sale.


These 3 important steps will ensure that your many years of hard work translate into an optimal opportunity to realize your life's dream and gain the largest payday of your life.  Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation at 949-629-2520, by email at mhartsell@ceoadvisor.com or visit www.CEOAdvisor.com for more information.

Attention CEOs - Start Planning for 2016 Now
Critical Skills for the CEO/Owner
The Wharton Business School newsletter, published by The Wharton School, University of Pennsylvania did a recent poll of executives and business owners. The results below show the four most important skills that would strengthen a CEO's performance.
Strengthening what skill would most improve your performance?
Leadership - 33%
Time Management - 28%
Negotiating - 22%
Understanding Your Financials - 17% 
1. Leadership
Leadership and execution is the key to success and achieving your goals. Leadership requires planning, organization, being proactive, having a crystal clear understanding of the business both financially (quantitatively) and operationally (qualitatively), hiring and managing people of multiple generations and cultures, and creating a culture of accountability to grow your business to the next level.
2. Time Management
Time management is the Achilles heel of most CEOs and small business owners. Not just managing time on a calendar and working 60 hours a week to keep up, but real strategy and planning to focus and structure your time to impact your business in a disciplined manner. CEO Advisor, Inc. works with its CEOs and small business owner clients to set goals and priorities, and truly excel in both leadership and time management.
3. Negotiating to Success
Negotiating is the Holy Grail in business - with customers, prospects, vendors, employees, etc. We focus deeply on negotiations using some of the top techniques used by military leaders and business people. Your sales team can benefit tremendously from sales training and negotiating skills training from securing the initial meeting to negotiating price effectively to closing large deals. Strengthening your negotiating skills can yield a 100X return on your investment. If you are not a master negotiator and salesperson, invest in your negotiating skills and prosper in 2014 and beyond.
4. Understanding Your Financials
If there is one New Year's resolution that every CEO and small business owner should commit to is gaining a thorough understanding of the financials of your business. If you don't, you are flying blind! This includes your Profit & Loss Statement (Accrual and Cash basis), Balance Sheet, Financial Ratios, creating a 2014 Financial Forecast, and learning to analyze and understand how to positively impact your Gross Margins and Net Profit, as well as, pinpointing early signs of problems. CEO Advisor Inc. spends the time to ensure every client not only understands but uses their company's financials in growing their business to the next level.
Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. today at (949) 629-2520 for a no cost initial consultation, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.
Critical Skills for the CEO/Owner
The Wharton Business School newsletter, published by The Wharton School, University of Pennsylvania did a recent poll of executives and business owners. The results below show the four most important skills that would strengthen a CEO's performance.
Strengthening what skill would most improve your performance?
Leadership - 33%
Time Management - 28%
Negotiating - 22%
Understanding Your Financials - 17% 
1. Leadership
Leadership and execution is the key to success and achieving your goals. Leadership requires planning, organization, being proactive, having a crystal clear understanding of the business both financially (quantitatively) and operationally (qualitatively), hiring and managing people of multiple generations and cultures, and creating a culture of accountability to grow your business to the next level.
2. Time Management
Time management is the Achilles heel of most CEOs and small business owners. Not just managing time on a calendar and working 60 hours a week to keep up, but real strategy and planning to focus and structure your time to impact your business in a disciplined manner. CEO Advisor, Inc. works with its CEOs and small business owner clients to set goals and priorities, and truly excel in both leadership and time management.
3. Negotiating to Success
Negotiating is the Holy Grail in business - with customers, prospects, vendors, employees, etc. We focus deeply on negotiations using some of the top techniques used by military leaders and business people. Your sales team can benefit tremendously from sales training and negotiating skills training from securing the initial meeting to negotiating price effectively to closing large deals. Strengthening your negotiating skills can yield a 100X return on your investment. If you are not a master negotiator and salesperson, invest in your negotiating skills and prosper in 2014 and beyond.
4. Understanding Your Financials
If there is one New Year's resolution that every CEO and small business owner should commit to is gaining a thorough understanding of the financials of your business. If you don't, you are flying blind! This includes your Profit & Loss Statement (Accrual and Cash basis), Balance Sheet, Financial Ratios, creating a 2014 Financial Forecast, and learning to analyze and understand how to positively impact your Gross Margins and Net Profit, as well as, pinpointing early signs of problems. CEO Advisor Inc. spends the time to ensure every client not only understands but uses their company's financials in growing their business to the next level.
Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. today at (949) 629-2520 for a no cost initial consultation, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

Here are 7 key issues that typically cause major issues in a business or lead a CEO or business owner to decide to exit the business, usually through a sale or liquidation, in an unplanned sale or at less than desirable results. Planning now for 2016 will head off these issues for a more productive new year.


1. Lack of Operating Capital

 

Lack of cash to meet short-term cash needs is a major burden and sometimes crippling to businesses and their CEOs. Also, cash shortages preclude funding essential for business growth. Serious cash needs also cause short-sighted actions and even bad decisions.


2. Management is Too Thin or Less Than Competent


The CEO can be so tied to the business with no additional resources for the CEO to share management responsibilities. Thus decision-making, sales, marketing, operations and growth are restricted to the CEO's abilities and available time.


3. Lack of a Business Strategy and Business Planning


There is no strategic business plan, financial forecast and goals to focus resources effectively toward results and to increase sales and profits. This is critical and rarely done consistently in small business today causing a whole range of problems.


4. The CEO is Seriously Ill or is Disabled

 
Being prepared for the calamities that can ruin a business is a responsibility a lot of business owners do not take seriously enough. Insufficient financial and management preparation for the death or disability of the CEO can create chaos for those left to sort out the issues. A trusted business advisor familiar with the business can be an extremely valuable resource to any CEO or business owner to act in an Interim CEO role, as needed.


5. There is Disproportionate Risk through Personal Guarantees or Expenses Tied to the Business


Because of personal financial guarantees required for the business or considerable fixed expenses, especially in an economic downturn, a major crisis could ruin the business owner.


6. The Business is No Longer Satisfying or CEO Fatigue Sets In


Many CEOs and business owners reach a point where they no longer wish to endure the pressures of the business or the risks related to the business. They have lost their enthusiasm and commitment to continue to invest in and grow the business.


This condition is not only an impediment to growth, but it often creates a downturn in the business that puts the company in a vulnerable position. An interim, part-time CEO or business advisor may be the alternative that works best outside of a sale of the business.


 

7. The Assets of the CEO or Business Owner are Unbalanced


Most personal assets are in the value of the business. Little independent retirement savings have been established for the CEO/major shareholders in the event of a business downturn. In the absence of a strategic buyer, the sale of the business is required as a retirement alternative.
 

CEO Advisor's business consulting services can help you overcome these issues enabling you to grow your business to the next level, or explore your alternatives. Contact CEO Advisor for a no cost, no obligation initial consultation at your office by calling Mark Hartsell, MBA, CEO at (949) 629-2520, by emailing MHartsell@CEOAdvisor.com, or visiting our web site at www.CEOAdvisor.com for more information.

Testimonial  


"As President of a small technology company, I have been very pleased with the services provided by my CEO Advisor®. He contributed in many areas, but identified marketing and sales as our primary need. His guidance and contributions have been invaluable in establishing and maintaining a meaningful marketing and sales program for the company. He is a knowledgeable business advisor and a pleasure to work with."

 

CEO/President

Engineering Services/Manufacturing Company

"Mark Hartsell and CEO Advisor, Inc. provide a unique advisory service for CEOs. He not only tackles high level strategic issues to assist CEOs navigate through challenging times, but Mark also gets very involved in actually addressing important issues head-on by performing the work to achieve tangible results.


Whether it is growing a business to the next level, turning a distressed company around or preparing a company for an exit, Mark's firm, CEO Advisor, Inc, provides a broad range of services and Mark is there for the CEO every step of the way."

 


Partner

Haynes & Boone, LLP

Words of Wisdom


"Most people never run far enough on their first wind to find out they've got a second. Give your dreams all you've got and you'll be amazed at the energy that comes out of you."

 

William James
American Philosopher