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CEO Advisor® Newsletter
September 2012
 Considering the Sale of Your Business?

As mentioned in our last enewsletter on making opportunistic acquisitions to grow your business, we will now look at the exit or sale of your company.
Selling a business is likely to be the largest and most important financial deal any business owner will make.  For many owners, selling the business they have spent years building can be emotionally difficult.  Unless you have sold a business before, you will have no experience to draw on and won't know what to expect.  I have performed mergers and acquisitions since 1983 so expertise and experience will enable you to complete a successful transaction.

This guide outlines the main options available and will help you decide what is best for you and your business. It also covers a few of the basic things which can be done to make your business more valuable and attractive to potential buyers with advice on how to find the right advisors.
 
Is Selling the Right Option?
Before putting your business up for sale you must give careful consideration to your reasons for doing so. You will probably be asked about your reasons for selling by potential buyers, who will need to be comfortable with your motivation and answers.
You need to consider four key questions: 
  • What are my objectives as the owner of the business? 
  • What are my objectives as CEO of the business? For example, you might want to retire as soon as possible, or prefer to have an on-going involvement with the business. 
  • What are my objectives for the business itself? For example, the business might need new investment in order to grow. 
  • Who else will be affected and what will they want? For example, other shareholders, managers and employees, and even key customers and suppliers. 


Selling part or all of the business may be the best way to achieve your objectives. You might, for instance, want to sell your business outright, leaving you with no financial or management involvement.  You may also sell a majority of your business providing upside in the future due to additional growth from the investors.


There's a range of other exit routes that may suit your needs better. If you want to retire but already have enough money, you could pass the business on to your children, or you could sell to your employees.  

 

Methods to Sell 

There are various ways you could sell your business, with the options available depending on factors like your business type, size and market. Most businesses are sold in an Asset Sale to another business, usually to a public or private company operating in the same or a related field.

 

Other options available to you could include: 

  • Selling all or part of your business to a private equity firm (typically requires $10 million in sales and $1.5+ million in EBITDA (earnings before interest, taxes, depreciation and amortization)
  • Finding a private buyer who wants to run his/her own business 
  • A management/employee buyout - perhaps with the help of a venture capital firm or bank loan 
  • Attracting a private investor who acquires and invests in the business without managing it and typically sells it in 3 - 7 years


There are several different sale options - the one best for you will depend on your individual circumstances. The buyer will also have an opinion on deal structure and how they wish to make an acquisition, so you'll need to know what you want to achieve and how you would like to structure a sale early on. This will save time and money, and avoid unnecessary delays, taxes and other issues. 

 

Asset Sale 

Instead of selling the business itself, a buyer will typically provide a Letter of Intent (LOI) to purchase the Assets - the property, customers, contracts, etc., without the liabilities, obligations and unforeseen lawsuits.  In this case, the buyer will extend an offer to most or all of your employees at closing. You will be left with whatever assets and liabilities are not included in the sale. In this case, the needed business advice is an essential factor in deciding the most suitable deal structure. 

 

Immediate or Phased Payment 

You can ask for payment in full at closing or you may be prepared to accept payment in installments. The buyer may well prefer to pay in installments, and you may gain tax advantages, as well. But you will be at risk if the buyer cannot make future payments. 

 

Some buyers will want to make a series of payments based on profits, in the form of an Earn out, in which case you may be contracted to stay with the business for a period of time to meet certain sales and profit goals for additional compensation. 

 

LOI  - The Offer 

There are many variables that can be presented in a Letter of Intent (LOI). Your goal is to attract an LOI or an offer to buy your business from a strong buyer that represents a good fit to your goals.  A non-binding LOI typically will come early on in the process, after a meeting or two and a review of your financials. Since the LOI is non-binding and typically the optimal scenario (the buyer may reduce the offer after due diligence), it is critical to have a 3rd party negotiator to assist you and help you maintain a good relationship with your buyer. A seasoned business advisor can add tremendous value in negotiating the best offer and in getting the deal done. 

 

Preparing to Sell 

It usually pays to start planning a sale well in advance. This gives you time to solidify the business - fixing any issues that could dramatically affect its value and making it as attractive as possible to potential buyers. 

 

You also want to make sure your financials are in order and are ready for the due diligence process. More importantly, you want to operate your business to ensure you have recurring revenue with one, two or three year contracts to provide real value as a seller.  

 

When to Sell 

Selling at the right time can have a significant impact on the price you get for your business.  If possible, plan ahead so that you can pick the best time rather than being rushed into a quick sale. For example, if you plan to retire in three years' time, it's a good idea to start planning the sale of your business now. 

 

The reality is that a great buyer may call next month and you need to be prepared at all times. 

 

Choosing Advisors When Selling Your Business

Experienced business advisors such as a corporate transaction attorney, tax advisor and business advisor, are essential for an effective sale. The right business advisor can have a big impact on the preparedness and success of your sale, and the amount you receive. It is extremely important to have an experienced, third-party negotiator help you through the process and negotiate a deal to your liking. 

CEO Advisor, Inc. has several decades of experience in buying and selling companies.  Contact us today for a free consultation at (949) 759-8676 or email Mark Hartsell, MBA and CEO of CEO Advisor, Inc. at MHartsell@CEOAdvisor.com.   

FREE BUSINESS GROWTH SEMINAR
 

CEO Advisor, Inc., the leader in growing small to mid-size businesses to the next level, will hold a FREE Business Growth Seminar exclusively for CEOs, Presidents and business owners at our Newport Beach office. 

 

This event is limited to 10 Orange County business owners and will cover critical areas of business growth to drive your sales and profits. All small business owners and CEOs who are committed to growing your business to the next level should take advantage of this tremendous opportunity.

  

A $100 gift certificate to the Pelican Hill Resort in Newport Coast will be awarded to one lucky attendee. A $250 rebate will be offered on business advisory services to all seminar attendees who sign-up by September 30th.

  

The CEO Advisor Business Growth Seminar will benefit you by: 

  • Increasing Sales with Proven Techniques
  • Discussing Sales Strategy and Execution as a Key Driver for Growth
  • Focusing on Sales, Sales Management and Sales Team Building
  • Creating a Reseller Channel to Leverage Sales
  • Setting Goals in the Financial, Sales and Marketing Areas of your Business as Critical Factors in Growing to the Next Level
  • Providing Tools to Drive Both Sales and Profits
  • Demonstrating How to Break Through to Higher Sales and Profits
  • How to Hire Key Personnel in Sales and Marketing for Little to No Salary and Leverage your Sales Exponentially
  • Opportunistic Acquisitions for Accelerated Growth
  • Much More!  

Register Now

 

Location:  

23 Corporate Plaza Drive, Suite 150

Newport Beach, CA

 

Date:  

Wednesday

September 12, 2012

 

Time:  

1:30 - 3:30

 

Presenter:  

Mark Hartsell, MBA, CEO/President of CEO Advisor, Inc.

 

Wine and dessert to be served

 

Free Parking

 

For CEOs, Presidents and Business Owners Only

 

Registration required. No Walk-ins, Vendors or Service Providers

 

Register Now or call us at (949) 759-8676 for more information. 

Testimonial  


"I have been a client of Mark Hartsell and CEO Advisor, Inc. for 2 years, and Mark has introduced many new ideas for us to improve our business. Once implemented we have seen very tangible increases in our sales that have added greatly to the value of the company. 

In addition, he has advised us on many organizational changes, such as revamping our sales strategy and team that will have a big impact in the future as we raise additional funding and we ultimately sell the business. He also helped us with our financials and coached us on using this information to make better management decisions. 

CEO Advisor® has shown us how to increase the price of our products and services without impacting our customer acquisition, which has been a large boost to our revenues. I strongly recommend CEO Advisor, Inc." 
 
CEO/Founder, 
Software 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


"The measure of success is not whether you have a tough problem to deal with, but whether it's the same problem you had last year."

John Foster Dulles
Former Secretary of State

 



"Yesterday does not equal tomorrow. Forget the past and move towards your goals."

Tony Robbins
Motivational Speaker

"Yesterday does not equal tomorrow. Forget the past and move towards your goals."
Tony Robbins
Motivational Speaker
"Yesterday does not equal tomorrow. Forget the past and move towards your goals."
Tony Robbins
Motivational Speaker



Prime Minister of the U.K.