Are your dreams of retiring on the sale proceeds of your business pie in the sky?
Are your dreams of retiring on the sale proceeds of your business pie in the sky?
You’ve heard of the baby boomers right? In fact, you may even be one. So you will know that the baby boomers will shortly be heading towards retirement. It’s that fact which underlies recent market research saying that 83% of business owners intend to retire in the next 10 years and 46% of business owners intend to sell in the next 5 years. Furthermore, 48% of business owners are expecting that sale to fund their retirement.
That means, there will be a lot of businesses for sale in the next few years, but who is going to buy them? Not the baby boomers, that’s for sure, which just leaves Generations X & Y; the generations who are mortgaged up to their eyeballs, whose ability to borrow is being squeezed by the credit crunch and who would probably rather build their own businesses anyway.
You can see where I am heading with all of this: lots of supply but no demand – a sure way to drive prices down.
Not all businesses will suffer
As with any type of market, where there is lots of supply and limited demand, it doesn’t necessarily mean that every business will suffer. Those businesses which offer a true return on investment for the investor will continue to attract good prices. It’s those where the current business owner hasn’t given any thought to exiting the business or growing value in the business who will suffer. Unfortunately, they may not find this out until they have spent part of their “retirement money” on a process called due diligence.
Due Diligence: the purchaser’s weapon
Due diligence is a process conducted by the lawyers and accountants instructed by your potential buyer. Their job is to identify the potential risks in your business which may impact upon the return on investment for their client. Due diligence is a tedious process and is going to cost you money in lawyers and accountants fees too. Whilst the purpose is generally to help the buyer decide whether to proceed with the purchase or not, it is most generally used by the buyer to drive your price down. The more the buyer will find wrong with your business, the more your retirement fund gets smaller and smaller. In a worst case scenario, the sale will not proceed and you are left with a hefty bill from your lawyers and a business hanging around your neck like a noose.
Then the regrets creep in
It is when you get the due diligence report and your lawyers bills, that the regrets start to creep in. Regrets like: Why didn’t I get a proper employment agreement put in place at the beginning? Why didn’t I secure written supply agreements with key suppliers? Why didn’t I protect my IP? The list goes on. But of course by this stage, it is too late.
It is too late 6 months or even a year out from sale
If you want to exit your business at some stage in the future, whether it be 2 years, 5 years, 10 years or 20 years, the time to start preparing for it is now. That’s because the longer you leave it to put in place key agreements and putting your business in a state where anyone could run it without your input, the harder and more expensive it gets. Take a simple example of employment agreements. You cannot move your employees from a badly drafted employment agreement to a robust employment agreement without their consent. If the badly drafted employment agreement works to their favour, do you think they will give their consent without a financial incentive? Similarly, if your business shows a history of poor cashflow due to inadequate terms and conditions of business and in effective systems, that will affect your ultimate sale price.
It’s like selling a car
If you are selling a car, the first thing your buyer would look for is a full service history. The point behind this document is that it demonstrates the car has been looked after during its lifetime and is therefore going to be more reliable.
If on the other hand you had things fixed up just before sale, you won’t have that history of reliability, and therefore it will present more of a risk to the buyer.
Make sure you can demonstrate reliability in your business
Buyers and investors will always prefer a safe return over a risky return. If you can demonstrate reliability in your business year after year, your business will sell for good money and fund your retirement. But that requires you to put the systems and agreements in place now. Investment of that nature now, will pay dividends later on when you come to exit.
Are your dreams of retiring on the sale proceeds of your business pie in the sky - To learn more about this author, visit Michael Smyth's Website.
Like this article? Share it with your friends
Market Forces are changing
You’ve heard of the baby boomers right? In fact, you may even be one. So you will know that the baby boomers will shortly be heading towards retirement. It’s that fact which underlies recent market research saying that 83% of business owners intend to retire in the next 10 years and 46% of business owners intend to sell in the next 5 years. Furthermore, 48% of business owners are expecting that sale to fund their retirement.
That means, there will be a lot of businesses for sale in the next few years, but who is going to buy them? Not the baby boomers, that’s for sure, which just leaves Generations X & Y; the generations who are mortgaged up to their eyeballs, whose ability to borrow is being squeezed by the credit crunch and who would probably rather build their own businesses anyway.
You can see where I am heading with all of this: lots of supply but no demand – a sure way to drive prices down.
Not all businesses will suffer
As with any type of market, where there is lots of supply and limited demand, it doesn’t necessarily mean that every business will suffer. Those businesses which offer a true return on investment for the investor will continue to attract good prices. It’s those where the current business owner hasn’t given any thought to exiting the business or growing value in the business who will suffer. Unfortunately, they may not find this out until they have spent part of their “retirement money” on a process called due diligence.
Due Diligence: the purchaser’s weapon
Due diligence is a process conducted by the lawyers and accountants instructed by your potential buyer. Their job is to identify the potential risks in your business which may impact upon the return on investment for their client. Due diligence is a tedious process and is going to cost you money in lawyers and accountants fees too. Whilst the purpose is generally to help the buyer decide whether to proceed with the purchase or not, it is most generally used by the buyer to drive your price down. The more the buyer will find wrong with your business, the more your retirement fund gets smaller and smaller. In a worst case scenario, the sale will not proceed and you are left with a hefty bill from your lawyers and a business hanging around your neck like a noose.
Then the regrets creep in
It is when you get the due diligence report and your lawyers bills, that the regrets start to creep in. Regrets like: Why didn’t I get a proper employment agreement put in place at the beginning? Why didn’t I secure written supply agreements with key suppliers? Why didn’t I protect my IP? The list goes on. But of course by this stage, it is too late.
It is too late 6 months or even a year out from sale
If you want to exit your business at some stage in the future, whether it be 2 years, 5 years, 10 years or 20 years, the time to start preparing for it is now. That’s because the longer you leave it to put in place key agreements and putting your business in a state where anyone could run it without your input, the harder and more expensive it gets. Take a simple example of employment agreements. You cannot move your employees from a badly drafted employment agreement to a robust employment agreement without their consent. If the badly drafted employment agreement works to their favour, do you think they will give their consent without a financial incentive? Similarly, if your business shows a history of poor cashflow due to inadequate terms and conditions of business and in effective systems, that will affect your ultimate sale price.
It’s like selling a car
If you are selling a car, the first thing your buyer would look for is a full service history. The point behind this document is that it demonstrates the car has been looked after during its lifetime and is therefore going to be more reliable.
If on the other hand you had things fixed up just before sale, you won’t have that history of reliability, and therefore it will present more of a risk to the buyer.
Make sure you can demonstrate reliability in your business
Buyers and investors will always prefer a safe return over a risky return. If you can demonstrate reliability in your business year after year, your business will sell for good money and fund your retirement. But that requires you to put the systems and agreements in place now. Investment of that nature now, will pay dividends later on when you come to exit.
Are your dreams of retiring on the sale proceeds of your business pie in the sky - To learn more about this author, visit Michael Smyth's Website.
Like this article? Share it with your friends
 | |
 |
No article feedback found. |
| |
Leave Your Feedback |
 | |
| |||
David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
|||
George LudwigGeorge Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
|||
Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
|||
Casey GollanCasey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan's Website |
|||
Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
|||
Jeff FosterWebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas. We specialize in internet consulting & internet marketing. - Visit Jeff Foster's Website |
|||
David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
|||
Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
|  |
Subscribe to Michael's articles
 | |
|
|  |
 | |
|
| |
 | |||||||
|
 | ||
|
||
 |
||
 |
||
|
| ||
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"
Click Here To Learn More |
|
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 Capture More Clients Write A Bestseller Write Marketing Plan Increase productivity Radical Green Business |
|
 | ||
 |
More PR Resources
Press Release Builder | |
 |
Top 50 Debt Blogs
Learn To Get Out Of Debt | |
| ||
 | ||||
| ||||
|
| ||||
| ||||
|
|
|
|
|
||||||||||||
|
Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
|
|
|
| ||||||||||
|
| ||||||||||
|
|
||||||||||