Welcome to the May issue of our newsletter. In this issue we have two feature articles. One provides some specific ideas for business owners to add value to their businesses. The other describes some common exit planning mistakes that can be avoided by what the business owner does long before he or she is ready to sell. If you know anyone who is thinking about buying or selling a business, we would be glad to assist them. We also provide exit planning and business value enhancement services . Your referrals are greatly appreciated. Sincerely,
John Austin & Bob Dale
Austin Dale Group
512-327-0427
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Building Value in a Business
Below you will find a number of suggestions for owners to consider in order to build value in their business.
The role of the owner
One difficulty in selling many small businesses is the role of the owner. Too many times he or she is the "one man band." A new owner may have difficulty filling that role. While a business owner may not be considering selling, the time will come, sometimes unexpectedly. It pays for owners to work at making their businesses less dependent on them. One solution is to get one or more employees more actively involved in the role of the owner.
Important customers and suppliers
Too many "one-on-one" relationships with major customers and suppliers may also make a business harder to sell. An owner will want to work with more than one contact at important customers or suppliers so the personal relationships are not just one-on-one and more easily transferable to a new owner.
Loyal Employees
Happy and loyal employees create a strong business. Keeping employees involved in the business, creating transparency in business decision-making, and providing good employee benefits can go a long way in keeping employees happy and loyal, thus increasing the value of a business. Growth
Small businesses tend to stay small because the owner wants to keep it that way for many reasons. The owner may want to maintain control, or maximize his or her own benefits. But, in order to build growth and subsequent value, the owner has to build new services, market share and/or new markets. A business intermediary can help business owners consider other ways to increase the value of their business before the time comes to sell. |
Exit Planning Mistakes
There are a number of common exit planning mistakes. Below are just a few. Procrastination The first and worst mistake is failing to develop an exit strategy long before one is needed. Unfortunately, too many owners don't even think about exit planning until circumstances make it imperative that they sell.
Reactive vs. Proactive
Once a business owner decides to sell, he or she must be proactive, not reactive. Selling a business is not like waiting for Publisher's Clearing House to knock on the door and hand over a big check. That's why it pays to build the exit strategy long before it is needed.
Failing to Consider All Options
IIt also important to consider alll options. An outright sale is obviously the most common. However, other options may involve a sale to management, an ESOP, a recapitalization, an intra-family sale, etc. Owners should consider what they desire from the sale of the business and which option or options best meet those desires or the needs of the business owner.
Unaware of the Company's Actual Value
As part of the exit planning strategy, knowing what the company is worth is critical. Ideally, this should be evaluated every year. Only by knowing the value of the business can business owners decide if the value coincides with their "exit" requirements. A professional business intermediary can assist in this process. Keep in mind that market conditions greatly impact value.
Failing to Plan Life After the Business
Many business owners place their business up for sale and only then, for the first time, give thought to what they are going to do if it sells. This often results in panic after an offer has been made and the business owner then begins to seriously consider what he or she will do after the sale and how that will be financed. Many owners in this situation actually abort a pending sale or withdraw it from sale. This thought process about what life will look like "post-sale" should be done long before considering selling.
Going Solo
Another mistake is failing to take advantage of the outside professionals that are available. Attempting to be a sole practitioner in the selling process is a big mistake. Business owners also need to make sure these outside professionals have transaction experience. Starting with a professional business intermediary is a good start. |
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Webinar on May 16
Title: "Legal Issues in Buying and Selling IT Companies".
Featured speaker: Bob Reetz, M&A transaction attorney and partner at Haynes & Boone, LLP.
Time: 11 AM Central
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M&A Activity Remains Strong in Healthcare Technology
Since the beginning of 2008, private equity firms have invested in 94 companies in the Healthcare Technology Systems industry, according to pitchbook.com. Deal activity held steady in 2011 with 23 completed deals vs. 22 deals in 2010. So far this year, there have been five deals. Although the Enterprise Systems sector has accounted for almost half (46%) of the deals during the time period, the Medical Records Systems sector has seen increased deal flow in last two years. |
The Three Ways to Respond in Negotiations
Basically, the various ways of responding during a negotiation fit into three different categories.
1. Take it or leave it.
The simplest way to respond in a negotiation is with a "yes" or "no" to the proposal.
For example, whether the buyer makes an offer or a seller makes a counter-offer, the other party has the option to accept or reject the offer exactly as proposed.
2. Split the difference.
Another valid response is to split the difference or find middle ground between two positions.
For example: A buyer and seller may elect to split the difference between what the seller is willing to accept and the buyer is willing or pay. This is an oversimplification, but this method is often used.
3. Trade-offs.
The third way to respond is to offer or ask for a trade-off in one area in order to hold one's ground in another area. The parties have to know what is really important to them. Many of these trade-offs are non-monetary and involve personal issues.
For example, the seller may want his son to be able to stay with the company or may want a guarantee that the buyer will not move the company. In either of these situations, the seller may accept a lower price offered by the buyer as a trade for accepting such a condition.
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 512-327-0427
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