Capital Strategies

You may be surprised to learn that if you want to sell your business, there is about a one in five chance of actually achieving that goal. Even with strong financial performance, sometimes businesses with less than $1,000,000 in revenues don’t sell.  According to BizBuySell, the largest online business-selling platform: only 20% of all of the businesses listed for sale ever sell, roughly 50% of the deals agreed to between buyer and seller never close only 10% of sales are handled by business brokers  The last fact may explain the first two! Here's my list of Why Businesses Don’t Sell: Seller believed the business was worth more than valuation showed and wouldn’t negotiate on the price or terms.    Seller wanted all cash and was unwilling to carry part of the financing. Buyer liked the business but it failed the “rule of thumb test” meaning that the cash flow was insufficient to pay the acquisition debt payments and provide the buyer with a living wage.

The other day an attorney friend said in his best Scrooge-like voice, “I don’t like goodwill.” Because we were discussing business sales, I knew he wasn’t referring to the happy, peaceful, holiday goodwill. He meant business goodwill except he called it “blue-sky”. Contrary to popular belief, the word blue-sky is not synonymous with goodwill. Goodwill has more than one meaning especially at this time of year, but blue-sky isn’t one of them.   My attorney friend was confusing something of no value (blue-sky) with a sale-able asset (goodwill). While some owners do have blue-sky dreams, the buyer purchases goodwill and tangible assets when a business is transferred in an asset sale.  According to Merriam-Webster’s dictionary, Goodwill is:  1)     a kindly feeling of approval and support; benevolent interest or concern;  2)     the favor or advantage that a business has acquired especially through its brands and its good reputation;  3)     the value of projected ear

Successfully selling your business is a full-time job. While finding a buyer is essential, determining that a buyer is qualified, willing and able to purchase your business is another matter.  Convincing the buyer to buy your business through careful negotiation, due diligence, financing, deal structure, funding and closing is the value that a business broker brings to the transaction.  A former client said afterward, “At first, I didn’t think I needed a business broker but after going through this process, I realized that the transaction wouldn’t have happened if you weren’t involved”.   If your business is priced right, has adequate cash flow to service the acquisition debt, and you are willing to finance a portion of the goodwill , then finding a qualified buyer is usually not a challenge . This is especially true if you, as seller, have business Seller’s Discretionary Earnings (SDE) in the six-figure range. (Remember: Discretionary earnings are the sum of net profit + dep

A couple of weeks ago I had the opportunity to talk with Brandon Wright on his weekly show, Wright Stuff Radio , about the steps to maximize the value of your business when you sell.  Being a business owner himself, Brandon has a no-nonsense approach to getting to the bottom line about topics that matter to business owners.  Listen in as we talk about what buyers want from you when you sell your business: https://soundcloud.com/wrightstuffradio/wright-stuff-radio-sheila-spangler

The following story is true. I’ve eliminated the names and some details to protect the privacy of the business owner.  While I’ve written this story as a letter, I didn’t actually mail it. However, I am publishing it here because it is important, if as a business owner, you want to maximize the value of your business when you sell. As a business owner, it is likely that you have built your business from the ground up.  You've invested a considerable amount of energy, money and time to develop and grow your company.  And it's quite possible that you've experienced setbacks and challenges along the way causing you to falter or even consider shutting down.  I know this…..and that’s why I want the best for you when you are ready to sell. Why do I care so much? Perhaps it’s because I grew up in an entrepreneurial household. I didn’t realize it as a child but looking back, I see the risks my dad took to leverage his assets and “bet” on his own abilities, stamina, intuitio