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By JoAnn Lombardi, President VR Business Brokers/Mergers & Acquisitions
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When Considering When To Sell a Privately Held Small Business, Consider the Following:
It takes a long time to recover from a bad year following the best year ever means the stakes are high to raise the bar for next year. Following your best year ever with even a “normal” year is a downward trend. A common “look back” period is three years. In our recasting exercises with owners, we put 60-70% of the weight on the cash flow of the most recent year. Buyers are extremely suspect of firms that are trending downwards; it’s considered a risk, and risk is always expressed in a lower multiple of earnings/revenue or less favorable terms such as an earn-out or seller financing. Furthermore, banks are very conservative and have similar concerns about down years. Limited financing options send a signal that a business isn’t “worth it” and further weaken the owner’s position for getting an aggressive purchase price.
Last Year Could Have Been Your Best Year Ever Due To Factors You Can’t Control
Even if you just had your best year ever and you’ve executed a long-term strategy to take your business to the next level in the years to come, you can’t control all factors, such as changes in technology (have you seen any movie rental stores lately?) or macro-economic factors. You could have your margins eroded by tariffs if you’re relying on overseas products due to a political fight in the White House… Business ownership is all about predicting and protecting, but some threats are unavoidable and unforeseeable.
Click Here to Read Full Article
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Whether you are buying or selling a business, following a few guidelines can help you negotiate more effectively and improve your chances of achieving a favorable outcome. While you may already be familiar with basic negotiation strategies, a refresher can be beneficial, especially for what might be the biggest deal of your life.
Know Yourself
Good negotiators start by knowing themselves. Before entering sale negotiations, take time to identify your goals and tactics for achieving them. If you’re buying, determine your “reservation price”—the maximum amount you are willing to pay. Consider whether you can walk away if the seller refuses to budge on price.
If you are selling, similar questions apply: What’s the lowest offer you will accept? Are you in a hurry to sell? What conditions will you require as part of the sale? For example, retaining certain employees might be a priority. Be prepared to speak confidently about your business’s strengths and address any perceived weaknesses. Since the buyer’s negotiating leverage often focuses on your weaknesses, you need to be aware of them and ready to provide solutions that mitigate their impact on the buyer’s offering price.
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Exiting your business successfully means securing a deal that aligns with your future goals. Whether you aim to find a new owner to continue your legacy, fund a new venture, or exit quickly to focus on other priorities, finding the right buyer is essential.
This post covers five chronological steps to find a buyer for your business, vet them, and determine if they can ensure a smooth transition that supports your exit goals.
Many business owners assume they must rely on their personal network — or even Google — to find a buyer. Maybe you’ve received an unsolicited email from a buyer or know someone who sold their company this way.
However, this post explains why working with a qualified M&A advisor who understands your exit objectives, casts a wide net, and negotiates with buyers on your behalf is a far more effective approach.
The Different Types of Business Buyers
When seeking the right buyer for your business, it’s important to recognize that different buyers have varying motivations, propensities, and priorities during a sale.
Understanding these buyer types will help you position your business in a way that aligns with your goals. Creating Ideal Buyer Profiles (IBPs) or buyer personas is key to this process. While none of these types are inherently good or bad, some may be a better fit for your preferences and objectives than others.
We start by categorizing buyers into two groups: strategic buyers and financial buyers.
Strategic Buyers
Strategic buyers acquire and absorb companies to grow their businesses. They might be your firm’s competitor, supplier, or customer, or they might be looking to expand in your market or diversify their revenue streams.
For example:
- A competitor might acquire your business to gain access to your R&D (research and development), IP (intellectual property), increase their market share, or expand geographically.
- A competitor may also want to acquire you to add an adjacent product line to their offerings.
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A Thriving Top Sports Bar Restaurant Located in Central Florida, Disney District
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We present an extraordinary investment opportunity to become part of one of the most exciting restaurant projects in Central Florida: the development of a premier sports bar in a Disney-owned shopping center, just minutes away from the world-famous Disney theme parks and Disney University, home to over 10,000 students. This high-traffic location, coupled with the rapidly expanding surrounding area, offers exceptional potential for success and strong returns on investment. Our chosen brand is ranked among the Top-5 sports bar chains in the United States, renowned for delivering a unique and memorable experience that caters to sports fans, families, and food lovers alike.
For more information contact: Claudia Luquerna
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VR Office Located in San Antonio, TX Facilitated the Sale of a Commercial HVAC Company
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A rapidly growing HVAC company services both commercial and residential properties and has a customer base that spans 30 years. Known for its exceptional service and knowledgeable technicians, the business currently divides its workload between 80% commercial and 20% residential during winter months, while the summer months see a shift to 60% residential and 40% commercial.
The company prides itself on operating with Christian values and integrity, ensuring each customer receives the best possible experience. To enhance efficiency and reduce expenses, they utilize QuickBooks and Fleet Locate GPS for their employees. Fully equipped with the necessary tools, vehicles, and equipment, the company is ready to deliver high-quality service to its clients.
Congratulations Javier Luna on your successful closing.
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AI in Cross-Border Transactions
by Gundo Kahle, CEO CBA Cross Borders Associates
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It is time for all of us to recognize the importance of AI in Cross-Border transactions.
AI can make a significant contribution to finding buyers for cross-border transactions. It can improve the process of finding buyers for cross-border M&A by analyzing large amounts of data to identify potential acquirers that match the target’s industry, financial profile, and strategic objectives.
AI-powered tools can also optimize lead generation by using predictive analytics to suggest the most promising prospects. AI-powered tools include chatbots, virtual assistants, and recommendation engines that enhance user experience and automate tasks. Depending on the kind of transaction and the target country, we use partly various AI Tools for M&A Buyer Identification, such as Grata (AI-powered private market intelligence platform), Axial (Deal sourcing platform for lower middle-market transactions), SourceScrub (Data-driven buyer and investor research), and will soon add PitchBook (Market intelligence on financials, deals, and investors), and CB Insights (AI-driven market and acquisition trends analysis).
They can analyze large amounts of market data to identify potential buyers based on their buying behavior, industry trends, and demand patterns. It can analyze global deal databases, financial reports, and market trends to identify companies actively seeking acquisitions or expanding into new regions.
Machine learning models can evaluate historical deal patterns and predict the likelihood of specific buyers based on their investment behavior.
AI-powered sentiment analyses of news, earnings announcements, and analyst reports can uncover signals of interest or financial readiness from potential buyers. Automated outreach tools can personalize communication and thus increase engagement with the relevant decision-makers.
In addition, AI-driven CRM (Customer Relationship Management) systems can automate contact, personalize communication and streamline negotiations. Language translation and sentiment analysis tools help to close communication gaps and assess the buyer’s intentions.
In addition, AI can evaluate due diligence by analyzing financial statements, legal documents, and regulatory filings, helping buyers and sellers assess compatibility more efficiently. AI can also improve digital marketing efforts by targeting relevant audiences through social media and search engine advertising, ensuring sellers reach the right buyers in international markets.
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VR is the Only Remaining Founding Firm of The International Business Brokers Association (“IBBA”).
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Have You Ever Considered Selling Businesses?
Small businesses make up over 56% of the annual U.S. GDP and every year a large amount of them change hands. VR is the industry leader in facilitating such transactions. Click here for more information on how to join VR.
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