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Highest Price is Not Always the Highest Priority

Many M&A experts believe that the highest price may not be the most important factor in putting a deal together. Here is one such expert’s opinion of the most important factors:

  • The assurance that the sale will close promptly.
  • The deal terms, e.g., cash, stock, notes, all cash at closing, earnouts, contingencies, etc.
  • Total price and/or consideration.
  • Legal issues.

In many cases, the legal issues can make or break a deal. The expert mentioned above feels strongly that the Representations and Warranties requested by the buyer should be submitted along with the Letter of Intent. He feels that the business should not be removed from the market until there is basic agreement on the Reps and Warranties; this negotiation may be more complex than the price, especially if the buyer is not willing to bend.

Here at American Business Acquisitions, we dedicate ourselves to assisting business sellers in determining their highest priority. We discuss the desired timeline and needed outcomes to achieve their goals. In many cases, our business seller clients are relocating from Illinois or Indiana and purchasing another business or a new home elsewhere, which requires proceeds from the current business sale to complete that transaction. As M &A advisors and business brokerage professionals, we seek to achieve a win-win outcome for the parties involved and, importantly, to happily conclude the sale on their behalf. Setting priorities and expectations upfront help with this process.

Copyright © 2023 American Business Acquisitions, Inc. 

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What Serious Buyers Look For

Serious buyers want to look at the financials of a company with forethought as well as all the other considerable aspects of the Business. Nonetheless, there are some other areas that the serious buyer will heavily consider that sellers may pay no attention to.

The Industry – The serious buyer will want to take a significant look at the industry itself, the competition, the suppliers, the patronage, etc. This research will cover the strengths, weaknesses, threats from the opposition, and opportunities of the possible acquisition. With the expansion of the “big box” retailers, much power has shifted from the manufacturer to the retailer. A manufacturer may want to raise prices, but if big retailers say no, it’s a very strong no that has a large impact on others.

Discretionary Costs – Some sellers will cut down their expenses in nonobligatory areas with a goal of freeing up funds that can be used for other purposes. Some of these purposes include reinvestment in the company, paying down debt, or repurchasing shares of stock. However, these cuts will hinder the future bottom line, and smart buyers will take recognition of this.

Obsolete Inventory – This is also an area that buyers take a serious look at and that can cause a change to the purchase price. You can reduce the amount of obsolete inventory by selling it at a discounted price or giving it away for free. Another option is donating the obsolete inventory to charity so that it will be put to good use instead of taking up space in your store or being thrown out because no one wanted it. The best way to know if your inventory might go obsolete soon is by keeping up with trends and changes in.

Wages and Salaries – A company may be paying minimum wages or offering little to no benefits. These cost-saving decisions may seem like a good idea at the time but could cause detrimental issues in the future. Some of these issues include employee turnover or quiet quitting. If the target company is to be consumed by another, compensation issues could be critical to making the business a success.

Capital Expenditures – The no-nonsense buyer will take a very close look at machinery and equipment to make sure they are functioning, up to date and as good or in better condition than the competitors. Buying new equipment can modify projections and could have an affect on the offering price. Although it seems like a large expense in the moment it can have an even greater impact in the long run.

Cash Flow – Serious buyers will diligently review the cash flow statements and what affects them. The buyer wants to be sure that the business will continue to bring in a positive cash flow after the acquisition (i.e.: after paying off the debt and after paying a reasonable salary to the owner or general manager, as well as other employees).

Other areas that sellers overlook, but that the serious buyer does not include: internal controls/systems, financial agreements with lenders, governmental controls, anti-trust issues, legal matters and environmental concerns.

Please feel free to contact American Business Acquisitions for a free consultation on selling a business in Illinois or Indiana.

Copyright © 2022 American Business Acquisitions, Inc. 

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Telling the Story of Your Business

A Brokerage Professional Can Help Tell Your Story

It’s extremely common that sellers don’t usually know the true story of what their business actually is because they tend to lack the proper perspective as they are too deeply involved. Business brokers and M&A advisors serve a great function as a third party who can look at the story from a different perspective because in reality, sellers may be burnt out or haven’t taken time to really think about what the story of their business truly is. Now it goes beyond these professionals just being numbers people, as they can see your business as a story to be told. And they can help you control that storyline for optimal results.

Embracing the Human Element

When it comes to telling the story of your business, it’s necessary that your M&A advisor completely understands your business from the ground up. Communication is key here and this will play into why a buyer is going to want to buy your business. After the interview process, these professionals will go to the lengths to properly arrange all relevant information to support the story in such a way that the buyer can digest it and see the potential within the business. This is so a prospective buyer can understand that value and envision him or herself as the hero.

It Goes Beyond the Financials

Brokerage professionals will want to interview you to learn how to weave together your story. A part of this process will involve business brokers and M&A advisors in order to help sellers determine the price and work as advisors on pricing. Because the financials and the facts are going to be the front page of each business story. In the end, every story has a moral and pulling all of these elements together to make an engaging story that will ultimately inspire and motivate a buyer to buy the business.

Storytelling Leads to Successful Deals

Selling a business isn’t just about all of the financial variables. Of course it’s important to consider the numbers, figures and facts, but it is also about the people. When buyers open their minds to the story being told, they are able to envision the future potential of the business and why it is going to be a valuable opportunity.

Please feel free to contact American Business Acquisitions for a free consultation on selling a business in Illinois or Indiana.

Copyright © 2022 American Business Acquisitions, Inc. 

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When It Comes to Selling Your Business, Let Others Do the Heavy Lifting

While brokerage professionals are working to sell your business, it’s important for you to keep your daily operations running as smoothly as possible. Sellers often make the common mistake of becoming distracted during the selling process and allow things to fall by the waist side. You’ll want to make sure everything remains the same, as prospective buyers will otherwise start to become nervous. Operating hours, inventory levels, and tasks such as keeping the premises in prime condition should remain unchanged. If any changes like revenue or sales decrease, that will raise a red flag for buyers.

Business brokers , M&A advisors, Attorneys and CPAs – anyone professional who may be involved during the sales process – will help tremendously with various details and events. This way, you can focus your energy on running your business, and they will continue to assist with the process from beginning to end.

Get Professional Advice on Pricing

You may have a ballpark figure of what your business is worth and an estimated amount you expect it to sell for. However, the truth is that you will only receive what the market will allow. Always obtain a professional valuation before providing a listing price. Over pricing the value of your business will certainly derail the process and potentially halt it all together. You want to strive towards successful results, not set backs.

Keep Things Confidential

Confidentiality will be an extremely important piece of the puzzle during this process, especially until your sales transaction has fully concluded. If your vendors and employees know that you are selling, it could lead to circumstances that are detrimental to the value of your business. Employees may begin to pick up on what is going on behind the scenes and opt to seek employment elsewhere. Similarly, vendors may catch wind of what is happening and choose to terminate their contracts if word were to get out.

Decide On Your Strategies

Think about how willing are you to stay for a designated period of time after your business sells. Weighing this decision tends to help increase the amount you receive for your business, as many buyers will hold you as a valuable asset as a reduction in their risk and often increase their offer. Another thing to consider is offering seller financing. Similar to sticking around, buyers will view financing as a sign that you believe in the future success of the business.

Prepare in Advance

It’s always best to prepare when you are not experiencing external pressures. Unfortunately life is unpredictable and any event could cause you to sell at an unexpected time. Factors to consider are making sure, years in advance, that your bookkeeping and paperwork is kept up with. This would include organizing documents or handling any litigations and environmental issues. As mentioned above, selling a business can be highly distracting for business owners.

A prime reason for business owners is to start talking to an M&A advisor or a business broker a few years in advance. That way they can make sure everything is optimized for positive results.

Copyright © 2022 American Business Acquisitions, Inc. 

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What Do Buyers Really Want?

When sellers get ready to put their businesses on the market, they often wonder what buyers are really looking for in an effort to make their businesses as attractive as possible.

The answer to this question can seem mysterious when you are on the other side of the bargaining table. So, what are buyers typically thinking about when they make the decision about whether or not to purchase a business for sale in Illinois? It should come as no surprise that much of this is tied into earnings and stability.

Guarantees of No Surprises

Earnings that are sustainable are very attractive to buyers. After all, it allows them to know what to expect. Buyers can then factor in if they can advance the business in a way in which it would grow faster than the current pace.

If not, they at least would have the confidence to know that the business will proceed at the same rate. Of course, no buyer would want to acquire a business only to find that it only had high earnings temporarily due to a one-time contract.

Accuracy of Information

Along the same line of avoiding surprises, buyers will want to verify the information they receive about a business. Anything involving past, present, or future legal issues will be scrutinized along with other issues, such as pending product returns. The due diligence process is when you can expect the buyer to really dig into the details of your business. You can expect that he or she will often do so with the assistance of an attorney and accountant.

Oftentimes, accountants or appraisers add back one-time expenses or non-recurring expenses. Buyers will want to look at the earnings and have proof of expenses that are non-recurring, such as fees for a lawsuit or heavy repairs to a building. Since this process inflates earnings, it can make it difficult for buyers to understand the actual earning potential of a business. Otherwise, those expenses would obviously throw off the true earning potential of the business.

In Closing

These are just a few of the critical considerations made by business buyers when looking at a potential acquisition. There are numerous other considerations that a buyer will make, and it is important to be prepared to address those questions and potential concerns a buyer may have up front, or they will quickly lose interest and move on to other potential acquisition opportunities. Put yourself in the shoes of a potential buyer and think about the kinds of assurances you would want before buying a business.

Working with Business Brokers in Chicago or Mergers and Acquisitions Advisors can be tremendously beneficial in this regard. These professionals have worked with many buyers in the past, and therefore easily see things from a buyer’s point of view. They will not only be able to help you get prepared up front when buyers begin looking at your business, but easily identify and point out areas of concern that a potential buyer may have in order to keep the journey to closing on track.

Copyright © 2022 American Business Acquisitions, Inc. 

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Seeking Professional Help When Selling Your Chicago Business

When it comes time to sign on the dotted line while buying or selling a business in Chicago, you only have one opportunity to get it right. Many owners misvalue the worth of their business or don’t take the time to fully understand the process and preparation that goes into it. You may know a friend or even a relative who is able to help you navigate the waters, but it’s always to your benefit to seek professional help and advice. Here are some common mistakes.

Not Prioritizing Confidentiality & Financial Information

There are hundreds of Chicago businesses for sale, and at the top of the list are competitors wanting to gain access to valuable information, so keeping your confidentiality intact is detrimental to the successful sale of your business. Trying to endure the process on your own may make you susceptible to sharing your personal information with the wrong parties. Or in a worst case scenario, accidentally alerting employees, suppliers and customers that the business is up for sale. It’s critical these errors do not occur as to retain employees and not have the scoping out new job opportunities because the sale is taking place or to a rumor thereof, especially if it will not be affecting them. Should these occur, it could jeopardize the sale of the business and deface reputation. It’s equally as important to ensure you trust the parties that are assisting you in selling your business. If any of said parties lack experience, someone may accidentally omit preparing critical paper work or neglect to have financial records properly audited, which could negatively impact your numbers. This could lead to lower offers and less interest from prospective buyers.

Failing to Involve Key Parties

Owners have spent countless hours and tons of energy building their business into a thriving, salable entity. Successful business owners never cut corners on their way to this point, and it’s not time for them to start doing so now. In order to ensure that their sale goes smoothly and that they reap the benefits of their hard work, it’s essential to hire sell-side advisory services. Business Brokers in the Chicago area could likely tell you horror stories of the damage inexperience in the industry has done. Understanding the importance of bringing in key parties should again, not be overlooked by any means. When a business owner is guided by those who are not trusted professionals, there can be many miscommunications in involving key parties. While an error like this one might not necessarily kill the deal, it could lead to delays and complications.

The bottom line is that when it comes to a large transaction like selling your business, it is time to rely upon trustworthy professionals. There are countless protocols that go into ensuring a deal moves along and satisfies smoothly. Experienced business brokers and M&A advisors will make sure that all the best practices are followed and that you come out ahead in the end.

Copyright © 2022 American Business Acquisitions, Inc. 

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The Importance of Employee Happiness

Creating a Better Workplace Culture

There’s no question that employees are an integral part of operating a thriving business. Which is why keeping employees happy plays such a huge role in improving workplace culture, retention, and overall productivity. According to a study by the University of Warwick, happy employees are 12% more productive, which allows them to put forth better work quality and even increase their creativity. When your employees are feeling not only satisfied, but also valued, they will be more likely to keep your clients satisfied too. For each happy employee you have, the focus and engagement will continually increase, projecting onto your customer base. Of course, there is also an opposing side to this. If some of your team members feel frustrated and angry, their actions can drive away your customers and clients. If you are looking to sell or operate your business for maximum revenues, it is a good idea to also maximize employee satisfaction levels as well.

Employee Benefits & Retention

It goes without saying that employees will be more likely to feel satisfied when they feel that their salary and benefits are fair for the work they do. If they are resentful about the compensation they are receiving for their work, this will ultimately impact their performance. Employees who report higher levels of stress are more likely to be absent from work, take longer breaks during their shifts, or even quit their jobs altogether. Listening to employee concerns and consistently conducting one on one meetings to check in with them is extremely important in keeping the lines of communication open. This way your people will be more likely to come to you when they’re stressed or facing a problem. When you think about some of the most successful companies, you realize that many of them invest substantially in supporting their employees to cultivate higher levels of employee satisfaction. For example, Google is well-known for offering a wide range of perks from parental leave and paid time off to free lunches and fitness facilities. Putting forth this extra effort will really go a long way when it comes to retraining not only employees in general, but especially the most talented ones.

The Customer Experience and Company Longevity

Happy Employees = Happy Customers. Those who feel valued are more likely to exhibit happiness and deliver great customer service. When you exhibit good leadership and act as a positive role model, your employees will likely follow suit. When you know your team members are struggling, provide them with resources such as training in resiliency, mindfulness, and cognitive-behavioral techniques and don’t forget to recognize a job well done! Employees should be acknowledged and rewarded on a regular basis. In some cases this may be a financial bonus, but even sending them a personalized note or acknowledging their work within a team meeting will go a long way in cultivating a positive company culture while boosting morale. This will ultimately contribute to your company’s overall ongoing growth and development for the future.

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Important Points for Selling to a Family Member

Every business owner will eventually have to turn over control of their business to someone else. There are many avenues for how this can happen. They range from selling to a prospective buyer, selling to a competitor, or turning the business over to a family member. The key is to start thinking about all of these options for several years before you end up in a situation where you are actually forced to sell.

Working with a Business Broker at American Business Acquisitions in the greater Chicago area can help you determine what sales options are optimal for your specific situation. To help shed some light on the options above, here are some variables to explore when you decide to transfer your business to a family member.

Tax Advantages 

There can be significant advantages when transferring a business to a family member. Without a doubt, the top advantage is the fact that the transfer can be considered a gift. This approach will help reduce your real estate taxes. You might also be able to maintain some control over the business as well, depending on how the agreement is written. For many business owners, this factor can be a big advantage.

Seller Financing 

When transferring a business to a family member, one item you’ll want to explore is seller financing. This is a common practice in general, although it is even more common when transfers to relatives are concerned.

Seller financing is a versatile option of implementing a private annuity. A private annuity can spread payments out across a long period of time. This option can be a win-win situation for both you and your relative. This would ensure a long-term stream of income as a result of ongoing payments. In turn, this decision might make ownership more financially realistic for your relative.

Legal Agreements  

It Is important to keep in mind that selling to a relative no way negates the need for a buy-sell agreement. Even when you’re dealing with your most trusted family members, having a legal agreement in firmly in place is a must. This is an invaluable tool that protects everyone involved.

A buy-sell contract will clearly outline all aspects of the arrangement. This agreement should include the value of the business, amount being paid, information on which employees will be retained, the current business owner’s level of future involvement, parameters of financing, and much more.

Working with Professionals 

Ultimately, there is a spectrum of potentially powerful benefits that are associated with transferring ownership of a business to a relative. While you can expect the IRS to closely evaluate the sale, this should not dissuade you from considering this option. The Business Brokers at American Business Acquisitions are experts at buying and selling businesses, and they understand the specifics of transferring a business to relatives. Early on in the selling process, you’ll want to work with a professional to help you gain tremendous insight into the best way to proceed.

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Disruptive Factors in Selling Your Business

Down the road, every business owner will need to entertain the idea about selling his or her business. When the time comes, you’ll need to be ready to tackle a range of obstacles, as the selling process can be both confusing and time-consuming. This is especially true for those who haven’t had to go through the process before. Here are some of the key reasons why deal can fall apart when you’re selling your business.

Psychological Factors

Just like sellers, buyers will enter the process with a wide variety of preconceived notions about how the process should work, as well as what they consider to be “a great deal.” The psychological factors when it comes to both buying and selling a business should not be overlooked. Sellers specifically need to understand the specific wants, needs, and desires of a potential buyer, as well as their own psychology.

Even serious buyers may have highly unrealistic expectations regarding various aspects of a business. This ranges from price to opportunities for future growth. In some cases, buyers may drag their feet due to the fact that they are not quite ready or have a sense of urgency to buy a business.

Buyers can also be influenced by outside parties, which could be from friends, family members, or advisors. In short, sellers may discover that buyers might actually be several people who are forming a collective opinion regarding the business.

Seller Psychology

A seller’s own psychology can play a major role in whether or not a business is sold successfully. Many sellers start the process without fully understanding what is involved. This factor, of course, highlights the tremendous importance of working with professionals for months, if not years, before you actually place your business on the market. The professionals at American Business Acquisitions can help streamline the selling process in the greater Chicago area and help sellers understand all aspects of what is involved.

Another major obstacle is that sellers often have unrealistic expectations about both price and the time frame it takes to sell their business. It is very important to enter into the selling process with open eyes and realistic expectations in place. This includes establishing a fair price, and understanding that it could possibly take up to a year before the right buyer is found, but that is very rarely the case at ABA.

Acts of Fate

Sellers should remember that there are many “acts of fate” that could disrupt a deal. It could seem as if everything is moving along smoothly, and at the last minute a buyer isn’t able to secure the funds needed to close.

All parties should understand that until a deal is finalized, any problem can still arise. In fact, they can arise from the most unexpected direction, but it is difficult to anticipate and spot every single potential disruption. The complexity of selling a business is one of the main reasons why so many business owners opt to work with an advisor at American Business Acquisitions.

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How to Capitalize on Your Company’s Uniqueness – A Quick Guide for Selling a Business in the Chicago Marketplace

It is well known that the city of Chicago has a long history of industry and commerce, offering a business environment with natural competitive advantages rooted in its location, infrastructure and workforce.  Given the fact that there are more than 1.2 million small businesses operating in the state of Illinois, it is essential for small businesses to establish and market themselves with a niche or specialized foothold within their specific industry.

Although it’s not always obvious, every business is unique in one way or another.  Whether it be how long you’ve been in business, that the company has been passed down for generations, or because it’s located two blocks away from Millenium Park, there is some special aspect that sets your business apart from its competition.  Oftentimes however, these specialties aren’t promoted to their fullest potential. Although understandable, this oversight is a startegial error which can be especially costly during the small business acquisition process. As the business owner, you know your company better than anyone and being able to effectively convey these aspects to your broker will ultimately lead to the most profitable outcome.

There are of course many unique attributes of a company which can make it more attractive to a possible acquirer. This fact is especially true in the saturated Chicago business listings. Certainly, the numbers are important, but potential buyers will look beyond the figures alone. Factors that make your company special or unique can often not only make the difference in a possible sale or merger, but also can dramatically increase value. Review the following to see if any of them apply to your company and if they are transferable to new ownership.

Brand Name or Identity

Does your service line have a recognizable name? While it doesn’t have to be Sara Lee or Quaker Oats, a name that is well known within a specific geographic region, or one that is identified with a specific product can be extremely advantageous. A product with a unique appearance, taste, or image is also a big plus. For example, Uno Pizzeria & Grille has a unique regional identity, and also a distinctive taste. Both factors are big pluses when it comes time to sell.

Dominant Market Position

A company doesn’t have to be a Fortune 500 firm to have a dominant position in the marketplace. Businesses who are major players in a niche market are in a dominant position as well. Possible purchasers and acquirers, such as buy-out groups, look to the major competitors in a particular industry, regardless of how small it is.

Customer Lists

Maintaining an accurate and current list of customers is important as it can be a valuable resource in many aspects of your business. Not only can it provide leads for sales, a group for testing new products but it can also become an effective method to provide positive customer feedback and social media promotion. Newsletters and other publications have, over the years, built mailing lists and subscriber lists that create a unique loyalty base. Just as many personal services have created this base, a number of other factors have contributed to the building of it. The resulting loyalty may allow the company to charge a higher price for its product or service.

Intangible Assets

A long and favorable lease (assuming it can be transferred to a new owner) can be a big plus for a retail business. A recognizable franchise name can also be a big plus. Other examples of intangible assets that can create value are: customer lists, proprietary software, an effective advertising program, etc.

Price Advantage

The ability to charge less for similar products is a unique factor. For example, Wal-Mart has built an empire on the ability to provide products at a very low price. Some companies do this by building alliances with designers or manufacturers. In some cases, these alliances develop into partnerships so that a lower price can be offered. Most companies are not in Wal-Mart’s category, but the same relationships can be built to create low costs and subsequent price advantages. 

Difficulty of Replication

A company that produces a product or service that cannot be easily replicated has an advantage over other firms. We all know that CPA and law firms have unique licensing attributes that prevent just anyone off of the street from creating competition. Some firms have government licensing or agreements that are granted on a very limited basis. Others provide tie-ins that limit others from competing. For example, a coffee company that provides free coffee makers with the use of their coffee.

Proprietary technology

Technology, trade secrets, specialized applications, confidentiality agreements protecting proprietary information – all of these can add value to a company. These factors may not be copyrighted or patented, but if a chain of confidentiality is built – then these items can be unique to the company.

As any seasoned business person will testify, selling a company is one, if not the biggest deal of a professional career. Countless hours have been poured into cultivating a company with unique service and offerings, so when it comes time to sell, it’s crucial to entrust in a Chicago business broker who is not only well versed in local market, but also one who appreciates your company’s unique attributes and the nuances of the industry it serves. By understanding these industrial strengths, your broker will be better able to maximize valuation and make the selling experience not only smoother, but one that is more financially advantageous.

For a free consultation on selling a business or hiring a business broker in Chicago or across the State of Illinois, please schedule a virtual meeting using http://calendly.com/abameeting or contact us to find out how we can help you achieve the highest value and close on the sale of your business or company.

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