The Road Beyond ...: What Nobody Tells You About Selling a Midsized Business

By Achim Neumann

Without question, successful business owners know a lot about managing their business but selling a business is for most businesses owners a “first” and one time event. Moreover, selling a business is essentially the last chance to capture a significant financial gain, and thus, it is important to ensure that this event is professionally executed in a most profitable fashion.

However, this is not another ‘Do-It-Yourself’ handbook. As a matter of fact, it is my strong belief that business owners should have highly qualified professional M&A advisors, in conjunction with transaction attorneys and CPAs, facilitating the sale of their businesses – very much as few business owners would attempt to present themselves in court litigation or file their own tax returns. More importantly, no two transactions are alike.

Knowing these insides tricks will be crucial in successfully completing the sale of a business and can easily amount to thousands of dollars in additional income.

• Language: English
• Publisher: BookBaby
• Release date: Apr 15, 2017
• ISBN: 9781543900217

Book preview

The Road Beyond—What Nobody Tells You About Selling A Midsized Business

Copyright 2017

by IWS License, LLC

Postal Box 500,

Atlantic Highlands, NJ 07716

For more information, please contact:

[e-mail]

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be sent to the address above.

Library of Congress Cataloging-in-Publication

Data is available on request from the publisher.

ISBN 978-1-5323-3022-3 (alk. paper)

eISBN 978-1-5439-0021-7

Photo Credits: All photos © IWS License, LLC/Achim Neumann

LIMIT OF LIABILITY DISCLAIMER OF WARRANTY:

The publisher and the author make no representations or warranties with respect to the accuracy or completeness of the content of this work and specifically disclaim any warranties, including but not limited to warranties of fitness for particular purposes. No warranty may be created or extended by any sales or marketing materials. The advice and strategies herein may not be suitable for every situation or every seller. The work is sold or provided with the understanding that the publisher and author is not engaged in rendering legal, accounting or any other professional services. The reader is strongly urged to seek proper professional advice. Neither the author, nor companies owned by the author, nor the publisher shall be liable for damages arising here from. The fact that an organization or web site is referred to in this work as a citation and/or potential source of additional information shall not imply that the author or publisher endorses such information source

Dedicated to my parents

With tremendous appreciation to the entire team at A Neumann & Associates, LLC

CONTENTS

Foreword

About the Author

CHAPTER 1: A Real Soul-Searching Mission Needed

CHAPTER 2: The Process of Selling a Business

CHAPTER 3: Why Use an M&A Advisor or a Business Broker?

CHAPTER 4: The Need for a Business Valuation

CHAPTER 5: What Drives a Business's Value?

CHAPTER 6: Tax and Legal Experts

CHAPTER 7: Marketing Documents

CHAPTER 8: Marketing Campaign

CHAPTER 9: Business Buyers

CHAPTER 10: Buyer Introduction and Offer Negotiation

CHAPTER 11: Due Diligence Period and Acquisition Financing

CHAPTER 12: Deal Closing

CHAPTER 13: Post-Closing

The Top 15½ Deal Killers

Afterword

Glossary

Index

FOREWORD

By Jane R. Gardner,

former owner of a New Jersey-based B2B consulting business, providing key services to Fortune 500 companies in the pharmaceutical industry nationwide

If you are like most business owners, you've put your heart and soul into building and improving your business and, for better or worse, looked at its value as your retirement plan or a way to leverage the business's equity to achieve some other important goal. Wouldn't you want to maximize the revenue you receive when your business is sold? Wouldn't you want to see your business thrive into the future, even after you are no longer involved? And how about finding a buyer who can really afford to buy your business?

Selling a business is akin to growing one, except that you probably don't know much about how to position this kind of sale, how to prepare your backroom for the sale, or how to find the right buyers without telling the whole world your business is up for sale. In my case, I was so busy running and managing my business that I didn't have the time or the inclination to dive into the details of finding potential buyers. Nor did I want any of my customers knowing that I was getting ready to retire.

I had already built up a good sales force and taken the reliance of my clients away from me and onto my employees to ensure that I wasn't primary equity of the company in my customers' eyes. I had been cleaning house over the prior two years to remove some of the less productive staff and had right-sized to increase the profitability of the firm. My books were in order. I was turning a consistent profit and growing the concern through new sales and customer retention.

But everyone has to retire someday. What was my business really worth? Some multiple of net income, some multiple of annual sales, or some other magical factor I knew nothing about? What were the hard assets I had to sell? Mine was a consulting business with some proprietary software and web applications. But what were these really worth, much less my essential customer base?

Certainly, I knew nothing of prequalifying buyers or of how to determine which of the potential buyers I might identify was a good match for success with my business, nor did I understand how to pursue a sale without taking my eye off the ball of managing the current employees for their (and ultimately my) success. The most important question to me was: How do I put this business on the market without letting everyone know it is for sale? I knew that once that news was out in the marketplace, my business would undoubtedly not be worth what it was before the word got out.

It takes an average of twelve months to sell a profitable business and a lot of work to get the job done. I decided to hire Achim. Achim Neumann is an expert in selling businesses, maximizing the impact of marketing and financial materials, and finding qualified buyers. There are myriad details to consider, not the least of which is how to keep the business growing successfully while maintaining margins, keeping your employees working hard and undistracted, and closing the deal while managing the buyer's expectations.

In this book, you will gain a clear introduction to what it means to embark upon the important journey to selling your business. Some of the salient points include:

•  Determining the true market value of your business—that value can be very different from the price you have in the back of your mind or what you think is a fair share for your hard work

•  Preparing the marketing materials for your business—you probably know how to sell your services and products, but this sale is probably a lot different from what you do every day

•  Dealing with your current employees—should you consider selling your baby to your current employees? Do you tell your employees you are planning to sell?

•  Deciding on the essential things to do as you get ready to sell—how do you make your business as attractive as possible?

•  Getting your records in order—if you aren't much of a financial person, do you have your bookkeeping system up to date, and is it accurate? Can you run accurate reports to get the information a potential buyer might need to consider the sale?

•  Finding qualified buyers—now here is one to stymie the most intrepid business owner! Where do I look? How do I ensure they can pay me? Am I willing to pay for background and financial reviews for every buyer who shows up?

There are a lot more important points included in Achim's wonderful analysis and discussion of selling a business.

Reading Achim's book will help you prepare for offloading this important part of your life, your business. Whether you are trying to determine who to engage in selling your business, such as hiring a good business broker, or whether you are simply wondering how the process works, spending time with Achim in his world of mergers and acquisitions is a great place to start.

As for me, my business sold with Achim over five years ago. The business is still working and includes some of my same old employees who made the transition to their new world with a new owner. I was able to keep my business profitable while it went through the sales process and maximized my net income through the sale, which was important to me. Most important, by hiring Achim, I reduced a great deal of the anxiety and stress I would have put upon myself had I tried to sell it alone. It was well worth the investment for over a year's hard work in selling my firm.

If you are ready to sell, Achim's book is a wonderful place to begin learning about what it takes to position and sell a business, while you achieve your goals of moving on to other things in your life.

ABOUT THE AUTHOR

Achim Neumann spent his early years in Germany, relocating to the United States in 1979. During his time in Germany, he received early insight into various financial aspects of businesses through employment at an international Fortune 500 bank.

After working in the entertainment industry in 1979 in Atlanta, he earned a bachelor's degree in economics from Columbia University, where he was awarded the Economics Prize for outstanding academic performances. He then completed a master of business administration (MBA) from The Wharton School, University of Pennsylvania, Philadelphia, focusing on marketing and finance.

Subsequently, having held executive positions at Siemens, a Fortune 500 technology corporation, for nearly a decade, he built his expertise in mergers and acquisitions, strategic planning, domestic and international finance, and business development.

As president of da music and 1201 Music, Inc., two leading independent jazz labels based in New Jersey, he built two publishing companies that were awarded several coveted gold records and leading music chart positions in the entertainment industry in combination with a national promotion and distribution network. At that time, he became thoroughly familiar with intellectual property rights, patents, trademarks, corporate contractual engagements, and processes in the high-tech industry.

Achim formed A Neumann & Associates, LLC, New Jersey, in early 2003. As president and founder of the firm, he brings more than forty years of business and management experience from multiple industries.

A Neumann & Associates has taken a leading role in the mergers and acquisitions and business brokerage field for midsized businesses on the East Coast and counts many highly qualified professionals among its team members.

Due to his long-term involvement with midsized companies, Achim is thoroughly familiar with the concerns and goals of respective midsized business owners, allowing his company to provide valuable input to owners in the transfer process.

Throughout his career, Achim has been quoted in a wide spectrum of media, including national publications such as The Wall Street Journal, Forbes, INC, Entrepreneur, The Huffington Post, Billboard, NJ Biz, and The Sunday Star Ledger.

His current associations include the Better Business Bureau of New Jersey, the International Business Brokers Association (IBBA), the Wharton Club, and approximately forty Chambers of Commerce on the East Coast. He is also a regular speaker at a variety of seminars and workshops, including recent lectures to the Executive MBA class at Rutgers University.

CHAPTER 1

A Real Soul-Searching Mission Needed

Before considering the sale of a business, a business owner must do some true soul-searching.

A sale of a business takes a lot of resources, such as gathering of documents, having a valuation performed, tax and legal planning, taking time to interview investors, and negotiating an offer—as well as performing post-closing consulting obligations. This all translates into time demands and financial investments.

Often, an owner's estate planning, in addition to retirement planning, has to be updated. Without a true motivation to sell and actively execute a sale, there is little sense in initiating the process of selling a business and consequently wasting a lot of resources in the process.

I have often been asked if a business is sellable. Indeed, not all businesses are sellable. There are certain factors that make it more difficult to sell a business. These include:

•  Significant decline in sales and/or cash flow

•  No market demand for products or services

Reviews for The Road Beyond ...

[Chandler · Rating: 5 out of 5 stars]

Great review and analysis of the proper way to go about transitioning a business.