Reasons For Selling A Business

 A business sale is not a "one size fits" all situation. The details that apply in a specific situation will not all be the same. Before proceeding further, it's important to step back a bit and look at the big picture for business sales in a variety of circumstances. Not all business sales are for the same reasons, and the circumstances of the sale can have a big impact on how a sale should proceed.

What KIND of Buyer is it?

Before considering the various sale situations, it helps to consider the KIND of buyer. In almost all cases the buyer will be either another company or an individual.

If the buyer is another company then it is likely the buyer will be able to run the business successfully. The buyer's ability to pay may be fairly secure. Training the buyer may not be critical, but assistance with customer retention after the sale may be critical. The buyer may be more sophisticated, or at least have more sophisticated advisors. Consideration for the sale may include some form of performance based incentives (i.e., an "earn-out").

If the buyer is an individual, training the buyer may be even more important than assisting with customer retention. Since the buyer's ability to run the business successfully may not be as certain as it would be if the buyer were another company with a proven track record, the cash and/or collateral the buyer brings to the table may be a major factor in the sale.

The Most Common Sales Situations

These are the most common sales situations. Whether you are a buyer or a seller, one of these situations most likely fits you. Additional details applicable to each are covered later in subsequent articles.

Very Small Business - This is the most common business sale situation

Sometimes referred to as "Mom & Pops", "Main Street Businesses", etc.

Most of these businesses do not actually sell.

This is usually a sale to an outside individual (an "External Sale").

Sometimes (although rarely) the sale will be to an insider (an "Internal Sale").

It is rare to have an employee with both the interest and the ability.

The person needed can sometimes be recruited.

Can often be creatively structured as a win/win, even if the buyer has little money.

Somewhat Larger Small Business - External Sale

More likely to sell than a Mom & Pop, but many never do.

Internal Sale

Easier to structure than for a Mom & Pop, but still difficult to find the right successor.

Family Sale

The IRS has insanely complex rules designed to make sure they get all the tax revenue they think they are entitled to. Which is A LOT.

Will most likely need an appraisal to support the price.

Divorce

Often VERY contentious, with expensive appraisal and attorney fees, and the eventual price and terms set by a judge.

Can sometimes be greatly simplified with advance legal planning (such as Shareholders Agreements).

Partner Buyout

Can also be contentious.

Can sometimes be greatly simplified with advance legal planning (such as Shareholders Agreements).

Sale for Health Reasons

If the seller is in ill health but not clearly dying

Time is not as critical as for a dead or dying seller.

Potential buyers may try to take advantage of the situation.

The seller's help with the post-sale transition may be affected.

If the seller is still alive but clearly dying

A sale planned to occur upon death can sometimes be arranged.

This has the potential to save a LOT of tax.

Seller (business owners) has passed away

The company may be in turmoil.

Can be VERY difficult to find a buyer.

Tax issues can be VERY complex.

Financially Distressed Sale

If the business is in trouble, the buyer will need to see a way to fix the problem, or a sale will not happen.

Often involves simply liquidating the assets and walking away.

May be forced by the company's lenders.

Sale to a Large Buyer

Likely to be fairly sophisticated buyers.

Likely to include an "earn-out" as part of the "price".

Publicly traded buyers

May involve tax-advantaged strategies involving the buyer's stock.

Large, closely held buyers

May be easier to attract than a publicly held buyer.

Start-ups

Often done with personal funds.

If funding is from family and friends, then their ownership must be decided.

If Venture Capital is involved, then complexity goes way up.

Usually only available if the upside potential is very high.

Initial Public Offerings ("IPO's")

Basically, this is selling part of the company to the public in the form of company stock.

Often involves venture capital at an earlier stage.

VERY complex.

Employee Stock Option Plan (ESOP)

Very complex and expensive.

Can have significant tax advantages.

Might have motivational effect on employees.

Not as popular as initially expected when these were created.

Very Small Businesses

These businesses are sometimes referred to as "Mom & Pops", "Main Street Businesses", etc. Although each company is small with only a few employees, they represent a huge part of the goods and services available in our economy, and are the embodiment of the American Dream for many people.

Attempted sale of these businesses is the most common business sale situation. Unfortunately, most of the time they never actually sell. Some estimates are that only one in seven of these businesses will actually sell once they are listed for sale. Many more simply shut down once the owner decides to move on to something else.

Unrealistic expectations on the part of the seller, particularly the value of the company, are one of the reasons blocking sale of many of these companies.

The value of these companies is NOT the value of the company to the seller, which may be quite high. Instead, the maximum value is limited by the cost a potential buyer would incur to start a similar business instead. That means the value may be determined by the value of the equipment, plus something extra for the "running start" available to the buyer from buying the existing business instead of starting a similar operation from scratch.

 Even with telecommunications revolutionizing the entire manner in which businesses communicate and with the advent of the Internet too, the telephone still remains the most reliable and the quickest mode of communication. The business phone system should be equipped well enough to handle a large volume of incoming as well as outgoing calls apart from directing and re- directing calls appropriately and accurately without mystifying or disconnecting the customers. Any Business Phone Service is the life line of its productivity as well as its functionality. The choice of the most appropriate service provider would go a long way in heralding newer clients for the businesses as well as augmenting their businesses.

OPTING FOR SMALL BUSINESS PHONE SERVICES FOR BUSINESSES

Small and medium enterprises are over the year's increasingly making use of small business phone service as they are comparatively more cost-effective than other services. These services are capable enough to look after the communication needs of their businesses and they are increasingly cost-effective as they could be used for businesses of every genre and size that demand small Business phone service.

With the passage of time, telecommunication has revolutionized and incredibly advanced its services technologically. The fact of the matter is that the services of the small telephone phones have been installed in most companies globally. It is far less expensive when compared to other telephone services, especially by those being used by major organizations. A small business phone service could still be useful for small business enterprises because of its reliable and accepted functions and other specialized features. Realizing the fact that top-notch telephone services would be rather expensive, small business services continue to go in for and settle down with small business telephone services.

There have been new components that have been developed in the recent past in the realm of communication and this was what service companies have been making use of in their own services. Some suppliers offer small business phone service that comes with extra services incorporated. A small business would definitely vouch for these services as they come with extra capabilities which would later prove to be priceless assets to the organizations. And it is because of the phone service coming at cost-effective prices, the services of small business phones have not been difficult to obtain.

SMALL BUSINESS PHONES FOR ORGANIZATIONS

Every business needs telecommunication lines to communicate efficiently and effectively. Over the years, business enterprises have been using analogue systems for telecommunications. But ever since telecommunications have metamorphosed the way in which businesses operate and communicate, business has taken giant leap forward too. Installing a phone system would not only ease the work flow but also increases the productivity of the company per se.

Call forwarding facility could be another facility that could be considered by companies when they sign up for a new service provider. This would be useful for small business enterprises as the number of telephone connections as well as the extensions would not create problems for them.

FACTORS TO CONSIDER BEFORE GOING IN FOR A SMALL BUSINESS PHONE SERVICE:

• Whether the company could afford the service.

• The present employee strength of the organization

• The competence of the business

• Would it be the service that your business really needs

It would be better that these questions be evaluated, analyzed and assessed before any company would desire to go in for a business phone provider.

As most service providers come with free customer service toll-free number, service hotlines where they can get round the clock customer support that would help them get their queries speedily redressed.

BENEFITS OF SMALL BUSINESS PHONES:

• BUSINESS OPERATIONAL FROM ANYWHERE

It simply does not matter where you are and from where your business operates out of. An answering phone gives you the convenience as well as the feasibility as of conducting your business from wherever you are your business takes you. As the service is so programmed as to function as per the operational schedules of the business per se, the calls automatically get forwarded on to the business owner's phones even though they might not be in their offices.

• A BIGGER AND A LARGER CORPORATE IMAGE

A novel business telephone interfaces of small business telephone answering service that offers' efficient customer care, to gain the attraction of the potential customers into your businesses which would mean that all the incoming calls that land on to your telephone would be answered and greeted with utmost professionalism. These calls could also be customized to business hours and post business hours greetings. The callers get to listen to melodious and soothing music while their calls get connected. The phones could also be auto programmed to an auto attendant so as to provide additional information about the features and benefits and services to the callers.

• COST EFFECTIVE AND TIME SAVING

Small business phone services could be obtained at extremely cost-effective and affordable prices. As all operations are controlled by the service providers, the service that the client gets is devoid of installation, repair as well as maintenance charges. All that it would need is a dedicated phone line and an Internet connection to have your business be provided with multiple phone line connections within the office network which would otherwise incur huge expenses for each individual phone connection.

A hosted PBX service gives your business the attention and the promotion that it so immensely deserves. This could happen if the service providers offer a superior level customer support that could not only enhance your company's productivity but also its revenues and client base.

CONCLUSION

For businesses to operate and function efficiently and for the communications to flow smoothly and effortlessly, Small Business Phone Services is the answer as put simply, it would only help increase your profits and your revenues as well as client base in the market even more

The society which scorns excellence in plumbing as a humble activity and tolerates shoddiness in philosophy because it is an exalted activity will have neither good plumbing nor good philosophy: neither its pipes nor its theories will hold water.-John W. Gardner

As a plumbing business owner, your focus on achieving excellence in the profession has yielded great success. You love what you do and your passion and hard work has paid off.

Your business has managed to survive and prosper in the toughest economic climates and has earned the respect of your customers, peers and employees. Your plumbing company is considered a true asset to the community with a reputation for reliability and honesty.

All of this, however, has come at a price. You've had to sacrifice time you might rather have spent with family or pursuing a hobby or other interest. You may have postponed taking better care of your health and fitness. You may be at a point, right now where you want to retire from the business and start the next half of your life.

If you are like the majority of plumbing company owners, you simply haven't had time to sit down and plan for the inevitable day when you will exit your business. In fact, the vast majority of owners of small and medium-sized businesses (nearly 80 %!) admit that they have no succession plan in place.

This fact points to a common assumption many business owners make.

"My business is so profitable and amazing that it will be easy for me to find buyers and sell it quickly."

Unfortunately this is far removed from reality. Even in the best of times, for the very best businesses, the success rate for selling in the United States is less than 3%.

That's why, if you plan on exiting your business, you should start putting together a plan at least two years before you intend to leave.

Document your financials to assist in valuation...

Putting together a thorough, comprehensive exit plan entails paying attention to some critical areas of your business in order to attract the highest caliber of potential buyers.

For example, you must have fully-documented financials available that cover a minimum of five years, including the present year.

For savvy buyers, the reality of potential return on investment is what your plumbing company actually looks like on paper, and not what you as the seller think it is worth.

While you will certainly want to engage the services of an experienced professional who is well-versed in all the nuances of proper valuation, you do need to understand at least some of the factors considered in a valuation.

Potential buyers will focus on obvious things such as net income, revenue, and cash flow as basic measures

Buyers may also consider what is known as the EBITDA, or "earnings before interest, taxes, depreciation, and amortization," a measure used to analyze and compare profitability between companies.

In addition to a thorough financial review, a buyer who is looking to invest in a plumbing business will consider other things before making an offer. A prospect will probably want to know details such as how many service calls you average per day and the value of those calls.

He or she will be looking beyond the books for both tangible and intangible factors that make your business more likely to produce a quick return on investment. Planning ahead will ensure that you have done everything possible to make your business an attractive option for the prospective buyer.

What you can do right now to prepare for a great outcome...

The first place to start when planning a business exit is to put together a highly-skilled, trustworthy transition team.

This team consists of experts and trusted advisors with experience in business transitions, as well as key employees, family members, and other interested parties. In addition to your attorney and tax consultant, include a mentor from your industry who has actually gone through the sales process; someone who has been in the trenches and can assist and advise you.

Selling a business is no longer effected with a bundle of cash and a handshake. It is a highly complex process and you need as much expertise and wisdom as you can gather together. Once your team has been assembled, you can meet regularly to draw up a step-by-step transition blueprint.

After your team has been assembled and you have created a basic timeline for how your exit will play out, you then need to put a lot of effort into making your business as profitable and efficient as possible.

Experts liken this to the seller of a home making the cosmetic fixes that lead to "curb appeal."

You don't want to wait until the last minute to start enhancing the curb appeal of your plumbing establishment.

If it makes sense to your transition team, consider replacing or repairing worn-out equipment and tools. Run the numbers to determine whether or not it is worthwhile to invest in new trucks, communication equipment, or computers.

Your physical location speaks volumes to a potential buyer, so don't neglect it. Something as simple and inexpensive as tidying up the landscaping, throwing a fresh coat of paint on the exterior, or ensuring that the dumpsters are emptied and clean, can make a big difference when you are courting buyers.

Get your employees in the habit of keeping their company vehicles clean, their workspaces orderly, and their personal appearances neat and professional.

First impressions count and never more so than when you are trying to find the perfect buyer for your plumbing company.

Don't forget to grow your business...

Once you've made the determination to leave your business, it's easy to get caught up in the sales process and forget you still have customers of whom you need to take care.

Don't allow yourself to get distracted from the everyday running of the business. Allow your advisors and transition team to handle the exit details while you do everything you can to increase your bottom line and make the company run more efficiently.

Remember: the typical qualified buyer most likely is not purchasing your business because he or she has always dreamed of becoming a plumber. That buyer is looking for a business that will produce profits now and for many years to come.

If you have key commercial accounts, now is the time to make them feel especially appreciated. Customer loyalty is one of the intangible qualities that seasoned buyers look for in a business. Do your best to keep your client base happy, satisfied, and singing your praises. Something as simple as a phone call from you, a thank you card, or an invitation to lunch can create strong feelings of loyalty in a client.

You may also want to step up your marketing efforts a bit to get those service calls coming in more regularly or shore up your commercial database.

Even if you are currently busy and successful, building a pipeline to add new clients is never a bad thing. To a potential buyer, a phone that never stops ringing is an irresistible siren song.

Consider this...

It is likely that you will only get one chance to successfully sell your plumbing company. There are many gremlins that can creep into the process and wind up making it take longer and cost more.

That's why it is so important to put together your team and create a game plan that doesn't overlook any detail.

As you prepare to end your career in plumbing and move on to the next phase of your life, you must avoid making mistakes in strategic planning that will cost you money.

A short article such as this one can't possibly address all the factors that go into a very successful, stress-free business transition. The hope is, however, that this will get you started doing the necessary things to guarantee the best outcome.

Leaving your plumbing business is one of the most important phases of your life. Planning and preparation ensures that you will be able to get out of your business the money you need in order to create the future you desire.

Educating yourself now on the perfect exit strategy and implementing it in phases is the best way to avoid making bad decisions that will impact your retirement.

During his twenty-year career in business, Heath Frantzen has helped dozens of business owners, including plumbing and HVAC contractors, sell their businesses successfully, with fewer hassles.

His current role as Chairman & CEO for Texas-based Delta Business Services ([http://www.deltabusinessservices.com]) enables him to take business owners by the hand and craft holistic exit strategies, combining his investment experience with his business acumen. Heath holds a Bachelor of Business Administration degree in Finance from the University of Texas at Austin https://jump.africa/. His continued commitment to life-long learning includes completion of the Business School for Entrepreneurs, Toastmasters International, Secrets of Professional Investors, Financial Literacy, and Financial & Tax Strategies for Business Professionals. He is the author of the computer books Psychology of Money: 101, 202, & 303.