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When to Sell a Business: Factors to Consider

When to Sell a Business: Factors to Consider

 

Timing is everything, and that’s especially true when it comes to selling your business.

 

This article explains the factors that impact the timing of a business sale. Owners should consider if they have a viable business model and the industry conditions that affect the firm. You’ll learn why larger businesses are more difficult to sell, and how a business broker can guide you through the business sale process.

 

 

Is the business viable now?

 

Consider whether or not you have a viable business model now and d if you’re willing to continue to manage the business based on that model.

 

Assume, for example, that you sell products online using a direct to consumer (DTC) model. Your business is growing sales and profits, but the model requires a huge ongoing investment in technology. Are you willing to operate the DTC business and make large IT investments?

 

A successful retailer, on the other hand, may invest a large amount of time hiring and managing workers and dealing with high employee turnover.

 

Both types of businesses present challenges to an owner. You need to decide if you’re willing to accept the challenges, or if you’d prefer to sell the business.

 

The timing of a sale has a big impact on the sales proceeds that you receive.

 

Timing is everything!

 

To sell your business, you need to consider making improvements, gather documents, market your business, and negotiate with potential buyers. The process can take up to a year and will require time and working capital to operate.

 

 

You may have a particular date in mind for selling your business. The date may be based on reaching a particular sales goal, or when you reach a specific age.

 

Events often impact the timing of a sale:

 

  • Motivated buyer: If a buyer has a strong interest in buying your company, and is willing to pay a premium, you may want to take advantage of the offer. Selling at an attractive price allows you to maximize the dollars you receive. If you wait and sell based on your personal timeline, you may not receive a more attractive offer.
  • Industry changes: Changes in your industry may increase or decrease the interest in your business. If consumers are rapidly increasing their online purchases, retailers with a strong online presence are more valuable. As a result, online retailers may receive more purchase offers from interested buyers.
  • Economic conditions: Buyers are more motivated to take risks and purchase businesses when the economy is growing. An economic downturn will reduce interest in business sales, and sellers will be at a disadvantage.

To sell your business for an attractive price, you may need to start the process sooner than you planned. If an event negatively impacts your particular business, the industry, or the economy, buyers may lose interest.

 

The size and complexity of your business is also a factor when considering a sale.

 

How does company size impact a sale?

 

Larger businesses are more difficult to sell. The due diligence process takes longer, and the buyer must put more money at risk. A larger company has more exposure to legal risks from employees, customers, vendors, and regulators.

 

 

Effectively managing a large business requires talented people. As your business grows, you need to find and develop qualified people, and cost may be substantial. A buyer must be able to justify the cost required to maintain a qualified management team.

 

The decision to sell your business may come down to personal considerations.

 

What does the owner want?

 

If an interested buyer contacts you, or you’re starting the process to sell your business, ask yourself these questions:

 

  • Passion: Owners must be passionate about what they do. Growing a business requires a huge investment in time and effort, and you need a strong level of commitment to stay in the business. Are you still passionate, or do you need to make a change?
  • Managing risk: As you grow your business, you’ll need more capital to purchase assets and to hire talented people. Larger businesses raise capital by issuing stock, borrowing large sums of money, or both. Are you willing to manage the expectations of stockholders and creditors as your firm grows? Some owners prefer to sell the business to someone who is more qualified.
  • Financial sacrifice: Many owners take out a second mortgage or liquidate retirement plans to start a business. They give up the income and benefits available working for someone else, and they may not take a full salary for years. Does operating your business still require a financial sacrifice? Is selling your business and investing the proceeds a better option now?

An experienced business broker can help you make an informed decision about a business sale.

 

How a business broker can help?

 

Business brokers understand both the industry-specific and broad economic conditions that impact the timing of a sale. They can use their experience to help you make decisions as market conditions change.

 

Brokers can offer recommendations to help increase the value of the business, in order to maximize value. They use industry knowledge and marketing ability to find qualified buyers for the seller. A business broker understands the market and will educate buyers on why your business is attractive.

 

 

When you find an interested buyer, the broker will keep the due diligence process on track, answer questions, and increase the success of closing the deal.

 

Finally, a broker acts as a buffer between the buyer and seller and is not emotionally connected to the business. The broker ensures that the seller does not leave money on the table, and helps you obtain the maximum possible price for your business.

 

So, what’s your next step?

 

Why it is important to work with a trusted advisor?

 

At Raincatcher, we focus on the seller’s needs- not our own. We focus on providing the best advice about the market, industry, and whether the business is ready to sell.

 

Our objective is to educate the seller about their options. If it makes sense to work on the business, we will recommend affiliates that we partner with to help the owner maximize the value of their business. 

 

We understand how hard our small business owners work to grow their company, and we do not take that lightly. Work with Raincatcher to make a more informed decision about a business sale, and to maximize the sale price received for your business.

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GET YOUR FREE COVID-19 BUSINESS CHECKUP

As COVID-19 wreaks havoc on our nation’s economy, small business owners have faced an operating environment like none we’ve seen before.

The cash management plan that helped you succeed last year—or even as recently as February—doesn’t meet today’s current needs, nor does it allow you to thrive (or at a minimum, survive) as you try to do business over the rest of this year.

Our world has changed, and it continues to do so.

At Raincatcher, we get it. As entrepreneurs and fellow small business owners, we’ve taken a long, hard look at our own books, examined our cash management plan, and made the changes needed to reduce potential risk and maintain a positive cash flow in the face of an international pandemic.

Operating in a COVID-19 Economy

  • Customers might cancel future orders, be slow to pay, or stop buying altogether.
  • Competition might affect current pricing—which affects your profitability.
  • You might need more liquidity in case of another revenue-halting retail shutdown.
  • Future stay-at-home orders could be enforced by restricting purchases made through traditional channels.
  • Borders might even close in the future, directly affecting your supply chain.
  • Reduced supplier production might force you to hold more inventory at increased prices.

Get Your Free COVID Business Score

We’d love to help you and your business weather this storm—at no charge to you. Just answer a short series of questions focused on eight key areas of your business and how COVID-19 has impacted (or is likely to impact) daily operations.

We’ll use the information you give us to provide you a customized, quantitative measure of your ability to survive these changes and mitigate risk—what we call your COVID Business Score

What You’ll Get:

  • An assessment of where your company stands on each risk category
  • An overview of each category and why you need a plan
  • Insights and recommendations to improve in each category

At Raincatcher, we believe in small business and the pursuit of the American dream—no matter what’s going on in the world around us. That’s why we want to help you respond to the shifts and business disruptions your business is facing as a result of COVID-19. Get your free COVID Business Score today, and if you have any questions, let us know how we can help.

GET YOUR FREE COVID BUSINESS SCORE

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How to Take Charge of the Exit Planning Process

How to Take Charge of the Exit Planning Process

Every owner will exit their business at some point. There are many reasons why an owner may sell the business, but what is important is they have a plan to exit.

More than likely you will have a large percentage of your net worth tied up in your business, and you can maximize the value of your business by creating an exit plan. The Value Builder System analyzed more than 40,000 businesses and determined that firms with an exit plan sell for 71% more than companies that don’t have a plan.

This article defines exit planning, and why planning is important. You’ll read about the steps required to create an exit plan, and how Raincatcher’s exit planning services can help.

What is exit planning?

Exit planning is a strategy that owners use to exit a business. It’s a comprehensive approach that addresses financial, legal, tax, and management issues that must be addressed when an owner leaves the business.

Company founders are people who take charge, and you can use that same mindset to plan for a business exit. If you create an effective plan, you have more control over these factors:

  • Timing: When you leave the business
  • Sale price: Maximizing the amount of sales proceeds that you receive
  • Transition: Create a smooth transition that benefits your employees and the buyer

Perhaps most important, exit planning helps an owner determine their priorities. Some owners are comfortable selling to a third party, while others feel a strong need to sell the business to their employees. Planning needs to start years before an owner plans to leave the business.

How to create an exit plan?

The business sale process starts with knowing what your business is worth.

Getting a company valuation

Raincatcher’s industry-leading team of experts has behind-the-scenes access to all of the best valuation methods and tools available. They also have their finger on the current pulse of the market, and they understand your industry.

Most importantly, they know how to analyze and interpret all of the available metrics and data to give you a fast, accurate, reliable, and 100% confidential business valuation.

Once you have a valuation, you may decide to make improvements to your business and increase the value.

Improving your business

Here are some strategies you can use to increase your firm’s value, and to maximize the company sale price.

Build a talented management team

A good manager will use their talents to make smart business decisions and increase company value. Take a look at your organization, and hire managers to fill each important role. This strategy helps you create a business that can thrive without your day-to-day involvement, which is a value driver that is important to a buyer.

Document business operations

Valuable businesses operate efficiently. They can complete routine tasks quickly so that key employees can spend more time on company growth.

Document each routine task that you perform, how often the task must be completed, and who is responsible. Compile this information in a procedures manual, and share the manual electronically with your staff.

Improve your accounting system

Accounting is the process of gathering source documents, posting accounting entries, and creating financial statements. Your accounting system must post information in a timely and accurate manner, so you can generate reliable financial reports.

To improve the process, make sure that you leverage technology by using an accounting software package like QuickBooks. Move away from paper files by scanning documents and saving them on the cloud in software like Dropbox or Google Drive. Integrate your accounting software with payroll, banking, and credit card processing.

Physical inventory count

If you’re a retailer, wholesaler, or manufacturer, you may have a large dollar amount of inventory. Perform a physical count that compares each item in the accounting records to the physical items in your store or warehouse. A physical inventory count is the best evidence to confirm that the accounting records are accurate.

There are a number of other documents you’ll need to review, and possibly update.

Organize and review documents

If you can organize and review records in advance, you’ll spend far less time preparing for the due diligence process. Review your insurance policies, disaster recovery plans, and contracts with customers, employees, and vendors. Keep your files updated, so you’re ready for the due diligence process down the road.

In spite of your best efforts, you may have to overcome some obstacles during a business sale. To plan for your exit, decide if these potential roadblocks apply to your company.

Overcome obstacles to a sale

These issues can have a negative impact on a business exit, and reduce the interest level of a buyer:

  • Working capital: Does your business generate enough cash inflow to pay for company operations? If your cash flow forecast does not project enough cash inflows to operate, you may have trouble finding a buyer.
  • Can the business operate without the owner? As mentioned above, a buyer wants a business that can grow sales and profits after the owner leaves. You need a plan, and an experienced management team to implement the plan after your exit.
  • Documentation: The buyer needs data, in order to fully understand your business, and how to operate after the sale. If you’re missing records, or have poor documentation, a buyer may lose interest.

Planning for a business exit requires a great deal of time and effort. Fortunately, Raincatcher has created a system that makes exit planning much easier.

Raincatcher’s exit planning service

If you work alongside Raincatcher’s exit planning experts, you will transform your business into a built-to-sell enterprise in a matter of months. We’ll guide you through our proven multi-step process designed with one goal in mind – maximizing the value of your business at exit.

Our service addresses these important points:

Our process focuses on key drivers of value that buyers assess when looking for a company to acquire.

Our exit planning fees are built into the cost of the sale. With proper preparation, you can get a 71% value boost in the sale of your business, which will more than cover the cost of working with our team.

Contact Raincatcher and start creating an exit plan to maximize the value of your business sale.

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Best Practices for Selling Your Business Website

Best Practices for Selling Your Online Business or Website

Building an online business or website that attracts a strong following and generates revenue is difficult to achieve. If you want to know how to sell your website, you can learn about several strategies to find interested buyers.

This article explains how to improve your website before you look for a buyer. You’ll read about how websites are valued, and the methods you can use to sell a website. Finally, you’ll learn how the experts at Raincatcher can help you make an informed decision about a website sale.

If you’ve said to yourself: “I want to sell my online business or website”, start the process by making changes to enhance the value of the asset.

Optimize website performance

If you can increase website traffic, and motivate viewers to stay on the website for longer periods, you can increase revenue from the site. Take these steps to optimize your website before looking for a buyer.

Content strategy

What information is most helpful for your audience? To find out, analyze competing websites and review the blog posts, videos and other content that they post. Use this information to consistently post information that solves a problem for your audience.

Search engine optimization (SEO)

Moz defines SEO as the practice of increasing the quantity and quantity of traffic to your website through organic search engine results. Organic traffic is not paid website traffic, and is a key metric that indicates your website’s value. You can use keywords, and website article design strategies to increase SEO.

Promotion of social media, paid advertising

Many sites promote their content on Twitter, Facebook, and other platforms. You may post content with the goal of increasing organic website traffic, or pay for ads on social media platforms.

Email list

One of the most valuable tools to promote your products and services is an email list. Consider offering free resources to website visitors, in exchange for an email address. You can send targeted messages to email subscribers to sell products and services.

Mobile-friendly

A growing percentage of website traffic comes from mobile devices. Work with a programmer to ensure that your site is easy to view and navigate on mobile. If you use WordPress, you can review website templates and see how they look on a mobile device.

Take these steps to optimize your website, and wait a few months until you can see the improved traffic statistics on Google Analytics. Better traffic statistics indicate that your business is more valuable.

Next, consider the factors that make a website valuable to a potential buyer.

How websites are valued

These factors impact how much a buyer is willing to pay for your website:

Niche

Health and wellness, along with money and personal finance, are two niches that drive a large amount of website traffic. If your website operates in a popular niche, the site is more valuable.

Income sources

Revenue and profits are important, but a website that drives revenue from multiple sources is even more valuable. A site that generates revenue from Google ads, product sales, and podcast subscriptions offers more potential for growth.

Repeat visitors, time on site

If viewers return to your site, and spend an increasing amount of time on your pages, they are more likely to purchase a product or service. Both of these metrics are measured using Google Analytics.

Finally, a buyer needs to know the costs you incur to manage the site, and how much time is required to maintain the website. A successful site will pay website developers (and possibly writers) to maintain the site and to add content. A high-traffic site with low costs and a minimal time investment may sell at a high price.

Once you’ve done your homework and improved your site’s performance, find the right method to sell your website online, or through other methods.

Where to sell your online business or website?

The method you use to sell your website depends on the amount of revenue your site produces each month. Here are the most common ways to sell a website:

Marketplace

Larger online businesses or websites that generate higher revenue are often sold on larger platforms, including BizBuySell. You’ll see both online businesses and traditional companies for sale on this site.

Business broker

The largest online businesses and websites are complex businesses, and you’ll need a business broker to work as your trusted advisor throughout the sale process. Raincatcher has the experience and buyers to help you sell your business.

When you find an interested buyer, you can start the due diligence process.

How to provide due diligence information

A buyer is interested in an online business and website that has a track record of success, and the potential for growth. Buyers want a site that drives repeat viewers, and a place where visitors stay longer and consume content.

Keep these points in mind as you enter the due diligence process. The buyer is looking for evidence that explains why your website is attractive. The due diligence process will vary, depending on the size and complexity of your website operation.

Provide Google Analytics and other third-party reports that explain your website’s traffic, how long people stay, and the conversion rate for landing pages. If you have a landing page where you sell a product or service, a buyer will want to know the percentage of visitors who clicked through and made a purchase.

Provide documents that explain your website’s influence on social media. This might include Twitter followers, or the members of a Facebook group. If another site links to content on your site, are those backlinks purchased or organic links? A buyer will want to know.

A buyer may ask you about the traits of the people who use your website, and how the purchaser can grow the audience.

If the buyer makes an offer for your business, reach out to a broker or have an attorney review the business sale agreement. You need to understand exactly what assets are being sold (website, email addresses, etc.), the sale price, and how the proceeds will be paid.

You’ve worked hard to create an engaging website that generates sales and profits. Before you start looking for a buyer, have a conversation with the experts at Raincather.

Work with a trusted advisor

At Raincatcher, we focus on the seller’s needs-not our own. We focus on providing the best advice about the market, industry, and whether the business is ready to sell.

Our objective is to educate the seller about their options. If it makes sense to work on the business, we will recommend affiliates that we partner with to help the owner maximize the value of their business.

We understand how hard our small business owners work to grow their companies, and we do not take that lightly. Work with Raincatcher to make a more informed decision about a business sale, and to maximize the sale price received for your business.

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How to Save Time and Sell a Small Business Without a Broker

How to Save Time and Sell a Small Business Without a Broker

If you’ve decided to sell your small business, you’ll need help. Many owners retain the services of attorneys and CPAs to provide expertise during the sale process. While some founders hire business brokers, others are able to successfully sell the business without a broker’s help.

This article explains why an owner may sell the business without a broker, and the steps that are necessary to close a sale. You’ll also learn why the services of an attorney and a CPA are important, even if you choose to sell the business without a broker. Finally, you’ll read about the benefits of Raincatcher’s Sell By Owner program.

Reasons to sell without a broker

Here are some reasons why a firm is sold without the services of a business broker:

  • Distressed sale: If an owner is selling a company that carries a large debt load, the sales proceeds may not pay off all of the firm’s liabilities. The owner may not have cash available to pay the broker’s fee. Raincatcher represents some distressed businesses so reach out to us to learn more.
  • Seller relationship: A sale to a family member, key employee, or a business peer may not require a broker. In this case, the buyer and seller know each other, and the sale may take far less time and effort to negotiate.
  • Established price: If the price has already been negotiated with the buyer, a broker may not be necessary. If partners A and B have a written agreement that includes a formula for a sale price, one partner can sell to the other without the need to negotiate a sale price.
  • Experience with company sales: If the owner has sold multiple businesses in the past, he or she may have the skills that a business broker would provide.

If you choose to sell your business without a broker, you’ll need to invest time to prepare for the sale in advance.

Preparing for a sale

The first step is to assess your business, and to make changes to enhance the value of the company.

Enhance company value

Business purchasers are looking for firms that have these traits:

  • Competitive differentiation and uniqueness in the market: If consumers view your firm as unique and different, they may become repeat customers and be willing to pay more for your products.
  • Track record of sales, positive cash inflows, and net profits: Your business must be able to grow sales, increase profits, and collect cash in a timely manner. Profits may not be enough to attract a buyer. You also need the ability to collect cash inflows to operate the business.
  • Recurring revenue streams: Firms that generate recurring revenue, particularly those that have subscription revenue, are particularly attractive. These firms have a more predictable revenue model.
  • Carve a profitable niche: Niche businesses may have less competition, and they can become experts that have a deep understanding of the customer’s needs.
  • Create a disruptive product or service: If you offer a product or service that disrupts an industry, you can charge a high price and still drive sales.

If a buyer shows a strong interest, you need to be ready to provide more information.

Gather a complete set of records

Create a complete set of financials, which may include these records:

  • Financial statements: Balance sheet, income statement, and possibly a statement of cash flows for the past three to five years
  • Contracts: Employment agreements, vendor contracts, leases, and other legal agreements
  • Customer lists, market research, marketing plans

You should have an attorney write a non-disclosure agreement (NDA), and have each potential buyer sign the NDA before you provide sensitive information about your business. Have these records organized and ready for review, so that you can provide the records quickly.

As the owner, you’re the individual best positioned to explain why your business is valuable. Create a marketing plan to market your company to prospective buyers.

Marketing your business

You can market your business by working your professional network, and by advertising on business sale websites.

You can post an advertising listing on Raincatcher’s Sell By Owner listing website and other sites. Some sites earn listing fees from the business owners that advertise their companies but Raincatcher includes their listing website as part of their Sell By Owner Marketing & Listing program. Potential buyers sign an NDA and complete a form to send the owner a message about the listing.

Speak with people in your professional network. Ask business peers, attorneys and CPAs if they know of any potential buyers for your business. Attorneys and CPAs often work on business transactions, and they may be able to refer you to a buyer.

Qualifying buyers, and due diligence

Ask each potential buyer for a personal financial statement, in order to verify that the buyer has the ability to buy your business. The statement will list the buyer’s assets, which may include other businesses. A buyer may also provide documentation that they have financing to buy the business.

If a potential buyer has the interest and the financing to purchase your business, start the due diligence process. Organize your records and plan meetings so that the buyer can review your documents in detail.

The due diligence review includes financial, marketing, and operational details that you use to manage your business. As mentioned above, ask an attorney to write an NDA, and have the buyer sign the NDA before you share documents.

If you provide information quickly, you can keep the due diligence process on track and move the potential buyer closer to making an offer.

Negotiating the sale price

A buyer will analyze the sales of similar companies, evaluate industry trends, and consider other market factors. Do your own research to understand the metrics that the purchaser is using to evaluate your business.

Talk with a CPA about the tax impact of the transaction. Will the buyer pay a lump sum, or will you receive sales proceeds over a period of time? Does the sale include company equity, or is the transaction a sale of assets? These factors impact how the sale is taxed, and the after-tax dollars you receive for selling the business.

Have an attorney review the legal documents that you provide in due diligence, and the business sale documents before closing.

To market and sell your company without a business broker, you need a tool to manage the process. Raincatcher’s Sell By Owner program provides the resources you need to sell your business.

Sell By Owner Marketing & Listing program

Raincatcher’s Sell By Owner program provides you with a comprehensive collection of online tools, software, marketing materials, and business listing services to help you orchestrate the sale (or transfer ownership) of your company yourself.

Included in Our Program:

  • Access to Raincatcher’s support specialist team to help you through the marketing and listing process.
  • Ballpark business valuation — Includes a 27-page report on the strengths and weaknesses of your business along with a Vertical IQ report and personal readiness to sell your business
  • Access to eLearning courses to help you prepare your business as well as sell your business
  • Access to deal project management software (for up to 6 months) – Allows you to track all buyers and marketing efforts +Walks you step by step on the closing procedure.
  • Assistance creating marketing material
  • Professionally designed prospectus
  • Assistance posting your deal on various marketing websites
  • Free business listing on Raincatcher Sell By Owner listing website
  • Documents and tools to help you close the deal (PM Software)
  • Due diligence data room (PM Software)

Use this program to restructure your business into a built-to-sell company, maximize value, and to find the ideal buyer for your business. Contact us today to sign up for the program and start your business sale process.