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What You Need to Know About Selling Your Construction Business

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After years as a contractor, you may be ready to move into another life stage, whether it’s retirement or a different occupation. You may be wondering how to sell a construction company safely and properly, which means getting the highest possible price and picking a buyer who will keep the company going.  This is what you need to know about selling your construction business.

There are multiple steps in the sale of a contracting business. The more prepared you are as an owner, the easier the switch will be. Our team of business brokers in Austin will walk you through the process from start to finish, facilitating the sale by valuing the business correctly and putting you in touch with qualified buyers.

In the sections below, we will offer some tips to ensure a successful sale.

Get an Accurate Valuation

Successful sales begin with comprehensive, accurate valuations, which yield an asking price for a construction business. To produce this figure, we will begin by researching the market prices of comparable businesses. A proper valuation takes time to create, and it will include information about various parts of the company. Brokers consider the following factors when valuing a construction business:

  • Property owned by the company.This includes real estate and intellectual property such as copyrighted architectural plans.
  • Equipment.A brokerage will assess the condition of the company’s construction equipment.
  • Customer information.It’s impossible to arrive at an accurate valuation without information on the company’s clients. That information will, of course, be kept confidential.
  • The brand itself.We will factor in the company’s online presence as well as its brand identity.
  • Current and predicted revenue
  • Comprehensive financial records
  • The company’s management team and crewmembers
  • Physical location
  • The success of the company’s past marketing efforts
  • Safety records (history of serious accidents)
  • Information on past and pending litigation

A great deal of information goes into the process, but it’s all needed to arrive at a fair asking price. Count on our experts to dig deep and find the data needed for a successful valuation.

Make the Company More Appealing to Potential Buyers

Along with valuing the company, an owner will need to assemble and reconcile its financials before presenting the information to potential buyers. Just as one would tidy up their home before guests arrive, a construction business owner would organize their records before putting the company up for sale.

Organizing a contracting business’ records is a multifaceted process that starts with the arrangement of paperwork. Tax returns, profit and loss statements, and credit histories will go a long way toward reassuring uncertain buyers. Finally, it’s a good idea for an owner to take an honest look at their equipment. Will the new owner find it to be in good shape?  This is certainly a discussion to have with your business broker before any large equipment purchases.  This is one example of what you need to know about selling your construction business.

An experienced business broker can help you through this process and ensure that the company puts its best face forward. Contact us today to learn how our business brokerage can find the right purchaser and increase the chances of a sale.

Remember That Timing is Everything

The right time to get out of the construction business is when profits are rising, not when sales have slowed down. Some owners opt to sell when their health or that of their company has declined, but that’s not always the best strategy. No matter when you sell, keep in mind that, the more accurately you describe the business to your business broker, the more likely it is that it will sell.

Maintain a Respectful Distance

Before putting the company up for sale, consider distancing yourself from its daily operations. Hands-on ownership is a good thing, but it puts a business at risk when the owner decides to step away. By gradually pulling back before the sale, you’ll show the buyer that the company will do just fine without you.

Contemplate M&A

For an owner who wants to reduce his or her role, mergers and acquisitions are another viable option. Acquiring and merging with competitors allows construction companies to grow rapidly, enabling them to move into different markets or offer new services. Finding other owners who want to expand their companies’ footprints is a great strategy when it is time to sell a construction business.

Consider an Internal Sale

Internal sales are another way for owners to get out of the construction business, and they can be quite lucrative when executed properly. There are two options, including ESOPs (employee stock ownership plans) and direct sales, with both approaches offering increased flexibility and business continuity. A business broker can, after reviewing the business’ financials and considering other factors, determine if an internal sale is the right strategy for your company.

Contact a Business Broker

Working with a business brokerage that knows the industry will help an owner sell their company faster and for a better price. It’s important to find a brokerage with industry-specific marketing strategies as well as professional connections and an awareness of the demand for these companies.

Aside from getting clients the highest possible prices for their businesses, brokers can also guide them through the transition. Whether you’re staying on in an advisory role or making a clean break, a business broker will recommend the right strategy for the company and its buyer.

Is It Time to Sell?

The decision to get out of a business that you’ve worked hard to create isn’t an easy one but selling doesn’t have to be difficult or painful. The team at CGK Business Sales is here to help contractors at every step, from valuation to closing. We are proud to help our clients sell their construction businesses for the highest amounts, in the shortest length of time, and with the least risk possible.  This article was only part of what you need to know about selling your construction business now or in the future.

We have finalized dozens of transactions for clients in the construction industry as well as numerous others, and we would be honored to put our experience to work for your company. Request additional information via our online form or call today to find out how our team can put any business in front of potential buyers from across the country and around the world.

Maintaining Confidentiality While Selling A Business

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Discretion can be challenging during the sale of a business, especially when competitors are potential buyers. If an owner shares too much, a bidder could use that information against them; if they share too little, it may scare away potential buyers. While it’s always best to work with a business broker, these tips will help business owners ensure confidentiality during a sale.  Here are some ways of maintaining confidentiality while selling a business.

Prepare Blind Listings

There are a few ways to ensure confidentiality while getting the business’ information in potential buyers’ hands. Blind listings offer enough data to create interest without publicizing the company’s identity. Most buyers want to know the company’s industry, size, description, cash flow, and location. When creating a listing, consider whether details may reveal the company’s identity.

Put Customers and Clients at Ease

Customers are like everyone else—they prefer to see the same sales team members, products, and ordering processes. When clients hear of an impending change in ownership, they often worry about rising prices, different purchase methods, and a decline in service quality. While these concerns may seem inconsequential to some, they’re crucial considerations for owners and business brokers in Austin.

When a sale is upcoming, it’s only natural for customers and clients to wonder how it will affect them. To stop the rumor mill and preserve confidentiality, business owners should take steps to reassure their valued customers.

Sign a Confidentiality Agreement

Confidentiality and non-disclosure agreements (NDA’s) are sometimes seen as ineffectual, but that’s not always the case. Strong agreements compel companies, advisors, and employees to keep information private throughout the process. Agreements should cover elements such as:

  • Not discussing the sale with the acquiring company’s employees
  • Not discussing the acquiring company with outsiders
  • Not divulging details of the sale to customers and vendors

People tend to be more selective about the information they share when consequences affect them instead of the entire company. With a strong confidentiality agreement, it is easier to keep sales private.  Maintaining confidentiality while selling a business is made a bit easier after signing an NDA.

Redact Crucial Information

Another way to keep sensitive information out of competitors’ hands is to redact certain parts. It could be as easy as deleting customers’ and products names and using generic placeholders. For purchase contracts, pricing lists, employee names, and other elements can be redacted.

Selectively revealing information allows owners to show their companies’ value and performance without losing any of their intellectual property rights. Again, it’s a matter of balancing the need to share information with the desire to keep things private. A broker’s advice, along with redaction, will help sellers maintain confidentiality.

Use Online Data Rooms Wisely

Running an efficient merger and acquisition process by maintaining information in a data room does much to ensure confidentiality. Online data rooms should be able to monitor who is seeing documents, when they’re being viewed, and how often they’re accessed.

A secure data room allows for view-only access to documents, preventing them from being printed or saved. These restrictions can protect lease agreements, contracts, and other sensitive documents during a business sale.

Protect the Company’s Reputation

In the business world, a company is only as good as its reputation. When confidentiality breaches occur during sales, the word gets around quickly—and the company’s reputation will inevitably suffer. A breach may keep a company owner from closing a deal, and it may prevent potential business buyers from accessing future mergers and acquisitions.

In either case, others will be reluctant to work with an organization that doesn’t follow honorable principles. While it is difficult for owners to trust others to behave ethically during a sale, professional reputation is a powerful motivator that tends to keep business buyers and sellers honest.

Don’t Divulge Information Too Early

The signing of a purchase agreement doesn’t negate the need for privacy and confidentiality. Buyers and sellers should agree on when workers, customers, and suppliers will be informed of an upcoming sale. While it may be necessary to bring key players into the process early on, it is usually better to wait until the transaction is finalized to notify employees. Things can go wrong at any time and deals often fall apart. In these cases, it’s best for vendors, employees, and clients to be uninformed until the last minute.

Verify Buyers and Release Information Gradually

Business brokers typically vet potential buyers by asking them for a substantial amount of information. Requesting personal or company financial statements will help brokers and their clients determine if a potential buyer is able to acquire a business. It will eliminate curiosity seekers and those who simply want to learn more about a competitor. Once a letter of intent has been signed by the buyer and the seller, provide information gradually, with the most important matters being discussed immediately before the deal is closed.

Prepare and Number Deal Memos

Once an owner determines that a buyer is qualified and the non-disclosure or confidentiality agreement has been signed, a sale memorandum with a tracking number is a necessity. These documents offer a thorough overview of a company and its value. Sometimes referred to as offering memos, confidential description books, and selling memos, sale memos should fall under the terms of the confidentiality agreement—and there should be consequences for breaches.

Consider Who May Tip Their Hand

Those who don’t understand the importance of discretion, as well as those with good but mistaken intentions, are most likely to breach the confidentiality of a business sale. Friends and family are common sources of leaks, as these matters are often discussed in closed quarters. However, relatives and acquaintances should be made aware of the consequences of divulging such information.

Rely on a Competent, Connected Business Broker

The most effective way to ensure a confidential business sale is to allow a business broker to manage the process. Business brokers can guide clients through the points on this list, ensuring that information is shared on a need-to-know basis.

The help and support of a professional, experienced broker will streamline the sale process and help an owner maximize the sale value of their company.  Maintaining confidentiality while selling a business is a must and some simple guidelines will keep it quiet.

The Real Value of Your Business Versus an Idealistic One

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Reports show there are more than 32 million small and medium businesses currently operating across the United States. They make up more than 99 percent of our business sector. At the same time, they contribute a great deal to the nation’s economy from several perspectives. Consumer spending and employment opportunities are a couple of the most significant.  This article’s focus is about the real value of your business versus an idealistic one.

Many people dream of starting a business but few actually bring that vision to life. As a business owner, you’ve certainly accomplished more than most. You deserve a great deal of recognition for all your hard work and achievements. As is the case with the majority of entrepreneurs, though, the time will inevitably come when you’re ready to pass along your company to someone else.

A Brief Look at Business Sales in America

Some experts have said that all businesses are technically for sale providing the right price and circumstances are on the table. Reports vary when it comes to the number of companies entrepreneurs place on the market each year, but it has been growing for quite some time now.

Of course, the more important figure might be the number of companies that end up selling once they’re on the market. There’s a significant gap between the two with experts saying only 20 percent or so of businesses for sale are actually purchased by new buyers.

Though businesses fail to attract buyers for a range of reasons, one stands out as the most common. In many cases, entrepreneurs simply price their companies too high. They’re focusing on an idealistic value rather than a realistic one.

That, alone, drives away countless potential buyers. Business brokers in Austin can help you understand the true value of your company versus one you may be basing on intangible factors. In the meantime, let’s take a closer look at the problem and why working with a more realistic figure is so important.

Looking at the Unrealistic Side of the Equation

Numerous measures go into building a business from the ground up. Obviously, you spent some time trying to find a market niche that dovetailed with your knowledge, talent, and passion. From there, you had to consider the products or services you’d be offering customers. Then, you had to develop and hone them to meet the public’s demands. No doubt, you had to create a well-thought-out business plan to cover all those bases as well.

Figuring out where to build your business also came into play. Marketing, funding, and all the little legal details entered the mix, too. Those are only the bare basics. They only take a few minutes to read about, but actually putting them into practice can take months or years. On top of all that, you can’t overlook all the time and effort you put into running and further developing your company over the years.

All that is surely worth quite a bit, right? To you, it’s priceless. There’s no way to put a concrete value on your dedication and hard work. Still, you try to come up with a figure that might come close. Factoring in all the equipment, intellectual property, established customers, and other assets you’ve amassed further drives up your company’s perceived value.

All that often adds up to a price potential buyers wouldn’t even consider. As such, your business lingers on the market for years without prospects showing any interest. Those who do consider purchasing it give you lowball offers that don’t come close to what you feel it’s worth. This is why you should know the real value of your business versus an idealistic one.

From a Different Angle

On the other hand, coming up with an abstract value for your business might take matters in the opposite direction. Maybe you’ve been losing money for a while and don’t see things taking a turn in the right direction any time soon. If so, you may simply want to cut your losses and get out from under the business before things take a turn for the worse.

That might lead you to choose a price that’s well below the actual value of your business. It’ll be sure to sell then, right? While that might be true, you could also be selling yourself short in more ways than one. This scenario is far less common than the previous one, but it certainly happens to more business owners than you might imagine.

Determining the True Value of Your Business

All that brings us to the concept of determining a realistic value for your business. Several methods can be used for business valuation. Each one takes a range of factors into consideration.

One of the simplest approaches is to look at how much similar businesses have recently sold for. That’ll give you a general idea of how much you may be able to get out of your company. Though this is the easiest valuation method, it’s not necessarily the most favorable for business owners.

Another option would be calculating your company’s book value. That entails adding up the value of your assets as well as your liabilities. Then, you would subtract the latter from the former to come up with a feasible sale price. If your liabilities add up to more than your assets are worth, though, you could run into serious problems with this method.  This methodology is also not used often for businesses that will remain as ‘going concerns’, as this does not value most businesses in a correct fashion.

Other solutions consider your company’s future cash flow. They may use past sales trends or other figures to predict how much money your business might bring in during the years to come and discount those future cash flows back to the present. In turn, that would determine a reasonable price for your company. Alternatively, valuation experts may also calculate how much your assets would be worth if they were simply liquidated.

Keep in mind, not all of those options are right for all businesses. It’s best to work with business valuation experts like us to determine which one best suits your needs and circumstances. We’ll do a deep dive into your business, comparing variables and valuation strategies as they apply to you. All the while, we’ll keep your best interests at heart.  This is how we get to the real value of your business versus an idealistic one.

Why Is a Realistic Value Important for Business Owners?

With all that in mind, let’s discuss why knowing the true value of your company and using that figure when placing it on the market are essential. When you create an idealistic value that’s not based on concrete evidence, you’re likely to be disappointed in the end. Your business probably won’t sell. If it does, it’ll be for far less than you’d hoped.

On the other hand, using a realistic value sets you up for success. You’ll have a valid and reasonable image of how much your business is actually worth, so you won’t sell yourself short or price yourself out of a sale. This could also give you a chance to improve upon various aspects of your business before selling to bolster its market value.

Let Us Help You Make the Most of Your Business Sale

Knowing the true value of your company is crucial. Finding out this figure long before you decide to sell is also essential. Valuation needs to be an ongoing process that allows you to heighten your company’s worth and set yourself up for success when the time comes to place it on the market.

At CGK Business Sales, we’re experts in our industry. We’ll help you understand the true value of your company and find the right buyer to meet your expectations. Contact us and let us put our experience to work for you.  We will get to the real value of your business versus an idealistic one.

Reasons to Use Business Brokers to Sell Your Business in Austin

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When it comes to selling your business, you want to know that you are getting the full value of the business in the transaction. Oftentimes, business owners will have a hard time selling their business without professional outside help. This help best comes in the form of intermediaries or business brokers. A business broker can bring a lot of benefits to the table when assisting in the process of selling or buying a business.

There are various reasons why you should hire a business broker to help you with your selling process. These can range from simply increasing the value you will get out of the sale, to ensuring that your sale is fully documented and processed legally when transferred.

This article focuses on reasons to use business brokers to sell your business in Austin.  Here are some of the best benefits to hiring business brokers in Austin:

Privacy and Confidentiality

One of the more important benefits to hiring a professional business broker to handle your sale is their confidentiality and privacy in the process. They will ensure your identity is protected, as well as the identity of your company and its integrity. Every business broker will have procedures to follow that help maintain your business sale’s confidentiality. When a prospective buyer is approached, they will need to sign a confidentiality agreement and need to disclose details about who they are, where they work, and what types of funds they have available in order to qualify for the purchase. Only approved buyers will be given information by the business broker, to ensure both privacy for you and confidentiality of your sale.

Continuity and Integrity

The process of selling any business can be both taxing and time-consuming. It can often overwhelm business owners. A business broker can help alleviate this stress by allowing the owner to focus on handling the business while the broker handles the sale. This allows the company to continue without interruption while the business sale is processed.

Better Reach

In any industry, advertisement is key to getting you the customers you want. In a business sale, the same is said for the reach of potential buyers. Professional business brokers have both the tools and the resources to reach the largest buyer base possible for your business. Brokers will have first-hand knowledge of what buyers are looking for, which can help them secure the sale you need. A business broker will work hard to expand the reach of your potential sales by including not just the business and its services, but its current inventory as well.  This is just one of many reasons to use business brokers to sell your business in Austin. 

Marketing and Advertising

As previously mentioned, advertising is key to getting attention for any sale or service. Presenting your company in the best light will help maximize your profit. If a business has time to improve certain things prior to being sold, a business broker can help improve its appearance to potential buyers. A good broker will understand the key values needed for selling any type of business.

Negotiation and Tactics

Business brokers are some of the best negotiators in the business industry. They want to sell your business and will do so as quickly as possible at the highest price and best terms available. Business brokers are skilled negotiators that handle multiple sales at once. Their role is to bring potential buyers together with their clients to sell the business with the least amount of friction and risk involved.

Risky Business

Speaking of the risks involved with a business sale, there are many factors that can put any potential sale at risk. From the risk of potential buyers defaulting on finances to situations arising that impact the value of a business unexpectedly, there are many challenges that a business broker can help overcome or avoid. Past dealings and experiences with other sales help them qualify buyers to reduce any chances that the deal will fall short.

Valuation and Due Diligence

Financial due diligence on a business is typical for a sales process. It helps keep your sale process going with the diligence it requires. Performing some financial due diligence prior to a business sale will help the business broker estimate the current value of the company as well as its future profits. These factors can play a large role in the sale of a business with prospective buyers. Every business will include variables that differ from one another. An experienced business broker can tell the differences and ensure each type of business gets sold for the highest value with best terms possible. In some cases, a business broker can also help a buyer secure financing options for purchasing your business.

Closing the Deal

While you handle the company’s day-to-day operations, your business broker will be handling all the nuances and processes of selling your business for you. Once they’ve reached an agreement with the buyer, they will close the deal as quickly as possible. The faster a sale is, the less risk there will be of customer defection, employee problems, or issues with competition. A business broker’s goal is to ensure a smooth transaction at the highest fair value for your company.

History and Paperwork

The history of a business is important when it comes to selling it efficiently. In some cases, the longer a business has been in a community, the better standing it will have with qualifying buyers. Brokers can utilize business and sales records to help their evaluation of your business. Appraising your business accurately will help increase the value and reduce the risk of selling it. Business brokers, with the help of banks and M&A attorneys, will also help with the paperwork involved for the actual sale process.

Conclusion

An experienced business broker’s primary goal is to sell your business. While many buyers and sellers are unaware of the full spectrum of buying and selling a business, experienced brokers will be able to handle the process much more easily and provide help along the way. Utilizing a business broker will give you the time to handle your business normally, while also giving you the peace of mind that your sale is in good hands. Hopefully, this article has expressed that there are reasons to use business brokers to sell your business in Austin.  Take your time and contact an experienced business broker to learn more about the sale process and how they can benefit you most.

Why Austin Texas Is Great for Business

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Many people are setting their sights on Austin, Texas so they can start a new business. As of late, Austin has received recognition for being the number one city for job growth and the best performing city. There are a number of reasons why Austin Texas is great for business.

Those who have never visited Austin, Texas, may not be aware of its rapid growth and potential for business success. Learning why this part of Texas is a goldmine for entrepreneurs will help people make important decisions that will launch their careers and allow them to see success.

Austin, Texas Is More Than a Charming Southern Town

Austin is the bustling capital city of Texas and is home to 964,177 people, as of 2021. Many multi-billion-dollar corporations make their homes in Austin, including Hewlett-Packard, Facebook, Google, and eBay/PayPal. With your business in Austin, you can experience brilliant success.

Austin has become a hotbed of success for many industries, including medical technology, real estate, and data management. The technology companies in Austin account for a tremendous amount of Texas’ tech-related revenue. These corporations have made Austin a diverse destination for those seeking new opportunities in business ownership and employment.

Reasons Austin, Texas Is an Exceptional Place to Start a New Business

Austin abounds with a multitude of business opportunities, but what would cause entrepreneurs to decide on this great city? The following offers some reasons a person should set their coordinates to Austin.

1. Austin’s Business Environment Is Growing Rapidly

One of the top reasons people have opened businesses in this state is the business sector’s growth. Once top corporations move in, they attract other businesses, creating a boon to the economy.

People see the success of the Austin business landscape and want to get in on the action. Programs, such as Opportunity Austin, not only help employees but also foster a rich environment that helps small business owners flourish.

Austin is frequently voted as one of the top cities for business in America. In 2018, this city received the title The Best City to Start a Business. Among the many established business names, Dell Technologies and Whole Foods also call Austin home.

2. Austin Offers a Favorable Business Tax Structure

Another reason so many businesses are flocking to Austin is the advantageous business tax structure. Texas does not levy any individual state income taxes.

Companies want to save money as much as possible. With the business tax structure in Austin, small business owners can take advantage of pass-through entity tax savings and ensure they attract the best employees with tax incentives as well.

3. Austin Offers an Impressively Talented Labor Force

Austin offers some of the most talented workforces in the nation. Graduating from universities such as the University of Texas, St. Edward’s University, and Concordia University Texas, as well as graduates who flock from some best universities across the nation, the labor force in Austin allows new startups the opportunity to hire the very best of the best.

4. Austin Offers a Welcoming Atmosphere to New Business Owners

As many new small business owners have discovered, Austin offers a welcoming business atmosphere. The Chamber of Commerce works to help new business owners feel confident in their choice of cities. The goal of the chamber is to help new businesses get established rapidly.

Austin, overall, is simply a friendly place. Help is available at every turn, allowing new business owners to broaden their horizons and start working towards their goals.

5. Austin’s Tech Industry Is Rising to New Heights

The tech industry in Austin has risen to new heights and continues to beat records. Experts have estimated that around 1/3 of all businesses moving to Austin were originally in California. This is telling information about the tech industry landscape in Austin.

The state of Texas offers an astounding $19 billion a year in grant money. With the Emerging Technology Fund, tech startups receive money for product development, talent recruitment, and public and private partnerships. This fund has passed out $410 million so far and has also created over 54,000 jobs in the state.

Techies coming out of the University of Texas are thriving. They come with new and innovative ideas that are skyrocketing the industry and challenging it like never before. Those wanting to open up tech companies will find like-minded people willing to help them succeed in Austin.

6. Life Science Industries Continue to Grow in Austin

Besides tech, the life science industries are also enlarging. While some people mistakenly believe software and hardware are all Austin offers, they are wrong.

Both established companies and new startups are changing the healthcare industry. Right now, there are over 200 life science companies in the city. These companies develop medical devices, biologics, biotech, and diagnostic devices.

Since the opening of the Dell Medical School at the University of Texas at Austin in 2016, the life science scene in the city has multiplied, and business forecasts expect the upward trajectory to continue.

7. Austin’s Infrastructure Remains the Finest in the Nation

To support the boon of new residents, Austin continues to work on its infrastructure, striving to make it the best in Texas and the nation. New buildings and developments are going up throughout the year, increasing the capacity for the influx of new residents. These are just a few of the reasons why Austin Texas is great for business.

Choose the Right Business Startup

If you are considering a move to Austin, choosing the right business initiative will help you see success. Many industries are welcome in the city.

In the end, the choice will rely upon the skill set and knowledge of the owner. Maximize your experience and education by choosing an industry that showcases your talent.

Make Austin, Texas Your Home

Now is an ideal time to broaden your horizons, make a new start, and open a business in the beautiful city of Austin, Texas. With so many industries thriving in the city, entrepreneurs should take advantage of the exciting landscape and become a part of it all.

Whether you plan to start a business in tech, life science, or other industries, they will welcome you to Austin. Here, you will find help in every area of your business. With the tax incentives and helpful atmosphere, Austin is the place to get a new start in the business world. As you can see, there are more than a few reasons why Austin Texas is great for business.

Common Mistakes When Buying a Business

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Purchasing a small business can be an excellent way to start or grow your own company. It’s a fast way to obtain the assets and skilled staff you’ll need, as well as an established customer base with which to start. Buying a business can be a risky decision. Without the right knowledge beforehand, however, there are some common mistakes when buying a business that buyers should know.

Below are some commonly made mistakes by entrepreneurs when purchasing businesses, and ways that you can avoid them to buy businesses safely.

1. Not letting a business attorney review all of your contracts

There are many common mistakes when buying a business. One of the more important steps to purchasing a business involves due diligence. This is the process of investigating everything there is about a business from a legal and financial standpoint. Due diligence should ALWAYS be done before negotiating any purchase with a seller. This will help you understand your position on the sale and help with logistics over it.

This process may seem easier to handle yourself but hiring a CPA and lawyer to handle this process is advised. Due diligence will be able to help you better understand if a business has any debts or liens they may owe, lawsuits or litigations they may be involved in, information on suppliers and any debts owed to them, and give you a better understanding of the liability involved with the purchase.

2. Overestimating profit within the first 1-5 years

Never take profit or loss figures at face value. This is a pretty common mistake for new business owners to make. Unfortunately, we don’t live in a perfect world where we can trust a seller to be 100% honest about their business. However, as most sellers are trying to keep taxes to a minimum, this can result in higher-than-expected earnings.  But, doing research into their sales profits, supply costs, labor costs, and any other asset costs they may incur will help you plan for profit made within the first five years.

Gathering this information can be a tedious task, however, making it a good idea for business buyers to hire an independent CPA. CPA’s are experienced in assessing a business and its assets, and converting that data into simple terms for a purchaser to understand. They can also help keep a business running smoothly with regular reviews.

3. Trying to please everyone instead of sticking with a target market

Sure, expanding a business sounds like a great idea. If done correctly, it can bring in a lot of profit. A business should never forget its target market, however, by trying to draw in newer customers. Your target market is where your business stays afloat. Expanding to get more customers should be done carefully.

4. Underestimating how much “start-up” costs will be; including hiring, training, and overhead costs

Buying a business is a lot easier than starting one from scratch. You have your customer base and employees already set up. The problem most new business owners face is underestimating start-up costs. While you may have an employee base to work from, you will need to consider hiring new employees and training both new and old ones. Overhead costs are another big consideration that gets neglected by new business owners.

5. Forgetting about business and liability insurance

Like car or homeowner’s insurance, businesses have liability insurance that can help protect you and the business as well. Once you’ve purchased the business, make sure that you are signing as the business and not yourself. This will prevent you from being personally liable for any contracts, as well as any accidents that happen on the business premises.

6. Not researching the demographic of your location

The demographic of your business’s location is key to how it functions within its market. Understanding the ages, genders, income levels, and so forth of the demographic area will help you plan ahead for how your business will reach your customers for its services.

7. Research where your supply is going to come from and how you’re going to provide services to customers

Supply and demand are two of the most-commonly heard words in business. Understanding demand is easy: everyone wants your product if you market it and it’s something useful. Supply, on the other hand, is the harder of the two variables. Always ensure that the suppliers you work with can handle the amount of product your customers demand. In some cases, it may be more convenient to rely on multiple supply chains for various services and products you provide.

8. Research WHY the business is for sale

Ask yourself these questions:

  • Did it fail?
  • Are the owners retiring?
  • Did the demographic change?
  • Is the business outdated?

An CPA can help find the answers to these questions, as well as any legal aid you hire for due diligence. While some businesses may be easier to manage and grow than others, some may not be worth the cost and effort it will take to turn them around.

9. Failing to create long-term goals; how will the business change/adapt to new technology, legislature, etc.

Most buyers are focused on how to grow the business.  Long-term goals help a business productively plan how it can grow. Realistic goal-setting helps improve employee effectiveness and productivity.

Legislative changes, on the other hand, will require legal advice in most cases. Hiring a lawyer to help you understand changes to local or federal laws will help changes go over more smoothly for the business.

10. Making too many changes, too fast

Change is not something that everyone appreciates. Even small changes can cause employees to become upset. Try to take things slowly as you make changes to any business you purchase. Take your time to understand your new company and its employees. Explore how things work, who you can trust within the company, and how its politics function.

Conclusion

If you’ve considered purchasing a business, take your time to check with legal and business advisors, perform your due diligence, and work slowly with everyone involved. Make sure that any changes they experience are gradual to make the experience as smooth as possible. Most of all, be aware of these common mistakes when buying a business.

Sell Your Business For Retirement

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Most business owners plan on selling their business when they retire. For many of those owners, the proceeds from the sale will be a major part of their retirement fund. If you’re one of those people, and you’re nearing retirement age, now is the time to start planning if you want to sell your business for retirement.

There are several steps necessary to generate the greatest return on investment when selling a business. Some of those steps should be taken care of well before attempting to sell. Here are six steps an average business owner will normally take during the sales process.

1.)  Build Value Before Selling

In the majority of cases, preparing to sell includes boosting your company’s value well before selling. Buyers look at the history of a company when deciding on a purchase. That means it’s important to demonstrate a strong record of profit, whenever possible.

At the same time, many sellers should invest, well ahead of a sale, in new equipment or renovating existing machinery and fixtures prior to putting a business on the market. Investors don’t generally want to spend a great deal of money immediately after a purchase to keep a company operating. Don’t defer needed maintenance or upgrades when you’re planning to sell.  However, this needs to be carefully thought out, as significant capital expenditures right before a sale will generally favor the buyer, and not the seller.  Tread carefully.

2.) Prepare Financial Statements and Other Records in Advance

No prospective purchaser will make an offer without understanding what they’re buying. That means they’ll expect to see comprehensive profit and loss statements as well as a complete list of equipment, fixtures, and real estate included in the sale.

In all cases, it’s important to put your best foot forward when putting together the materials you intend to provide to prospective purchasers. However, it’s vitally important not to “puff” too much, as savvy buyers will quickly spot inflated figures and exaggerated claims. It’s always a good idea to work with sales professionals when planning to sell your business in Texas, as they will have the expertise to help you determine how to put together the necessary documentation. If you want to sell your business for retirement, good financials are the “oxygen” of the deal. Too many personal expenses in your financials can significantly reduce your purchase price.

3.) Establish a Realistic Valuation

While it’s tempting to throw out an asking price you feel is fair when selling a business, that’s not the best way to determine the value of a company. Many business owners tend to overestimate the value of their company, but the reverse can also be true. To market a business successfully, and in a reasonable amount of time, it’s absolutely necessary to establish a realistic value before attempting to market the business.

So, how can an owner decide what price to put on their business? As a rule, your business broker will help you through the process. In most cases, the broker will have adequate information available to reach an appropriate asking price. In special cases, it may be a good idea to work with a valuation expert who specializes in evaluating the type of business you own, in addition to the business broker.

Seeking advice from an attorney and accountant may also make sense in a lot of cases. While those experts may not be the best option for setting the price, they can help you determine how and when to sell to garner the best return.

The appraiser or business broker may also be able to share insights in how to improve the value of your business. That can mean making minor improvements to increase the curb appeal of a business or when investing in updates to equipment or hires is appropriate.

If you want to sell your business for retirement anytime in the near future, industry experts routinely recommend contacting a business broker for advice well in advance to allow time for changes and improvements necessary to improve the odds of selling quickly and for the best price.

4.) Work Closely With the Business Broker Throughout the Sales Process

Sellers rarely have the experience needed to market a business effectively, which is why it’s crucial to work closely with a business broker during the sales process. Brokers understand the entire sales process and explain each step to the seller.

Business brokers also know the best ways to approach unique situations. They will recommend strategies to retain existing employees, generate leads, and develop ways to minimize the impact on day-to-day operations during the sale.

5.) Close the Sale

Once a buyer is found, an LOI is signed, banking is initiated, and a purchase agreement is created, the next step is to close the sale. At this point, it’s common for both the seller and purchaser to use the services of attorneys, bankers, third-party valuation experts, and accountants. Each expert provides advice to sellers or buyers to make sure all steps are properly followed and the sale closes smoothly.

In the event a problem develops, the experts are there to smooth the way and ensure the sale closes as planned. Remember that issues are common, so no one should be surprised when problems occur. As a rule, it’s relatively easy to resolve issues when it’s in everyone’s best interests to do so.

6.) Plan Early to Make the Ownership Transition Flow Smoothly

Sellers are always encouraged to negotiate the terms of a transition, as there are numerous elements involved that could prove costly to the seller or buyer. With proper planning, the process of transitioning from one owner to the next will be easier.

If, for example, the buyer wishes the seller to remain on to assist with the transition, that must be spelled out in advance. That’s vitally important, as some SBA regulations will dictate how and when a seller can assist with the process.

Again, the purchase agreement will stipulate what actions each party will take during the transition. Accountants and attorneys will assist with the planning process to eliminate, or at least significantly reduce, the odds of issues developing during the change of ownership.

Start Planning Now

Now is the time to start planning, if you want to sell your business for retirement. Since a sale may take some time to complete, it’s important to start discussing the procedure with a business broker as soon as possible. The broker will explain the process involved in the sale of a business and help sellers make crucial decisions. If you’re within a couple of years of retiring, it’s important to contact a business broker for help as soon as possible.

Three Proven Strategies to FAIL in Your Business Acquisition

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Every business seeks ways to enhance market share and establish dominance in its niche. One proven strategy is to acquire other organizations that can contribute value and open new markets. However, history has shown that many acquisitions end in failure. In some cases, those failures could have been avoided. Here are three proven strategies to FAIL in your business acquisition. Are you making one of the mistakes?

1. Focusing on the Wrong Issues

In the majority of cases, acquisitions focus primarily on financials. Industry experts generally agree doing so rarely generates long-term value. While cutting costs does, indeed, help in the short term, it’s not a strategy you can repeat. In addition, cutting costs often results in reduced productivity or research and development, which hampers long-term growth.

Another common error is shopping for the cheapest acquisition rather than the one that is most likely to add value. If a company is priced too low, it generally suggests it is in distress, which can present a real opportunity or, conversely, lead to additional losses.

Of course, there are other possible issues that could impact the success (or failure) of an acquisition. For example, acquiring a company with a culture that’s totally different rarely ends well. While it’s possible to merge companies when cultural differences are present, it’s not easy.

One proven way to avoid making errors is working with advisors familiar with the acquisitions process. As a rule, acquisition experts in Texas will include a well-established broker, financial experts, and legal representatives. Those experts work closely with clients to determine which potential acquisitions are worth exploring in depth.

2. Not Having a Rationale for the Acquisition

According to industry experts, too many companies seeking acquisitions don’t have a well-defined reason for the acquisition. In some instances, a company lacks any real reason for a specific acquisition. It’s always vitally important to determine why you’re considering an acquisition. Going ahead with an acquisition simply because it looks good on paper is not in the best interests of your company or the company you’re acquiring. Understand what value the acquisition will add and make decisions based on what’s best for both organizations prior to finalizing any acquisition.

Remember that the initial acquisition is only the beginning, as integrating the two organizations will certainly present some issues. Your rationale for the acquisition should always consider how all steps in the process will impact your organization and the company being acquired. If your rationale doesn’t suggest the integration process will flow smoothly, it’s time to look elsewhere for an organization that will benefit your company.

3. Failing to Perform Due Diligence

It’s always important to understand what you’re getting into when considering any acquisition. Sellers understand they’re expected to provide details related to their organization, but not all will be forthcoming with details that might cause concern. When considering a possible acquisition, it’s attention to detail that often uncovers possible issues that must be addressed before finalizing the buying process. Here are a few of the elements to include in your due diligence.

  • Explore possible legal issues. This is where legal advisors are crucial. While it’s relatively difficult to hide tax liens and similar problems, it’s not hard to disguise other problems. For example, environmental issues can cause significant financial problems if they’re not discovered during the due diligence process. Your legal team, working with the Seller and the business broker, will provide advice when the potential for environmental problems is present.

  • Review the valuation process used. The Seller’s business broker may use one strategy to arrive at an asking price while your business valuation expert may recommend another approach. The numbers used to arrive at the asking price may be similar, but the analysis of that data may result in different final numbers. For example, the selling broker may rely on the market approach to valuation while your third-party business valuation may believe an income approach is more valuable. It’s a good idea to look at the results provided by different approaches, especially if the company being acquired is in an industry that’s outside your area of expertise.  Remember, if your deal is done through a bank that is backed by the SBA, the SBA will require a third-party, arms-length valuation.

  • Consider multiple financing options. There are usually multiple options for financing an acquisition. Some favor buyers who wish to purchase the business with as little upfront cash as possible and are willing to pay higher interest rates to close the transactions. Other buyers have significant funds available to make a large down payment and want to keep their long-term costs to a minimum. How the company is structured will also be important here, as some financing options require specific forms of ownership. Your broker can assist with determining the best ways to approach financing acquisitions.

  • Know what you’re purchasing. A complete list of assets being acquired is an absolute must. Determine the ownership of all equipment included, as it’s common for companies to lease equipment. Of course, it’s also important to determine the condition of all assets, as having to deal with major building repairs or machinery replacements will create financial liabilities after the sale.

Acquisitions will always vary to some degree, so enlist the help of advisors throughout the process to ensure no due diligence matters are omitted. In addition, remember that some factors will be more important than others in certain settings and industries.

Is It Time to Move Forward?

It’s rarely easy to determine when (or when not to) move forward with an acquisition. The process will be time-consuming and, in many cases, expensive to complete. While risks are inevitable when acquiring a business, following recommended steps tends to minimize those risks. In this article, we discussed three proven strategies to FAIL in your business acquisition.

So, what’s the first step? Discussing your objectives with acquisition experts in Texas should always be your first step. Business brokers are well-versed in the local markets and understand the steps required to complete a transaction. At the same time, your broker will recommend strategies to ensure the acquisition is successful and generates the profits you expect.

If you’re unsure which types of acquisitions will meet your needs, now is the time to discuss the various options and determine which path will provide the desired results. To get started, and avoid strategies that lead to the three proven strategies to FAIL in your business acquisition, contact a local acquisitions expert today.

2021 May Be the Perfect Year to Sell Your Business: Here’s Why

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If you own your own business, you’re among an elite handful of people who have made their entrepreneurial dreams come true. Though a significant number of Americans dream of starting their own companies, only about 10 percent have actually taken that leap and followed through with their plans. Of course, plans change, and dreams evolve. Maybe you feel like the time has come to sell your business and explore other opportunities. If so, 2021 may just be the perfect year to do so.

Getting Expert Help with Selling Your Business

Selling a business isn’t a fast or simple matter. It takes numerous steps even before placing the business on the market. You’ll need to have a business valuation performed to determine how much it’s worth.  Please be aware, if you own the real estate, the real estate is a separate transaction.  Businesses, however, are valued on cash flows. You’ll also have to get all your financial documents and affairs in order.  We, as business brokers, will create a Confidential Information Memorandum (CIM), highlighting future potential in the business, among other essential aspects.

Once the business finally reaches the market, your business broker will face a long list of challenges when dealing with possible buyers, such as negotiating prices, discussing potential problems buyers might foresee, and weeding out unqualified leads. Even after all that, only about 20 percent of businesses that are placed on the market actually sell, most of which are represented by a business broker.

Partnering with a business broker can greatly reduce the stress and hassles involved in selling your business. Here at CGK Business Sales, we’ve helped numerous Austin entrepreneurs find qualified buyers for their businesses. We’ll use our experience and expertise to increase your chances of selling and getting your asking price. We have an extensive list of buyers on hand both locally and nationally as well as a long list of additional prospects, all of whom could be the ideal buyer for your company.  We sell 90%+ of our engagements.

Why 2021 Is a Great Year to Sell Your Business

Few people would argue that 2020 was a particularly unusual year. Obviously, the pandemic brought about changes most of us never would’ve imagined experiencing in our lifetimes. Though COVID-19 dominated the headlines, it wasn’t the only event to take shape over the course of the year.

Brexit reached a new phase in its ongoing development, and the world suddenly and unexpectedly lost Kobe Bryant in a helicopter crash. On top of all that, people across the globe watched from the edge of their seats as America’s 2020 election meandered through all its twists and turns. Companies in all industries and market niches also saw their fair share of ups and downs, and those evolutions have made 2021 a great time to sell a business for many reasons.

Favorable Market Conditions

One of the main reasons 2021 could be an excellent year to sell your business is the state of the mergers and acquisitions market. It’s a seller’s market right now because more people are looking to purchase businesses than planning to sell them. At the same time, Austin’s business environment and real estate market has been deemed the hottest in the country at this point according to a recent write-up.

Austin is quickly becoming the go-to spot for businesses, and quite a few people are looking to get in on the action. For many, that means purchasing a business that already exists and placing their own unique spin on it. Numerous prospects are also looking at the matter from an entrepreneurial investment point of view because they fully understand all the potential profits to be gained.

Possible Tax Changes

Proposed changes in capital gains taxes for business sales also stand to impact entrepreneurs after this year. If you sell your business during 2021, you’ll be looking at a capital gains rate of about 20 percent. In the event the Biden administration follows through with its proposed plans, that rate will almost double during the years to come for high earners.

Even if the higher tax rates were to come to pass today, though, there’s a decent chance they won’t kick in until 2022 at the earliest, despite recent rhetoric. Selling now could save you a great deal of money when you file your taxes next April. That’s money you could use for any number of other ventures, like delving them into a new business or extending early retirement plans.

A Wealth of Opportunities

Numerous business owners are planning to sell in the immediate future. Some found themselves floundering in the wake of the pandemic. Others have simply made their money and are looking to take life a little easier moving forward. Regardless of the reasons they’re selling, they’re creating a vast range of opportunities for people who are looking to buy a business.

If you’re selling your businesses because you want to explore new entrepreneurial paths, 2021 holds plenty of opportunities in store. You could place the profits from selling your current company into purchasing an entirely new one in a different industry. Transform that business and make it your own. With the economy rebounding from pandemic-related hardships, there’s no limit to the success you might see.

Getting Out While You’re Ahead

Countless businesses fell into unprecedented times of hardship because of the pandemic. Some lost millions of dollars in potential sales due to social distancing, shelter-in-place orders, mandatory curfews, and other restrictions. On the other end of the spectrum, some businesses saw new opportunities in the glittering in the rubble and profited from them.

If your company falls into either of those categories, selling now might be a good choice. Perhaps you’re among the many who struggled just to make it through last year, and you just want to cut your losses. Maybe you seized an unexpected opportunity in the face of the adversity and came out on top, but you’d like to get out while you’re ahead. Either way, 2021 is giving you a unique range of possibilities.

Taking Advantage of the Latest Opportunities

Many business owners are thinking of selling their Austin businesses right now. As fate would have it, 2021 has brought about favorable market conditions, potential tax breaks, and a number of other opportunities. You can certainly take advantage of the circumstances, but doing so could be exceptionally difficult if you go it alone. Fortunately, you don’t have to shoulder all the burdens on your own. We’re here to help you overcome the hurdles involved in selling a business and get the most out of the experience.

Best Practices for Each Phase of Mergers and Acquisitions

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It’s natural for company owners to explore ways to move their businesses forward. In this post, we’ll describe best practices for each phase of mergers and acquisitions. In many cases, growth means acquiring another company or merging with a similar organization to gain a competitive advantage in the marketplace. However, the process isn’t always easy, and numerous decisions must be made before a merger or acquisition can be completed.

To avoid making errors, it’s crucial to know and understand how to complete the process seamlessly. Business acquisition experts know there are specific steps to follow to avoid problems during any merger or acquisition. Here are just a few of the best practices to adhere to when it’s time to move your company forward.

Create a Strategy

It’s virtually impossible to move forward without first defining what you’re attempting to accomplish and what steps you’re willing to take to achieve those objectives. During this phase, working with a business broker will make it easier to set both short- and long-term goals and define the strategies necessary to reach those goals.

Develop a List of Targets

Once you’ve established your goals and clarified the requisite strategies, the next step is to establish a list of target companies to consider. In some instances, those targets may be on the market, but that’s not always the case. Brokers providing mergers and acquisitions services may also be aware of potential targets that are not currently on the market.

Your business broker will work with you to develop a list of candidate businesses that would be beneficial acquisitions. Depending on your goals, that might mean companies which enhance your strength in a specific niche or allow your organization to expand into other market segments. This might mean buying a business in your supply chain, also known as vertical integration.

Evaluate Potential Targets

Once the basic list is established, best practices require further analysis to determine which targets should be more carefully considered and which ones are less likely to provide the required benefits. In other words, not every potential target will be what it appears to be on the surface.

Some companies will be far too disorganized to make them attractive. Others may not be investing enough in research and development, depending instead on products that are currently successful but may not be in the near future. There are also times when a potential target doesn’t have a culture or customer base that would blend with your objectives.

Contact the Targets

Next, it’s time to contact the targets. When the target is already being marketed, that process is rather simple, and your business broker will certainly handle the initial contacts. In situations where the targeted company isn’t for sale, approaching the owner will require a little more finesse.

Based on the individual situation, the initial contact might be made by the business broker, but there are times when other options might be considered. To obtain the desired results, planning the approach may take time, so don’t be in a hurry. Follow the advice of your business broker and other trusted advisors.

Begin the Valuation Process

At this stage of the process, it’s time to get down to evaluating the nuts and bolts of target company. All companies know they’ll need to provide financial reports to prospective purchasers, but not all companies will be totally upfront with their disclosures. That’s not to say they will falsify documents, but they may choose to obfuscate some less-than-ideal aspects of their financial situation. Let the experts evaluate the financial reports and determine if requesting additional information is warranted.

Having the financial reports and tax returns are important, but it’s also important to identify what assets are being purchased and what those assets are worth. To establish that, various inspectors and appraisers may be used to establish their value.

Make an Offer

After the value of each asset is better established, it’s time to develop an offer, otherwise known as a Letter of Intent or LOI. Again, the business broker will work with you to write an LOI (offer) that defines the selling price and terms. As a best practice, it’s important to have your attorney and accountant review the offer before it’s presented to minimize the potential for errors.

It’s rare for an initial offer to be accepted. The Seller will likely present a counteroffer that you’ll need to consider. Remember, negotiation is an art, which means it’s once again time to look to your business broker and other advisors for advice. They can make it easier to determine if the counteroffer is workable or if additional changes will be necessary.

Conduct the Appropriate Due Diligence

Once a basic agreement is reached, it’s time to make sure all assets and clauses included in the agreement are carefully examined. All legal matters should be reviewed by an M&A attorney to make sure there are no surprises later.

Everything you or your representatives evaluated earlier will be reviewed again to uncover hidden issues or potential problems that could create any type of issue later. For example, errors in past tax returns could, and likely would, cause problems for the purchaser or bank. Performing due diligence takes a lot of time and attention to detail, but the process should never be glossed over.

Closing the Sale

Finally, it’s time to draw up the final contracts and associated paperwork. Again, all paperwork should be reviewed by your legal team and accountants to reduce the odds of any errors in the documentation.

Begin the Integration

This is the final phase of the sale. Here, it’s always crucial to ensure the integration proceeds as smoothly as possible. Remember, the integration should leave the new organization with the best aspects of both the original company and the acquired one. That’s not always easy to accomplish and often takes some time to accomplish. The Purchaser and the Seller may both be involved in the process, depending on the terms of the sales contracts. It’s natural for company owners to explore ways to move their businesses forward. We could write an entire separate post for best practices for each phase of mergers and acquisitions integration process.

Moving Forward Begins Now

Because so much rides on the success of a merger or acquisition, take whatever time is needed to start planning now. If you’re considering acquiring another company or merging, it’s important to contact a business broker for advice. Advance planning can make the difference between a highly successful acquisition and one that provides lackluster results. Keep these best practices for each phase of mergers and acquisitions in mind, when you want to acquire a business to grow your own.

Contact Us

CGK Business Sales

401 Congress Ave

Austin, TX 78701

phone: (512) 900-3770

website: https://businessbrokersaustin.com