Browsing Tag

selling business

Negotiation

Authority Tactics

August 18, 2014
shield-511714_1280

In negotiations there are three distinct authority tactic circumstances. No authority, limited authority and full authority. Each comes with assets and liabilities in the negotiation process.

No Authority

If you have no authority to negotiate you may have a great advantage. Say your a salesperson at a company and you are selling something to a potential client. Once you present the value proposition and it is turned down, and if you have no authority to adjust it, you have the ability to probe and ask “what would it take for the proposal/price to be acceptable”. Having no authority to change the proposal is an advantage in there is no pressure to be swayed by the prospective client. “Passing the buck”, “being the good cop”, “blaming a third party” are tools of this circumstance that can be used expertly.

Who me?? I need to ask corporate!

Who me?? I need to ask corporate!

Limited Authority

Just as it is defined, as a manager or person selling for a company, you may have some leeway to give discounts or extend more favorable terms to clients in order to close deals. Again this can be a powerful tool for the salesperson, but it can also be a curse. Many times limited authority leads to just “folding like a cheap chair” very quickly to try to appease clients. (I will talk about discounting in a future post). But limited authority can be a great way to ease a possible bottleneck in a sales chain. It also transfers some of the power and work away from the person that has full authority, which can again relieve some stress on a company’s sales systems.

Full Authority

“The Buck Stops Here”! Your the CEO or President and have full authority to make changes to proposals or prices and your client knows it. I have seen many business owners put Vice President on their business cards just for this reason. I don’t buy that practice, as I have plenty of reasons not to discount my fees. But for this reason I do not like to attend closings. Last minute hitches or expenses can cost a full authority figure lots of money! Be strong business owners/CEOs! Often this can be powerful in multi party negotiations. When the decision finally reaches the top authority’s desk and is rejected, the client may feel satisfied that it was raised to the highest level.

Understand your and your opponent’s authority level in a negotiation and you may be at a distinct advantage to gain insight and leverage!

Andy Cagnetta owns and operates Transworld Business Advisors www.tworld.com. He joined the company as a sales associate and later purchased it. Transworld is an international franchise business and franchise brokerage, with thousands of businesses for sale and franchisees in the United States and Internationally.

Business Sales

When to Plan to Sell Your Business? Now and Always!

December 15, 2013
plantosell

Most people have a will.    Your business needs one too, in the form of an exit plan.   Most business owners will not sell voluntarily.  Why?   Selling a business is not the best way to make money from it.

Most small businesses sell for 1-3 times adjusted earnings (larger ones can sell for more).  So, if you are planning to stay working in your business for a longer than a few years, it pays to keep it.  However, there are  factors  that can get in the way of your business “status quo” , and you need to have a plan to sell it.    What do we typically see happen?

  • The business owner can no longer physically work.    Death or disability will force a sale.   If this happens, time is of the essence!  The businesses’ value can evaporate daily!
  • The owner hates working in the business.   Burn out is real and life is too short to be miserable.   Understand you can simply sell and buy something else!
  • The business has unsolvable cash flow issues.  Either it is a victim of its own success, and grows too quickly, or more often, gets into trouble monetarily.   Time to sell in either case.
  • The business has grown beyond the owner’s capabilities.     Many entrepreneurs are not good corporate CEO’s.    Many times the founder is not the person who makes a business a huge success.
  • Outside economic or competitive forces change the industry, and your business is in danger or, there is huge opportunity.    Either way you see the writing on the wall, and it is time to sell!
  • A strategic buyer comes along and will pay the owner above a fair market value price.   It may be time to cash, in rather than compete.   Your proverbial ship has come in!

Many times, there are combinations of reasons why the time to sell will come…and often it comes suddenly.     What should you do in order to plan?

Formulate a plan.    Write it down.   Tell people where it is.

  1. Have your specific wishes known by your family, senior staff, and advisors.  Who is in charge?  Should they sell immediately? Who should they listen to for advice?
  2. Give someone power of attorney or have someone able to sign for your company in your absence or disability.
  3. Get insurance! Have a Life & Disability policy!   A buy-sell agreement can easily be funded by insurance and make everyone whole in often a very turbulent time.
  4. Meet with a business broker, spend time with them, and befriend them.   Review your financials annually or bi-annually with them and understand your business market value.    A strong relationship with a broker and knowledge of the marketplace will make selling your business relatively painless.
  5. Have a sell price!  When you reach your goal, punch out and do something else!
  6. Be realistic and unemotional.   A business can become like a child to entrepreneurs.    This can lead to bad decisions about when to sell or dispose of a business.     Try to listen to others and understand when the time to sell is upon you.

One thing is certain in business ownership.   One day you will not own it.    The only question is how that is going to come to be, and with help, it can be a very profitable and easy transition!

Andy Cagnetta owns and operates Transworld Business Advisors.  He joined the company as a sales associate and later purchased it. Transworld is an international franchise business and franchise brokerage, with thousands of businesses for sale and franchisees in the United States and Internationally.

 

Business Sales

12 Fatal Mistakes When Selling Your Business (Pt 2)

December 1, 2013
Mistakes

Selling a business is not easy. Each deal has its challenges and nuances. That is why I love what I do, and know how valuable our service is at Transworld. Do you think you place an advertisement somewhere and the perfect buyer will call? I wish it was that simple.

While many entrepreneurs build a successful business through vision, excellent management skills and sheer hard work, most do not have a thorough understanding of the complexities and factors that are present in the deal structuring and business selling process. Plainly said, “It’s a jungle out there, and you need a professional tour guide”!
Here are more of the most common pitfalls when trying to sell your own
business continued…………..

7) FAILURE TO PROPERLY STRUCTURE THE DEAL
When the seller has limited knowledge about the available alternatives for structuring the deal, he is at a definite disadvantage and probably a costly one. Items such as leverage buy-outs, leases, royalties, earn-outs, consulting agreements, non-compete contracts can add immeasurable value and security to both buyer and seller alike. At the same time, terms unfavorable to you could be a fatal mistake or make your head ache trying to figure out if
something is a scam.

8) FAILURE TO PREPARE FOR PROPER DUE DILIGENCE
Due diligence issues are very important to the selling process. It is imperative to be prepared and organized. You must be able to defend and substantiate
representations made during the selling process. We can guide you through the due diligence jungle. If your records are still in the shoebox, you will probably not get the deal done!

9) FAILURE TO MARKET THE SALE
If your business sale is being handled by a small brokerage or by you with limited advertising resources you will never find the best buyer at the highest selling price. With our large network, we are able to interview hundreds of buyers and get the best ready to purchase your business. Transworld’s approach creates a mini trading floor and auction like atmosphere that will
produce buyers that know the value of your business.

10) FAILURE TO SEEK THE RIGHT PROFESSIONAL ASSISTANCE AND CONSULTATION
There are legal, financial, marketing and other vital considerations that must be addressed in the selling process. Many decisions in the selling process should not be made without the advice of the right professionals. The wrong professional can lead you to make bad decisions. You need the right team.

11) FAILURE TO PROPERLY PACKAGE YOUR BUSINESS
A potential buyer will want information about your customer base,  competition, financial history and industry characteristics, such as size, growth potential and areas of opportunity. This information must be provided in a salable format and in a way to ensure your confidentiality. Your financials
must also be recasted to show your business in the proper light. Most financials are prepared to minimize taxes; we work with you and your accounting professional to recast them in a format that maximizes your
businesses value.

12) FAILURE TO CONTROL THE DEAL
We have sold thousands of businesses. We know when to let buyers look at customer lists, when to talk with employees (if ever), when to start and end due diligence, when to hire the right professionals, when to call the landlord and more importantly we know when to refuse access to your business and its records.

There are many opinions on how to sell and buy a business. You need a strong brokerage company in your corner. Again, this is a complicated process with many pitfalls. But with the right team, your goal of selling your business for the right price is just a phone call away.

Andy Cagnetta owns and operates Transworld Business Advisors.  He joined the company as a sales associate and later purchased it. Transworld is an international franchise business and franchise brokerage, with thousands of businesses for sale and franchisees in the United States and Internationally.

ANDREW CAGNETTA

Certified Business Intermediary
CEO, Transworld Business Advisors
Offices Nationwide
954-772-1122
www.tworld.com

Business Sales

12 Fatal Mistakes When Selling Your Business (Pt 1)

November 18, 2013
Don't make a fatal mistake when selling your business!

Selling a business is not easy. Each deal has its challenges and nuances. That is why I love what I do, and know how valuable our service is at Transworld.
Do you think you place an advertisement somewhere and the perfect buyer will call? I wish it was that simple.

While many entrepreneurs build a successful business through vision, excellent management skills and sheer hard work, most do not have a thorough understanding of the complexities and factors that are present in the deal structuring and business selling process. Plainly said, “It’s a jungle out  here, and you need a professional tour guide”!

Here are some of the most common pitfalls when trying to sell your own business:

1. FAILURE TO MAINTAIN CONFIDENTIALITY
If you let the “cat out of the bag” too early it can be dangerous! If employees know that you are selling and changes are coming, they may quit or become less productive. Competitors may use this information as a selling tool against you. Vendors may not continue to extend you favorable terms. Make sure all potential buyers sign confidentiality agreements prior to meeting with you.

2. FAILURE TO CONTINUE TO RUN YOUR BUSINESS
It is important to maintain your business at peak operating capacity. If you try to sell your business yourself, you may have hundreds of buyers call you, and most are “tirekickers”. The time wasted with these buyers takes your eye off the ball and leads to lower profits and market value. All buyers will seek the latest P&L statement just before closing. If sales and profits are down, the buyer will most likely try to give you a major “haircut” on the selling price.

3. FAILURE TO USE PROPER NEGOTIATING TECHNIQUES
Poor negotiating techniques can cost you considerably in terms of selling price, terms and other opportunities. You shouldn’t have to be the “bad guy”, an intermediary can best negotiate for you. Many times a deal will fail to close because of poor negotiation and communication skills between the parties. Pro-Athletes (most anyway) understand the importance of a skilled negotiator.
Bottom line is you need one too.

4. FAILURE TO SECURE QUALIFIED BUYERS
Knowing how to qualify a buyer is critical. We can help you pre-qualify each buyer to avoid a negotiation that is doomed to fail. This saves you time and money. The best buyer is one that will close, not always the one with the most cash!

5. FAILURE TO MOVE THE DEAL ALONG
A good deal is like fresh fish. The longer they sit around, the more they stink.
While you focus on running your business, we can be there on a daily basis quarterbacking your deal to the end zone.

6. FAILURE TO PLACE THE PROPER VALUE ON YOUR BUSINESS
A business has value to a buyer because of its anticipated earnings from its established resources, and has demonstrated a successful track record. Proper evaluation is crucial, enhancing the chances of selling. You need to have the right price, so as not to scare off potential buyers while at the same time, maximizing your eventual price. It is a proven fact that an intermediary can sell your business for more!

If you can’t wait until next week for Part 2, email Andy for the rest of the article.

Andy Cagnetta owns and operates Transworld Business Advisors.  He joined the company as a sales associate and later purchased it. Transworld is an international franchise business and franchise brokerage, with thousands of businesses for sale and franchisees in the United States and Internationally.