Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

January 11, 2020

2020 Resolution – Prepare Now For A Sale Of Your Business

By Jeremy Albelda

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You’ve worked hard over the years to build your business and you’ve made a positive impact on employees, clients and the community.  As another year begins, it may be time to turn some attention to your exit strategy.  Selling your business can be one of the most significant and complex financial transactions you will ever experience.  If you are within shouting distance of retirement (let’s say within 5 years), then you should resolve to prepare for a sale now.

According to Achim Neumann, President of A Neumann & Associates, LLC, a New Jersey based mergers & acquisitions and business brokerage firm, “whatever the ultimate motivation or timing is for a sale, what is most important is setting the planning into motion with as much lead time as possible – ideally, at least three to five years ahead of the planned transaction.”  With that in mind, let’s discuss some of the things that you can do in 2020 to better prepare for a potential exit from the business.

  1. Get Your Financial House in Order. Accurate and dependable financial record keeping is an absolute necessity for a successful sale of the business. If you are not doing so currently, you should be producing internal monthly statements – Balance Sheet, Profit & Loss, Accounts Receivable and Inventory (if applicable).  Moreover, for the Balance Sheet and Profit & Loss, you should get comparative numbers for the same period in the previous year.  If your business is heavily driven by inventory management or a large stable of fixed assets (equipment, vehicles, computerization, etc.), these should be itemized on a regular basis with current values indicated.  If you can’t produce timely and accurate financial reports, then there is no way to properly value the firm, and most definitely no way to sell it at its maximum value.
  2. Identify Your Competitive Advantage. What sets your business apart from the competition? What are the elements of your organization that put you in a position to gain market share?  By specifically and thoughtfully stating your “Unique Selling Proposition” (we deliver solution X to target client Y so they receive benefit Z), you provide clarity to your organization’s mission and place in the market.  It is crucial to illustrate those attributes of your business that give you a leg up – among these could be things like employee expertise, defined supplier contracts, protected territories, coveted client relationships, marketing initiatives and advanced technology.  By highlighting these aspects of your business, you are showing a potential investor why they should choose your offering over another.
  3. Address Deficiencies and Dependencies. Buyers are looking for “weak links”. As you prepare for a potential sale, it is imperative that you eliminate as many of these as possible.  Typical examples include – too much reliance on the owner for everything, too much revenue concentration with one key client, poor bookkeeping (as outlined above) and sub-par sales/marketing efforts.  Simply put, if the owner is driving all the sales and has all the client relationships or if there is little middle management support for ownership, it will severely reduce the attractiveness and marketability of the firm to the investment community.  On the other hand – if the business is well run with stable management/operating procedures in place and the client base is well diversified, it will be far more attractive to buyers in the marketplace.
  4. Outline Your Growth Story. A savvy investor will be looking to take your business to the next level and will want to know your thoughts on how to get it there. Even though, at this stage of the game, you might not be willing to make the types off investment (dollars and time) needed to aggressively grow the business, you should still layout the growth path for a prospective new owner.  New target clients, new territory coverage, additional revenue streams, innovative marketing efforts and new product/service categories – all need to be identified.  Do you have the capacity to double the size of the business and what types of investment will be needed to get there?  The ability to answer that question, will go a long way with an investor.
  5. Find Out (for sure) What Your Business is Worth. When it comes to preparing for a sale of the business, guessing the value or relying on risky rules of thumb is a dangerous game. The best solution for this is an “independent and accredited fair-market valuation” of the business performed by an experienced M&A team.  This type of multi-dimensional business evaluation is designed to answer all the key questions that you might have prior to making the decision to sell.  By putting this formal appraisal into place and updating it on a regular basis, you will know exactly what the business is worth, the specific deal structure that is obtainable, the relative marketability of the firm, the tax implications of a sale and the items needed to complete the process in a confidential and expedited manner.  If done correctly, the valuation process will provide peace of mind, maximize the ultimate financial return and lay the foundation for an efficient sale of the business.

While these five items are certainly not comprehensive, they do serve as a good starting point in any meaningful preparation of an exit strategy.  As opposed to real estate, the complex process of selling a business properly takes time, patience and determination.  The sooner you begin taking steps like the ones discussed here, the better off you will be when it comes time to sell or if an opportunity from a suitor presents itself.

As Neumann states, “the key to a smooth and successful business transfer is the owner’s earnest soul-searching well ahead of a sale, considering all aspects and scenarios.  It is far better to be proactive than reactive.  After all, it is your business and you should be in control of the process.”  By resolving to begin preparations now for a potential sale and addressing some of the critical elements outlined above, you will certainly put yourself in a far better position to meet your goals on your terms when the time is right.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer

“I utilized A. Neumann & Associates to assist in an M&A process. They are VERY thorough in using their time-tested process to calculate the value of investment opportunities, a process which provided a very detailed explanation for the value of the potential opportunity. Additionally, they also went above and beyond to extend other services including connecting with others who specialize in your industry and can assist with necessary steps including legal and accounting. Highly recommended!”

Edward Lane , Business Owner

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Achim, who explained the process in detail. He had his colleague Gary come to my office in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using when the time comes for me to sell my business for max value. They gave me great insight into the steps I need to take now to get the best deal in the future. I highly recommend this firm to anybody who wants to sell now or down the road. They not only know their stuff, their actually just real nice guys.”

Robert Kardane, Business Owner
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Contact A Neumann & Associates, LLC

If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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