Why You Should Focus on Proper Exit Planning
If you are like many business owners, you are primarily focusing on building your business. Yet, as we’ve covered here many times before, you should start thinking about what you’ll need to do to sell your business before you even officially launch. Many businesses can take years to sell or even fail to sell all together. For this and many other reasons, it is important to invest some time and energy into thinking about proper exit planning and strategies.
Walker Deibel’s recent Forbes article, “How Proper Exit Planning Benefits the Buyer and Seller,” Deibel discusses his interview with Exit Planning: The Definitive Guide, author John H. Brown. Brown and Deibel both agreed that, when properly handled, exit planning can help both the seller and the buyer.
Exit planning can make a business more transferable. As Deibel points out, when buyers are evaluating businesses, transferability is a key factor. A buyer must feel that he or she can walk into a business, take it over, keep it running effectively and even grow the business in the future.
A key aspect of being able to buy a business and having that business be successful is that all relationships from vendors to customers are transferable. A good management team, one that can step in and help a new owner thrive, is a must. Building that team in advance is a savvy move for any business owner looking to sell his or her business. Concerns on any of these fronts can spell doom for a seller. If a buyer doesn’t feel that they can operate a business, then they probably shouldn’t be buying it.
Great exit planning most definitely benefits the seller as well. As Deibel notes, when sellers engage in exit planning, they realize how much money they need in order to exit. In turn, this forces sellers to become very focused and goal-oriented. Sellers will take proactive steps to ensure that their business is as appealing to a potential buyer as possible.
Ultimately, proper exit planning is a win-win, one that benefits both buyer and seller. Exit planning can provide sellers with much-needed clarity while simultaneously lowering the overall risk that sellers face.
Buying or selling a business is a multifaceted, and often quite complex, process. The sooner you begin working with a professional, like a business broker, the better off you’ll be in finding the right business for you and your particular needs. For most people, buying or selling a business is the financial decision of a lifetime. Having a proven trusted partner, one that knows the lay of the land, is simply invaluable.
Copyright: Business Brokerage Press, Inc.
Selecting the Right Valuation Expert for Your Case
Selecting the right valuation or damages expert can make or break your case. Knowing how to pick the right expert is key to obtaining a successful outcome.
Choosing the right expert for a litigation matter goes beyond just checking that the person has the right credentials to act as an expert on financial damages. It is equally important that the expert can connect with the judge or jury, and educate them about how the available data and other information supports your client’s position.
Know What Skills Your Expert Witness Must Have
Expert witnesses are often referred from one attorney to another, however, when you need an expert with a very specific skill set, like expertise in business valuation and mergers and acquisitions issues related to buying and selling private companies, clients and law firms do research to identify potential experts.
When picking an expert witness it is critical that you and your attorney know exactly what skills you want your expert witness to have. Richard Jackim, the Managing Partner at Jackim Woods & co, is a former mergers & acquisitions attorney and an experienced investment banker who has been involved in over 75 mergers and acquisitions in over 20 different industries, has performed over 290 business valuations, and has represented both buyers and sellers. Jackim earned his law degree with honors from Cornell University Law School and his Master of Business Administration with honors from the Kellogg Graduate School of Management at Northwestern University. Rich also developed and taught the Certified Exit Planning Advisor program offered through the Booth School of Business at the University of Chicago. A copy of his expert witness curriculum vitae is available here.
Communication Skills Are Key
In addition to the right credentials, an effective expert witness must be able to communicate in a clear, concise, and articulate manner. He must come across as knowledgeable, accessible and self-assured, but not condescending. The ability to build rapport with the judge and jury is essential; and when both sides present a strong, technically sound case, a jury often favors the side whose expert was able to communicate the issues more clearly or convincingly. To that end, we offer clients and their attorney’s a free, one-hour initial assessment of their claims so they can determine if our approach and communication style meets their needs.
Richard Jackim is a personable and knowledgeable expert and has a unique ability to present complicated issues in a clear and concise manner that connects with judges and juries.
Credibility Is A Must
An expert must also be polished and unflappable in the face of tough, sometimes seemingly stupid questions from opposing counsel. An expert witness must be able to answer questions about his background and experience to withstand a Daubert challenge. It’s critical for the attorney to have an upfront conversation with the expert to ensure they are of good character; have worked for both plaintiff and defendant; learned of any positions they may have taken that are adverse to the position taken in this case, whether through testimony or through publications of an article; and whether they have been Dauberted.
Richard Jackim’s top-tier academic credentials, plus his 30 years of business experience including practicing mergers & acquisitions law, and leadership positions at several leading investment banking firms, provides him with unique qualifications as an expert witness. His opinions are based on market realities and actual transactions, not just financial theories. As a result, he can speak to industry best practices and what is “market”.
An Expert’s Experience Wins Cases
It’s also important that you select an expert witness who has experience testifying in a courtroom or providing deposition testimony. This experience enables them to have a clear understanding of the moving parts of a case, gives them an advantage by being able to understand how litigation and depositions work, allows them to anticipate the kinds of questions opposing counsel might ask, and helps you and your attorney understand the key weaknesses in the opposing expert’s presentation.
Jackim has consulted on over thirty-two different litigation matters, testified in six depositions, and provided expert witness testimony in two trials. His experience as an industry expert and as an expert witness helped the parties settle thirty matters without going to trial. On the two matters that did go to trial, Jackim’s clients won both matters on the merits, with the judge stating in one case that Jackim’s testimony was clear and convincing and could not be refuted by the opposing expert witness.
Areas of Expertise
- Business Valuations
- Financial Damages (lost revenues & profits)
- Purchase Price Allocation
- Valuation of Personal Goodwill
- Earnout Disputes
- Lender or Creditor Disputes
- Shareholder Disputes
- Divorce
- Buyer & Seller Disputes
- Phantom equity and other employee incentive plans
- ESOP disputes
- Business broker & investment banker fee disputes
Engage An Expert Witness as Early as Possible
For these reasons, we encourage clients and their attorneys to contact us as early as possible. Early collaboration provides us with an opportunity to help you and your attorney to discuss strategy. Ideally, we would be engaged early enough to assist in formulating requests for discovery. As a well-versed damages expert, Jackim knows what information is needed to ensure a thorough and supportable analysis. In addition, engaging us early in the process allows time to think through the issues and help you and your attorney develop the most cost-effective strategy to present your case.
In the event we find we cannot support your position based on the information provided, knowing this early on can give you time to either revise your strategy or find a different expert. Remember, unlike attorneys who are advocates for their clients, your expert witness should be a neutral, third party whose opinion is objective and unbiased. Jackim has built an impeccable reputation by providing clients with honest, objective, advice based on the available facts and his years of industry experience.
As an experienced damages expert, Jackim is familiar with recent case law in the subject area, as well as the best business practices in mergers and acquisitions and business brokerage firms. He knows his role and can be the deciding factor in your case if you choose to use his knowledge, experience, and credentials. For a free initial consultation, please contact Richard Jackim at rjackim@jackimwoods.com or at 224-513-5142.
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The Best Ways to Create an Attention-Grabbing Ad to Sell Your Business While Protecting Your Privacy
A big part of selling your business is getting the word out. The more people who know your business is for sale, the more interest you’ll receive. However, the trick is to write a great attention-grabbing ad that helps you attract buyers while protecting your privacy at the same time.
Spreading the Word
At Jackim Woods & Co, we understand the importance of creating a quality and compelling advertisement. We also understand that you need to use all the technology available today to get the word out so people view the add. As a result, we use business brokerage websites like BizBuySell, BizQuest, MergerNetwork, Axial Network, DealSteam, and about a dozen others to get the word out to potential buyers. We also send emails to the buyers in our proprietary database and to the attorneys, CPAs, financial advisors, and consultants who are part of our network.
Top Tips to Generate More Interest
Over the last 25 years, we’ve discovered that there are five key things in a listing that help attract more prospective buyers.
1. Details Sell
First, the listing should be as descriptive as possible, without revealing any information that would enable a buyer to identify your business. The sales listing should provide an excellent description of your business and its unique features, including a summary of its financial performance, the opportunities for growth, and your reason for selling. As Richard Jackim, Managing Partner at Jackim Woods & Co points out, you want to “engage the buyer early.” That means, now is not the time to be vague or secretive. You want potential buyers to have a very clear idea of what kind of business you have so they can determine if it’s the right fit for them.
2. Headlines Count
Second, every listing needs a great headline. Buyers skim the Internet looking for something that catches their eye. As a result, a good listing ad should have an engaging and descriptive headline. You want to capture a buyer’s attention. We start by determining what your business’s best features are and then emphasizing one or two of those features in the headline.
3. Incorporate High-Quality Images
Third, everyone knows a picture is worth a thousand words and this is especially true on the Internet. Interesting and compelling pictures do a much better job capturing attention than a great headline. If you don’t have high-quality professional photos of your business or its products, we have access to a wide range of high-quality stock photos that we can use to create a professional image for your business.
4. Include Your Financials
Fourth, your listing post should include a summary of key financial information. The first question any serious buyer will have is what your financial results have been. Providing as much information as possible upfront about your business’s revenue, expenses, and cash flow is a good idea since most potential buyers screen their business searches based on key financial metrics.
5. Proof-read, Proof-read, Proof-read
Finally, it is essential that you proofread anything you put on the Internet very carefully. At Jackim Woods & Co, we understand that we only get one chance to make a good first impression, so we proof-read and double proof-read every posting that we put online. We realize that clients are trusting us to present them to the world of prospective buyers and we realize that buyers are discerning and detailed focused, so a listing with simple grammar or spelling mistakes will turn potential buyers off and creates the wrong impression from the start.
Creating a great listing posting is both an art and a science. The best way to ensure that you have a great listing posting is to work with an experienced business broker who understands what issues to emphasize about your business to attract the largest number of potential buyers. At Jackim Woods & Co we know what buyers are looking for, and as experienced marketing professionals, we can help you present your business to buyers in the best light possible.
Image Credit: Goodluz/BigStock.com
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What Do You Need to Do to Get Your Business Ready to Sell?
In his recent article in Smart Business entitled, “How to get your business, and yourself, ready for sale,” author Adam Burroughs explores the key points of getting your business ready to sell. Burroughs points to the truism that, at some point, almost every business owner must sell his or her business. For this reason, it is critical to think about what it takes to get your business ready to sell. Simply stated, it is best to explore and plan for selling your business long before you actually need to place your business on the market. Let’s explore some key points for selling your business.
Broadening Your Options
Burroughs interviews Scott McRill at Clark Schaefer Hackett. McRill notes, “The sooner you think about your exit, the more options you’ll have for yourself and the business when the time comes.” A savvy business owner will always want to give himself or herself as many options as possible. McRill wisely points out that early planning is key, and a failure to engage in early planning could lead to a lower selling price. If you want to get the best price for your business, then planning for the eventual sale as far in advance as possible is a good move.
Planning in Advance
According to Burroughs, business owners should start planning to sell their business at least 2 to 3 years before they actually plan to sell. Part of the reason for this is so that business owners will have enough time to make operational improvements designed to maximize the business’s overall value.
A Financial Review
At the top of every business owners “preparing to sell” list is to have a third-party review the business’s financial situation. This is excellent advice for, as frequent readers of this blog know, any serious prospective buyer will look long and hard at your business’s financials. Getting your business’s financial house in order means that you should turn to an accounting firm for help. You’ll want to review financial statements for at least the previous 2 to 3 years.
Burroughs points out that when it comes to selling a business, there are many variables that business owners often overlook. At the top of the list is the management team.
Your Management Team
Prospective buyers can get very nervous about the stability of the management team once ownership has changed hands. Often, the new buyer may only sign on the dotted line if the owner agrees to stay on after the sale during a transition period. Having a competent and proven team in place, one that is dedicated to staying with the company will help you get your business ready to sell.
There are a lot of variables involved in preparing to sell a business. The sooner that you get experts involved in the process, the better off you will be. A business broker can serve as a guide – one that can point you in the right direction. Find a broker with an abundance of experience, and you’ll have an invaluable ally who can help you navigate the process. It can take a lot of time and effort to sell a business. Working with a business broker can keep you from reinventing the wheel at every step of the process.
Tax Planning Has a Huge Impact on Your Net Proceeds When Selling Your Business
Effective tax planning is the number one way you can increase the amount of money you net when you sell your business. Author Tim Fries at The Tokenist has written an excellent article on what tax issues business owners need to consider before they sell their business. His article, “What Tax Structure Should You Use When Selling Your Business?” explores many aspects of a topic that most business owners fail to investigate before they decide to sell.
As Fries astutely points out, the taxes you are responsible for paying when you sell your business can be complex and are usually a big unknown for business owners who have never sold a business before. Your tax structure can have a big impact on how much money you receive at the closing of your deal, so it’s important to get good advice from a tax advisor early on. A little bit of tax planning ahead of time can save you a lot of money in the long run.
Fries points out that taxes and selling a business are no small matter. It is possible that up to 50% of the proceeds you receive from the sale of your business can go to pay taxes. Don’t worry if you are learning this for the first time and feel more than a little shocked. However, this fact does a good job of illuminating the importance of setting up the right tax structure for your business. While you probably won’t be able to avoid paying altogether, you can prevent paying more taxes than are necessary.
There are a lot of variables that go into how much you will owe in taxes. Let’s take a look at some of the factors that impact your tax liability.
- Will the sale be structured so you receive ordinary income tax treatment or will the sale receive capital gains treatment?
- Is your business an LLC, a sole proprietorship, a partnership or are you operating as a corporation?
- What portion of the sale price is being allocated to tangible assets versus intangible assets like goodwill?
- What is your tax basis in your business?
- How much depreciation have you taken and how much of it was done on an accelerated basis?
- How will the purchase price likely be paid? In installments over time, or in cash at closing?
- Will the deal be structured as a stock purchase or an asset purchase?
- Do you know that your transaction costs are likely to be? These will be added to your tax basis and reduce the overall capital gains taxes you will need to pay.
Selling a business is obviously complicated. Working with an experienced business broker can help you navigate the complexities of selling your business and getting top dollar for that business when you decide to sell, but getting advice from a tax advisor will help you ensure you keep as much of the proceeds of the sale when you ultimately decide to sell.
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