There can be no doubt that selling your business stands as one of the most complex and important decisions you’ll likely ever make. It is quite often the case that a business represents decades, or even a lifetime, of dedicated work. In this article, we’ll examine some of the key steps that you should take when it comes time to sell.
One of the most important steps that any seller can take is to begin the sales process far in advance of the date that he or she plans to put the business on the market. Working with an experienced business broker or M&A advisor (and doing so preferably years in advance) is one of the single best ways to ensure that you’ll be ready to sell your business when the time comes. It will also help you to avoid the numerous pitfalls that potentially await.
A good brokerage professional can also help identify weaknesses in your business and help you address those issues; however, this is only the beginning. Your broker can help you with everything from strategy and negotiations, maintaining confidentiality and establishing the market value of your business, to connecting you with other seasoned professionals, such as accountants and lawyers.
A third key point that all sellers should consider is their own psychology. It is vital that all sellers remain flexible in their approach to selling their business and also remain respectful of prospective buyers. It is important that you put yourself in the shoes of your buyer and try to think of what they will need to feel confident in their decision.
The right seller psychology is also absolutely essential. Sellers should not attempt to rush or force a sale or overprice their business. In short, you need to keep “your head in the game” and as much as possible, keep your emotions out of the process.
Sellers also need to realize that the statistics strongly indicate that seller financing is likely. Only 75% of sellers ultimately receive their asking price, and businesses that are listed as “all cash” generally don’t sell. Reasonable sales terms will greatly increase the chances of successfully selling a business. It is common that sellers fail to realize just how much interest they can generate by financing the sale of their business. A reasonable down payment is also another way to improve the odds of selling a business. Being willing to offer financing makes a clear statement to a prospective buyer that you believe in the business and its ability to generate revenue. From a buyer’s perspective an “all cash” demand can be a red flag.
At the end of the day, an open mind and steady temperament will increase your chances of selling. You may want to sell your business and completely move on to new things. But the reality of selling a business is such that “walking away” may not be feasible. Transitioning your business into the hands of a new owner is usually more of an ongoing process than a “sign on the dotted line and receive a check” type of situation. Understanding this fact, and working closely with a business broker or M&A advisor in advance of selling your business, will help to streamline the sales process and greatly improve your chances of a successful outcome.
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Companies of all sizes frequently fail to handle customer complaints appropriately. In the digital era, where complaints can be seen by hundreds, thousands or go viral to millions, it is essential that customer complaints, especially serious ones or ones backed by considerable emotion, are treated seriously and dealt with in a timely manner.
If you are failing to provide good customer service, this should be corrected. After all, offering decent customer service is neither costly nor overly complicated. At its core, good customer service can be reduced down to listening to the customer, letting the customer know that his or her complaint has been acknowledged and cataloged, and then working to remedy the situation if possible.
A good positive attitude and staying calm when dealing with irritated or dissatisfied customers can go a long way towards keeping a customer happy and halting them from expressing their feelings in an online public forum. Let’s look at five tips for dealing with customer complaints in an effective manner.
Tip #1 – Take a Proactive Stance
A good attitude and a proactive stance can go a very long way towards diffusing an unhappy or angry customer. A disappointed customer wants to know that he or she is being heard and that steps are being taken to remedy their situation. Clearly communicating that you are working to fix the situation and doing so in a positive manner will diffuse most negative customer scenarios.
Tip #2 – Take Quick Action to Fix the Problem
Once a customer is calm and is feeling a little better about your company, there is still more work to do. When you state that a problem will be addressed, it is essential that the problem is indeed addressed. This is vitally important for the reputation of your company. A failure to follow up on a promise to fix a situation could actually backfire and leave customers feeling as though they were initially manipulated.
Tip #3 – Always Stay Calm
If a customer is unhappy enough to write an email or post a negative review online, then they are obviously displeased. However, if a customer is angry enough to pick up the phone and call, you can be fairly certain that the customer in question is rather upset. This anger may boil over on the phone call. That’s why customer service people need to be ready to deal with that anger in a calm and collected fashion. Customer service team members or salespeople should never match the anger of a customer. Instead, they should focus on demonstrating that they are committed to fixing the problem. It may benefit you to invest in employee training so that employees are ready to deal with angry or disappointed customers when the time arrives.
Tip #4 – Look for Customer Dissatisfaction Problem Patterns
If the same complaints and issues come up again and again, then it is very likely that there is a larger problem that must be addressed. Numerous customer complaints from different customers shouldn’t be treated as a “headache.” Instead, it should be viewed as a great opportunity to improve your goods and/or services. Once you have detected a negative customer service pattern, be sure that you and your team move quickly to remedy the problem. Your business will be stronger for doing so in the long run.
Tip #5 – Track Your Success
It is important to never assume that you have successfully addressed customer service issues until customers have, in fact, verified that the situation is resolved. For this reason, it is wise to follow up with customers and ask for feedback via either questionnaires in the mail, email follow ups, or even phone calls.
Customer complaints that are not appropriately addressed can fester and become larger problems. The time, effort, and money you invest in boosting the quality of your customer service team will yield significant positive results for the long-term.
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Finalizing a deal is usually a complex process, and there is a good deal of room for error, misunderstandings, miscalculations, and good old-fashioned wild cards. That is why it is critical to carefully think through the deal process well in advance. In this article, we’re going to explore the top ten steps you can take to avoid wrecking a good deal.
- Confidentiality – At the top of our “how not to wreck a deal list” is confidentiality. It is vital that everyone involved in the deal takes steps to avoid a breach. Experienced business brokers are experts at maintaining confidentiality.
- Flexibility – The second tip on our list is to be flexible. A lack of flexibility can absolutely destroy a deal. You shouldn’t go into a deal expecting to have all of your terms met.
- Be Open to Negotiations – Just as it is critical to be flexible, it is also important to embrace the concept of negotiation. Sellers are used to being their own bosses, but when it comes to successfully selling a business, no factor is quite as important as a willingness to negotiate.
- Advance Preparation – Next on our list of musts to avoid wrecking a deal is to prepare for the sale well in advance. Sellers will want to make sure that they have several years of records as well as legal and accounting documentation ready and well-prepared. You can be 100% certain that any serious buyer will want to see your records and take a look at your financials.
- A Reasonable Selling Price – An inflated price will decrease the number of buyers that take a serious look at a business. Additionally, an unreasonable price may make a seller look uninformed. Business brokers and M&A advisors are experts at handling valuations. One of the single best ways to boost your chances of finalizing a sale is to establish a fair and justifiable price for your business.
- Maintain Operations – Far too often sellers lose track of the day-to-day operations once their business goes on the market. It is absolutely vital that sellers continue operating their business as though it may never sell. The bottom line is that it can take months, or even years to sell. The last thing any seller wants is for their business to lose value when they are in the process of trying to sell.
- Keep up the Momentum – A lack of momentum can kill a deal. Working with a business broker or M&A advisor is an easy way to make sure you maintain momentum throughout the process.
- Consider Your Buyer’s Needs – Serious buyers will need a variety of information from sellers in order to obtain financing. You can expect buyers to need appraisals of assets, information on environmental regulations, and more. Sellers should have this kind of key information ready and waiting.
- Encourage Competition – Another great way to avoid wrecking a deal is to achieve leverage via buyer competition. In general, it is a good idea to create a competitive situation – one in which prospective buyers know that there is more than one interested party. Brokerage industry professionals understand the delicacies of presenting this information.
- Seller Participation – Finally, sellers must stay involved in the entire process, and that includes being willing to assist during the transition. Showing a willingness to help during the transition period will help to foster goodwill and trust.
There are many reasons why a deal could potentially fall apart. You may not be able to control every single variable, but by following the ten key tips outlined in this article, you will be well on your way to increasing your chances of successfully completing a deal.
The post The Top Ten Ways to Avoid Wrecking a Deal appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Just as people will form judgments and ideas about you as a person based on first impressions, the same holds true for your company. It is always best to put your “best foot forward,” and this is true whether we’re talking about your personal life or business. Periodically, it is prudent for every company to step back and evaluate its initial point of communication with customers and clients.
In today’s digitally interconnected world, it is critical that customers and clients feel as though they are not just being listened to; they really want to be heard. Emails must be responded to promptly. This is true regardless of whether the email is from a customer requesting more information about your goods or services, or if it’s a message with a question or complaint. If your company is unresponsive, this fact can quickly spread on social media.
Of course, customers and clients still pick up their phones and make calls. While many people’s first impressions of your business are increasingly likely to be via your website, there is no denying the importance of the phone call experience. When callers reach your business, it is vital that they receive a professional and warm reception. Whether the point of contact is a live person or a message, the experience should be a trouble-free and low stress experience.
Far too many businesses overlook this variable, but you can be quite certain that not all of their competitors are doing so. If you have a navigation system, it should be easy to navigate. If possible, there should be an option to talk to an operator so that callers don’t get lost within a labyrinthian phone maze filled with dead ends. Callers might not remember a positive phone experience, but you can bet that they will remember a stressful one.
When a team member greets a caller, the response should be pleasant and should include some version of “How may I help you?” Every operator should know company basics, such as your times of operation and the key names of your personnel. They should also demonstrate a willingness to help. Your team members should understand that their job depends on the success of the company and that they are on the frontlines of maintaining a positive business-customer relationship. Professionalism is a must, and team members should never lose sight of this fact.
Finally, your key management executives should invest the time to experience your company’s sphere of communication. What is it like to call your company and interact with team members? What improvements could be made?
In this very digital era, it is important to remember that there is still no replacement for human interaction. When a caller reaches out to your company for information or assistance, it is best to use technology judiciously. Try to opt for the human touch when possible. While the person answering the phones at your business might not be the highest paid person on your payroll, always remember that their job is an essential part of your company’s image.
When buyers are looking to make a purchase, the most important step they can take is to perform due diligence on both the business and the seller. Yet, it is important to note that a large percentage of sellers fail to do their due diligence on buyers.
Deals fail all the time. Sadly, this means that all parties lose a tremendous amount of time and effort. Additionally, sellers not only waste time, but often lose money due to business disruptions during the process of working with a prospective buyer.
Let’s dive in and look at a few warning signs that you should look for when dealing with a buyer. The sooner you spot these red flags, the sooner you can avoid potential problems.
There are several key questions that sellers should ask. The list includes:
-What, if any, other businesses have you considered to date?
-How much equity will you be committing?
-Do you have any experience with my kind of business?
It is important to look for warning signs early on, as this is the way that sellers can avoid wasting considerable time. It should also be noted that sellers shouldn’t be afraid to listen to their gut instincts. If you feel that a prospective buyer isn’t serious and may only be window shopping (or if you feel that the buyer is looking for a far greater deal than you are willing to provide), then simply move on. When you cut your losses early on, this can free you up to focus on prospective buyers that are a better fit.
What if your intermediary informs you that there has been no communication from the prospective buyer after they received the memorandum? Simply stated, this lack of communication could mean that the prospective buyer has changed his or her mind, or was never that serious in the first place.
Another red flag you might see is when the process is turned over to a junior member of the prospective buyer’s management team. In other cases, the prospect may fail to provide details or information concerning their financial capability to successfully complete the deal. If any of these three red flags pop up, you should consider being proactive. You and your broker might want to reach out to the prospective buyer and ask to meet to discuss the situation.
Warning signs can also occur just prior to closing. Even after the letter of intent has been signed, there is still room for problems to arise. An inexperienced attorney representing the buyer, one that simply doesn’t understand what is involved in a deal, can spell doom for what could have otherwise been a good deal. The same is true for an over aggressive attorney. One potential remedy for this situation is for your own attorney to intervene and discuss the situation.
Spotting warning signs is about more than not wasting everyone’s time. When you can observe these indicators and act effectively to address them, it can help keep deals on track. Working with a business broker or M&A advisor is an excellent way to not only spot red flags, but also to know how to respond appropriately. The end result will be more successfully completed deals.
Damon Neth is a Professional EOS Implementer of the Entrepreneurial Operating System®. He co-authored a best-selling book entitled X-Formation: Transforming Business Through Interim Executive Leadership. He also has founded five companies and acquired four other companies. Additionally, Damon Neth is an accomplished entrepreneur and a leading EOS® business coach.
EOS® is a powerful set of business tools that provide a framework that empowers companies to create a clear vision throughout their entire organization, and in the process, boost the health of the company as a whole. This article discusses EOS® and how it could potentially transform your organization.
What is EOS® All About?
EOS® is based on the book Traction: Getting a Grip on Your Business, which is written by Gino Wickman. The effectiveness of EOS® is underscored by the fact that EOS® is currently utilized by over 10,000 companies around the globe.
EOS® is a powerful set of tools that, as Neth explained, “are being used by businesses every single day to grow, transform and capitalize on opportunity and deal with problems. These tools provide strategic advantages and strategic tools that many organizations implement to become better, to beat their competition, to become stronger.”
How Can EOS® Benefit Your Company?
Through EOS®, it is possible to establish a clear vision for your organization. Neth points out that cultivating this vision is about finding clarity of purpose so that every team member is pulling in the same direction. When used from the top to the bottom of a company, the tools provided by EOS® can have a transformative effect. Discipline and accountability are key focal points of EOS®, as it is through discipline and accountability that the health of companies can be enhanced greatly.
At the core of EOS® is the concept that everyone should share the same company vision. That means that there must be good, consistent and steady communication. In order to facilitate this level of communication and understanding, it is necessary to have a transparent system in order to remove barriers, blockers and impurities. When properly utilized, EOS® creates an opportunity through which everyone can not only identify their own issues, but also find ways to solve those issues.
The most important asset that any company has is its people. As a result, it is absolutely essential to not only find the right people, but also to guide those people as efficiently and effectively as possible. As Neth explained, “You’ve got to be clear and transparent with people about what you need and about what success ultimately looks like. You want to make certain that everyone in the organization understands their job.”
In a world that is becoming increasingly complex, the role of the generalist is quickly being eroded. In its place, we discover that people’s roles within companies are, by necessity, becoming more and more specific. All of this points to the increasing importance of clarifying people’s roles within companies, and what is expected of them. Gray areas need to be eliminated as they impair team members’ understanding of their duties and responsibilities.
Communication is Key
Everyone in the organization should understand not only the role of their respective department, but also their role within that department and the organization as a whole. Once again, the key to success boils down to good communication and clarity of purpose and roles within the organization. Everyone must be rowing in the same direction, and it is through weekly measurables that true progress can take place.
What kinds of insights about selling a business might come from experts at private equity firms? This article includes advice for sellers from industry veteran Lamar Stanley. Stanley is a Director at Gen Cap America, which is a lower middle market private equity firm in Nashville, Tennessee. Since 1988, Gen Cap America (GCA) has made 60+ investments across seven committed private equity funds.
Before joining GCA, Stanley was with the Nashville based private-equity strategy group, Diversified Trust Company. Stanley holds a B.A. degree from The University of the South and an M.B.A. from The University of Chicago.
Understanding Small Business
Over the decades, Stanley has amassed a considerable amount of knowledge and expertise. He points out that it is easy for people to lose sight of the fact that many so-called “overnight successes” are actually the result of ten or twenty years of hard, thankless work. It is through these years of laser-like focus that entrepreneurs are able to bootstrap their business. Additionally, these business owners need to not only have a vision, but also the insight to bring on great people to help build their business.
The Benefit of a Deal Attorney
Stanley feels that working with a deal attorney can make a tremendous amount of difference, as it can increase the chances of a successful transaction taking place. Deal attorneys understand the deal process, which can make all the difference when it comes to streamlining the process.
“Deal fatigue” can derail what would otherwise be a good deal. This term applies to how deals can sometimes drag on for months. Working with an experienced deal attorney can help expedite the entire deal process. In turn, it can help to avoid the dangers typically associated with deal fatigue.
Preparing in Advance for a Sale
Stanley believes that it is critical for a business owner to think about selling as soon as possible. Ideally, a business owner should be thinking about selling when they start their business. He realizes that most business owners can’t hope to prepare for selling as soon as they create the business. But the point is clear, the sooner they begin the process the better. Business brokers and M&A advisors can best serve business owners by helping them understand that they shouldn’t wait until a month or week before they are ready to sell their business to get their respective houses in order.
There are so many important factors involved in getting a business ready to sell. They range from customer concentration and diversifying suppliers to preparing financial statements and working capital estimates well in advance.
In particular, Stanley points to the danger of business owners having to deal with preparing their business for sale while continuing to operate the business during the sales period. What must be avoided is for business owners to essentially have two jobs at the same time, as this increases the odds of deals falling apart from deal fatigue. The sooner a business broker is involved in the process, the better.
More than likely, selling your business is one of the biggest decisions of your life. Unless you own a business, it is impossible to understand just how all-encompassing of a process it can be. With that stated, it is important for business owners to step back and seriously reflect on whether or not they are truly ready to sell. The psychological aspects of selling are not trivial. Various aspects must be taken into consideration before initiating the process to sell.
There are many reasons why it is vital to step back and think about whether or not you are really ready to sell your business. Far too many business owners believe they are ready to sell, only to discover (much too late) that an executed sale is not optimal for their plans.
Selling When There is No Other Choice
Selling a business because there is no other choice, such as situations concerning failing health, personal issues or problems with a business partner, isn’t a true choice at all. In this situation, the psychology of selling is essentially irrelevant, as you have one option, namely, to sell.
The Case of Burnout
In other cases, owners eventually hit a brick wall and have no choice but to consider selling. As burnout sets in, owners may feel that the time is right to “hang up their hat” and put their business up for sale. However, as the process evolves, even those experiencing some level of burnout can discover that they are not emotionally or psychologically ready to sell. In many cases, people make this realization only once it is too late.
Take the Time for Self-Reflection
Quite often, a company becomes interwoven into a business owner’s sense of self, sense of place in the world and even, to an extent, sense of self-worth and identity. When business owners are unaware of this fact, it can be something of a shock to their system to begin the sales process. Many people simply are unaware of the strong hold that their business has on them.
Owners need to invest some time in self-reflection and ask four key questions: Do I really want to sell? If the answer is yes, then why do I want to sell? Will I regret selling once my business is sold? What will I do after I have sold my business? Answering these questions involves far more than evaluating your business. They also involve diving into emotional issues that could be central to your future.
Are You Really Ready to Sell?
One of the best ways of determining whether you are ready to sell, and preparing your business for that potential sale, is to work with a business broker or M&A advisor. Business brokers are experts at helping business owners deal with every aspect of the process of selling a business. They can act as experienced guides that can use that experience and expertise to help you determine if you are truly ready to sell.
If it turns out that you are indeed ready to sell, a brokerage professional can help you prepare so that you can achieve the best price possible once your business hits the market.
There are many reasons why small companies are put up for sale. Some of the more common reasons can actually have little to do with the company’s general performance. For example, many small business owners discover that they need to sell for health reasons or personal concerns, such as divorce or partnership issues. While a business downturn or fear of a larger competitor looming on the horizon might prompt many business owners to sell, economic drivers are not the only issue. Owners may want and need to sell, but often it isn’t always that simple.
Many business owners are looking to retire, but are unpleasantly surprised to learn that they simply can’t afford to do so. Still yet, many business owners don’t truly want to retire or sell, but instead they just want more freedom in their lives. The day-to-day responsibilities of owning and operating a small business can take their toll. Many business owners are looking to make a change and would love to be free of this burden. This class of owner has already “checked out” mentally, and this can have profound negative consequences for their businesses.
When an owner wants out but discovers that he or she simply can’t afford to sell or retire, it will come as no surprise that there is usually an accompanying drop off in enthusiasm. Ultimately, the vast majority of owners will start to lose focus. Often, we find that they stop investing the capital necessary to continue the growth of the business, which can trigger other events, such as the loss of key staff members and/or customers. Losing a top customer to a major competitor can further accelerate the downward spiral. The failure of the business to maintain its footing and competitive advantage can lead to a more aggressive posture by existing competitors or even encourage a new competitor to move into the market.
In time, the owner may come face-to-face with the harsh realization that they have no choice but to sell if they are to salvage any of the business’s value. The best way for a business owner to safeguard against this situation is to sell when his or her business is doing well, as this helps to ensure an optimal price.
Working with a business broker, even years before one is interested in selling, is one of the single smartest moves any business owner can make. The time to think about selling your business is now, as no small business owner knows what life or the market will bring.
A small increase in what you charge for your goods and services can make a tremendous difference to your bottom line. The fact is that many businesses could charge more for their goods and services than they do, but fail to do so. Owners often do not realize the great value of charging just one-percent more. In this article, we’ll explore how charging even slightly more can dramatically impact your business.
Let’s consider a hypothetical example. A business owner tells a potential buyer that he or she could safely increase their prices by 1.5% and do so without the price increase causing any negative impact to sales or business disruption. The savvy buyer quickly realizes that the business, which has $70 million in sales, is leaving $1 million dollars on the table by not increasing its prices by 1.5%. A smart buyer realizes that after purchasing the business, all he or she has to do is institute this small price increase in order to achieve a sizable increase in profits.
In his best-selling book The Art of Pricing, Rafi Mohammed explores the often-overlooked area of pricing. He keenly observes that one of the biggest fallacies in all of business is to believe that a product’s price should be based on the cost of the product. In The Art of Pricing, Mohammed points to several examples. One comes from the restaurant industry. He points to the fact that McDonald’s keeps entrée prices attractive with the idea of making up profit shortfalls in other areas, ranging from desserts to drinks and more. Or as Mohammed points out, McDonald’s profits on hamburgers is marginal. However, its profits on French fries are considerable.
Mohammed’s view is that companies should always be looking to develop a culture of producing profits. He states, “through better pricing, companies can increase profits and generate growth.” Importantly, Mohammed points out that it is through what he calls “smart pricing” that it is possible to extract hidden profits from a business. Summed up another way, pricing couldn’t matter more.
All too often business owners, in the course of their day-to-day operations, fail to place sufficient importance of pricing. Any business looking to achieve more will be well served by first stopping and taking a good look at its pricing structure.
Likewise, buyers should be vigilant in their quest to find businesses that can safely increase prices without experiencing any disruption. At the end of the day, small changes to pricing can have a profound impact on a company’s bottom line.