Southampton, PA (September 2008) – Expert business broker Michael Lefkowitz, owner of the Benjamin Ross Group , says proper exit planning is the key to preparing a small business for sale and realizing thousands in additional profit for sellers. Lefkowitz’s business brokerage specializes in the sale of privately held businesses priced from $200,000 to $20 million.
Speaking to members of the Newtown chapter of Business Networking International (BNI), Lefkowitz outlined several simple steps entrepreneurs can take to make their businesses more attractive to potential buyers – “a win-win for both the buyer and seller,” said Lefkowitz.
“People are leaving significant amounts of money on the table when they decide to sell,” said Lefkowitz, who has been in the mergers and acquisitions business for 22 years. “We see too many cases where owners do not have a business to sell. Although they may be making a profit and have a great reputation, the reality is they have a job with several assistants, not a business.”
Lefkowitz, whose professional business brokerage has been helping the owners of small businesses for sale since 1997, explained that every company has a life cycle. When it comes time to exit the business, an owner has two choices: close the doors and liquidate assets, or be acquired. “Finding someone to buy a business usually provides the best opportunity for maximum profit and long-term security,” he said.
“The best time to begin planning for your exit is the day you open the business,” he said. However, as soon as you think you are going to sell or transfer your business, you must begin planning. This is an especially important topic for today’s Baby Boomers, many of whom are now working towards retirement.
Lefkowitz suggested serious planning should begin at least three years in advance of a business being listed for sale. Early on, owners should be developing management depth, exploring tax implications, improving financial statements, formalizing partnership agreements, purchasing minority interests and negotiating lease transferability. If you will have a franchise for sale, you should be reviewing franchise agreements carefully.
As the sale gets closer, Lefkowitz suggested making sure the company’s books are in order, taxes are up-to-date, technology is functioning smoothly, and potential environmental issues are addressed. In the last six months before the company goes on the market, owners should clean up their premises to increase the business’s “curb appeal,” sell or replace obsolete equipment, resolve receivables and inventory issues, trim payroll and negotiate any contractual agreements.
Nationally, only about 20 percent of businesses on the market actually sell, according to a recent study by INC magazine. By contrast, the Benjamin Ross Group arranges sales for about 95 percent of its clients by working to make their businesses marketable.
“There are four common mistakes owners make in their businesses as it relates to their ability to sell,” said Lefkowitz. The number one-reason is the owner having too much responsibility for day-to-day operations; the business must be able to continue uninterrupted after the owner leaves.
“Another common mistake is a lack of professional (accounting, legal, financial planning) systems in place,” Lefkowitz said. Potential buyers want to be assured that the business has been running smoothly and efficiently, with no hint of underlying problems.
“Timing is also an issue,” said Lefkowitz. Owners should try to sell when on top and the business is running well rather when forced to by crisis (death, sickness) or external events (economic downturn, changing neighborhood, new technology).
“The final mistake business owners make before selling is an unwillingness to take risk,” according to Lefkowitz. A business that relies on one product, sold in one geographic area to the same customers year after year is not attractive to potential buyers. Lefkowitz suggested diversifying on a number of levels to improve the ability to sell a business.
“These four common mistakes cause owners to leaves thousands, sometimes millions, of dollars on the negotiating table, if they can even find someone willing to buy their business,” said Lefkowitz. “By being aware of these pitfalls and making a few changes that are transparent to the public, business owners are in a better position to reap the benefits of their hard work.”
NOTE – Michael Lefkowitz has more than 22 years of experience. He is a Certified Business Intermediary (CBI) and a Merger and Acquisition Master Intermediary (M&AMI), which has been granted to 68 people worldwide, including only three in Pennsylvania. He is available for interviews or as a resource on business-related news topics. Michael can be contacted at 215-357-9694