Buying a Family Business
There are challenges and rewards in buying someone else's business
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Getting Top Dollar for Your Business
By Catherine E. Toth
There are about 27 million privately owned businesses in the U.S., more than 90 percent of them owned and operated by families, according to a 2011 report published by the American Bar Association.
Every one of them – including the more than 35,000 in Hawaii– can be bought, says local mergers and acquisitions expert Matthew DiGeronimo. “For the right price,” he adds.
Here are some tips from DiGeronimo on what to consider when selling a business in the Islands:
• Prepare to sell: Owners shouldn’t wait until they’re ready to sell their businesses before doing anything about it. You want about 18 to 24 months to prepare to sell your business, DiGeronimo advises, and that includes getting all finances in order and handshake contracts put in writing. You should also be emotionally ready to sell the business. “The sale can take awhile, so you need to be patient,” he says.
• Sell on an upswing: Don’t wait until your business is failing to sell. “A lot of people say they’re not going to sell their business if it’s doing well,” DiGeronimo says. “Are you kidding me? The only time you should sell your business is when it’s doing well, when things are looking up.” This makes the business more appealing to potential buyers and increases your negotiation power, too.
• Don’t quit before it’s sold: Just because you’re selling your business doesn’t mean you should give up on it. Prospective buyers will look at the growth potential for the business and it may take months to finalize the deal. “As soon as you, the business owner, decide the fuel tank is empty, it’s over,” he says. “You can’t let that happen.”
• Don’t tell the world you’re selling: “Don’t put your business on Craigslist or put a sign on your door or tell your employees,” DiGeronimo says. “It’s the worst thing you could do.” Competitors could start contacting your distributors, employees could leave, customers could find another business to patronize. “And sometimes businesses don’t sell,” he adds. “The perception will take a long time to unravel.”
• Read your contracts: This is particularly important for businesses with landlords. Some malls in Hawaii require tenants to pay a percent of the sale price to the malls should owners sell their businesses. DiGeronimo says he’s seen leases that require the owner to pay as much as 30 percent of the sale price to the landlord.
• Consider hiring a professional: While some owners have successfully sold businesses on their own, consider consulting with a mergers-and-acquisitions expert. A professional can provide a valuation of your business and come up with a selling strategy tailored to it.
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