Articles

Written By: Laura Tiffany

Employees who feel appreciated, listened to, and supported are naturally going to do a better job and stick around longer. And the way to build a business that provides this type of employee experience is through the company culture you cultivate. But what does “company culture” really mean and how does it apply to smaller businesses?

On the surface, it brings to mind the perks of big tech firms: gourmet cafeterias, on-site laundry services, video game consoles and foosball tables.  But this definition no longer works anymore for two reasons: 1. Employees have wised up and realized that those perks are meant to appease them when asked to work 60+-hour weeks, and 2. They really don’t apply to typical smaller businesses.

A better definition is one by Don Mastro, found in an article from Security Sales and Integration: “In the simplest terms, culture is how an employee feels on Sunday night. Do they look forward to Monday morning and the week ahead? Or, conversely, do they dread it?”

 The Real Reasons Employees Leave — and Stick Around

Employee experience technology firm Medallia recently asked workers why they left their job or are considering leaving. The top five answers for hourly employees were their jobs in general, workload, pay equity, limited opportunity for career advancement, and not feeling appreciated. For salaried employees, the top five answers were workload, jobs in general, not feeling appreciated, company leadership, and pay equity.

Behind all of these reasons lurks a big question: Were employers aware of the issues and did they listen to and act upon employee feedback to address the problems?

A company culture that attracts and retains talented employees doesn’t revolve around perks that can be bought — in fact, these models are out of reach for many smaller businesses that simply do not have the capital to buy high-end amenities. What really brings workers satisfaction is being able to provide feedback and ideas for how to improve their work and the business — and knowing that those ideas are being taken seriously and acted upon.

Another Medallia survey found that only one of four employees felt heard by their bosses and even fewer felt their workplaces took any meaningful action based on their feedback. MIT Sloan analyzed 1.4 million Glassdoor reviews and found that a toxic corporate culture is 10.4X more powerful than compensation when predicting a company’s attrition rate in comparison with the average attrition rate of its industry.

Now, we can take the latter data point with a small grain of salt as compensation may be less of a concern at the large firms that MIT Sloan was analyzing. But it’s still illustrative of a point that is relevant for any small business: Toxic workplaces make people leave their jobs.

What makes a company culture not toxic, then? A great company culture starts with leaders who listen to the people who are there on the frontlines day after day. They handle customer complaints, hear customer compliments, and know what is working and what is not when it comes to their jobs.

As Mastro notes: “Provide employees with big, meaningful opportunities to share what’s on their minds, and then back them up with your day-to-day behaviors. You’ll make a difference.”

Every day is a new opportunity to build a company culture at your business that helps employees flourish in their jobs, engenders positive feelings about work, and demonstrates how much you value and appreciate your staff and customers.

Written By: Francesca Nicasio

Some business owners see themselves running their companies for decades — maybe even passing them down to their children — but most entrepreneurs don’t want to own and operate their companies forever. Industry data shows that 53% of business owners want to either sell their business or transfer ownership within the next 10 years.

If this is you, then you need to ensure you have a well-crafted exit strategy.

Mergers and acquisitions (M&A) are an attractive prospect for entrepreneurs because they provide a strategic exit route while ensuring long-term financial security and legacy preservation.

That said, the process of selling a business can be incredibly challenging, and only 30% to 40% of companies listed for sale are sold.

Why Do You Need an Exit Strategy? 

Your exit strategy can make or break the sale of your business. A well-crafted plan can maximize the value of the business at sale so that you can secure a solid financial position post-purchase.

In addition, a well-defined exit strategy — one that outlines the steps involved in transferring ownership — minimizes operational disruption. If there’s a smooth handover of leadership and responsibilities, your business can keep running.

A strong transition plan isn’t just about handing over the reins to someone new; it’s about ensuring that you and your business can thrive well after the sale.

How Do You Know When to Sell? 

The ideal time to sell your business depends on a combination of personal, business-related and market considerations.

On the personal side, you may be ready to pursue M&A if you’re approaching retirement age or looking for a lifestyle change. Maybe you’ve lost your passion for running the business or feeling burnt out. In these cases, selling your company may enable you to pursue new adventures.

Business-wise, you may consider selling your company when it has reached a certain level of maturity. Has the business grown to a certain size, and you’re not interested in taking it further? In some cases, the business may have reached a growth plateau, making M&A a good option.

Finally, the market itself could start telling you that it’s time to sell. If favorable market trends or emerging opportunities arise, selling may allow you to capitalize on these developments, see a positive ROI on your investments and pursue new ventures. Similarly, if you receive unsolicited or attractive acquisition offers, it could be a smart idea to explore them.

How Can You ‘Market’ Your Business as an Ideal M&A Target? 

If you’ve decided to sell your business, you need to position your company in the best possible position. Here are expert steps to establish your business as a good M&A target.

Strengthen your cash flow

“In the end, cash is king.”

Cash flow is always the first thing buyers look at — whether they’re private equity firms or competing businesses growing through acquisition.

As such, the first thing you should do before marketing your business to potential buyers is get your cash flow in order. You can do this by “cutting expenses in areas that will not hurt revenues or profitability. This may also involve the owner taking a salary as a W-2 employee. Owner Salary is a big component of Seller’s Discretionary Earnings — or some people use Adjusted EBITDA. In a small business where the owner is the daily operator, the owner’s salary may often be the biggest part of the business’ cash flow.

Get organized

Do buyers — and yourself — a favor by ensuring all company paperwork and components are in order. This will make the due diligence process immensely easier.

Get your house in order. This is everything from sales to operations, accounts payable and accounts receivable, and everything in between.  Buyers spooked by a messy due diligence process. It literally could cost you the deal.

Small business owners should gather all financial records, update their list of assets, and organize all contracts to ensure all information is organized and aggregated in one easy-to-access location. Make sure all key stakeholders are aware of the need to clean up shop and make it easy to give the potential buyer the information they ask for.”

Remove yourself from the business

Having an owner who’s heavily involved in the business’s daily operations can complicate the transition process, making the company less attractive to buyers.

Owners should minimize their involvement in their company’s day-to-day. ​​Start removing yourself from the daily operations by adding a layer of management below you. Step away from being the face of the business. This makes the business more appealing, especially to private equity groups.

Round up your key players

A solid team in place reassures buyers that your business can continue to operate successfully post-acquisition, which makes your company a lot more appealing.

Having key personnel identified, managing and leading teams is a very attractive thing for buyers because it shows stability, order, predictability and more importantly, scalability.

Pro tip: maintain confidentiality

While finding potential buyers is relatively easy, securing a serious prospect is a different story.

You can’t under emphasized the importance of maintaining confidentiality when finding a buyer. You can do this by creating a blind profile.

Blind profiles include vague and ambiguous details on the business — what it is, some high-level financial information, etc. Do not name the business, the owner or the precise location. This compromises confidentiality

When the public knows the business is for sale, there is a chance the business may lose customers.

How Will You Know if a Buyer is the Right Fit? 

A good buyer is not only willing and able to purchase your business but also motivated to do so. Here’s how you can determine if a buyer is a good fit or if you should go elsewhere.

Watch for red flags early on

You can usually learn a lot about a potential buyer in the first 15 to 20 days, which is why this period is essential for spotting red flags.

A telltale sign of a poor fit is experiencing difficulties during your early discussions.

The initial negotiations, letter of intent and due diligence stages should be easy. Difficult people, sloppiness and poor response times are major red flags that all too often end up being the sign of a bad buyer.

Assess the buyer’s economic stability

Just as the buyer would want to assess your business’s financial stability and cash flow, you should also evaluate their financial strength and credibility.

It’s key to ensure you are going to receive payment for your business. Even when you are willing to provide seller financing, make sure the upfront payment is adequate and ask for account statements or other proof of their financial capability to fund your business.

Set a Plan for Your Business’s Future 

There are several factors to consider when deciding whether or not to sell your business. If you do decide to go down the M&A route, you must take steps to make your business as attractive as possible to potential buyers.

From strengthening your financial position to finding interested parties, doing your homework — and the legwork — to secure the right buyer will make the sales process easier and more rewarding.

Bathtub Party Day

Bathtub Party Day encourages us all to skip the ordinary shower and linger in the tub instead. On December 5th, add some suds to the tub and pamper yourself.

• 3000 years ago is about the time that the first ‘ancestral’ pedestal tub was unearthed on the island of Crete, it measured five feet long, was made of hard pottery, and its shape resembled our modern 19th-century claw-foot tub.
• 6000 years ago archeologists discovered a plumbing system near the Indus River Valley in India
• 264 BC – The physics of displacement was discovered by Archimedes while he was soaking in a bathtub
• 17th Century – The earliest variant of the modern bathtub appears in Crete.
• 1825 – It wasn’t until the sixth president of the United States, John Quincy Adams, took office that the first bathtub appeared in the White House. Unfortunately, actual bathing was a bit tricky as there was no running water.
• 1873 – The Kohler Company is founded, with Jacob Vollrath and John Michael Kohler among the founders.
• 1853 – Franklin Pierce, the 14th man to serve as President, was the first to have a tub installed in the stunning Washington D.C. residence.
• 1883 – John Michael Kohler invented the world’s first claw-foot tub in enamel.
• 1921 – only 1% of the population’s homes had indoor plumbing, as outhouses were still the norm in rural America.
• 1928 – It was the Crane Company that first invented various colored bathroom fixtures in the US market back in 1928.
• Bathtub Gin received its name as the bottles were too tall to be topped up with water from a sink so they were filled in the tub and the gin was even sometimes distilled and fermented in a tub
• It’s against the law for donkeys to sleep in bathtubs in Arizona
• In Kentucky, a historic law required citizens to take a bath at least once every year.
• About 365 people drown in their bathtubs each year (bath safety is critical!)
• The average bathtub holds approximately over 52 gallons of water
• Marilyn Monroe reportedly bathed in champagne and it took a whopping total of 350 bottles to fill the bathtub
• It would take 17,000 McDonalds straws of water to fill a standard bathtub
• Mike Tyson reportedly spent $2 million on a bathtub for his ex-wife
• Dermatologists and skin experts have confirmed that ‘feel-good’ hormones – endorphins – are released when you bathe, similar to that feeling when you’re laying down on the beach enjoying all the warmth of the summer weather.
• An hour long soak at 38 degrees can burn on average 130 calories, which is the equivalent of doing 40 sit-ups or walking for half an hour.
• Did you know baths can make your heart actually pump faster? As the heart plays a vital role in cooling the body down, it has to work harder in a hot bath – not only exercising the heart but also great for the body’s general blood flow.
• Italy-based manufacturer Devon & Devon created a gold-coated tub.
• On the Titanic, only two bathtubs were available to over 700 passengers in third class.
• A steamy bath during cold and flu season helps to clear our sinuses and improve our oxygen intake. It also increases our circulation.
• The warm water reduces inflammation, easing achy joints and sore muscles. It also helps relieve stress.
• Dropping temperatures outside mean cold hands and feet, or just a chilled body in general. A soak in a warm tub warms us right up.
• Roman baths were originally built exclusively for the poor. The very first of Rome’s 900+ public baths were actually built for the poorest people to use, while the rich folks would have baths at home. Over time, however, the leisurely bathing pastime became a hallmark of Roman society in general – and bridged the gap between rich and poor just a little bit.

By: Datasite – October 30, 2023

Recent breakthroughs in artificial intelligence are having ripple effects in virtually every industry, and the M&A field is no exception. This new technology has potentially huge implications for dealmakers, both in day-to-day practice and big-picture strategy. Datasite’s roundtable discussion for Q3 of 2023 focused on how buyers, sellers, and M&A advisors should think about AI as they look ahead.

Questions and Concerns About AI Adoption

Artificial intelligence seems poised to reshape virtually every field of human endeavor. Which of those impacts should be top of mind for M&A professionals?

According to Justin Gans of Capstone Partners, it can be hard to pick just one. AI has already had a considerable impact on the market landscape as major tech firms race to scoop up top talent through large acqui-hires. It’s also impossible to ignore the risks this technology poses, such as the spread of misinformation through deepfakes or the possibilities for market disruptions due to algorithm-driven stock trading.

Meanwhile, professionals across the workforce are wondering how this new technology will affect their careers, even as they search for effective ways to work with it. Audience polling numbers suggested that adapting to the novel capabilities of AI may be the most pressing concern for many, with 53% of viewers listing it as their number-one concern.

What’s Next For AI?

Amir Ghavi, a partner at Fried Frank and the head of the firm’s technology practice, said he’s anticipating a major expansion in the ways artificial intelligence will be deployed. Initially, he pointed out, many observers viewed AI mainly in terms of individual apps like ChatGPT. Now, there’s a growing awareness of the viability of a multimodal approach incorporating disparate capabilities like image recognition, language models, and video generation.

“All of the applications we’re used to using today in the enterprise are going to have varying degrees of AI baked into them,” he said. “AI won’t look like one particular thing. Sort of like eggs in a cake, it’s going to be an invisible but quite powerful layer.”

Ashish Pagey, Datasite’s Vice President of Artificial Intelligence, agreed with Ghavi’s assessment. He also noted that there’s a great deal of progress being made on agentic tools that can perform complex, multi-stage tasks autonomously. In addition, the open-source world may be catching up to proprietary models like GPT4, which should further accelerate AI adoption.

AI Market Trends to Watch

The panelists suggested that the M&A market’s initial enthusiasm for AI is being tempered by a growing caution about the risks it poses. Sellers today often have to make a case for their ability to remain competitive in the face of AI-driven disruption.

At the same time, there’s an increasing expectation that companies in every space will have sophisticated cybersecurity and data analytics capabilities. Audience poll responses reflect this concern, indicating that concerns about data security are the biggest headwinds for AI in the M&A industry.

On the more positive side, the panel identified two major hotspots for AI-related deals. The first was advanced tech, as machine learning tools enable companies to better identify and engage with their customers.

Gans offered TikTok as a perfect example. “The thing that makes TikTok such a super-popular app is the way its algorithms can very quickly determine what is most of interest to any particular user,” he said.

Another potential growth area is in large-scale data analytics. The ability to derive useful insights from massive, unstructured data sets offers potentially game-changing benefits for buyers of all kinds.

Kicking the Tires on AI Acquisitions

Moderator Abby Roberts (Senior Director for Datasite Insights) asked the audience what’s most likely to cause a deal in the AI space to fall apart. The top contender: difficulty verifying the seller’s claims about their tech.

Gans concurred, adding that most of the deal collapses he’s seen have been due to exaggerated promises by sellers.

“For example, there was a company that claimed they were experts at identifying hazards for driverless cars,” he recalled. “They were great…when it was a nice, clean street in the middle of the day.”

The panelists suggested that one of the critical questions diligence teams should ask is whether a given solution is taking advantage of the latest in AI capabilities. Buyers may need to beware of companies that say they’ve built their own models, when in fact they’re simply reskinning open-source technology or adding UI/UX features to an existing engine.

“In a very short period of time, we’ve gone through two or three generations of technology,” Pagey said. “The thing I would look for is: Is this product using the previous generation’s technologies and competencies? Or are they well-positioned to use the next gen and continue to expand and differentiate?”

AI Tools In the M&A Workplace

Will generative AI tools increase or decrease the workload of M&A professionals? In a recent survey by Datasite, 47% said they expected this technology to make them busier rather than taking work off their plate.

“We think of AI more as automation, which is true,” Pagey said. “But the macro-level value for an organization is to use that automation to scale up.”

While many individual tasks may be faster with help from these novel tools, dealmakers may have much more to do as the capabilities of their firms expand. Ghavi seconded this view.

“It’s a productivity tool,” he said. “A country like France might use it to take more time off. I suspect that’s not going to be the way it plays out in America. We’re going to continue to try to do more in the same amount of time.”

The trillion-dollar question, he said, is whether dealmakers can handle this accelerated pace competently. Even with the added capabilities offered by AI, there’s a risk of vital details falling through the cracks when major workflows are handed over to computers.

Why Dealmakers Should Stop Worrying and Learn to Love AI

Roberts closed out the discussion by asking the panelists what advice they’d offer to M&A professionals who are concerned about this technology’s potential to disrupt the industry.

“Become as smart as possible about what AI can do,” said Gans, “both for you and your company. We’re past the initial adoption curve…if you don’t get smart on it, you’ll get left behind.”

Ghavi cited MIT roboticist Kate Darling’s suggestion that we should think of AI as animals rather than human replacements — semi-autonomous tools that will sit alongside humans.

He also pointed out that companies may be facing an important tradeoff: should they let vendors use their data to train their models? Their competitors will also have access to the advanced tools that result, but AI may not realize its full potential if companies are stingy with their data.

Pagey suggested that M&A companies may want to start their AI adoption with simple, reliable tools that will enhance their workflows without disrupting them. Then they can move on to more transformative capabilities.

“The first step, I think, will position people to understand, learn, de-risk, and remove some of the unknowns,” he said. “Step number two will probably have much higher returns.”

By, Matt Benjamin, Senior Markets Expert, The Oxford Club

In a presidential election, should smart business owners, CEO’s and investors vote for the Democrat or the Republican?

It’s an age-old question, and it’s becoming relevant again as the 2024 election season approaches and business owners, CEO’s and investors start eyeing the polls.

Invariably, each election delivers hysterical prognosticators who tell us the market will tank under a particular candidate.

On election night in 2016, when it looked like Donald Trump would beat Hillary Clinton, and New York Times opinion columnist and Nobel laureate Paul Krugman predicted apocalypse.

“Markets are plunging,” Krugman wrote that night. “If the question is when markets will recover, a first-pass answer is never.”

He was dead wrong. While the market went for a wild ride over Trump’s four years in the White House, the S&P 500 Index was 63% higher when he left office.

Similarly, I have Republican friends who predicted an utter market collapse under Barack Obama.

Yet the S&P was up 176% over his eight years in office.

For comparison, the market has struggled a bit during the Biden administration and is up just 14% over Joe Biden’s first 33 months as president. And the market fell almost 40% during George W. Bush’s eight years.

As the chart below shows, it doesn’t make that much difference to the market whether the Oval Office occupant is a Republican or a Democrat. (You can compare the S&P performance under presidents going back to Herbert Hoover here.)

That isn’t to say that a president’s policy choices don’t matter.

It’s All About the Policies

Regulation and tax policies influence the behavior of companies and individuals.

Just as important – and maybe more so – is fiscal stimulus. If you pump a lot of money into the economy, chances are that consumers and businesses will spend it. And that spending will drive corporate profits up and, eventually, stock prices higher.

And boy, oh boy, have we had fiscal stimulus in the past few years!

Trump’s 2017 Tax Cuts and Jobs Act amounted to $3 trillion in economic stimulus over 10 years. That’s bigger (as a percentage of GDP) than the entire New Deal pushed through under Franklin Roosevelt. The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 amounted to another $2 trillion. Overall, Trump’s administration enacted about $6 trillion in stimulus spending.

Biden has tried to match that. His administration has overseen the passage of five pieces of stimulus legislation that total just over $5 trillion.

As you can see in the table below, these numbers (all adjusted for inflation) dwarf both the New Deal and the Marshall Plan.

Yes, I’m well aware most of this government largesse is deficit spending, and that the national debt has ballooned to more than $33 trillion. And yes, eventually, there will be consequences to this uncontrolled borrowing.

Monetary policy, however, matters just as much as fiscal policy. And unfortunately for Biden, the ZIRP – zero interest rate policy – era is over. Just about 13 months into Biden’s term, the Federal Reserve embarked on the steepest interest rate hiking cycle in four decades.

That marked the end of easy money.

What Will 2024 Bring?
The 2024 presidential election could be very important indeed, and you’ll want to have a plan for it no matter who wins.

The reality is that smart American businesses find ways to succeed no matter who’s in charge.

Executives depend on the quality of their people to achieve their corporate and personal career goals. It is an old adage – and a true one – that the best jockey cannot win races if he only rides slow horses. A better understanding of the skills and abilities of executive recruiters will enable any manager to greatly increase the quality of his hiring decisions, and thereby enhance his own career!

Some managers are aware and take full advantage of the best possible means of identifying and selecting top quality candidates for critical staff openings. However, many do not. Frequently, this stems from misconceptions regarding the merits of utilizing the services provided by topflight executive recruiting firms.

By a better understanding of these realities, hiring managers will dramatically improve their ability to secure the most qualified candidates in a timely manner.

Misconception # 1: Companies Can Find the Same Talent That Executive Recruiters Can.

With the rise in popularity of on-line job boards and networking platforms, many companies mistakenly believe that these sources contain the same talent that can be found through executive search firms.

This belief couldn’t be further from the truth. Executive recruiters don’t just post ads on job boards to find qualified applicants. Typically, they focus on specific industries, and many even specialize by types of positions within those industries. The benefits of doing so are enormous. It allows them to invest tremendous time and energy forging relationships with high performing candidates within these niche markets, learning the types of positions in-demand people would see as advancing their careers.

Professionals who genuinely excel have neither the time nor desire to peruse on-line ads or to respond to on-line inquiries. It is only when a search consultant personally approaches them that the best people take the step to becoming available for your firm.

Good recruiters invest countless hours establishing unique connections with key performers. These connections allow access to talent pools built over many years…and which are available through no other sources.

This, along with the ability of executive recruiters to carefully screen and evaluate the best candidates, is what allows them to bring the strongest talent to a company’s attention. Companies that rely on job boards or networking platforms will never find the outstanding quality of talent that executive recruiters can provide.

Misconception #2: The Internal Staff Can Do the Same Job as a Quality Executive Search Firm.

While this belief is prevalent within some firms, a thoughtful analysis will prove the opposite. Executive recruiters make a living by finding talent that companies cannot find on their own. While in-house resources may be effective for lower level roles, it makes sense for hiring managers to give themselves every opportunity to interview the very best candidates.

Moreover, internal recruiters typically spend their time vetting applicants who apply or can be found through on-line portals. Search firms focus on finding superior candidates who are successful in their present situation. This very different methodology results in a very different level of candidate.

The ability to call proven performers with direct competitors to discuss career options is a significant factor in what sets professional recruiters apart from internal recruiters or HR people. Having the ability to reach out to these peak performers offers hiring managers access to highly-sought-after candidates they would never see otherwise.

What experienced manager has not extended an offer to a candidate who would have helped the manager’s company and career enormously – only to receive a turndown? In many instances, the manager is not emphasizing the specific elements of the opportunity which are of greatest interest to the candidate. These quality performers are not actively looking, and may need to be “sold.” While there are various reasons why good candidates are open to making a change, the fact is that virtually none would be comfortable sharing those concerns with an internal recruiter.

Professional recruiters have great expertise in developing in-depth individual relationships with the candidates they present. As part of a professional recruiter’s service, they will provide the candidate’s primary motivators to making a move – and thereby reduce or eliminate turndowns and assure the manager of securing the best talent available.

Misconception #3: Executive Recruiters Are Too Expensive.

Executive recruiters report that many of the companies that can most benefit from their services employ internal recruiters. This may lead to the belief that utilizing executive search firms when internal recruiters or HR people are employed is not cost effective.

A simple cost analysis will show otherwise. Consider the combined cost of salaries and benefits of HR personnel and internal “recruiters”, as well as the time that HR people spend doing non-productive interviews with unqualified candidates. These direct and indirect costs are substantially higher than paying out a one-time fee for an executive recruiter’s services.

Executive recruiters eliminate the time and expense required by a firm to find, hire, and train a new internal “recruiter”. And any truly successful in-house recruiter will soon leave his salaried position to become a successful executive search consultant.

Additionally, your chances of securing a long-term contributor are much better if an experienced executive search consultant is involved. Studies have shown that a bad hire costs companies three times more than an employee’s annual salary.

With executive recruiters, their work isn’t done once a candidate has been placed successfully. A guarantee covering the candidate during the probationary period is standard in the industry. Seasoned recruiters make a point of periodically checking in with candidates that they have placed and will share any concerns with the hiring manager. This is invaluable information and directly contributes to a long-term successful employee… and a highly productive staff.

Internal recruiting can be a good solution to filling less critical positions. They can screen the candidates that apply via the company portal and can provide hiring managers with candidates for lower end roles.

However, for more significant positions, it is an excellent and necessary business decision to utilize the services of a highly skilled executive recruiter with a strong industry focus.

At some point, every business owner leaves the company, either voluntarily through retirement or otherwise. Some businesses will outlive their founders. Others can’t survive without the continued involvement of a key owner-employee. And a few business concepts — from horse-drawn buggies to video rental stores — eventually lose relevance. Here’s an overview of the options for owners in this phase of the business lifecycle.

Selling the Business

Many owners cash out by selling their business interests to the remaining owners, family members, employees, private equity firms, competitors, or other outsiders. A sale provides owners with cash flow to fund retirement and pass along to their heirs.

Steps to make your business sale-ready may include:

• Divesting less-desirable assets,
• Buying out difficult shareholders,
• Trimming excessive overhead costs, and
• Transitioning customer accounts to employees who will continue working for the business after the deal closes.

Your professional advisors can help position your business for sale and maximize the selling price. They can also help identify potential buyers, compile financial documents for prospective buyers, set a reasonable asking price and recommend alternative deal structures.

After closing, buyers might ask key owner-employees to continue working for the business as an employee or consultant. These arrangements are usually temporary and go hand-in-hand with a noncompete agreement and/or an earnout provision, where a portion of the purchase price is contingent on the company meeting certain financial benchmarks in the future. It’s important to understand the tax obligations associated with these arrangements — they may be treated differently than capital gains from sales proceeds.

Going Public

With a professional management team in place and audited financial statements, larger companies might be positioned to make an initial public offering (IPO). This can be a daunting endeavor, but an experienced professional advisor can help navigate the details.

When contemplating an IPO, it’s important to carefully estimate the costs associated with going, and being, public. Beyond the initial registration costs, publicly traded companies are subject to extensive ongoing filing and disclosure requirements with the Securities and Exchange Commission.

Reorganization

When a mature business’s performance starts to decline, it can potentially be saved with a turnaround (or reorganization) plan. Reorganizing can provide a fresh start, especially in today’s volatile economy. For instance, management might:

• Renegotiate debt terms,
• Close unprofitable segments,
• Refocus on core business operations, and
• Revise its marketing strategy.

Professional advisors are central to an effective turnaround. They can help you get the business back on track by creating short-term cash flow projections and monitoring progress. Real-time tracking allows you to pivot as needed and improves the odds of success.

Once a turnaround is successfully completed, the business could be positioned for a sale. Conversely, failed turnaround attempts may result in a distressed business sale or an asset liquidation.

Liquidation

Some businesses are no longer viable. In this situation, the owner will need to sell assets, repay creditors and wind down operations. This includes filing final tax returns.

Selling assets at auction is usually the method of last resort because you’ll receive pennies on the dollars you’ve invested. Professional advisors can help liquidating businesses find competitors, suppliers and even customers who might be willing to buy the assets for a fair price. When creditors are involved, liquidation might require a formal bankruptcy proceeding. Your advisors can guide you through this process.

Ask the Pros

Businesses need guidance from experienced professional advisors as they mature and evolve. Sometimes long-term plans may need to be revised as market conditions and owners’ personal circumstances change. If you haven’t done so already, discuss exit strategy options with your tax and legal advisors. They can help determine the optimal path based on your business and personal situation.

By Larry Adams

WOODWORKING NETWORK

October 23, 2023

Custom and semi-custom cabinet sales increased from August 2022 to August 2022, rising by 11.4 percent and 6.3 percent respectively. These positive gains, however, were muted by stock sales, which took a YTD drop of 22 percent.

According to the Kitchen Cabinet Manufacturers Association’s Trend of Business Report, August’s year-to-date sales were $1,879,829 in August 2022 and rose 1.7 percent to $1,911,327 in August 2023.

In terms of monthly sales comparison, August 2023 compared to August 2022 is down 7.4 percent. However, when compared to July 2023 numbers, which were $211,047, sales were up 12.5 percent.

Estimated year-to-date sales through August were $11,847,800, according to KCMA statistics. In July 2023, YTD sales were $10,357,800.