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How to know when it is time to sell your business

Many entrepreneurs believe they can sell their business because their marketing is working, but demand is not the only indicator that predicts it is possible to sell. We talk to an expert to find out how you can gauge whether or not it is time to sell your business.

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Are there magical signs that point to selling your business?

Many entrepreneurs start their business because it is their dream to bring their product into the world, or introduce their service to an underserved niche, and other are building a brand to sell and set them up for their next venture or retirement. But how do you know when it is time to sell your business? Are there magical signs that present themselves? Do you wake up one day and the clouds part, traffic gets out of your way, everyone smiles at you and holds doors open? Nope. So how can you tell that your ducks are in a row?

FourBridges Capital advisor, Andy Stockett says there are some key signs that point to it being the best time to sell your business:

1. When Your Business is Humming

There’s a Merle Haggard song that goes, “Someday when things are good, I’m gonna leave you.” It’s probably not the healthiest mindset in a relationship, but it’s definitely the best way to think about the timing of a sale. Granted, business owners don’t always get to choose when a transaction takes place: if it’s a distressed situation or a personal emergency arises, the decision may be made for you. But assuming you’re in the driver’s seat, aim to go to market when your company is showing revenue and EBITDA increases. Why? You’ll be much more likely to maximize value and – most importantly – actually close a deal. Businesses that have gone flat, or worse, are trending downward, will have only a small universe of buyers. As a result, your ability to negotiate value and terms will be minimal.

2. When Your Management Team is Strong

Having gaps in your management team is akin to nailing a “buyer beware” sign over your business. Typically, buyers prefer to acquire a business that will continue to run smoothly post-transaction. If you’re hoping to sell your business and head to the beach condo, be sure you’re leaving behind a management team that can manage without you. Ultimately, that will get you more dollars in the bank.

3. When Things Are “Buttoned Up”

Potential buyers don’t want to deal with ongoing lawsuits or run-ins with the EPA. If possible, resolve these issues before trying to sell your business – and whatever you do, don’t try to bury them. Even if you come to terms with a suitor, the due diligence process won’t leave any stones unturned. If something pops up that the buyer wasn’t aware of and isn’t happy about, you can expect the whole transaction to come to a halt.

4. When Your Metrics Can Describe the Value in Your Business

Knowing your business is only half the battle. When you go to market, you need to be able to show it. Think:

  • Audits
  • Monthly “management packages” that present detailed financials
  • Operating statistics such as production runs, overtime hours, material waste and returns
  • There’s no substitute for hard – and accurate – data. For one thing, buyers will appreciate having all of the information laid out for them. It can also shorten the list of questions your buyers will be asking and minimize the back-and-forth, moving the whole process along faster.

5. When Your Personal Financial “Playbook” is Ready to Go

There’s a lot to think about when you’re considering a sale. While you and your investment bankers will be focused on positioning your business properly, don’t neglect your personal financial circumstances. Make sure you’ve explored ways to minimize taxes and address estate planning issues, and establish a plan for investing the proceeds from the sale. Lining up a wealth management advisor and an estate attorney can help you protect and grow the assets you monetize through a transaction.

The takeaway

Stockett makes some extremely important points that many businesses miss as they put their brand on the market – it isn’t just about nailing your offering, there are many moving parts that need to be in line before the time to sell is before you. Not all entrepreneurs plan to sell, but sometimes the stars are aligned and the timing becomes appropriate.

Marti Trewe reports on business and technology news, chasing his passion for helping entrepreneurs and small businesses to stay well informed in the fast paced 140-character world. Marti rarely sleeps and thrives on reader news tips, especially about startups and big moves in leadership.

Business Entrepreneur

Amazon sets eyes on couture with launch of online Luxury Stores

(ENTREPRENEUR) As of this week, Amazon is an online luxury retailer. Is this good or bad news for smaller luxury retailers?

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Amazon Luxury Stores logo

When I think of high-end fashion shopping, Amazon is not the first store that comes to mind. Groceries, random knick-knacks, and pet accessories for my adorable pooch are the items in my cart.

For years, the retail giant has tried taking over every single market. This year, they came one step closer to realizing drone delivery to customers. And now, they have their eyes set on couture.

This week, Amazon confirmed the launch of its high-end online designer fashion and beauty brand shopping experience, Luxury Stores. Currently, Oscar de la Renta is the first brand to launch on the platform, but more are on the way.

Available by invitation only to eligible Prime members, the store launched on Amazon’s mobile app. Eligible customers received early access to the designer’s Pre-Fall and Fall/Winter 2020 collections. The collection included “ready-to-wear, handbags, jewelry, accessories, and a new perfume,” according to Amazon.

If you’re a Prime member and didn’t receive an invitation, you can request an invite by visiting amazon.com/LuxuryStores.

Alex Bolen, CEO of Oscar de la Renta said, “Oscar de la Renta is thrilled to partner with Amazon for the launch of Luxury Stores.” He told Vogue that “somewhere near 100% of our existing customers are on Amazon and a huge percentage of those are Prime members. For me to get more mindshare with existing customers in addition to getting new customers—that’s the name of the game.”

According to The Verge, Amazon has over 150 million Prime members. With that big of a number and potentially huge customer overlap, we can all see why Bolen is so thrilled.

But what does Amazon’s break into luxury retail mean for smaller luxury retailers? Smaller companies are still struggling to keep up with the retail giant. With small brick-and-mortar stores fighting to stay afloat during the pandemic, could Amazon’s online Luxury Stores be an all-inclusive solution?

According to Amazon’s press release, the company doesn’t plan on only partnering with established fashion brands, but also with “emerging luxury fashion and beauty brands.”

“We are always listening to and learning from our customers, and we are inspired by feedback from Prime members who want the ability to shop their favorite luxury brands in Amazon’s store,” said Christine Beauchamp, President of Amazon Fashion.

Engadget reported that Amazon is taking a hands-off approach with Luxury Stores. The company will offer backend and merchandising tools support. Brands will have control over their pricing, inventory, and selection. With brands being able to have more control over their experience, maybe smaller luxury retailers will feel inclined to use this new sales outlet.

“It’s still Day One, and we look forward to growing Luxury Stores, innovating on behalf of our customers, and opening a new door for designers all over the world to access existing and new luxury customers,” Beauchamp said.

Amazon has yet to reveal which new luxury stores will arrive on the platform. Hopefully, we will also see our local luxury stores on Amazon in the future, too.

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Business Entrepreneur

Small businesses must go digital to survive (and thrive)

(BUSINESS ENTREPRENEUR) A study at Cisco reveals how digitizing small businesses is no longer optional, but critical to success, thanks to the pandemic.

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Black woman working on a laptop on a couch, running her small businesses' needs digitally.

As digital transformation efforts ramp up due to the COVID-19 pandemic, a new study released by Cisco has highlighted some key insights into how small businesses will need to adapt in order to survive in the “new normal.”

The study, conducted by International Data Corporation (IDC), analyzed more than 2,000 small businesses across eight different markets, including the United States, Canada, Germany, Mexico, United Kingdom, Brazil, Chile, and France. Using a four-section index to assess a small business’s digitalization efforts, the research found that 16% of companies said they were “thriving and feel their businesses are agile and resilient.” While 36% stated they were in “survival mode.” Regardless of where they were ranked in the index, the study concluded that 70% of firms were in the process of ramping up digital transformation within their company due to the coronavirus pandemic.

“The COVID-19 pandemic has exacerbated the digital divide that was already present in the small business market, and it is forcing companies to accelerate their digitalization,” said Daniel-Zoe Jimenez, AVP, head digital transformation & SMB research at IDC. “Small businesses are realizing that digitalization is no longer an option, but a matter of survival.”

The study also highlighted several challenges associated with digital transformation. The three biggest obstacles that businesses seem to face during the process were digital skills and talent, budgetary issues (lack of funds or previous commitment of funds), and cultural resistance to change. Despite these roadblocks, 45% of companies surveyed stated that they expect over 30% of their business to be digital by 2021. And 32% responded that they are planning on developing a digital strategy. This included investing in talent with the right set of digital skills moving forward.

Those decisions fall in line with Cisco and IDC’s recommendations. These include creating a three-year technology road map and building a workforce with the right skills to succeed in a digital world. Other suggestions include finding the right technology partner, and keeping up with industry trends. Leveraging financing and remanufactured equipment can aid with cash flow and budget requirements.

As small businesses continue to adapt to consumer behavior and the whirlwind of ever-changing rules that have come with the coronavirus, digital transformation will continue to play a major role in the post-COVID world. According to the report, if half of the small businesses surveyed can reach the second-highest tier of the index by 2024, those companies could end up adding an additional $2.3 trillion to the eight markets’ gross domestic product (GDP), contributing to the global economic recovery.

As we approach the six-month mark of the pandemic, just when and how the “new normal” will emerge is still uncertain. But there seems to be a light at the end of the tunnel for small businesses — even if it’s faint green and contains zeroes and ones.

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Business Entrepreneur

Choose your startup business partner wisely

(BUSINESS ENTREPRENEUR) Creating a startup business with a friend sounds amazing, but consider carefully if you may be better off as friends.

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Young couple working on startup together.

So, you want to be your own boss? Maybe get out and into a new career to crawl out from under the corporate drone motif? What better way to do it than to go into a startup business for yourself?

Hundreds of Americans have ideas that could turn into a new career. But not as many have the support structure, either financial or social, to make these dreams become a reality. A few of these people might look for someone to go into business with to help with the financial burden.

Can you think of a better way to start off a new business than with your best friend by your side? I sure as hell can.

My best friend and I get along great in our personal time. We’re both zombie horror nerds. He’s straight, I’m gay. He’s a cop, I’m an out of work geophysicist/bartender/writer – the jokes don’t quit with us. Our typical nights together include drinking at bars and smacking the other one upside the head as deemed necessary. We’re both slightly better than Neanderthals some days. And most importantly, neither of us should be trusted to work together.

Now of course that’s probably more specific to my situation, but let’s just realize that finding two people who can be the closest of friends and business partners is pretty rare.

There are a few people who have figured it out though and you can find a number of pointers online for new/established startup companies. A few of these tips include: Lots of structure to try and keep the fun at home and the business in the office, clearly defining roles, honest open communication, and strictly defining fiscal expectations.

So basically, it’s like committing to another marriage, which is what another set of people do for their startup business as well. Numerous married couples have put together careers and their relationships, and a great many of them are very successful.

So, if you have someone who you can commit to another potentially lifelong relationship with, and you trust to follow all of these rules, then go for it.

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