What Businesses are Selling?

Below you will find the current “hot” business list courtesy of data from BusinessesForSale.com. We asked Businesses For Sale for a monthly ranking of business types based on the number of “hits” on their site. This ranking is not based on the actual sale of businesses.

Top Ten Businesses for April 2014:

  1. E-Commerce
  2. Advertising
  3. Websites
  4. Convenience Stores
  5. Restaurants
  6. Bars
  7. Internet
  8. Auto Repair, Service & Parts
  9. Retail
  10. Gas/Petrol Service Stations

Top Ten M&A Businesses for April 2014:

  1. Distribution
  2. Manufacturing
  3. Car Wash & Valet
  4. Fabrication
  5. Gas/Petrol Service Stations
  6. Mining
  7. Wholesale
  8. Road Haulage & Freight Services
  9. Food & Drink Distributors
  10. Food & Drink Wholesalers

Are You Prepared to Sell Your Business

Be Prepared to Sell Your Business


Like the firemen who back the truck in order to be ready, you, as a business owner, need to be prepared when you get the call from someone who solicits to buy your business.  According to the latest Sellability Tracker report, the proportion of business owners who received an offer to buy their company in the quarter ending March 31, 2014 was up considerably from Q4 2013. Roughly 12% of business owners using The Sellability Score last quarter had recently received an offer to buy their business.

Companies are being  acquired more  because buyers have access to more cash than they know what to do with and interest rates are still very low.

This increase in activity among buyers has important implications for you as a business owner.  Chief among them is that you need to have a sellable asset when opportunity strikes.

Statistically speaking, the two most common reasons you are likely to sell your business are:

  1. A health scare; or retirement
  2. An unsolicited offer to buy your business.

As unsolicited offers increase, so too does the need for you to be ready if an opportunity comes your way. Unlike when the owner is in control of when he/she decides to list a property, the hallmark of an unsolicited offer is the fact that the owner doesn’t’ know when it is going happen; which means you need to operate your business as if an offer were always around the corner.

Companies that are sloppily put together with shoddy bookkeeping or too much customer concentration, or that are run by a Hub & Spoke manager, will end up being passed over for turnkey operations.

The time is now for you to get your company ready to showcase when opportunity comes knocking.




What are the “hot” businesses for sale in Orange County

I am often asked what business are selling in Orange County and across the country.   Buyers looking for a business or sellers wanting to sell the business, all want to know what is really going on out in the real world.  Here is what the latest;

Below you will find the current “hot” business list courtesy of data from Businesses For Sale. We asked Businesses For Sale for a monthly ranking of business types based on the number of “hits” on their site. This ranking is not based on the actual sale of businesses.

Top Businesses for Sale in March 2014:

  1. Café Bars
  2. Bars
  3. E-Commerce
  4. Convenience Stores
  5. Restaurants
  6. Nightclubs
  7. Sandwich Shops & Delivery
  8. Home & Garden
  9. Liquor Stores/Off Licences/Wine Merchants
  10. Pizza Delivery

Top Ten M&A Businesses for Sale March 2014:

  1. Distribution
  2. Manufacturing
  3. Wholesale
  4. Car Wash & Valet
  5. Fabrication
  6. Road Haulage & Freight Services
  7. Auto Repair, Service & Parts
  8. Gas/Petrol Service Stations
  9. Mining
  10. Construction


Strategic Ways to Sell your Business In Orange County

Did you see the news that Facebook  acquired Internet messaging service WhatsApp for $19 billion? It is the largest-ever acquisition of an Internet company in history.

WhatsApp is a true find for sure. The messaging service allows users to avoid text-messaging charges by moving texts across the Internet instead of the mobile phone carrier networks. This can save people who travel, or who live in emerging markets, hundreds of dollars a year, which is why WhatsApp is adding one million new users per day.

At the time of the acquisition in February 2014, WhatsApp had acquired some 450 million users. Their business model is to charge a subscription of $1 per year after their first full year of service. Even if all 450 million WhatsApp users were already paying, that is still less than half a billion in revenue. Why would Facebook acquire WhatsApp for a number that is somewhere north of 40 times revenue?

Nobody know for sure what is in Mark Zuckerberg’s head, but we can only assume that at least part of the opportunity Facebook sees is the opportunity to sell more Facebook ads because of the information they glean from WhatsApp users. Global advertising giant Publicis estimates 2013 online advertising spending in the US alone to be around $500 billion.   A strategic acquisition.

And therein lies the definition of a strategic acquisition. Most acquisitions run a predictable pattern of industry norms, but a strategic can pay a significant premium for your business because they are looking at your business for what it is worth in their hands. Rather than forecasting out your future profits and estimating what that cash is worth in today’s dollars, a strategic is calculating the economic benefit of grafting your business onto theirs.

There can be many other strategic reasons why a bigger company might want to buy yours. Here are a few to consider:

1. To control their supply chain

In 2011, Starbucks announced it had acquired Evolution Fresh, one of their providers of juice drinks, for $30 million. Now Starbucks is no longer beholden to one of its suppliers.

2. Increase sales by having the existing sales people sales new products

Also in 2011, AOL announced the acquisition of The Huffington Post for $315 million, even though HuffPost had just turned its first modest profit on paper. AOL wanted to give its advertising sales people more inventory to sell and HuffPo had 26 million unique visitors a month.

3. To make their cash cow product look better

Microsoft bought Skype for $8.5 billion dollars even though Skype was losing money. The good folks in Redmond must have assumed they could sell more Windows, Office and Xbox by integrating Skype into everything they already sell.

4. To enter a new geographic market

Herman Miller paid $50 million to acquire China’s POSH Office Systems in order to get a beachhead into the world’s fastest growing market for office furniture.

5. To get their employees

Facebook reportedly acquired Internet start-up Hot Potato for $10 million, largely to get hold of the talented developers working at the company.

Most acquisitions are done for rational reasons where an acquirer agrees to pay today for the rights to your future stream of cash. You may, however, be able to get a significant premium for your company if you can figure out how much it is worth in someone else’s hands.

Curious to see what your business is worth and how you might improve its value to both strategic and financial acquirers?  Complete the Sellability Score questionnaire today and we’ll send you a 27-page custom report complete with your score on the eight key drivers of Sellability. Take the test now: http://empireoc.com/sellability-score

What Are The Top Businesses for Sale In Orange County and Across the US

Often I am asked what are the types of businesses that sell or is my business a business which can be sold.  To answer the first question, here are the top current top ten in both Main Street and M&A.


Top Ten Businesses for February 2014:

  1. Printing & Typesetting Services
  2. E-Commerce
  3. Convenience Stores
  4. Restaurants
  5. Websites
  6. Services
  7. Wholesale
  8. Telephone Services
  9. Bars
  10. Auto Repair, Service & Parts

Top Ten M&A Businesses for February 2014:

  1. Distribution Businesses
  2. Wholesale Businesses
  3. Manufacturing Businesses
  4. Fabrication Businesses
  5. Mining Businesses
  6. Car Wash & Valet
  7. Food & Drink Distributors
  8. Food & Drink Wholesalers
  9. Construction Businesses
  10. Road Haulage & Freight Services

Valuations for Business Sold for Under $1,000,000

A recent report from Business Valuation Resources of the 4Q 2013 Pratt’s Stats Private Deal Update reports the following pricing/valuation multiples of EBITDA used on sales made by business brokers, of businesses that sold for under $1,000,000:

2013 = 2.40
2012 = 2.36
2011 = 2.50
2010 = 2.34
2009 = 2.35
2008 = 2.58
2007 = 3.73
2006 = 4.15
2005 = 4.05

As you can see the changes in the multiples of EBITDA have had impact on the expectations of sellers.  Sellers I have run across often don’t like the current multiples/pricing and think their business is worth more than the market will bring.  The  challenge is because many business owners expect to receive multiples of EBITDA that simply are not happening, like they were pre-recession.


Do You Want Your Business to Be More Valuable This Year?

For many, the first of the year is a time of rebirth and resolutions. It is a time to reflect on last year’s achievements and to set goals for the year ahead.

Some people will set personal goals but most company owners will set business goals, usually focused on hitting certain revenue or profit projections. But if your goal is to own a more valuable business in 2014, you may want to consider these goals:

* Take a two-week vacation without checking in with the office. When you return, you’ll see how well your company performed and where you need to make a key hire or create a new system.

* Write down at least one process per month. You need to document your systems by putting it down in writing for others to follow. Resolve to document one system a month and by the end of the year you’ll own a more sellable company.

* Offload at least one customer relationship. If you’re like most business owners, you’re still your company’s best salesperson, but this can be a liability in the eyes of an acquirer, which is why you should wean your customers off relying on you as their point person. By the time you sell, none of your key customers should think of you as their relationship manager.

* Cultivate a new relationship with a new supplier. Having a “go to” group of suppliers is great, but an over-reliance on one or two suppliers can create a liability for your business. By spreading some of your business to other suppliers, you keep your best suppliers hungry and you can make a case to an acquirer that you have other sources of supply for your critical inputs.

* Create a recurring revenue stream. Valuable companies can look into the future and see where their revenue is going to come from. Recurring revenue models can vary from charging customers a small amount for a special level of service to offering a warranty or service contract.

* Find your lease as well as any other key contracts. When it comes time to sell your company, a buyer will want to see your lease and understand your obligations to your landlord.   Make sure the lease can be assigned.

* Check your contracts and make sure they would survive the change of ownership of your company. If not, talk to your lawyer about adding a line to your agreements that states the obligations of the contract “surviving” in the event of a change of ownership of your company.

* Start tracking your Net Promoter Score (NPS). The NPS methodology is the best predictor that your customers will re-purchase from you and/or refer you, which are two key indicators of a healthy and successful company. It’s also why many strategic acquirers and private equity companies use NPS as a way to measure the health of their acquisition targets during due diligence.

* Get your Sellability Score. All goals start with a benchmark of where you’re at today, and by understanding your company’s Sellability Score, you can pinpoint how you’re doing now and which areas of your business are dragging down your company’s value.  Visit our website at www.empireoc.com to take the Sellability survey.

A lot of company owners will set next year’s goals around their revenue or profits, but those goals are blunt instruments. Instead of just building a bigger company, also consider making this the year you build a more valuable one.

How To Increase the Value Of My Business

How valuable your business is to a prospective buyer is the extent to which the buyer can see where your sales will come from in the future.  A recurring revenue stream means the buyer might not have to inject cash into the business going forward and therefore will pay more for it.   Recurring revenue streams therefore increases the value of your business.  There are various forms of recurring revenue.

1.  Contracts (think wireless phones)

2.  Automatic renewal subscriptions (think websites which charge a monthly fee automatically charged at the first of the month)

3.  Sunk-money renewal subscriptions (think equipment lease and then subscribe to information to monetize the leased equipment)

4.  Renewable Subscriptions (think magazine subscriptions)

5.  Consumables (think razor blades)

This is the time of the year to plan for the future.  If you can incorporate a recurring revenue stream into your business you can increase its value.



If I Sell My Business, How Much Is It Worth?

This is one of the first questions I get asked from a prospective seller.  It should also be the first consideration a prospective seller considers before he decides to sell.  How do you make a decision to sell unless you know what the business could possibly bring when it is on the market.   Unlike some other intermediaries, our company, Empire Business Solutions, offers a free Broker Opinion of Value so a prospective buyer can get an idea of the possible worth of his business.  Of course, the Broker Opinion of Value does not guarantee the seller will get that price but at least he has an idea of what it might possibly sell for.  Only the open market will determine the actual value of the of the business.

What to Expect in Selling Your Business

For many Owners and CEOs, selling their company is a once in a lifetime experience.  They may be very experienced but they can also be blind sided by surprises when selling their company.

#1: Substantial Time Commitment

In the real estate business, once the seller engages the broker there is very little for the owner to do until the agent presents the various offers from the potential buyers.  In the M&A business, there is a substantial time commitment required of the CEO/Owner in order to complete the sale properly.   The following examples are worth noting:

Offering Memorandum:

This 30 + page document is the cornerstone of the selling process because most business intermediaries expect the potential acquirers to submit their initial price range based on the information presented in this memorandum.  The intermediary will heavily depend on the CEO/Owner to supply him or her with all the necessary facts.

#2: The Need to Inform Other Employees in the Process

A number of owners selling their company are paranoid about a confidentiality leak regarding the sale of their company.  In fact, some owners prefer that no other person in the organization is aware of the pending sale of the company.  At a bare minimum, the CFO and Sales Manager should be informed.  The CFO will be asked to pull all the financials together, to supply projections, to articulate reconstructed earnings (add-backs) and to supply monthly statements…all of which suggest that the company is being sold.  The Sales Manager will be asked to supply the names of synergistic companies in or around the particular industry.  And, perhaps, the CEO’s secretary will be asked to set up a “war room” where all legal and contractual information is assembled for the buyer’s due diligence team.  In order to protect the company from confidentiality leaks and assure retention of key employees, the CEO/Owner should implement “stay agreements” for these key employees.

#3: The Need to Maintain, or Accelerate, Sales

The tendency for some owners is to become so distracted with the M&A process that they take their “eye off the ball” in running the business on a daily basis.  Potential acquirers will be watching the monthly sales reports like a hawk to see if there is a turn-down in business.  Acquirers become very apprehensive when they see a recent downward trend in the company they are about to acquire and may, as a result, want to negotiate a lower price.

#4: A Confidentiality Leak

Naturally, most CEOs expect the M&A process to go smoothly and usually it does.  However, there should be a contingency plan in place for such occurrences as confidentiality leaks.  The degree of damage determines what action should be implemented.   Much more serious confidentiality leaks can occur, and it is wise to discuss ahead of time how the matter is going to be handled with those concerned.

#5:  Low Bids

Ultimately, the M&A market sets the price of the company. However, rarely does a seller go to market without having certain expectations of price.  Let’s use a hypothetical case in which a company is growing at 15% annually.  The CEO/Owner believes that it is worth $6 million based on $1 million of EBITDA.  However, the top bid is $5 million cash or, obviously, 5 times EBITDA.  Assuming the business intermediary has exhausted the universe of acquirers, the seller has two choices to reach his desired $6 million selling price.  Either he can take the company off the market and return several years later when either the company’s earnings have improved or when the M&A market has heated up.  Alternatively, the CEO can negotiate further with the top bidder by selling 80% of the company now and the remaining 20% in three years on a pre-arranged formula on the expectation that business will improve.  Or, the CEO can sell the company now for $5 million with an earnout formula that might give him the additional $1 million.

#6: The P&S Agreement is Not What the CEO Expected

Numerous CEOs drive the M&A process to the letter of intent and then turn over the deal to their attorney to iron out the details of the purchase and sale agreement.  While the CEO should not micro-manage his designated professional advisers in the transaction, he should be involved throughout the process, or otherwise the CEO will invariably object to the final wording of the document at the signing state.  The area most likely to be overlooked by the CEO/Owner is the critical section of reps and warranties.

#7: Agreement of Other Stakeholders

While the CEO can negotiate the entire transaction, the sale is not authorized until certain stakeholders agree in writing, namely, the majority of the shareholders, financial institutions which have a lien on certain assets.