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RESOURCES FOR EXITING
CLIENTS +
Following are some of the most common
questions asked by potential clients. The
responses are based on both experience and
knowledge. If you have any questions that we
have not covered please don't hesitate to
contact us.
Should You Consider Exiting Your
Business?
Exiting your business is a major
decision! You have devoted your time, money
and energy to building, running and operating
your business. It may well represent your
life's work.
When Is the Best Time to Exit?
Usually the best time to obtain the
highest price occurs when sales and earnings
are good and trending upward. A solid
earnings trend will enable an entering owner
to pay a higher price and still meet his
return of investment criteria. A history of
good performance also gives the entering
owner confidence in projected future
earnings.
The exiting owner's bargaining position is
also strengthened by a profitable record
because the entering owner realizes that the
exiting owner has the option of keeping his
company.
When the decision to transfer is made,
preparing the business for transfer should
begin by obtaining current financial
statements, performing needed repairs, and
obtaining a third party appraisal before any
efforts to market the business begin.
Who Would Enter My Business?
For most companies, there are
several categories of prospective entering
owners. The most obvious are other companies
in the same business for whom the acquisition
would be a logical expansion with potential
economies of scale.
Consideration should be given to suppliers
and customers of the business.
However, based on our experience in
transferring many businesses, approximately
80% of the prospective entering owners are
individuals who want to control their own
future. Many of them will be moving into the
area from other states and countries. They
will consider retail, service, wholesale or
manufacturing businesses.
The Hughes Group Carolinas, Inc. is in
continuous contact with all categories of
prospective entering owners. We utilize
effective search procedures to find and
screen those who are best qualified to enter
business.
How Long Does It Take to Transfer a
Business?
It generally takes, on average,
between three to four months to transfer most
businesses. Keep in mind that an average is
just that. Some businesses will take longer
to transfer, while others will transfer in a
shorter period of time. The sooner we have
all the information needed to begin the
marketing process, the shorter the time
period should be. It is also important that
the business be priced properly right from
the start. Some exiting owners, operating
under the premise that they can always come
down in price, overprice their business. This
theory often "backfires," because entering
owners often will refuse to look at an
overpriced business. It is usually better to
set a fair, realistic price and be
"firm".
It has been shown that the amount of the
down payment may be the key ingredient to a
quick transfer. The lower the down payment,
generally 33 percent of the asking price or
less, the shorter the time to a successful
sale. A reasonable down payment also tells a
potential entering owner that the exiting
owner has confidence in the business's
ability to make the payments.
What Happens When There Is a Entering
Owner for My Business?
When a prospective entering owner is
sufficiently interested in your business, we
will help in the preparation of an offer or
proposal. This offer or proposal may have one
or more contingencies. Usually they concern a
detailed review of your financial records and
may also include a review of your lease
arrangements, franchise agreement (if there
is one) or other pertinent details of the
business. The entering owner's proposal will
be presented to you for your consideration.
You may accept the terms of the offer or you
may make a counter-proposal. You should
understand, however, that if you do not
accept the entering owner's proposal, the
entering owner can withdraw it at any
time.
We will submit all offers to you for your
consideration. At first review, you may not
be pleased with a particular offer; however,
it is important to look at it carefully. It
may be lacking in some areas, but it might
also have some pluses to seriously consider.
There is an old adage that says, "The first
offer is generally the best one the seller
will receive." This does not mean that you
should accept the first, or any
offer—just that all offers should be
looked at carefully.
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