Katrina Loftin: 30 years of lessons from a Business Intermediary (Voices)

Katrina Loftin: 30 years of lessons from a Business Intermediary (Voices)

Katrina Loftin Winkel

This year marks my 30th year as a Business Broker and M&A Intermediary. Over the years, I have been able to get an inside look at hundreds of different privately held businesses ranging in value from less than a million to $50 Million. I’ve witnessed the best of times and the worst of times. Some transactions come together, and some don’t. As a Business Owner, here’s what you need to know.

Be Ready: Most people never plan for illnesses or retirement. There is one thing that is certain, all businesses will either change hands or close. Have management in place and a plan in place if something happens to you.


Get your books in order: Up to date financials are crucial. The importance of staying on top of profits is essential. Make sure your CPA understands your plans and the need to maximize profits and minimize unnecessary and personal expenses (even though you may have to pay some tax), you can often see 2-3x’s return by cleaning up your books and maximizing your final selling price .


Clean up Inventory and sell outdated assets: Get rid of obsolete or excess inventory, most Buyers won’t pay for it and stale inventory may negatively impact the sale of your business.


Review your contracts: If your company has contracts with your customers or suppliers, make sure they are current, in writing and most importantly transferable.


Diversify: Large customer concentration will negatively affect the value of your business. If at all possible, try not to have any one customer account for more than 15% of sales.


Hire the right Broker: When it does come time to sell, make sure you have the right advisors on board. More often than not, this will pay for itself. Interview Brokers that are the right fit for the size of your company. Make sure you are talking to a Broker who is properly licensed and active in your local market, it makes a big difference. Start looking at least a year in advance.


Hire the right attorney: Make sure you have a Transaction attorney experienced in business sales. Mistakes at this stage can be very costly.


Hire a CPA that is the best at Purchase Price Allocation: This alone can save you a substantial amount of money on taxes. This may not be your current CPA.


Know the Value: The best person to determine the current market value of your business is a Business Broker or M&A Intermediary that is active in your market. Most brokers will get give you a value at no charge. A qualified Business Appraiser can also do this for you. There are so many factors to consider that can greatly affect the value, both positive and negative. It’s best to address issues that affect value early on.


Know when to leave: It’s best to leave on a high note when there is still upside for a buyer and you are seeing steady annual increases in income and profit. I’ve seen some very good offers turned down only to have the business fail during the recession. Many businesses only get one offer, consider all offers thoroughly and carefully. Business sales are nothing like home sales, very few buyers will overpay for a business.


The bottom line is selling your business is one of the most important and complicated things you will ever do. Having the right professionals guide you through the process is essential.


Katrina Loftin is a CBI, M&AMI. She is co-Founder/Managing Partner at M&A Business Advisors.

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