10 Solutions to Common Problems with the Sale of Self-managed Companies

To understand an entrepreneurial business, it's natural to start with the owner-his thoughts, feelings, words and deeds are manifesting in the business. An owner-owned business is usually the owner's life-work, and a generational shift, and especially a sale of the company, is thus a goodbye to the life-work.

The owner will give off his power, his daily work, his close relationship with the employees and thus also a good portion of status and recognition. After the change of ownership has taken place, the invitation to the bank's Christmas table and other events that may be linked to the position of owner-in-chief may fail.

A change of ownership is therefore not something an owner looks forward to implementing. It can be experienced as a forced process, perhaps driven by illness or old age.

Norwegian owners expose their ownership. This is fully understandable, because the owner will waive his life work. A change of ownership means a major overthrow of the owner's life situation. The business owner must through many internal processes. Selling the business means that the owner's role as entrepreneur, business owner and manager falls away. Therefore, parts of the owner's identity will be changed when these roles fall away (see, for example, the Ownership of Reason and Feeling, Nutek 2007). You who are business owners are strongly advised to plan for the time after change of ownership. Think through what you want to spend all the free time so it does not come as a big shock.

NB! Business owners and owners in Norwegian SMEs: investments and operating profit are negatively correlated with the age of the owner.
The result falls when the owner approaches retirement age. If you expire to sell your business for one year and the result drops by 100,000 this year, the company's value is reduced by 500,000 (multiple of 5). The figure below shows "The OWNomics curve". The result in the company falls when the owner approaches retirement age. Similarly, the OWNomics curve shows that earnings increase when new owners with good ownership assumptions take over the business.

Our calculations show that approx. 25,000 SMEs will be sold for the next 10 years. But many of these companies are not prepared for sale. Perhaps this also applies to you? Most have an owner who is Alpha and Omega for further operation. Check below in item 10, where we have set up tips for owner managers who plan to sell the business.

Many businesses are for sale in Europe. About. 1/3 of all SMEs will conduct a change of ownership over the next 10 years. Ownomics is a member of an international network for ownership shifts. There are many interesting businesses that are for sale.

All businesses are not marketable
Some companies do not have the right of life and should be closed down. The EU has estimated that 150,000 businesses will be shut down each year. This is very important for employment and the economy. It is important to take care of those companies that have the right of life. It is easy for politicians to forget this. Often they focus more on starting up new businesses. However, it often takes 5 years before startups to tax and deliver

The report entitled "Ownership Changes in Norwegian Business", which Menon together with the Ownership Center, commissioned the Ministry of Trade and Industry in 2009, describes the market. The description is repeated below in updated form. The primary tractors in the market are sellers and buyers of SMB. Other actors are business brokers / M & A advisors, the Ownership Alliance , auditors / lawyers and marketplaces. OWNomics is working to increase business owners' expertise in buying and selling multi-level businesses - either as self-help products in the form of videos and other digital equipment, in group programs or on a consultancy basis.

The market has become increasingly efficient in recent years. Today, the market is functioning satisfactorily in the Oslo Fjord region. A survey of business brokers dealing with the sale of small businesses confirms this. Effective use of the Internet and social media and a number of thematic meetings contribute to this. The organizers of these meetings are the Ownership Alliance, OWNomics, banks, lawyers / accountants, industry associations and business brokers.

Norway has an extremely transparent economy
An important reason for a more efficient market is that Norway has an open flow of information. Some simple search on google will provide potential sellers and buyers with a variety of sources of how to proceed, as well as where they can identify sales or purchase items. Information about companies, owners, their accounts, income, wealth and taxation is easily available.

Our foreign partners can not believe their own ears when we talk about everything that is open online about companies and owners.

The market for buying and selling SMBs is primarily driven by the sellers. There is always a larger number of "sales initiatives" in the market than "purchase initiatives". The largest group of sellers is owner managers.

If neither family nor employee is to take over management, sales or merger is the closest option. All businesses in this category must therefore be sold, merged or deposited sooner or later. The wise owners control the sales process themselves , so that the lifecycle continues after the entrepreneur no longer has the ability or wishes to move on.

Customers
Your customers may be interested in buying your business. By "buying backwards" they get a larger share of the value chain.
Suppliers Your suppliers may wish to offer more processed products by incorporating your business into their business.

Competitors
Competitors know the company's strong and weak sides. A competitor will
be able to see the opportunity to increase its market share.
Employees
Know the business well, and the company's customers will often be positive for the employees to take over.
Deleiere
Delvis sales through getting into an investment company or co-investors.
Private individuals
Buying a business with existing customers can be a good
option to start up your own business.
Investors and Acquisition Funds
Here are a number of financial and industrial investors in addition to so-called Business Angles. This is usually a very professional buyer.

The market for buying and selling businesses is highlighted through the activities of M & A advisory and business brokers. A business broker undertakes the project manager responsibility to sell the company (possibly assistance in purchasing) and takes a fee for this. Business brokerage is a specialized business. Business broker is not a protected title and there is also no special education to run this type of business.

A rough review of accounting data for 20 freelance M & A advisors / business brokers shows that turnover for the industry in recent years has been around. 300 million. This calculation includes consultants working on the sale of small to medium sized and large companies. It is important to emphasize that these figures also include advice that is not necessarily directly related to the purchase and sale of business. Banks' M & A activities are not included in the figures. The industry is cyclically sensitive and depends on the buyers' ability to fund acquisitions. For example, the financial crisis caused a dramatic decline in revenue. In the longer term, it is assumed that the industry has good prospects due to an increasing number of owners' changes over the next 10 years.

How does a business broker work?
The corporate brokerage industry is a relatively new industry and plays an important role for buyers and sellers to find each other. The role and assignment can be compared to a real estate agent, but the product (business) is significantly more demanding to sell. There is a great variety of businesses, ranging from small businesses to advanced technology companies. Business brokers therefore specialize in different industries and phases in a corporate development.

This specialization can compensate for the broker's geographical location. A broker with experience from an industry can have sales assignments across the country. The fee for the service is usually two-part with a current hourly fee / fixed fee for commencement of the assignment, and commission of the result obtained . Before choosing a business broker , please contact us at OWNomics.

Who has the highest synergies to add to your business?
The broker prepares sales documentation and valuation. The next step is to identify potential buyers who can achieve synergies and therefore pay a high price. The business broker has a good understanding of how synergies can be obtained from different types of buyers. The broker has a significant network among potential buyers including knowledge of their expansion strategies. Potential buyers are contacted and negotiations can start. The company's most important job is thus to identify the buyer who has the highest synergy value and bring this candidate to the negotiating table.

With the sale of a company, we mean that all or part of the company is sold to employees or a third party (in the form of stock or stock sales).

Due to the fire wave, there is an accumulation of older owners of SMEs in Norwegian business. The proportion of majority shareholders over 60 years has increased significantly in recent years. Below we have listed some advice based on our most important experiences from the work in OWNomics. Download tips for selling your business

OWNomics guide for the sale of the business

Business Owners - Beware Your Ownership
What are the most important value drivers for potential buyers? What current buyers are there? Business owners need to understand what potential buyers emphasize and develop the business in this direction. It is important to have knowledge about what reduces the value of the company. Dependence on the operative owner is often a verdict.

A SWOT analysis can document the values ​​and reveal weaknesses such as inadequate routines or addiction to key people. Reducing the risk of potential buyers is often the fastest way to a good price. Corporate brokers claim that business owners need to develop the business to a greater extent so that it can be sold at any time. Changes in privacy, new framework conditions, or potential purchaser contact may occur soon. When selling the business, it is important to have more options, and the conscious ownership management will contribute to this.
Pitfalls No. 1- Business owners wait too long to sell
As mentioned earlier, the owner's age has a negative impact on corporate value creation. Buyers do not like falling sales and earnings. They buy the future and there is a point to sell when the arrows point upwards. It may be wise to develop senior executives who can run the business independently of the owner. Anything unforeseen should happen to the owner, however, the activity is maintained.
Sell ​​in good times and when it suits you
In good times potential buyers can borrow to finance the acquisition. However, it is difficult to time sales relative to economic cycles. It is therefore so important to time the sale to the owner's situation. Does the owner have the prerequisites for developing the company further, does the owner want less participation in the daily work or a reduced risk profile? This may be relevant questions for the owner.
Use counselor to sell the life insurance.
Examples of advisors are banks, lawyers, accountants and M & A advisors / business brokers. SMB owners usually start this type of conversation with their existing advisors. An effective way to get an overview of current advisers is to contact us.
We recommend owners to obtain offers from several advisors to compare prices and terms from different suppliers. As mentioned earlier, the most important task of the adviser is to sell the business to the buyer who has the highest synergy effect. Knowledge of the sales object and how different buyer groups can exploit this is therefore crucial.
Assist Buyer With Transition
Seller knows everything about the business, buyer knows a little. Buyer acquisition takes two phases, and these are usually the integration phase and the harvest phase. The price can be increased by assisting the buyer to ensure a good acquisition and provide the best possible basis for triggering future potential. One way to do this is that the seller continues to work in the company until important knowledge is delivered.
Be honest about weaknesses and deficiencies
Buyers are keen to reduce the risk of acquisition. If there are negative surprises, the buyer will be unsure whether there may be other weaknesses the buyer should also know about. At worst, they cancel the purchase. At best, the buyer increases the return requirement because the risk is perceived to be too high. The result may be that the price will be reduced significantly. Another point is that weaknesses for today's owner are not necessarily a major weakness for the buyer. The buyer may have systems where this weakness plays a small role.
Use M & A Attorney
Use a lawyer who specializes in selling a business. Important agreements and tax issues must be taken care of in the process. When selling the life insurance, all major issues must be covered in a deal.

When you focus on doing one thing well, the quality will be good. You want to improve your competitive edge in the market. It will take time and resources to standardize and specialize the business.