Below are a few interesting articles we recently found on the web.
Article #1: “41% of Entrepreneurs Will Leave Their Small Business Behind In 5 Years” from Small Business Trends
A summarized report from a global financial services firm that looks at business ownership and entrepreneurialism in modern America. The report found that almost 60% of wealthy investors would consider starting their own business while more than 40% of current business owners are planning to exit their business. Of the 40% of business owners who are planning to leave their business in the next 5 years, half of them plan to sell their business.
Highlights from the report show that many business owners underestimate what they need to reach a successful sale. Another finding from the report is how family heirs are often unwilling to take over the business. The report found that 58% of business owners have never had their business appraised and 48% have no formal exit strategy. Small business owners need to prepare for selling their business and they should create an exit plan well in advance.
Article #2: “9 Reasons Acquisitions Fail and How To Beat The Odds” from Axial Forum
This article shows how looking at why others have failed can help you to learn from their mistakes in order to have a successful acquisition. Here are 9 common causes of failed acquisitions:
- Strategy – use of poor strategic logic
- Synergy – overestimation of the potential synergy between the companies or underestimating the complexity
- Culture – the companies are incompatible, the integration is ineffective, or the positive aspects of one business is compromised to create uniformity
- Leadership – not enough participation in the transaction & integration process, poor leadership, clashes between leaders
- Transaction Parameters – inappropriate deal structure, paying too much, negotiations taking too long
- Due Diligence – not enough investigation done beforehand, failure to act on findings
- Communications – lack of proper communication can result in talent loss, customer loss, and many more problems
- Key Talent – failing to identify or retain key employees
- Technology – failing to identify incompatibilities or underestimating the complexity and time required for integration
Integration involves many steps, starting from the initial strategic thinking, to due diligence and then carrying on into the months after the deal. Business owners and dealmakers need to consider all steps of the process to make an acquisition successful.
Article #3: “Almost A Quarter Launch Businesses With A Sale In Mind” from Business Sale Report
This report summarizes the results of a new study, asking nearly 1,000 entrepreneurs about their motivation for launching businesses and their start-up history. The study found that 23% of those starting their own business have their exit as a primary goal; with 83% of those claiming that selling at a profit is their main incentive.
Here are the top two answers for why they started their business: “It was a passion of mine” and “I knew it would eventually sell well and had exit in mind.” All of the study participants said that they wished they had an exact way to know the value of their business and more than half said they had no real way of knowing the value of their business.
If your main goal for starting a business is to sell it for profit, it is important to know your valuation so that you get a fair price.