Welcome to 2023: Your Business Guide to Surviving and Thriving the Year Ahead
PGP Advisory certainly hopes you had a joyous holiday season and a Happy New Year. As we enter into 2023, here are some of the challenges we anticipate and our strategic advice on how to combat and prepare for what may be a rocky and windy road ahead.
How to Prepare for Business Challenges in 2023
Reflecting on 2022
Business owners have faced huge challenges and undergone an incredible amount of change over the past few years, and this won’t slow down in 2023. Businesses will have to deal with the aftereffects of the global pandemic, Russia’s invasion of Ukraine, economic challenges, as well as an ever-faster development of technologies.PGP Advisory has several years experience of ongoing change and evolution of the industry. Below are key challenges to watch out for in the new year and insights into how business owners can prepare for obstacles they may face in 2023.The Looming Recession
As a recession for 2023 is likely probable, entrepreneurs will need to begin preparing their businesses now for the challenges ahead. Sales could slump, budgets could tighten, and securing capital could become a lot harder. Entrepreneurs will need to adjust their expectations from the big venture deals of the past decade.
How to Respond: PGP Advisory highly suggests meeting with your accountant. Now, is the time to audit your books and ensure you have the cash reserves to weather the bad times. Accounting can be an afterthought for new founders, PGP Advisory recommends hiring a third party to audit your books. Business owners should also consider auditing their processes too. When a company is in a high-growth stage, it might adopt ad-hoc systems that are fine for the moment but will need to be revamped in slower months to be sustainable and efficient.
Downturns in Sales
Business owners will likely continue to deal with price adjustments well into 2023. Inflation and interest rates often indicate how willing people are to spend. Consumers are shifting their focus to items they deem essential and highly valuable.
How to Respond: Business owners should consider adapting their business model or figure out the right pricing structure so they can continue to survive. This is a great opportunity to connect with customers to understand their needs. Perhaps there are new avenues for sales opportunities to explore.
Employee Retention, Engagement and Productivity
We’ve been hearing about the “War for Talent” for years, but now it feels like the war is deepening. Companies across industries are facing massive gaps for vital future skills, and they will need to re-skill or up-skill massive sections of their workforce to get ready for the 4th industrial revolution. On top of that, the pandemic has made many people reevaluate their jobs, leading to mass resignations in many sectors.
How to Respond: Create clear channels where employees can raise concerns and health issues. Stay up to date with emerging issues. Perhaps your business can allow flexible working hours to allow employees to attend to personal issues. Encourage employees to keep strict working hours to avoid the common burnout issue. Find out what you can provide for employee mental health support. Additionally, taking steps like hiring people straight out of school, employing low-code or no-code software for critical needs, and instilling cultures of continuous learning.
Accelerated Digital Transformation
Artificial intelligence (AI) is already starting to augment all of our businesses, and that trend will continue to accelerate next year. This is rapidly creating a world of ever-faster technological developments.
How to Respond: Every business must think of itself as a tech business. Companies need to re-design their processes and ensure their people have the skills needed for a world where we increasingly collaborate with and work alongside capable and intelligent machines.
Summary – Stay Flexible
It’s important to keep in mind that there will always be unexpected disruptions in our lives. Businesses should plan for these disruptions and make sure everyone knows how to respond when things go wrong. These unprecedented challenges provide opportunities to stay flexible in the months ahead. The most successful businesses, will be those that adapt quickly.
Guide To Selling Your Business & Building Your Transition Team
“I’m not ready to sell now. I’ve got several years left.” A key follow-up question to ask yourself is: “Is now the right time to sell?” As the Fed continues to raise rates to combat inflation and the risk of recession looms on the horizon, how will your business fair in this environment? We encourage you to consider these external factors when weighing whether or not this is the right time to sell.
Hopefully you’ve read PGP Advisory’s article, “What to Expect When You’re Ready To Sell,” which highlights the preparation timeline and how to set realistic goals for the process.
The team at PGP Advisory has formed a step-by-step guide to ensure businesses are sold at the right time, for the right price, and to the right buyer.
Step 1: Be Informed
Do your research and educate yourself on the selling process. Consult with an M&A advisor.
An M&A advisor will help you establish a strategy tailored to your business and manage the complexities of the sale process so that you can stay focused on running your business. They’ll identify and qualify buyers, secure an offer(s), and negotiate the eventual sale with the best possible terms.
If you’re invested in selling your business for the best possible value, choose a leading M&A advisory firm to broker the deal.
Step 2: Get Your Finances in Order
Purchase price is important, but so are the terms on the deal. Accurate financials can make the difference between getting 80-90% of the purchase price at close (via bank financing) and you becoming the bank (in the form of seller financing) for a significant portion of the purchase price over several years.
Do your due diligence by organizing your bookkeeping and financials and getting ahead of items that could prevent bank financing or slow down the sale (such as sign-off from other shareholders or active lawsuits or legal proceedings).
Consider your business’ employee contracts, intellectual property issues, and federal and state tax requirements. To ensure you have time to fix all potential red flags, hire a third-party accounting firm to assess your financial statements and advise on an exit-friendly tax strategy a year or two before the sale.
Step 3: Get a Business Valuation
Turn to experts (e.g., business brokers, M&A advisors) to understand how much your company is worth and to whom. Value is more than a number on a paper. The value that matters is what a buyer is willing to pay for your business. A trusted advisor will help establish a range that you would expect a reasonable buyer to offer for the business.
Step 4: Build Your Transition Team
“Great things in business are never done by one person, they’re done by a team of people.” – Steve Jobs. Putting together a team early can prevent a lot of stumbling down the road. Here is our list of professionals that business owners should have on their team (before your business goes to market) to smoothly and successfully sell their business:
1) M&A Advisor – Expert on sale strategy and process
2) CPA – Expert on your financials and tax strategies
3) Lawyer – Expert on identifying and managing legal risks with both the business and sale
4) Financial Advisor – Expert on planning for post-sale impact on your overall financial objectives
Summary
As experienced M&A Advisors, we are at the center of your business sale transition team. If the issues are not unaddressed, you will spend valuable time and resources prior to and after the sale trying to “fix” things. Your business is likely your most valuable asset, and building a successful company can take years of time and effort. If you’re considering selling your business at some point, schedule some time to discuss how we can help you make an informed decision – and maximize the price you receive for the sale.
Thinking Of Selling Your Business? Start Here.
What to Expect When You’re Ready To Sell
There are several reasons small business owners decide to sell their companies — they want to move to another city or state, sales are down, they’re looking for a new challenge or it’s time to retire.
The prospect of selling your business can feel overwhelming, and you want to receive a fair price for the assets you’ve worked so hard to create. To make the process as easy and profitable as possible, you’ll want to start planning early. Whatever the reason, once you decide to sell, you can’t just hang up a “for sale” sign and wait for the offers to come rolling in. Selling for the right price takes time and preparation.
What’s Your Goal in Selling?
Owners often focus primarily on the question “How much can I get for my business?” However, the first question an owner needs to be prepared to answer is, “What results do I want to get from this transaction?” Business owners will typically focus on what they think their business is worth or how much a peer recently sold their business for, even if that business was in a different industry.
PGP Advisory suggests focusing on the owner’s personal needs and goals. For example, consider these questions:
- Do you want to transition the company to the next generation of your family or to employees?
- Is your goal to find a willing buyer in the open market and maximize the sale price?
- Do you plan to retire and live off of the proceeds from the sale for the rest of your life?
- Are you looking to invest some of your equity with the buyer and work with/for the next owner?
- Are you looking to reinvest in a different opportunity?
- What other goals do you have (e.g., paying for college educations, contributing planned amounts to charity)?
Understanding the Realistic Timeline is Essential
In an ideal situation, the questions above would be asked and answered several years before the owner wants to take their business to market. This timeframe would allow for appropriate estate and investment planning. Plus, having a longer timeframe allows owners and their advisors to consider what actions can be taken to increase the value of the company before going to market and leaves ample time for implementation.
Having time on your side can really pay off when selling a business. Whether you’re ready to retire or simply want to move on to a new venture, it’s imperative to keep in mind, that the completion of a sale can take well over a year, so keep that in mind as you plan your exit strategy.
At PGP Advisory, we explain to our clients that it’s reasonable to prepare for this to be a 2-year process, roughly from the time you decide to sell, all the way to the completion of the sale. Wrapping your head around this realistic time frame is a necessary first step. This critical preparation will help you to improve your financial records, business structure, and customer base to make the business more profitable. These improvements will also ease the transition for the buyer and keep the business running smoothly.
Selling a business requires an enormous amount of planning. As you begin the process, it’s important to focus on the step you’re in and the long-term objective. Otherwise, you may end up making short-term decisions that go against your ultimate plan.
Takeaways
Knowing what you want/need as a result of the sale and understanding the realistic selling timeframe, will set you up as much as possible for a smooth and successful transaction.
In our next segment, PGP Advisory will walk you through the first steps owners will want to take to begin the selling process from an advisor perspective, including helping you construct your transition team.
Read MoreWhy Your Business Should ALWAYS Be Ready To Sell
Whether you have exit strategies in place or you plan to operate your business for a long period of time, as an entrepreneur, you should always be ready to sell your business. Many owners of private businesses fail to recognize the importance of running their companies in a way that ensures they are fully prepared should the need to sell arise.
Based off experience helping countless business owners reposition and restructure their businesses, PGP Advisory always encourages clients to the adopt the prepared mindset of ‘always be ready to sell,’ even if they have no intention of selling. Our goal today is to demonstrate how always being ready to sell will position your company for success regardless of where you are on your business journey.
Be The Buyer
Let’s begin by placing ourselves in the position of a prospective investor. A savvy business investor will want to see a well-oiled, automated, documented, efficient, and streamlined machine when they look under the hood.
Potential buyers almost always can see through a rushed attempt to make a business seem as though it’s running at its full potential. Failing to put solid financial systems in place or to make sure key management team members are fully capable of leading when you’re not around is like waiting until the week before your child graduates from high school to research college admissions requirements. Simply put, it’s too late.
Most sellers do not consider buyer needs until a sale is imminent, which often results in them scrambling to make changes or accepting a reduced sale price.
Prepare to Sell, Even If You Don’t
Ready to sell, does not mean your business has to be on the market. It means that if a sale arose, or circumstances change, your business will immediately be more attractive to buyers. The intention here is that by being ready to transition to a new owner, putting solid systems in place, employing great staff and reducing reliance on the you as an owner, will inevitably ensure you get the best price when it is time to sell. This also means that it becomes easier to run your business and you can spend more time working on your business instead of in it. At times, forces beyond our control (e.g. COVID-19, economic recessions, difficulty accessing capital, rising rates, etc.) may affect the timing of your decision. Many sellers took advantage of the premium paid by buyers in the seller’s market for businesses over the past few years. It pays “literally” to consider exiting when there is strong demand and favorable conditions for acquiring businesses.
How to Get Started
PGP Advisory suggests beginning the process with properly setting up your business’ documentation. Are your company’s leases and agreements current, secure and available? Insider Tip – Whenever you renegotiate your lease agreement, consider asking the landlord to agree to subordinate if you (or a buyer) decide to seek bank financing. Be sure your business’ financials are in order, are your Profit and Loss Statements, Balance Sheets, and tax returns accurate, easily accessible, and showing positive trends? We also recommend giving serious thought to your company’s systems and procedures- do you have an operational playbook? Take a look at your role within your company and reduce the need for you to be involved on a daily basis as you can delegate to adequate and well-trained staff.
Takeaways
Owners who adopt a prepared mindset receive the dual benefit of a business with higher value to any external buyer, as well as enhanced profits regardless of whether a sale ever occurs. Being ready for a sale, means making your business more attractive to an outside investor and means your business is more prepared for any eventuality outside of your control that may force you into sale. These tips will help you keep your operations in excellent shape, and they will help your company be more nimble and adaptive to change with a stronger foundation to stand on.
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Explore Tax and Cost Savings Opportunity
Valuation. Strategy. Results.
At PGP Advisory, we always emphasize the significance of valuation. Even if you have no plans to sell, intentionally adding value is one of the best ways to strengthen your business and protect yourself from unforeseen events. We work with clients in San Antonio, Austin, Atlanta and beyond. No matter where your business is located, life throws curve balls. Our experienced team of professional business brokers in San Antonio, knows what buyers look for in a business. The factors that result in a premium sale price are inherently good for day-to-day business. Our unique advisory service starts with a valuation and business analysis. We identify strengths and weaknesses, then we develop a realistic strategy designed to add value, streamline operations, reduce owner dependency, and increase profitability. We draw on academia, years of experience, and a deep understanding of what makes a well-rounded business broker in San Antonio. Implementing best practices early will result in a more efficient and profitable business that is ready to sell when the time is right. By planning in advance you are much more likely to achieve your financial goals.
- We offer a free automated valuation to get started. You will receive a broad perspective on your business’s potential value. Click here to proceed.
- Click here to schedule your free custom consultation. During this meeting, we’ll be able to provide more comprehensive insights about your business and its current worth.
- PGP Advisory also offers a more robust and detailed valuation model. Click here if you’d like to get started with a more in-depth business valuation that takes into account additional factors, such as your market.
Business valuations can highlight strengths and weaknesses, and expose opportunities for improvements to add value. Many of our San Antonio, Austin and Atlanta clients use their business valuation results to build and help locate new opportunities. Contact us today if you would like to discuss setting up your valuation and the most appropriate option for you.
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