Corrections or additions?
This article by Bart Jackson was prepared for the July 11, 2001
edition of U.S.
1 Newspaper. All rights reserved.
Your Baby on the Block
Since you and your husband mortgaged your home to start
your firm on a shoestring, you have never missed a day at the office.
Every morning — 6:30 a.m. until whenever. It seems inconceivable
that you would ever sell, but finally the time has come. The trouble
is, all your mighty sweat equity will undoubtedly blur the
How can you put a price on all those years?
To help business owners disentangle their heartstrings from their
purse strings, the Venture Association of New Jersey (VANJ) presents
a true nuts and bolts seminar entitled "What’s your business
worth? Maximizing your company’s assets" on Tuesday, July 17,
at 11:30 a.m. at the Westin Hotel in Morristown. Panelists include
firm Trien Rosenberg. Cost: $45. Call 973-267-4200, ext. 193.
For over 20 years, panelist Ciullo has watched the deals rise and
fall. A native of Italy, he settled in Westfield, gained an accounting
degree from Seton Hall, and went to work for Merck. Later, as a CPA,
he moved into private accounting firms, where he specialized in
Since 1990 he has worked with Trien Rosenberg. "It all comes down
to a question of perspective," Ciullo says. "The buyer of
a business is not only seeing a different item than the seller, he
envisions an entirely different way of paying for it." Thus it
becomes the seller’s job to dress up his firm to suit a buyer’s taste.
And, Ciullo says, myriad are the methods of dressing your business
up. Here are a few:
entrepreneurs who are used to handling things themselves, and don’t
want some slick know-it-all prying in and taking a cut. This, says
Ciullo is probably the biggest seller’s blunder possible — and
the most common.
He says that even for a small firm it is worth hiring an outside team
to set your business handsomely on the block. The most basic team
should consist of an accountant — not yours — to do basic
value assessments. An experienced merger attorney is also necessary,
says Ciullo, but invite them only at the end of the process —
never the start. Lawyers tend to be expert deal breakers, he says.
It’s their trade. Better to get your options and plans assembled
The team’s third member is frequently the most valuable, yet most
stubbornly resisted by the seller: A professional dealmaker or merger
negotiator charges a fee that almost invariably profits the owner
many times over. Far more than a facile-tongued chat man, the
can help you present your firm optimally and very frequently he has
a strong network of buyers on the shelf.
annual volume, perhaps the cost of an outside audit is too high. But
for larger companies, such a move shows the buyer that you have a
thorough handle on you business’s worth. A solid review of your
— presented at the ready to a buyer — gives him the feeling
that yours is not a dart board asking price.
head, your buyer will come in and meticulously analyze your every
asset. Beat him to the punch. Review salaries that might be excessive.
Shed excessive real estate. But don’t fall into the streamlining rut.
Take that high salaried employee and let her take that long-wanted
fling at a new, impressive venture.
advises Ciullo. "Don’t appear like a turtle who is pulling his
head in. You’ve got to convince these buyers that you are moving
Even if your value has dropped a bit, advance your aggressive posture.
Develop or strengthen new business alliances to enhance your customer
base. If you have 10 veteran salespeople, this may be the time to
hire two youngsters. Show buyers they’re hitching their wagon to a
meteor, not a tree stump.
is driven by its terms," says Ciullo. Typically, an owner wants
to take away about a third of the sale in cash. She prefers to sell
stock so she can take the profit as capital gains (a relatively low
20 percent) and at the same time, remove herself from all liability.
Buyers on the other hand, often seek to lock the seller into a
covenant of assured growth and pay by promissory note with payments
scaled to profits.
The trick here is to hint at deal restructuring. For example, buyers
hate real estate. They don’t enjoy the idea of plunking cash up front,
and hate thinking of being tied to you as an endless tenant. So adjust
that to a five year rent-to-buy option. Also, the reality of cash
is that it automatically lowers the business’s value. If your buyer
insists on a growth clause, sweeten the deal by taking less up front
in return for a percentage of the future pie for a few years. Your
assumption of upcoming profits should appeal to the buyer.
to sell? Certainly more than a few investors got woefully avalanched
in the collapsing E-commerce money pits. That makes this a tough time
to find a good buyer, right? Not so, according to Ciullo, who says
the E-commerce lesson has sent investors back to basics. Many have
abandoned gut hunches and are scrutinizing cash flows and projected
earnings based on historical data. "Besides," he quips,
got a lot of money with a lot of investors scared of the stock market.
If you dress yourself up well, they might just take it off the shelf
— Bart Jackson
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