Over the years business sales, purchases, mergers and acquisitions (M&A) have become more common and frankly business as usual. Companies may be looking to buy, sell, or merge with other businesses for a multitude of reasons. Global business sales and M&A volume reached record highs last year topping $5 Trillion in volume for the first time ever.
One of the noticeable aspects of M&As is that there is some form of risks involved on both sides. Why? Because mergers and acquisitions significantly impact growth projections and even long-term prospects. Another thing you need to consider is the costs involved.
If you are looking to sell your company or merge with another business further down the line, you should consider reevaluating your internal operations and potentially reduce monthly expenses. January is a great month for your business to review current operational costs that will impact the nature of the deal.
In this article, we will be addressing some of the pre-sale costs you should review.
There are dozens of expense categories that your business should consider reviewing and if possible reducing pre-sale. Some of these may include consolidating vendor contracts for similar services. Removing unused employee benefits, eliminating unnecessary office expenses, reviewing utility expenses, among many others. Increasing your discretionary earnings by reducing expenses can create a multiplier effect that exponentially increases the value of your business.
Expense To Profit is an expense reduction specialist dedicated to reducing business expenses and improving profits. For over ten years, Expense To Profit has helped businesses boost revenue by reviewing current business operations and implementing strategies for creating a competitive advantage.
If you are looking to convert your company into a group of companies by acquiring other businesses or merging with others, know that you may need to rebrand first. Thus, you may need the services of a branding agency.
Understanding rebranding costs is essential as they tend to get out of control. When you begin you need to consider many factors. A way to eliminate some of these unnecessary expenses is to compare services of branding agencies you might hire.
If you have the resources for branding internally you may not need the services of a branding company. FYI, do not ask a branding agency if your company needs rebranding because the answer will most likely be yes.
When looking to sell, merge or acquire a business it may involve taking on debt. One of the best ways to control this expense in advance is to review the financial and non-financial organizations willing to lend for your acquisition. This will give you ample time to properly review all the available terms and conditions and make a preferred choice before negotiating the purchase.
HR is one aspect that business owners looking to sell or merge often do not properly consider. Getting it wrong will not only reduce the value, but impair revenue in the long run. The costs you need to review are not just the apparent costs, but the ones that are not always visible.
For instance, you should consider salary increments, benefits and pensions, training costs, redundancies, liabilities, and onboarding costs. You should also look at unnecessary hiring and firing costs that may result from hiring the wrong associates. Hiring a professional consultant to evaluate costs can help reduce HR expenses prior to a sale or acquisition.
Business Broker/M&A Fees
Whether you are looking to buy, sell, or merge your business, you may require the services of an intermediary. So, naturally, one of the popular places to seek guidance is through a business broker.
Understanding the services that business brokers provide and their methodologies for determining a business valuation is as important as the costs charged for their services. One thing that needs pointing out is that these fees are typically dependent on the size of the deal.
Many firms charge up front retainers, analytical costs, and other ancillary charges in in preparation of the sale. That is where International Business Associates (IBA) is different as 100% of their fees are contingent upon the successful sale of their clients business.
One of the ways you can reduce these expenses is to look at what value a business broker, banker or financial expert will provide you and compare all of the costs.
Expense To Profit can help your business reduce expenses which will add value when you decide to sell in the future. Regardless of your business industry, we can help you generate more profits long-term.
Reach out to us to see how we can help your business grow.
Published by Marc Freedman
Marc currently serves as our Chief Cost Evaluator, expertly advising our client management team on how to help you successfully achieve your business and financial growth goals. A respected mentor to all he consults with, he is an avid collaborator and contributor to the spend consultant community, guiding thought leaders to formulate, design, and install the best operational solutions available to their clients.