A buyer will look long and hard at your team to determine if they are capable of advancing the company, so it is important for a business owner to ensure that their management team is held accountable for the successes and failures of their efforts. A stable well rounded management team connotes depth and strength and sustainability. Having just one or two critical managers could make the company vulnerable should they want to leave once the company comes up for sale or soon after your exit. In this podcast Gower Idrees, CEO of RareBrain, explains how key employees can undermine your company’s valuation and offers strategies that can help you prepare against key employee loss during your exit.
In family and closely held businesses, there are management gaps as company grows or the owner prepares to exit. Family business shareholders are often very leary of sharing company equity with outsiders. The situation becomes detrimental when the next generation isn’t prepared or willing to take over the reins, which can negatively impact the company and threaten its future. In this podcast Gower Idrees, CEO of RareBrain, explains the strategy of giving non-family key employees artificial, synthetic or phantom equity and how the strategy mirrors stock ownership without actually giving up equity in the family business.
No two business transition plans are exactly alike. But all transition plans need proper preparation and forethought to both secure the company’s future sustainability and to ensure that the transition will be seamlessly implemented. Many business owners do not realize that a transition plan is more than simply naming a replacement; it offers a roadmap for moving the company forward in such a way that protects its value and profitability. It also lays the foundation for growth and stability. In this episode Gower Idrees, CEO of RareBrain, offers suggestions that will help prepare you to do an honest assessment of your company and your transition plan and answer some tough questions.
A buy-sell agreement is a contract that outlines terms for the future sale of your business interest, whether the result of death, disability, or one of the owners opting to exit from the company. Buy-sell agreements are also sometimes called business continuation agreements and buyout agreements. Ideally, buy-sell agreements are fully funded in the event of death, and life insurance is frequently used for this purpose. The best time to do a buy-sell agreement is before you start your business and/or when you are the best of friends with your partners. In this podcast Gower Idrees, CEO of RareBrain, goes over key elements of a successful buy-sell agreement.
Family succession planning, better thought of as transition planning, is the most important thing you can do to help your company last through the generations but it is also the hardest challenge a business owner faces. Many put transition planning off because they are so consumed with running their company and keeping it successful. But if you only focus on today you will set your company up for future failure when it is time to relinquish control. Many successful businesses stumble and destroy wealth by not properly planning for intercompany transition. In this podcast Gower Idrees, CEO of RareBrain, discusses some of the transition issues you may encounter in family succession planning.
For many entrepreneurs with ambitions to establish a startup, venture capital is the Holy Grail of investment money. But venture capital can come with certain strings that could impact futureexit plans. In many cases, the entrepreneurs desire and timing for exit conflicts with the venture capital partners. In this episode Gower Idrees, CEO of RareBrain, briefly details how venture capital companies work, what they may want in return for their investment, and the involvement they will typically seek to have in the future exit of your company. Idrees also explains why it is crucial to negotiate control covenants and board control as part of your negotiation—instead of waiting until after securing investment.
Acquiring another company to drive growth can be a complicated transaction in the best of circumstances. But it can become an expensive lesson of “buyer beware”, if the seller uses various devious means to reduce the working capital in the business. Too often, an acquirer will discover their new acquisition has fewer assets on its balance sheet than they expected and even worse, the acquirer ends up having to provide more working capital than they anticipated. In this video Gower Idrees, CEO of RareBrain, offers insight into the ways a seller can change the existing assets and liabilities of their company without impacting the EBITDA, and offers would-be acquirers some strategies that can protect them against sellers’ financial games.
In the eyes of lenders, not all financing is created equal. As a general rule, many businesses discover it is easier to secure financing for an acquisition than it is to raise necessary capital to organically grow the business. Even so, lenders will conduct careful due diligence on any acquisition financing request, so companies need to take the process seriously and be properly prepared. In this podcast Gower Idrees, CEO of RareBrain, offers insight on what lenders are likely to look for in an acquisition financing and how businesses can best prepare for the process.
When assessing the financial health of a company, its EBITDA (earnings before interest, taxes, depreciation and amortization) is often the focus of buyers, especially those buying a company to grow by acquisition. In this episode Gower Idrees, CEO of RareBrain, explains why it is wiser to focus on free cash flow vs. EBITDA when acquiring a target company, and provides an example of how EBITDA can create a misperception of how much cash is actually available to service debt obligations.
Getting any kind of business financing is a complicated and difficult process. For business owners looking to grow their company internally, raising capital to finance that organic growth requires more than just presenting a proposal on how they plan to achieve that growth; they must defend that proposal to the lender and convince them of its viability. In this episode Gower Idrees, CEO of RareBrain explains why it can be easier to secure financing for an acquisition than to raise the capital needed to grow your company through natural expansion. He also offers insight on what to expect from lenders when requesting acquisition financing.
There are a number of reasons for a business owner to grow their company through an acquisition. Rather than having to go through growing pains to establish new operations for a new product or service, an acquisition can let a company hit the ground running, enabling it to grow faster, quicker, and cheaper than traditional growth methods. In this podcast Gower Idrees, CEO of RareBrain, outlines several other synergistic advantages provided through an acquisition.
Acquisitions can help companies drive growth, market share, reduce R&D time & costs, improve time to market and create economies of scale among a plethora of other reasons. However, despite all the advantages and benefits, acquisitions are not automatic pots of business gold; they can also have significant risks and often fail. In this podcast Gower Idrees, CEO of RareBrain, explains some of the more common reasons an acquisition can fail, so businesses considering growth through acquisition are better prepared for the potential pitfalls.
Historically, acquisitions have been a popular growth strategy to increase top line revenues and market share. But it needs to be the right acquisition targeted for the right business reasons. If not done correctly, it can wreak havoc on the company’s growth plan and momentum. In order to make an acquisition successful, you need a strong strategic rationale for pursuing the target company. Moreover, this rationale must create value and have cultural alignment. In this episode Gower Idrees, CEO of RareBrain, outlines the most successful acquisition models.
In order to maximize the full value of your business, it is mission critical to secure an experienced, knowledgeable, and business savvy merger and acquisition advisor to explain the various factors that can promote, or hinder, a company’s performance. A good M&A adviser will also help protect business owners against shrewd buyers looking to take advantage at any sign of unpreparedness. In this podcast Gower Idrees, CEO of RareBrain, outlines the steps a smart M&A advisor will take to increase your sale value before entering the market and preserve the purchase price during due diligence.
Often times business owners assume that the sale price of their company reflects the amount of money they will walk away with when they exit. That assumption can lead to a nasty financial surprise. So rather than focusing solely on sale price (gross sale proceeds), it is critical for the business owner to understand the concept of net sale proceeds. This is the amount the seller receives after all purchase price adjustments, holdback escrows, contingent payments, taxes, expenses and liabilities are deducted from the sale price. In this podcast Gower Idrees, CEO of RareBrain, explains how conducting a net proceeds analysis before you list your company for sale, can maximize your takeaway in a business sale.
On the visible surface, venture capital and private equity investing can often appear to be the same. Moreover, increased competition in recent years among investors has forced both venture capital and private equity investors to expand their respective horizons in order to secure new opportunities. The result is that the lines between venture capital and private equity are often blurred, especially to the public eye. Because the two groups may overlap in practice, it can be confusing for business owners to understand the distinction between them. In this podcast Gower Idrees, CEO of RareBrain, explains the fundamentally different investment targets and business models that distinguish venture capital from private equity.
Regardless of how much you believe your business should sell for, in the end it is worth whatever someone is willing to pay for it. Not all business buyers are created equal—one buyer’s bargain is another’s overpayment. How much you get for the sale of your business will truly depend on who is buying the business and their underlying motivation for buying that business. In this podcast Gower Idrees, CEO of RareBrain, explains the different types of business buyers you may encounter and how their motivations—which may include everything from a strategic acquisition to financial engineering—may impact your company’s sale value.
Determining the best time to sell your business requires knowing yourself, knowing the market, and knowing your company’s stage. In this episode Gower Idrees, CEO of RareBrain, outlines four of the most important timing factors that can impact whether or not you get the maximum price when selling your company. There may never be a perfect time to sell but you can improve your chances of getting top dollar by knowing these critical timing factors.
Nearly every business owner wants to know how much their company is worth on the open market. But there is no one-size-fits-all answer to that question. The valuation will depend on the personal, family, financial, and business objectives of the business owner as well as the exit option implemented to meet those goals. In this episode Gower Idrees, CEO of RareBrain outlines the eight exit channels—four internal, four external—available to business owners. Whether you have already implemented an exit plan or are just getting started, Idrees offers perspective on how the business exit option you select may impact the valuation of your company.
Over the years nearly every industry has seen a rise in specialty services and the financial sector has followed that trend. Today many successful companies seek the input of business brokers, merger and acquisition advisers, investment bankers, and exit planners. But it can be difficult for a business owner to differentiate their roles in a business sale. To clear the confusion, in this episode Gower Idrees, CEO of RareBrain explains the spaces in which each of these specialists operate and also provides their general compensation structure.
Three out of four business owners admit they are too busy running their company to devise and implement an exit plan. That can be a dangerous gamble with your financial future. 80% of small businesses listed for sale in the United States do not sell and only 30% of family businesses successfully transition to the next generation. An exit plan is more than simply circling a retirement date on the calendar; it is creating a strategic plan that helps a business owner successfully exit their company. In this episode Gower Idrees, CEO of RareBrain, explains the elements that comprise the most effective exit plans, how exit plans differ from estate planning, and the top benefits of establishing an exit plan.