In most jurisdictions, a board of directors is not required for privately held companies. However, many of these companies have appointed what might be termed advisory boards. Although they may not have any legal authority, owners of these privately owned companies have discovered that this team of outside advisors can assist them in many ways.
One important way they can help is just by having their name and/or company affiliation attached to the company. This can open doors to new customers and new relationships. Appointing advisors from both the accounting and legal fields can help insure that the company maintains strong controls on these important areas. This board can also assist in developing company strategy and systems. A business-savvy board can also help in management succession and can help prepare the company for sale.
In order to create a strong and helpful advisory board, “cronies” should not be included. The advisory team can consist of two to four people. They should meet several times a year, or in emergency sessions when necessary, and be available by telephone. They should also be compensated for their time just as any consultant would be.
Creating value in the privately held company makes sense whether the owner is considering selling the business, plans on continuing to operate the business, or hopes to have the company remain in the family.
This question can only be answered by addressing other related questions, specifically: Who’s asking and for what purpose?
Today's independent business marketplace attracts a wide variety of buyers eager for a piece of ownership action. Buyers of small businesses are most likely replacing lost jobs or searching for a happier alternative to corporate life. Buyers of mid-sized and large operations are, typically, private investment companies seeking businesses to build and eventually sell for a profit.
Keep in mind that the best time to consider selling is when business is good, the business is running profitably, and many of the above “value-adders” are in place.
For a business to sell, there has to be a seller - and a buyer. The buyer of today is a bit different than the one of yesterday. Today's buyer is not a risk-taker, is concerned about the financials, and seems to be overly concerned about price. Unfortunately, buyers have to understand that they cannot buy someone else's financial statements.
Before answering the question, it makes sense to first ask why people want to be in business for themselves. What are their motives? There have been many surveys addressing this question. The words may be different, but the idea behind them and the order in which they are listed are almost always the same.
Once the decision to sell has been made, the business owner should be aware of the variety of possible business buyers. Just as small business itself has become more sophisticated, the people interested in buying them have also become more divergent and complex.
Buyers buy a business for many of the same reasons that sellers sell businesses. It is important that the buyer is as serious as the seller when it comes time to purchase a business. Here are just a few of the reasons that buyers buy businesses:
41% joined the family business;36% wanted more control over their future...
Why does it take so long to sell a business? Price and terms are the biggest reasons.
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