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E-Folder - Why Selling a Business is Different from Selling Anything Else
You’ve sold many things in the past. But, prepare yourself. Selling a business is completely different. Throw out everything you know about selling and find out why selling your business requires a completely different mindset.
An Intangible Product
Just about everything for sa
An Intangible Product
Just about everything for sa
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
le is a tangible thing. You can see what you’re getting. You know exactly what you’re buying. Unfortunately, this is not the case when it comes to selling a business.
Your business possesses a collection of tangible assets: your equipment, inventory, accounts receivable, etc. Contrary
Your business possesses a collection of tangible assets: your equipment, inventory, accounts receivable, etc. Contrary
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
to what a lot of people believe, these are the items that bring the least value to your business.
It’s the intangibles - the assets that cannot be perceived by the senses - that make all the difference to a buyer. These are things like:
It’s the intangibles - the assets that cannot be perceived by the senses - that make all the difference to a buyer. These are things like:
- Quality of management
- Unique
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
ness of business model
Industry and market position
Systems and procedures in place
Quality of accounting and information systems
Relationships with distributors & suppliers
Customer loyalty and diversity
Product/service qualit
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
and diversity
Quality and morale of employees
Patents, trademarks and other intellectual property
The value of these intangibles –that is, the amount paid by the buyer over and above the value of the tangible assets- is referred to as goodwill.
So what
The value of these intangibles –that is, the amount paid by the buyer over and above the value of the tangible assets- is referred to as goodwill.
So what
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
does this mean to you, the seller?
The real value in your business is found in things you cannot see, hear or touch. As the seller, it’s your job to convince buyers that these things exist and will earn them profits. Bet you don’t have to do this with whatever you’re currently sellin
The real value in your business is found in things you cannot see, hear or touch. As the seller, it’s your job to convince buyers that these things exist and will earn them profits. Bet you don’t have to do this with whatever you’re currently sellin
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
g.
A Product With No Objective Value
A business is worth what someone is willing to pay for it. End of story.
Isn’t this true of every product? Sure. But with other products you have the ability to compare to other sales in order to set a price. How much is your house worth?
A Product With No Objective Value
A business is worth what someone is willing to pay for it. End of story.
Isn’t this true of every product? Sure. But with other products you have the ability to compare to other sales in order to set a price. How much is your house worth?
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
sk your realtor. She’ll quickly look up comparable sales, as will the buyer’s agent, and determine a reasonably accurate probable selling price. There is an efficient market at work for most commodities.
But not when it comes to selling a business. Although you will want to look at co
But not when it comes to selling a business. Although you will want to look at co
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
parable businesses when trying to set a price, you have to keep in mind that there really are no comparable businesses. Your business is unique because of all those intangibles we discussed.
Sure, you can get opinions of value. You can get them from industry associations, business bro
Sure, you can get opinions of value. You can get them from industry associations, business bro
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
kers, valuation experts, accountants, friends and even your spouse. And they’ll all be different. Each person who attempts to set a value on your business does so through personal filters and judgments about what’s valuable.
How do you sell something when no one seems to know what it’s
How do you sell something when no one seems to know what it’s
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
worth?
A Product You Can’t Walk Away From
Sell anything else, collect your money and you’re done. Sell a business, and you can’t just walk away.
You may end up tied to the business due to:
A Product You Can’t Walk Away From
Sell anything else, collect your money and you’re done. Sell a business, and you can’t just walk away.
You may end up tied to the business due to:
- Seller financing. If you’ve invested in the business by financing the
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
uyer, you’ll want to make sure it’s being run well until the money is paid back.
Training and consulting. Most buyers want the seller involved for some period after the sale. This can range from a few weeks to several years.
Earn-out provision. In an ea
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
rn-out, some of the proceeds of the sale are dependent upon the future success of the business.
What if you really just want to be done with the whole thing? Sellers who are reluctant to stick around and/or finance part of the deal make buyers nervous. You will lower your s
What if you really just want to be done with the whole thing? Sellers who are reluctant to stick around and/or finance part of the deal make buyers nervous. You will lower your s
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
lling price and may even find it very difficult to sell.
A Product You Can’t Openly Advertise
You want the whole world to know your products are for sale. You want everyone to know your house is for sale. Advertise, advertise, advertise.
The one thing everyone knows about sell
A Product You Can’t Openly Advertise
You want the whole world to know your products are for sale. You want everyone to know your house is for sale. Advertise, advertise, advertise.
The one thing everyone knows about sell
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
ng a business? Keep the sale confidential. You don’t want to indiscriminately announce the sale to the world. Employees may leave. Customers might go elsewhere. Competitors will start licking their chops. Suppliers may get nervous.
This creates one huge dilemma. How do you go about sel
This creates one huge dilemma. How do you go about sel
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
ling a business without letting people know it’s for sale?
A Product the Seller Has to Finance
Getting financing for real estate, cars - anything - is relatively straightforward; Lenders know they can recover the loan quite easily.
When it comes to lending money to a business
A Product the Seller Has to Finance
Getting financing for real estate, cars - anything - is relatively straightforward; Lenders know they can recover the loan quite easily.
When it comes to lending money to a business
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
uyer, no one wants to risk it. Banks and other lenders are reluctant to finance anything but certain assets such as inventory, accounts receivable, machinery and equipment. Even then, they will only lend a percentage of the full value. And they prefer assets that can be easily converte
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
to cash.
Most businesses sell for more than just asset value, unless they’re one step away from going out of business. This excess is goodwill, and lenders simply refuse to finance goodwill.
Sweet deals do happen. But, if you’re counting on selling a business for cash only, you’re pr
Most businesses sell for more than just asset value, unless they’re one step away from going out of business. This excess is goodwill, and lenders simply refuse to finance goodwill.
Sweet deals do happen. But, if you’re counting on selling a business for cash only, you’re pr
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
obably in for disappointment. Most often, the seller has to finance part of the deal.
A Life Decision
Perhaps the major reason selling a business is different is that your business is likely a huge part of your life and most, if not all, of your nest egg. Parting with y
A Life Decision
Perhaps the major reason selling a business is different is that your business is likely a huge part of your life and most, if not all, of your nest egg. Parting with y
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
ur business is more like getting a divorce or seeing your children leaving home.
The emotions you will have to deal with when selling your business may be the biggest obstacle to a successful sale. You may not realize it consciously, but deep down inside you may not really want to sell
The emotions you will have to deal with when selling your business may be the biggest obstacle to a successful sale. You may not realize it consciously, but deep down inside you may not really want to sell
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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