This current recession in 2008 and 2009 is marked by how low the economy has gone, the increase in unemployment, but most frustrating of all, how long it has taken before the “green shoots” appear. If your business is struggling and you think your only option is to close the door and hand the keys back to the landlord, here are some things to consider.

First, it’s rarely as simple as closing the door and handing the key back to the landlord. If your business has a lease you obviously need to discuss the situation with the landlord. If you have a good relationship and feel you can handle it on your own to save hiring help, take care as you handle the issue. Bear in mind the landlord is no different to you. They lease the real estate to make money. If you close the doors, they need to find a replacement for you which may take time to achieve. This can be a talking point with the landlord as you may be able to bring a tenant to replace you. If this is the case, make sure this is correct as the landlord may become frustrated if the person changes their mind. Similarly, the landlord is not required to accept the person you bring so be aware the landlord has options.
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There is no doubt that the current recession is as long and as hard as we’ve seen for many years. And hopefully we will not get to see again for quite some time. If you are a business owner whose business is not making a profit and you don’t have the capital to invest and keep the business, going you may be wondering about your options.

The first option is to take a real assessment of where you are at. One of the best ways of doing this is to talk with your accountant. Make sure your accountant is not simply filing your tax return to meet compliance but actually helps you look behind the numbers and understand how your business is performing.
What do you need to know?

Most business owners understand their gross sales. Some are adept at using this number to explain the success of their business. For example, have you spoken to a business owner that said “Sales are up 20% on this time last year.” They say this with great pride but that doesn’t tell the full story.
Some business owners can tell you the net profit of the business. Net profit is simply what they pay taxes on or gross sales less cost of goods less expenses. Some business owners like to say “Our bottom line was up 10% compared to last year.” This is good news but that doesn’t tell the full story.
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An area that a lot of businesses don’t spend a lot of time measuring but is very easy, cost effective and critical to do is the key performance areas of the business.  These key performance areas or metrics can show whether the business has all the parts working together and in a healthy manner or is in need of a tune up or radical surgery.  There are a number of key areas to a Performance Plan so let’s break them down.

The first area to look at is the financial statements of the business.  The first and most readily used is the Profit and Loss Statement as it shows the income and expenses of the business with hopefully the income greater than the expenses.  Just as important, however, is the Balance Sheet as this document shows the wealth of the business.  With an up to date profit and loss statement and balance sheet, a trained business appraiser can then calculate what the owner of the business could expect to get if they decided to sell it on the market.
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The following article is re-printed from an email sent by Mike McGrane, an SBA lender with Wells Fargo based in Roseville, CA.

The Senate and the House have both passed various versions of the following improvements to the Small Business Admin 7a and 504 loan programs. This is a very good thing for Small Business, Entrepreneurs, Banks and Business Brokers and Developers. There is something for everyone in this Senate Bill outlines below. It still needs to be signed into law and the SBA needs to make their official guidelines public, but this should be what is coming.
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If you brought ten entrepreneurs together to ask them to make a list of the five most important traits of a successful entrepreneur they would probably finish up with eleven lists. Entrepreneurs don’t like predictability and arriving at simplistic answers. However, if you read each of those eleven lists, I think you would find the following traits on a lot of those lists.

1. Vision
One of the first attributes of all successful entrepreneurs is having a clear vision. The evidence of that is easy to see from the most successful companies – Microsoft, Berkshire Hathaway, Johnson and Johnson, and so it goes on. If you’re an existing entrepreneur, what made you start the journey of being a business owner? Make sure you haven’t moved away from that. If you have, find it again and re-focus your long term goals.
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Gilmore Bank in Los Angeles, CA just released the following information about great news on upcoming changes to the SBA:

On October 21, 2009, President Obama announced steps that the administration is taking to expand access to capital for small businesses. Senate Bill 1832 was introduced by Senator Mary Landrieu to implement the administration’s initiatives.

HIGHLIGHTS OF THE PROPOSED LEGISLATION INCLUDE:
• Increasing maximum 7(a) loan size to $5 million
• Increasing maximum 504 sizes to $5 million (non-mfg) and $5.5 million (mfg)
• Increasing maximum guarantee dollars to one applicant/affiliates to $4.5 million
• Extending 90% maximum 7(a) guarantee percentage through 10/1/2010
• Extending ARC Loan relief to existing SBA loans
• Increasing the maximum microloan loan size from $35,000 to $50,000
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The number one reason most transactions don’t close after a buyer and seller have “negotiated” a deal is that the landlord cannot come to terms with the seller and/or buyer.

The number two reason is that finance is not available.

For obvious reasons, a seller prefers cash. Tom West of Business Brokerage Press is a writer and analyst on small business transactions. According to West, his research has shown that sellers receive a significantly higher purchase price if they decide to accept terms or carry a seller’s note and that, on average, a seller who sells for all cash receives 69.9 percent of the asking price whereas if the seller is willing to carry some of the finance, the selling price will increase by 15.8%. For example, if a business is listed for $150,000, and the seller who is willing to carry some finance, they will receive approximately $24,000 more than the seller who is asking for all cash.

Applying the above but instead of looking at selling price but gross sales, West has found that a seller who asks for cash receives, on average, a purchase price of 36 percent of annual sales; compared to the seller accepting terms, who receives an average of 42 percent of annual sales.
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Buying or selling a business is complex task as there are so many moving parts. The moving parts obviously include the buyer and seller but may also include lenders, landlord, franchisors, attorneys, accountants, customers, suppliers, competitors, employees and others. Just as you can get help from a residential real estate to buy or sell a house, there are also business brokers or intermediaries who provide the services of an intermediary. If you are looking for the help of an intermediary or business broker, consider the following.
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With negative economic news grabbing the headlines in the United States, business owners may think it’s not a good time to sell their company. But fortunately for owners looking to sell, that’s not necessarily true. 

Business sales are still taking place with sellers capturing attractive prices and favorable terms, when the deal is structured properly. 

Look at the buyer’s credibility
Of course, you want to find the best buyer possible. Whether it’s an individual, another company or a Private Equity Group, look for a potential buyer with business acumen, significant assets to pledge as collateral or a committed fund, as well as demonstrated success.
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As a business owner, and part of the baby boomer generation, you’ve seen your share of ups and downs in the business world.

If you are considering the sale of your business there are a growing number of brokers and mergers and acquisition specialists available to offer professional assistance to help you determine the value of your business and how the market might respond. 
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