Andrew Rogerson's Blog » Buying A Business http://www.andrew-rogerson.com Helping one entrepreneur at a time Wed, 01 Sep 2010 16:29:58 +0000 en hourly 1 http://wordpress.org/?v=3.0.1 SBA Update – December 18, 2009 http://www.andrew-rogerson.com/sba-update-december-18-2009/ http://www.andrew-rogerson.com/sba-update-december-18-2009/#comments Fri, 18 Dec 2009 21:28:05 +0000 Andrew Rogerson http://www.andrew-rogerson.com/?p=821 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.

Senate Bill 2869 contains several critical provisions to bolster SBA assistance to America’s nearly 30 million small businesses and aspiring entrepreneurs. Specifically, the bill would:
• Increase the loan limit on 7(a) loans from $2 million to $5 million;
• Increase the loan limit on 504 loans from $1.5 million to $5.5 million;
• Increase the loan limit on microloans from $35,000 to $50,000 and increase the maximum loan made to a microloan intermediary from $3.5 million to $5 million;
• Allow the 504 loan program to refinance short-term commercial real estate debt into, long-term, fixed rate loans;
• Extend the authorization to provide 90 percent guarantees on 7(a) loans and fee elimination for borrowers on 7(a) and 504 loans through December 31, 2010; and
• Direct the SBA to create a website where small businesses can identify lenders in their communities.

]]> http://www.andrew-rogerson.com/sba-update-december-18-2009/feed/ 2 10 things to expect from your Business Intermediary http://www.andrew-rogerson.com/10-things-to-expect-from-your-business-intermediary/ http://www.andrew-rogerson.com/10-things-to-expect-from-your-business-intermediary/#comments Sun, 04 Oct 2009 03:29:09 +0000 Andrew Rogerson http://www.andrew-rogerson.com/?p=505 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.

1. Trust and Ethics.
When selling your business you want to feel assured the intermediary has a strong commitment to trust and ethics so you know your business and its interests are fully protected. Getting an ethical and trust commitment from your business broker is the most important ingredient. It is critical and should be non-negotiable.
2. Real Estate License.
Many states in the US require a business broker to hold a real estate license in order to represent an owner of property in a sale and be paid for providing that service. In California, a license is issued by the California Department of Real Estate for two types of persons; a Broker and a Sales Agent. A Broker can either work for themselves or choose to hire Sales Agents that work under the Broker.
3. Specialization.
Does the Business intermediary you are considering hiring specialize in either residential sales, business opportunities, commercial real estate, mortgages or finance or a combination of these? Because of the complexities and differences of each markets, most Brokers or Sales Agents tend to specialize in one area. Even within these broad specializations there are specialists. For example, in business opportunities, if a transaction is greater than $5,000,000 there are there are Broker/Sales Agents that specialize in this market called M&A intermediaries.
4. Experience.
Has the Business Intermediary owned and operated a business? Business ownership teaches many skills and requires a unique understanding of what is involved in owning and operating a business. When detailed negotiations take place between the business owner and a potential buyer, all the options must be explored, fully considered and understood.
5. Accreditations.
Does the have formal training or education to support the service they provide? There are different types of accreditations with some including the Certified Business Intermediary (CBI) from the International Business Brokers Association and the Certified Business Broker (CBB) from the California Association of Business Brokers.
6. Association memberships.
Accreditations are good, staying up with the accreditations is better. To see if a Business Intermediary is a member of their industry association, check the International Business Brokers Association (IBBA) at http://www.ibba.org or search the web for “Business Broker Organization” in the state where you live.
7. Communicates and explains clearly
Selling or buying a business requires dealing in financial, legal, industry and other forms of jargon. Are you able to communicate easily and clearly with your Business Intermediary and understand what they are talking about?
8. Network of professionals.
Selling a business often brings together different professionals such as Accountants, Attorneys, Property Management Companies, Landlords, Escrow officers, Appraisers, Tax Agents, Lenders, Franchisors and Financial Planners. Does your Business Intermediary have professionals he can introduce you to if your business requires that expertise?
9. Testimonials.
What do the past customers have to say about the services of the Broker/Sales Agent?
10. Finance.
Most sellers do not wish to carry any finance or they wish to carry as little finance as possible. Is your intermediary able to introduce you to finance professionals who would finance the deal for a qualified buyer?

Buying or selling any item of value must be done properly so the value of the asset is protected. Using the services of a professional intermediary to guide you through the process and protecting your investment is good business.

]]> http://www.andrew-rogerson.com/10-things-to-expect-from-your-business-intermediary/feed/ 0 What does Recasting Financial Statements mean http://www.andrew-rogerson.com/recasting-financial-statements/ http://www.andrew-rogerson.com/recasting-financial-statements/#comments Fri, 18 Sep 2009 07:00:06 +0000 Andrew Rogerson http://andrewrogerson.wordpress.com/?p=236 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. 

Most businesses track their financial performance by using balance sheets, profit and loss statements and tax returns. These reports are beneficial in determining the value of a business. In most instances it’s the cash flow that prospective buyers need to identify to better understand the health of a business. They must also understand how the money is being spent and the available opportunities to generate positive cash flow in the future.

The process of recasting financial statements is essential in determining the value of a business when the owner’s intentions are to sell. Recasting requires extensive investigation to ensure all relevant and appropriate adjustments are correctly reported. This is one of many services provided by a business broker or mergers and acquisition specialist. They will examine your financials along with the historical performance of the business, and endeavor to identify keys to future performance and market opportunities.

The recasting process identifies items such as excessive and discretionary expenses and nonrecurring revenues and expenses. Recasting provides an economic view of the company, and allows meaningful comparisons with other investment opportunities. However, the owner benefits (salary, commissions, perks, incentives, personal loans and discretionary expenses) are considered and added back into the value of the company so a future buyer can adequately assess the business, its cash flow and future earning capacity.

A great deal goes into the process of determining value and selling a business. Recasting the financial statements of a business provides an indication of the business value and helps an owner with accurate expectations. A broker or mergers and acquisition specialist will help you understand the financial statements and help you move forward toward the completion of the business sale.
 
If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

]]> http://www.andrew-rogerson.com/recasting-financial-statements/feed/ 0 Don’t forget to consider Seller financing http://www.andrew-rogerson.com/don%e2%80%99t-forget-to-consider-seller-financing/ http://www.andrew-rogerson.com/don%e2%80%99t-forget-to-consider-seller-financing/#comments Fri, 04 Sep 2009 07:00:38 +0000 Andrew Rogerson http://andrewrogerson.wordpress.com/?p=232 As baby boomers begin to hit retirement age, many who are business owners are ready to sell. It’s created a market that has many businesses for sale. 

At the same time, concerns about the economy had made it tough to get financing for many potential deals. Seller financing is one option that could be the solution to get many deals done.

Seller financing involves a seller helping to finance the sale of the business by taking back a second note on the business. It differs from a traditional Small Business Administration (SBA) loan because the seller essentially extends credit to the buyer against the purchase price of the business. However, seller financing is misunderstood by many, even though it may be the best way to sell a business during a stagnant economy.

The most common option for seller financing involves secured notes, but other options also exist, including: unsecured notes, assumption of the seller’s guaranteed credit, assumption of capital leases, a real estate lease, earnouts, notes on capital equipment and more.

There are a number of benefits for business owners who are considering seller financing:

  • Faster sale
    Seller financing provide an attractive option for buyers which means that sellers can sell their business fast and at a higher price.
  • Flexibility
    Seller financing enables the seller to create a payment schedule, interest rates and loan period that fit their personal needs.
  • Tax breaks
    Taking a note for part of the business purchase price may provide a tax break for the seller. The seller can defer some of the tax due on the sale of the business until full payment is received, which could be several years down the road.
  • Protections
    Asking the new owner to keep the seller up to date with information like monthly profit and loss statements, workforce numbers, order backlog, inventory levels or other items with the monthly payment can be in the sale contract. The additional information allows the seller to keep track of the business and step in to offer advice or help if any problems are detected.

Working with a qualified business transaction professional, like a Certified Business Broker (CBI) or Mergers & Acquisitions Master Intermediary (M&AMI) is also recommended. Certified brokers and intermediaries can provide the guidance you’re looking for when considering seller financing or other financing options. They will help potential buyers and sellers develop a deal that is fair to both parties in the acquisition process.

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.
 
This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

]]> As baby boomers begin to hit retirement age, many who are business owners are ready to sell. It’s created a market that has many businesses for sale. 

At the same time, concerns about the economy had made it tough to get financing for many potential deals. Seller financing is one option that could be the solution to get many deals done.

Seller financing involves a seller helping to finance the sale of the business by taking back a second note on the business. It differs from a traditional Small Business Administration (SBA) loan because the seller essentially extends credit to the buyer against the purchase price of the business. However, seller financing is misunderstood by many, even though it may be the best way to sell a business during a stagnant economy.

The most common option for seller financing involves secured notes, but other options also exist, including: unsecured notes, assumption of the seller’s guaranteed credit, assumption of capital leases, a real estate lease, earnouts, notes on capital equipment and more.

There are a number of benefits for business owners who are considering seller financing:

  • Faster sale
    Seller financing provide an attractive option for buyers which means that sellers can sell their business fast and at a higher price.
  • Flexibility
    Seller financing enables the seller to create a payment schedule, interest rates and loan period that fit their personal needs.
  • Tax breaks
    Taking a note for part of the business purchase price may provide a tax break for the seller. The seller can defer some of the tax due on the sale of the business until full payment is received, which could be several years down the road.
  • Protections
    Asking the new owner to keep the seller up to date with information like monthly profit and loss statements, workforce numbers, order backlog, inventory levels or other items with the monthly payment can be in the sale contract. The additional information allows the seller to keep track of the business and step in to offer advice or help if any problems are detected.

Working with a qualified business transaction professional, like a Certified Business Broker (CBI) or Mergers & Acquisitions Master Intermediary (M&AMI) is also recommended. Certified brokers and intermediaries can provide the guidance you’re looking for when considering seller financing or other financing options. They will help potential buyers and sellers develop a deal that is fair to both parties in the acquisition process.

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.
 
This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

]]> http://www.andrew-rogerson.com/don%e2%80%99t-forget-to-consider-seller-financing/feed/ 0 Seller can stay following the sale http://www.andrew-rogerson.com/seller-can-stay-following-the-sale/ http://www.andrew-rogerson.com/seller-can-stay-following-the-sale/#comments Fri, 28 Aug 2009 07:00:21 +0000 Andrew Rogerson http://andrewrogerson.wordpress.com/?p=228 Selling a business and walking away can be very difficult. But in many cases, there’s a transition (“training” and/or “consulting”) period dependent on the size of the company and the role of the owner. Transitions may be as short as a month or two or as long as a year. In most situations, the buyer wants the seller to remain on board to shorten the learning curve and help with the smooth transfer of key relationships.

In the typical business sale, a transition period of four to eight weeks is included, and sometimes a “telephone consulting period” is added (e.g., 6 months of telephone consulting not to exceed 5 hours per month). Also, the seller may additionally be retained as a consultant at a negotiated rate. In some instances, a long-term employment contract is negotiated and the seller maintains daily involvement for a much longer period of time.

For the owner who wants to sell the company and leave quickly, the focus should be on the development of a strong management team. Be sure to introduce key employees/managers to your major customers and vendors and look at ways to delegate responsibilities. The more the customers think they are interacting with “the company” versus the “owner” the easier the transition.

If you’ve established a good management team, less time will be required for the transition to the new owner. In addition, a well developed team usually adds value to the sale.

Occasionally there are owners who want to sell but just aren’t ready to quit working. They may be looking to sell early to get a premium price while the market is in their favor or to get away from unwanted or overwhelming administrative and management duties.

Either way, long-term employment contracts can be included in the sale agreement. The seller can stay on board and work with the business a few more years while still drawing an income and benefits.

If you’re selling your business, in most cases you won’t be able to walk away the day after the sale and in most cases you probably don’t want to. Talk to your business intermediary about the true timeline of the sale and transition. It’s not uncommon for owners to sell while the price is right. If you’re not quite ready to leave immediately, consider the options available and maintain a role with the company.

 

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

 

This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

]]> Selling a business and walking away can be very difficult. But in many cases, there’s a transition (“training” and/or “consulting”) period dependent on the size of the company and the role of the owner. Transitions may be as short as a month or two or as long as a year. In most situations, the buyer wants the seller to remain on board to shorten the learning curve and help with the smooth transfer of key relationships.

In the typical business sale, a transition period of four to eight weeks is included, and sometimes a “telephone consulting period” is added (e.g., 6 months of telephone consulting not to exceed 5 hours per month). Also, the seller may additionally be retained as a consultant at a negotiated rate. In some instances, a long-term employment contract is negotiated and the seller maintains daily involvement for a much longer period of time.

For the owner who wants to sell the company and leave quickly, the focus should be on the development of a strong management team. Be sure to introduce key employees/managers to your major customers and vendors and look at ways to delegate responsibilities. The more the customers think they are interacting with “the company” versus the “owner” the easier the transition.

If you’ve established a good management team, less time will be required for the transition to the new owner. In addition, a well developed team usually adds value to the sale.

Occasionally there are owners who want to sell but just aren’t ready to quit working. They may be looking to sell early to get a premium price while the market is in their favor or to get away from unwanted or overwhelming administrative and management duties.

Either way, long-term employment contracts can be included in the sale agreement. The seller can stay on board and work with the business a few more years while still drawing an income and benefits.

If you’re selling your business, in most cases you won’t be able to walk away the day after the sale and in most cases you probably don’t want to. Talk to your business intermediary about the true timeline of the sale and transition. It’s not uncommon for owners to sell while the price is right. If you’re not quite ready to leave immediately, consider the options available and maintain a role with the company.

 

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

 

This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

]]> http://www.andrew-rogerson.com/seller-can-stay-following-the-sale/feed/ 0 Keep it Quiet – Confidentiality critical to selling a business http://www.andrew-rogerson.com/keep-it-quiet-%e2%80%93-confidentiality-critical-to-selling-a-business/ http://www.andrew-rogerson.com/keep-it-quiet-%e2%80%93-confidentiality-critical-to-selling-a-business/#comments Fri, 21 Aug 2009 07:00:27 +0000 Andrew Rogerson http://andrewrogerson.wordpress.com/?p=224 As you prepare to put your house on the market, you get the word out to as many people as possible. The “For Sale” sign is placed in the front yard, you invite people into your home during an open house and you put ads in the newspaper and online. You want everyone to know your house is for sale.

However, that’s not the case when selling a business. Place an ad that your business is on the market and people start to wonder. It creates an air of uncertainty that can be detrimental to your bottom line and put the company in jeopardy.

To increase the likelihood of a successful sale of a business at an optimum price, keep it confidential!

What’s likely to happen if people find out the business is up for sale?

Employees get nervous. They begin to worry if their jobs will disappear or if they’ll get along with a new owner. Some may even quit before you have a chance to reassure them and it will probably be the good employees that leave. They’ll start looking for jobs that make them feel more secure.

Losing key people is serious, particularly during the sale process. Key staff members provide valuable continuity and business knowledge that buyers are looking for. Lose them and potential buyers may be lost too.

Customers begin to wonder. They may become concerned whether the business has problems that could threaten their supply chain. They may start questioning if they’ll get the same quality from the new owner.

Competitors will spread the word. Once the competition finds out, rest assured they’ll let your customers know and use it as ammunition to bring that business to their company. It opens the door for them to steal business from you.

Vendors and creditors may tighten terms. You may be working with terms of net 45 or more to benefit your own cash flow. But once creditors learn that the business is for sale, you may find those terms tightening or notes unexpectedly called due.

On average, a business sale takes nine months to one year. If even some of these changes occur early on, the impact can be dramatic. You’ll find that you’re not only running a business, but you’re busy putting out fires.

A buyer wants a successful operation with few changes until he or she can make those changes. Too many question marks translate to greater risk and lower purchase offers.

Confidentiality is crucial no matter the size of the company or the type of business. To maintain confidentiality, use a professional who understands the process – use an intermediary. An intermediary will market the business in a confidential manner, while providing just enough information to attract the buyers you are looking for.

The intermediary should be diligent in screening inquiries to be sure competitors aren’t out there fishing for details. The intermediary should only be sharing your identity after determining that a potential buyer is seriously interested and is qualified. Those serious and qualified buyers should also be required to sign a binding confidentiality agreement that holds them accountable for leaking information.

You want to maintain your business as usual for as long as possible. Keeping the sale confidential until the time is right will help you to minimize uncertainty and maximize the sale.

 

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

 

 

This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

]]> As you prepare to put your house on the market, you get the word out to as many people as possible. The “For Sale” sign is placed in the front yard, you invite people into your home during an open house and you put ads in the newspaper and online. You want everyone to know your house is for sale.

However, that’s not the case when selling a business. Place an ad that your business is on the market and people start to wonder. It creates an air of uncertainty that can be detrimental to your bottom line and put the company in jeopardy.

To increase the likelihood of a successful sale of a business at an optimum price, keep it confidential!

What’s likely to happen if people find out the business is up for sale?

Employees get nervous. They begin to worry if their jobs will disappear or if they’ll get along with a new owner. Some may even quit before you have a chance to reassure them and it will probably be the good employees that leave. They’ll start looking for jobs that make them feel more secure.

Losing key people is serious, particularly during the sale process. Key staff members provide valuable continuity and business knowledge that buyers are looking for. Lose them and potential buyers may be lost too.

Customers begin to wonder. They may become concerned whether the business has problems that could threaten their supply chain. They may start questioning if they’ll get the same quality from the new owner.

Competitors will spread the word. Once the competition finds out, rest assured they’ll let your customers know and use it as ammunition to bring that business to their company. It opens the door for them to steal business from you.

Vendors and creditors may tighten terms. You may be working with terms of net 45 or more to benefit your own cash flow. But once creditors learn that the business is for sale, you may find those terms tightening or notes unexpectedly called due.

On average, a business sale takes nine months to one year. If even some of these changes occur early on, the impact can be dramatic. You’ll find that you’re not only running a business, but you’re busy putting out fires.

A buyer wants a successful operation with few changes until he or she can make those changes. Too many question marks translate to greater risk and lower purchase offers.

Confidentiality is crucial no matter the size of the company or the type of business. To maintain confidentiality, use a professional who understands the process – use an intermediary. An intermediary will market the business in a confidential manner, while providing just enough information to attract the buyers you are looking for.

The intermediary should be diligent in screening inquiries to be sure competitors aren’t out there fishing for details. The intermediary should only be sharing your identity after determining that a potential buyer is seriously interested and is qualified. Those serious and qualified buyers should also be required to sign a binding confidentiality agreement that holds them accountable for leaking information.

You want to maintain your business as usual for as long as possible. Keeping the sale confidential until the time is right will help you to minimize uncertainty and maximize the sale.

 

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

 

 

This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

]]> http://www.andrew-rogerson.com/keep-it-quiet-%e2%80%93-confidentiality-critical-to-selling-a-business/feed/ 0 The importance of Due Diligence in a business transaction http://www.andrew-rogerson.com/due-diligence/ http://www.andrew-rogerson.com/due-diligence/#comments Fri, 14 Aug 2009 08:00:08 +0000 Andrew Rogerson http://andrewrogerson.wordpress.com/?p=220 The Merriam-Webster Dictionary defines Due Diligence as “research and analysis of a company or organization done in preparation for a business transaction.” Some even look at it as a pre-marital background check and counseling. But it should be noted that dissolving a merger is much more difficult than ending a marriage if things aren’t as they appear.

Ultimately, due diligence is the process of being sure that things are as they appear before a deal is sealed. For someone considering a merger or the purchase of an existing business, the review of documentation and the answers to your due diligence questions are critical. There’s no doubt it is a complex process that can be time-consuming. But with so much on the line with any merger or acquisition, you don’t want to make a decision without all of the information. You want to be sure everything is reviewed and all questions are answered to your satisfaction.

During the due diligence process, an often lengthy list of documents should be provided. The list of documents should cover a range of areas, including:

  • Legal structure and incorporation of the company
  • Internal Revenue Service (IRS) records
  • Insurance policy information
  • Organizational structure
  • Personnel policies
  • Operations
  • Capital and real estate
  • Contracts, licenses, agreements and affiliations
  • Technology and Intellectual Property
  • Current or potential legal liabilities
  • Marketing materials

Today more than ever, buyers are putting more emphasis on the due diligence process. And while the financial aspect is a key component, the due diligence process should also consider organizational items. Be sure to seek documentation and ask important questions about the company’s culture, strategy, leadership and competencies. 

To properly address and evaluate all of the areas of the due diligence process, you want to assemble the best possible team of people. Work with that team, including your business intermediary, throughout the process to review and evaluate the documents and information you receive. It’s also important to keep an open mind. Be sure that you get all of the information you need, but don’t assume that you will find something wrong. 

Although the due diligence process may take considerable time, it’s a critical part of any transaction and should be considered the foundation of the entire deal.

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

 This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

]]> http://www.andrew-rogerson.com/due-diligence/feed/ 0 Find the right professional to help you sell or buy your business http://www.andrew-rogerson.com/find-the-right-professional-to-help-you-sell-your-business/ http://www.andrew-rogerson.com/find-the-right-professional-to-help-you-sell-your-business/#comments Fri, 10 Jul 2009 08:00:44 +0000 Andrew Rogerson http://andrewrogerson.wordpress.com/?p=203 As a business owner, and part of the baby boomer generation, you’ve seen your share of ups and downs in the business world. The time is coming to step back and take life in a different direction. You’ve decided it’s time to seriously consider selling your business. Where do you turn? 

Many business owners in similar circumstances look first to their accountant or their business attorney, people they’ve worked with and have developed a relationship with. But the fact of the matter is they aren’t experienced in selling a business, just as you probably would not ask them to sell your home for you (which is much easier). No doubt, you’ll consult with them as you prepare to sell your business. But an initial step should be to enlist the help of a professional business broker or intermediary. 

A business broker or intermediary works to bring together buyers and sellers of businesses. Finding the right person to fill that role is crucial to making the right deal to sell your business.
Here are some tips:

  • Be sure to get referrals.
    It’s always advisable to get a referral from a trusted source. Your accountant or attorney may be able to direct you to a broker with a proven track record. Business brokers should also be able to provide you with a list of satisfied clients.
  • Check with the International Business Brokers Association (IBBA.org).
    The IBBA is a non-profit trade association with 1,900 members, providing education, professional certification, conferences and networking opportunities. The IBBA also provides the Certified Business Intermediary (CBI) designation for those members who have successfully completed a number of IBBA courses, including ethics, financial analysis, business pricing and valuation, legal and tax classes.
  • Look for a specialist in business sales.
    A business broker who spends their full time selling businesses will add more value to your sales transaction than someone who just dabbles in the sale of businesses, among other endeavors. A full-time professional intermediary will bring along a network of contacts and an understanding of the principles of business valuation, marketing and confidentiality. Find someone who is dedicated to the profession. Again, ask for testimonials.
  • Find a broker/intermediary you can trust.
    The business broker you contract with must be someone that you believe you can put your trust in because you will be working with him or her very closely for some time. He or she must have credibility and bring across to you a sense that you can rely on him or her to obtain the best price for the sale of your business in the shortest amount of time.
  • Be wary of upfront fees.
    Fees vary depending on a number of criteria and what you need in the way of analysis, appraisal and valuation. A business broker’s fee is typically a commission based on the sale price of your business, and sometimes includes a small upfront fee for valuation an/or marketing. Think twice before you decide to work with any broker who asks for an excessively large upfront fee to do a business valuation or to help market your company. Are they making their money from their valuation/marketing fee, or from selling your business? (It should be the latter.)
  • Keep your plans confidential. The selling of your business should be kept quiet until the time is right. A professional business broker will ensure that all safeguards are in place to protect your company and all information is kept confidential. Leaking your plans prematurely to suppliers, customers or employees can have repercussions on your business operations.
  • Steer clear of the pressure. Never rush into a decision. Selling the company that you’ve poured your heart and soul into for years is a complex proposition; not one to be rushed into. Be sure to take the time you need to learn about and clarify all uncertainties.

    Selling your business will undoubtedly be one of the biggest transactions you’ll ever make and one that you’ll probably only do once. The right professional business broker will help you find a source of potential buyers and aid in the sale of your company. Work with a team of professional advisors for the best results. 

    If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

    This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

    ]]> http://www.andrew-rogerson.com/find-the-right-professional-to-help-you-sell-your-business/feed/ 0 The Benefits of Buying a Business versus Starting a New Business http://www.andrew-rogerson.com/the-benefits-of-buying-a-business-versus-starting-a-new-business/ http://www.andrew-rogerson.com/the-benefits-of-buying-a-business-versus-starting-a-new-business/#comments Fri, 26 Jun 2009 08:00:22 +0000 Andrew Rogerson http://andrewrogerson.wordpress.com/?p=197 This is an article for business buyers. But it also helps the seller of a business understand what a buyer should look for when acquiring a business.

    So you want to be your own boss. Consider the options – work as an independent contractor…start your own business…buy an existing company. Certainly there are pros and cons to each option. If you do a careful analysis, you’ll learn what many seasoned entrepreneurs have discovered…the risk-to-reward ratio is tipped in your favor when you purchase an existing business.

    Admittedly, as an independent contractor, your risk is minimal. The up front investment and overhead costs are limited. However, without the ability to leverage the work of an employee base, the returns are limited by your own personal capacity.

    Starting a business of your own can pay great dividends, but it’s important to understand that the risks are significant. Most start-up businesses will falter and eventually die. According to Michael Gerber, author of The E-Myth Revisited, 40 percent of new businesses fail in the first year and 80 percent fail within five years.

    On the other hand, purchasing an existing business reduces an entrepreneur’s risk while creating opportunities for tremendous profit.

    There are a number of reasons to consider the purchase of an existing business rather that starting one:

    • Proven Concept. Buying an established business is less risky – as a buyer you already know the process or concept works. Financing a purchase is often easier than securing funding for a start-up business for that very reason—the business has a track record. A bank will be able to look at the historical results for the business, not just rely on projections.
    • Brand. You’re buying a brand name. The on-going benefits of any marketing or networking the prior owner has done will transfer to you. When you have an established name in the business community, it’s easier to place cold calls and attract new business than with an unproven start up. That’s an intangible benefit that’s difficult to put a price on.
    • Relationships. With the purchase of an existing business, you will also be buying an existing customer base and vendor base that took years to build. It’s very common for the seller to stay on and transition with the business for a short time to transfer those relationships to the buyer.
    • Focus. When you buy a business, you can start working immediately and focus on improving and growing the business immediately. The seller has already laid the foundation and taken care of the time-consuming, tedious start up work. Starting a new business means spending a lot of time and money on basic items like computers, telephones, furniture and policies that don’t directly generate cash flow.
    • People. In an acquisition, one of the most valuable and important assets you’re buying is the people. It took the seller time to find those employees, develop them and assimilate them into the company culture. With the right team in place, just about anything is possible and you will have an easier time implementing growth strategies. Plus, with trained people in place you will have more liberty to take vacation, spend time with family, or work on other business ventures. When start-up owners and independent contractors go on vacation, the business goes too.
    • Cash flow. Typically, a sale is structured so you can cover the debt service, take a reasonable salary, and have some left over to take the business to the next level. Start up owners, on the other hand, often “starve” at first. Some experts say start-ups aren’t expected to make money for the first three years.
    • Risk. Even with all these advantages, some entrepreneurs believe it is cheaper, and therefore less risky, to start a business than to buy one. But risk is relative. A buyer may pay $1 million, for example, for an established business with strong cash flows of approximately $200,000 to $300,000. A lending institution funds the transaction because historical revenues show the cash flow can support the purchase price. For many people, however, that is far less risky than taking out a $300,000 loan with an unproven concept and projections that may or may not be realized.

     
    Becoming your own boss always involves a risk. When you buy a business, you take a calculated risk that eliminates a lot of the pitfalls and potential for failure that come with a start up.

    If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

     

    This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

    ]]>     This is an article for business buyers. But it also helps the seller of a business understand what a buyer should look for when acquiring a business.

    So you want to be your own boss. Consider the options – work as an independent contractor…start your own business…buy an existing company. Certainly there are pros and cons to each option. If you do a careful analysis, you’ll learn what many seasoned entrepreneurs have discovered…the risk-to-reward ratio is tipped in your favor when you purchase an existing business.

    Admittedly, as an independent contractor, your risk is minimal. The up front investment and overhead costs are limited. However, without the ability to leverage the work of an employee base, the returns are limited by your own personal capacity.

    Starting a business of your own can pay great dividends, but it’s important to understand that the risks are significant. Most start-up businesses will falter and eventually die. According to Michael Gerber, author of The E-Myth Revisited, 40 percent of new businesses fail in the first year and 80 percent fail within five years.

    On the other hand, purchasing an existing business reduces an entrepreneur’s risk while creating opportunities for tremendous profit.

    There are a number of reasons to consider the purchase of an existing business rather that starting one:

    • Proven Concept. Buying an established business is less risky – as a buyer you already know the process or concept works. Financing a purchase is often easier than securing funding for a start-up business for that very reason—the business has a track record. A bank will be able to look at the historical results for the business, not just rely on projections.
    • Brand. You’re buying a brand name. The on-going benefits of any marketing or networking the prior owner has done will transfer to you. When you have an established name in the business community, it’s easier to place cold calls and attract new business than with an unproven start up. That’s an intangible benefit that’s difficult to put a price on.
    • Relationships. With the purchase of an existing business, you will also be buying an existing customer base and vendor base that took years to build. It’s very common for the seller to stay on and transition with the business for a short time to transfer those relationships to the buyer.
    • Focus. When you buy a business, you can start working immediately and focus on improving and growing the business immediately. The seller has already laid the foundation and taken care of the time-consuming, tedious start up work. Starting a new business means spending a lot of time and money on basic items like computers, telephones, furniture and policies that don’t directly generate cash flow.
    • People. In an acquisition, one of the most valuable and important assets you’re buying is the people. It took the seller time to find those employees, develop them and assimilate them into the company culture. With the right team in place, just about anything is possible and you will have an easier time implementing growth strategies. Plus, with trained people in place you will have more liberty to take vacation, spend time with family, or work on other business ventures. When start-up owners and independent contractors go on vacation, the business goes too.
    • Cash flow. Typically, a sale is structured so you can cover the debt service, take a reasonable salary, and have some left over to take the business to the next level. Start up owners, on the other hand, often “starve” at first. Some experts say start-ups aren’t expected to make money for the first three years.
    • Risk. Even with all these advantages, some entrepreneurs believe it is cheaper, and therefore less risky, to start a business than to buy one. But risk is relative. A buyer may pay $1 million, for example, for an established business with strong cash flows of approximately $200,000 to $300,000. A lending institution funds the transaction because historical revenues show the cash flow can support the purchase price. For many people, however, that is far less risky than taking out a $300,000 loan with an unproven concept and projections that may or may not be realized.

     
    Becoming your own boss always involves a risk. When you buy a business, you take a calculated risk that eliminates a lot of the pitfalls and potential for failure that come with a start up.

    If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

     

    This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

    ]]>     http://www.andrew-rogerson.com/the-benefits-of-buying-a-business-versus-starting-a-new-business/feed/ 0     Is now the right time to buy your business? http://www.andrew-rogerson.com/looking-beyond-the-economy-for-small-business-success/ http://www.andrew-rogerson.com/looking-beyond-the-economy-for-small-business-success/#comments Fri, 01 May 2009 08:00:02 +0000 Andrew Rogerson http://andrewrogerson.wordpress.com/?p=304 You wouldn’t think that now is a good time to buy or sell a business. However, even in the midst of a recession the timing might be just right, creating opportunity for small business owners looking to retire and inspiring entrepreneurs looking to control their future.

    Why it’s a great time to buy

    More sellers are willing to consider seller financing. If you have had difficulty getting a traditional bank loan to buy a business, seller financing could be an option to discuss with your broker and the business owner. Seller financing differs from a traditional SBA loan because the seller essentially extends credit to the buyer against the purchase price of the business. This allows more flexibility with payment options, which is good news for the buyer.

    Baby Boomers are retiring. For many boomer business owners it is retirement that is driving them to sell, not the economy. In fact, sellers looking to retire are choosing to sell while their business is showing a profit – showcasing that despite the economy, their business is going strong.

    In contrast, some baby boomers that are retiring (or being retired) from their corporate America jobs are looking for a less stressful situation and a way to have more control over their future earnings. Social security alone isn’t enough anymore, so boomers are buying businesses that will give them an additional income stream but conforms to a more relaxed lifestyle.

    Taking over a business when business is slow is a great time to learn the ropes in preparation for when the economy takes off again.

    Why selling is a real option

    Serious sellers are out there. Not all small business owners are prepared to sell, they’ve decided to ride out the economy, which means those sellers who are committed to selling will have less competition. Buyers know that businesses for sale now are serious about striking a deal.

    People are making a switch. Unfortunately with a poor economy come job layoffs. Many people who have lost their jobs and even those that fear job loss are choosing to explore an alternative to traditional employment by going into business for themselves. Today’s recession can be a tough time to start a business, but buying an existing business lowers the risks. And if a seller can offer seller financing, they will be in a great position to get their business sold at a good price.

    Some businesses aren’t affected by the economy. Service industries are faring much better than retail businesses and are still considered to be a good investment for buyers. In addition, businesses in the health or medical field, especially companies dealing with aging adults are going to be in demand for quite some time so the growth potential is a significant selling point. But the bottom line to remember is that regardless of industry, the businesses that will sell are those that have organized books, show a consistent profit and growth potential.

    What you’ll need

    Whether you are looking to buy or sell a business, working with a team of professionals is essential to your success. Working with a certified business broker can help separate fact from fiction when you are considering buying or selling a business. Your broker can also connect you with real opportunities and offers. In addition to a broker, enlist your attorney and accountant to help you wade through financial records, insurance policies and other items critical to a successful business.

    Once you have your team in place, it’s now time for you to become “Buyer Ready”.

    What does “Buyer Ready” mean?
    At a minimum it means have a resume, checking your FICO score, credit report and building a personal financial statement. A resume is required if you intend getting an SBA loan. SBA lenders now want to make sure you have the right management experience for the business you want to buy. If you want the seller to carry finance or get an SBA loan, your Credit Score needs to be about 700 or more. Similarly, get a copy of your credit report to make sure there are no mistakes on it. Imagine spending hours finding and negotiating the perfect business you want to buy, and asking the owner to carry finance. He then asks for a copy of your credit report so they can decide if you’re a good credit risk, and the report shows an inaccuracy. The seller then decides to kill the deal as they are not willing to extend credit to you. Finally, a personal financial statement will also be required so having this organized is one less thing to worry about later on in the buying process.

    Remembering that there is more than the state of the economy at play when it comes to buying or selling a business can position you to start your new career as a business owner or to hand off the business and enjoy your retirement years.

    ]]>     http://www.andrew-rogerson.com/looking-beyond-the-economy-for-small-business-success/feed/ 0