Posted by Kipp Krukowski on Fri, Jan 13, 2012 @ 04:43 PM
By: Kelcey Lehrich
In our experience, your age has a big effect on your attitude towards your business and how you feel about one day getting out. Here's what we have found:
For business owners between 25 and 46 years old
Twenty- and thirty-something business owners grew up in an age where job security did not exist. They watched as their parents got downsized, rightsized, or packaged off into early retirement, this has caused quite a jaded attitude towards the role of business in life. Business owners in their 20’s and 30’s generally see their companies as a means to an end and most expect to sell in the next five to ten years, similar to their employed peers who have a new job or employer every three to five years; business owners in this age group often expect to start a few companies in their lifetime.
For business owners between 47 and 65 years old
Baby Boomers came of age in a time where the social contract between a company and an employee was sacrosanct. An employee agreed to be loyal to the company, and in return, the company agreed to provide a decent living, good benefits, one golden watch, and a pension for a few golden years.
Many of the business owners we speak with in this generation think of their company as more than a income generation tool - they see their business as part of a community and thus, by extension, themselves as a community leader. To many boomers, the idea of selling their company feels a lot like selling out their employees and their community. This is is why so many Owners of companies in their fifties and sixties are torn inside about selling their business. They know they need to sell to fund their retirement, but they agonize over where that will leave their loyal employees.
For business owners who are 65+
Older business owners grew up in a time when hobbies were impractical or discouraged. You went to work while your wife tended to the kids (today, more than half of businesses are started by women, but those were different times), you ate dinner together at the table, you watched the news or read the paper, and you went to bed.
With few hobbies and nothing other than work to define them, business owners in their late sixties, seventies and eighties feel lost without their business, which is why so many refuse to sell their companies or experience depression after they do.
Of course, there will always be exceptions to general rules of thumb but we have found that – more than your industry, nationality, marital status, success leve, or educational background – your birth date defines your exit plan.
Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is, or isn’t. After completing the questionnaire, you will immediately receive a Sellability Score along with instructions for interpreting your results. Take the test here.
There is also a comprehensive report available after you take the Sellability Score, contact our office directly to receive the full report.
Posted by Kipp Krukowski on Fri, Dec 30, 2011 @ 12:21 PM
By: Kelcey Lehrich & John Warrillow
It seems like we’re at a fork in the road: there are some positive signs that the economy is entering the earliest stages of a long term expansion, but at the same time, if we dare read the headlines, it seems we’re destined to repeat 2008.
It’s precisely because we’re at this inflection point that we see a lot of business owners thumbing the eject button. If you’ve been thinking of selling your business, here are seven reasons to get out now:
1. You’ve lost the stomach for it
A lot of business owners took The Great Recession in the teeth. If you’ve got your business stabilized and the prospect of fighting through another recession leaves you panic-stricken, it’s time to get out.
2. The worst is behind you
Let’s say you were mentally getting ready to sell back in 2007. Then 2008 hit, and 2009 was your worst financial year in recent memory. You cut everything you could in 2010, showed a profit in 2011 and now you’re starting to see some profit and revenue growth. With your numbers going in the right direction, now might be just the right time to get out.
3. The tax man is coming
Governments around the world are looking for money to fund the cost of an aging population. In the U.S., the capital gains tax rate is set to go up after 2012.
4. Nobody is lucky forever
If you’re lucky enough to be in a business that actually benefits from a bad economy, congratulations. You’ve probably just had the three best years of your business life. But no cycle lasts forever and right now may be a great time to take some chips off the table.
5. The coming glut
As a business owner, demographics are not on your side. As the baby boomers start to retire, we’re going to have a glut of small businesses come on the market. That’s great if you’re buying, but if you’re a seller, you may want to get out ahead of the flood.
6. The closing window
It’s been tough for private equity companies to raise money since 2008; so many firms had their last successful round of fund raising in 2007. Many of these funds have a five-year window in which to invest; otherwise they are required to give the money back to the people who gave it to them. Some boutique private equity firms will make investments in companies that have at least one million dollars in pre-tax profits (larger private equity firms will not go below $3 million in EBITDA); so if you’re in the seven-figure club, you could get a bidding war going for your business among private equity buyers keen to invest their money before they have to give it back.
7. A good time to be liquid
The stock market has been swinging wildly lately which is why it would be nice to get liquid. With cash in the bank, you will be able to take advantage of a fire sale on the stocks of good quality companies should the market sink.
If you feel like a gambler at a blackjack table with everything riding on the outcome of one hand, it may be the right time to take a few chips off the table.
Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is. After completing the questionnaire, you will immediately receive a Sellability Score out of 100 along with instructions for interpreting your results. Take the test here:
sellabilityscore.builtosell.com/?advisor=KL4XYJ8TDUGZ626
Posted by Kipp Krukowski on Thu, Jul 07, 2011 @ 09:47 PM
Buying or selling a business and other major business decisions got delayed during the last election. Business experts say business owners are concerned about who will be in office and wonder if the newly elected politician will be friendly to business. Can you guess what will happen during the next election? You guessed it….small business owners will take a ‘wait and see’ attitude to decisions to expand, buy or sell a business. History will repeat itself again!
Unfortunately, as business brokers there is not much we can do to change this thinking, but my advice to those contemplating buying or selling a business is to do it NOW! Here is a summary of the last three years of small business ownership. In 2008 we had the election and had a ‘wait and see’ attitude. The last two years had the economy in reverse so owners did not want to sell or invest in business. This has created pent up supply and demand. THE TIME IS RIGHT NOW TO SELL YOUR BUSINESS OR BUY A BUSINESS! Next year will be too late because the election will make business buyers shift into the ‘wait and see’ mode.
After dedicating so much time, money, blood sweat and tears into building a business, many owners dream of the day when they will be able to sell for top dollar and enjoy a carefree retirement. For many, their companies are their main source of income and the cornerstone of their wealth. So when it comes to selling the enterprise, the stakes are high.
A recent survey of business activity nationwide shows that many sellers are taking advantage of the window of opportunity offered by today's favorable marketplace. In this recent survey, almost one-third of business owners responded that they are considering the sale of their business. The first question one might ask, given the relatively healthy financial climate, is WHY? Selling when times are good? The answer, for many sellers, can be a resounding YES! Here are some of the reasons why, followed by tips for getting the process started.
There are buyers out there The current economic upturn has depended to a great extent on trimming the corporate fat. Executives and middle managers out of work--and determined not to be "downsized" by big business again--are eyeing the advantages of being in business for themselves. Since 1990, the percentage has steadily grown of those corporate executives who leave jobs in order to become independent business owners. It isn't just the money they are dreaming of--it's the desire for more control over their lives.
How to find qualified buyers? The business broker is the professional to whom sellers turn when looking for serious, "qualified" buyers. The business broker not only helps match the right buyer with the right business, but also educates the buyer in the buy-sell process, alleviating concerns and keeping the transaction in steady forward motion. With plenty of buyers to choose from in today's market, it's more important than ever to identify the time-wasters and those who think they want to buy but really aren't ready to take the big step.
Cash-Out is better than burnout Burnout can come with a business that's successful as well as one that's failing to grow. The right time to sell is before the syndrome becomes a threat to the effective management of a business. What are the warning signs of burnout? Owning a business is hard work, but it should also include an element of enjoyment. The owner who drags himself or herself through every day, with a sense of dread--or boredom--should consider moving on to a fresh challenge elsewhere.
Sell in a positive market Other than burnout and its consequences, there are other factors that can lead to the "forced sale" of a business. Compelling personal problems (a divorce or death in the family, poor health), shortage of capital or outright failure of the business, the lack of heirs to take over--these are the traditional examples. Instead of waiting for unfavorable conditions, potential sellers should keep a eye out for that all-important right time for putting their business on the market. When might that time be?
The Small Business Administration (SBA), in researching selling trends, reports that three to five years is a long enough stretch for many of today's business owners. One in every three business owner plans to sell; many of them right from the outset. The business they've bought is not a legacy for their children--it's a shorter-term investment of their time as well as their money. The ability to present a healthy operation, with an owner in the position to hand over the reins to the next owner is a major advantage in the completion of a successful business sale. One of the surest ways to maximize the value of a business is not waiting too long to sell and selling before the next election season.
Written by Jeff Young, Business Intermediary Confidential Business Sale, Inc.
Posted by Kipp Krukowski on Sun, May 22, 2011 @ 02:10 AM
The Internet is credited for opening the floodgates to business opportunities that were never even dreamed of just a few short years ago. A “place” to do business is now irrelevant as long as you can get connected to customers. Many virtual business owners work from the home, but anyplace you can connect to the internet or get a signal on your cell phone can qualify as a virtual office. But what happens when you have a virtual business for sale? Will your virtual business command a premium price because it is a virtual business?
To get a better understanding of a virtual business, here is an example of a virtual business that is for sale in Pittsburgh. The owner lives in Pittsburgh but the buyer can be anywhere because it is a virtual business. Baseball Sports Agency For Sale. The assets in the business are the contracts and established relationships that the owner has developed in the virtual business.
When you sell a business, you transfer the assets, inventory, customers, systems and procedures to the new owner. There may be a building to buy or lease with the business. In a virtual business, there are usually less tangible items being sold and more intangible items like trademarks, websites, customer lists, software and telephone numbers. Yes, these are things that are the heart and soul of a virtual business.
Virtual businesses today are commonplace. Why go to a bookstore when you can purchase books cheaper online. Zappos has made buying shoes online the way to go. Netfix has reinvented the DVD rental business. The industries supporting virtual businesses are doing well. A perfect case in point is eBay. You could almost say eBay is built on serving virtual businesses.
EBay provides a marketplace for 750,000 businesses that sell online, the majority of which are virtual businesses or home-based businesses. Its PayPal unit enables countless businesses to operate virtually by streamlining their accounts payables and receivables, and even their eCommerce functions. For instance, with PayPal you can purchase needed business services and goods electronically, and issue invoices and get paid for them completely electronically. You also can use PayPal as a plug-and-play shopping cart for processing online eCommerce transactions. And Skype, also owned by eBay, allows virtual business team members to communicate easily and for free.
The traditional concept of employment is also changing with the virtual business concept. Independent contractors have replaced the traditional employees in many companies. High unemployment and an army of disgruntled employees allow companies to get work done with contractors and staffing companies. Virtual companies staffed with contract employees may seem like science fiction, but this is all part of the brave new business world of today. A concern is that when you sell a virtual business with contract employee’s, there’s a risk that these employees leave the business and may even become competitors of the new owner.
Virtual businesses often use a shared office facility to have a physical location to meet customers and conduct business. This is a smart new alternative to traditional offices and executive suites that combines the benefits of physical office space with the flexibility of virtual office solutions. The owner of a virtual business can work from home, out on the road, or wherever else their businesses take them while promoting a polished, professional image of themselves and their businesses.
The shared office facility may provide a full spectrum of address and mail services. Office and conference rooms are available for rent by the hour, day, week or a long term lease. The professional telephone answering service provides business men and women with a dedicated phone line with voice mail and a receptionist to answer and screen their calls. Calls can be seamlessly connected to customers putting them "in the office" wherever they are.
The strategic advantage of a virtual business will create demand for this growing business sector. Pricing and business valuation of a virtual business for sale may require business buyers and business sellers to challenge traditional methods and establish a new set of guidelines for virtual businesses. Business buyers will adapt to the notion that many businesses for sale have a virtual business address.
Written by: Jeff Young, Business Intermediary, Confidential Business Sale, Inc.
Posted by Kipp Krukowski on Sun, May 22, 2011 @ 01:53 AM
There's a great captive insurance agency for sale in Cleveland, OH. Here are six reasons why this business is a great opportunity:
- 100% Bank Financing! If you have a 700+ credit score, prior insurance experience, and no personal debt issues you may qualify for 100% bank financing for this purchase.
- Reduced Downside Risk! The parent company of this captive agency has a buy-back program for their agents that limits your risk.
- Growing Market! This agency resides in a growing Cleveland-area community. The real estate is available, but is not required to be purchased. You can move this business the day you buy it.
- Growth Opportunities! Beyond home and auto insurance there are dozens of financial products that this agency can sell including investments and life insurance. This book of business has not been heavily prospected for additional product sales.
- Strong Track Record! This agency has been open for more than a decade and the customer retention numbers are excellent.
- Transition Help! The current owner is willing to stay on and help train the new owner and the existing staff is both skilled and experienced making this a very easy transition.
If you want more information on this captive insurance agency for sale, please contact us. This insurance agency has provided a very nice living for the current owner for a number of years.
Posted by Kipp Krukowski on Mon, Apr 25, 2011 @ 03:20 PM
The first time is the most challenging, whether you are buying a car, home or ready to buy a business. A business for sale listing may catch your eye, but what do you do first? Pick up the phone and start asking the Business Broker questions about the business for sale. A professional Business Broker has the answers, even if you don’t have all the questions about the business for sale.
Questions for first time future business owners
Tell me about the business for sale.
How did you get started?
What services does your business provide?
Why are you selling your business?
What are the last three year's sales and earnings?
Who are your biggest competitors?
What are your industry trends?
What do you think are some things I can do to increase sales and profits?
How many employees do you have and are there any employees that are critical to the business?
How long will it take me to really learn this business?
The Process of Buying a Business
Confidential Business Listing/Initial Contact—The listing of the business for sale and your initial call to the Business Broker will provide general information. Consider this like reading the preface of a book. Does the information create an interest to continue? A business listing will typically provide enough information to generate interest while maintaining the confidentiality of the business and owner.
Non-Disclosure and Confidentiality Agreement—A prospective business buyer will sign a non-disclosure and confidentiality agreement before receiving additional financial information. In most cases, it is important that the sale of the business remains confidential during the sales process.
Financial Information Review—Business sellers can provide prospective buyers with a number of different items including the financial statements of the business for sale, tax returns, a list of assets of the business, business valuation reports and cash flow statements. How much and what type of information that is provided is dependent on the type of business and how sophisticated the business is. It is now time to review the information you’ve received in greater detail. You may want to do your own projections of earnings for the next three years based on the history of the company and your anticipated improvements. You may choose to do some research into the general industry if you are unfamiliar with it.
Meeting with Owner/Visit the Business-- If there is genuine interest in the business for sale, the Business Broker will arrange a meeting with the seller. This is typically held at the broker’s office, at a coffee shop or after-hours at the seller’s place of business. This is the time to ask general questions on anything and everything but not the time to begin negotiations on price and terms for the sale of the business.
The Offer-- Your offer to buy the business will typically be a conditional offer or in the form of a Letter of Intent (“LOI”). It will also contain specific requirements for the Seller as far as training and transition and non-competition clauses. With the offer, you will provide a reasonable deposit based on the purchase price. The purchase offer typically contains other provisions such as a stated due diligence period, deadlines for obtaining financing, and a specified closing date to buy the business.
Due Diligence Period—A reasonable amount of time is needed when buying a business to conduct due diligence. You and your advisors need to verify and review the information given to you including any information that may have been withheld prior to your offer.
Agree on Price and Terms--The details of your accepted offer of the business for sale or letter of intent will be forwarded to the lawyers for both parties for drafting and review of Definitive Purchase Agreement. The Definitive Purchase Agreement is the actual agreement of purchase and sale. It typically includes all of the conditions and clauses in the original offer or LOI plus any additional clauses and conditions you and the seller agree upon. This agreement is typically drafted by the buyer's lawyer.
Closing-- Close the purchase and begin your first day as the owner of your very own business. The seller will be available to assist in the transition of the business. Now you and your family are part of the American dream of owning your own business!
Here is one final piece of advice on buying a business. Be patient and persistent. The road from initial inquiry to closing the transaction is usually long taking weeks even months to complete. There may be several twists and turns in the road to buy a business but remain flexible, be thorough and determined to stake your claim in business ownership!
Written by: Jeff Young, Business Intermediary, Confidential Business Sale, Inc.
Posted by Kipp Krukowski on Fri, Apr 08, 2011 @ 09:28 AM
Just like the A-Team could solve the world’s problems in a moment’s notice business owners need their own “A-Team” when it comes to business sales and transition planning. Let’s take a look at the critical team members:
- Business Intermediary – Business intermediaries, or business brokers, are the deal makers that bring together third party buyers and sellers. While not every business transition will be or needs to be a third party sale the advice of a business intermediary can be invaluable. Business Intermediaries can provide information on current deal flow, pricing, and the business sale environment in general.
- Attorney – No matter what one’s business transition might look like an attorney will play a critical role on the advisory team. Attorneys will draft the necessary purchase documents, non-compete agreements, consulting contracts, and other legal documents.
- Accountant – Every financial transaction has tax implications. The sale of one’s business is perhaps the largest financial transaction one can undertake. Deal structure and deal taxation can greatly impact a seller’s net cash from the sale and an accountant should be consulted early and often during the transition process.
- Financial Advisor – What financial resources will you need post-transition to maintain your lifestyle and living expenses? A financial advisor can help you draft a succinct plan regarding your financial needs after the transition.
- Coach – In addition to the other A-Team members listed above a coach can be valuable asset during transition planning. Coaches can provide objective advice and act as a negotiator and intermediary amongst decision makers. More importantly, coaches can help owners dive into their true goals, motivations, and desires. Knowing the ultimate goal is key during the transition process; one should always begin every project with the end in mind.
Do you have your A-Team assembled? If not contact us today to begin your transition planning and we’ll make sure you get the best team of advisors possible around you.
Written by: Kelcey Lehrich, Business Intermediary, Confidential Business Sale, Inc.
Posted by Kipp Krukowski on Fri, Mar 25, 2011 @ 01:07 AM
Many times with business buyers come into our office they tell us that they are considering either buying a business or buying a franchise. More often than not, one choice is clearly a better idea than the other for a given buyer as there are some significant differences between buying an existing, revenue generating business, and starting up a franchise opportunity.
It is often said in business broker and franchise consultant circles that when you buy a business you buy “history” and when you buy a franchise you buy “mystery”. Existing business purchases are based on prior year’s earnings history and the actual economic results of that business. Franchise startups are based upon projections about what the franchise could or should produce. When purchasing an existing business you may be able to write yourself a pay check right out of the gate. When starting up a new franchise you may not even have any revenue in the first few weeks.
Franchise marketing materials often use the phrase “in business for yourself, not by yourself” and the phrase is quite accurate. Business buyers who purchase an independent business are by themselves, they have no built-in support system. Franchise buyers get support and training from the franchisor. More often than not, good franchise owners don’t make good independent business owners, and vice versa.
Do you need to write yourself a paycheck as soon as you’re working in the business? If so, opt for purchasing an existing business. If you’re looking for total freedom and control in your business then head down the business purchase path. If you’re looking for support and training, then head down the franchise purchase path.
Written by: Kelcey Lehrich, Business Intermediary, Confidential Business Sale, Inc.
Posted by Kipp Krukowski on Wed, Mar 16, 2011 @ 09:50 AM
Are you considering selling your business? I don’t mean selling your business today, next week, or even next year, I mean are you considering EVER selling your business? If so, the check list below will be quite helpful.
As business brokers we see lots of deals come to a screeching halt because the buying party finds out something about the selling party that is “less than appealing”. These issues usually come up in the finer details of the deal or in the nitty-gritty of due diligence. If you want to make your company more attractive to any potential buyer, ever, then examine the list below and make sure you’ve got all of your bases covered.
- Corporate Records – Every business needs clean corporate records, and I’m not referring to accounting, that is another matter all together. Corporate records are the board of directors meeting minutes, shareholder agreements, buy-sell agreements, and other pertinent documents that every corporation needs to have on file and current. Each form of legal entity (partnership, corporation, LLC) has their own set of specific records and agreements that should be maintained depending on the specifics of the situation. If you’re not 100% positive that your corporate records are in tip-top shape then contact a local business attorney for a corporate records audit.
- Employee Matters – Employees are one of the most valuable assets any business has – they perform the work of the business! Employees can also be one of the largest liabilities for a business when claims of harassment or injury are brought forward. Do you have an employee handbook? Do you have written employment agreements with every employee? Do your key employees have non-compete agreements or golden handcuffs to keep them from leaving? What is your history with the bureau of workers compensation? Business buyers want to acquire businesses with clean employment records. Consult with an HR or staffing consultant to ensure that you are doing everything you can to reduce your employee risk.
- Intellectual Property – Does your company have a valuable name brand? Did you invent a widget that changed your industry forever? Do you have a trademark on that name brand and a patent on your widget? Without good intellectual property protection your business is worth significantly less to a potential buyer. Work with your Intellectual Property attorney to ensure that every valuable non-tangible asset your company has is legally protected. You will sleep better with these protections in place and your offer letters at the time of sale will be much higher to boot!
Written by: Kelcey Lehrich, Business Intermediary, Confidential Business Sale, Inc.
Posted by Kipp Krukowski on Sun, Mar 06, 2011 @ 05:06 AM
To sell your business takes some guts. You put your heart and soul in your business so selling your business may be difficult, it may feel like you are losing a part of you. Yes, to sell your business, you will have to ‘Man-Up’. But starting your business took even more guts, but that was a long time ago.
When you think about it, you didn’t get much support from friends and family when you started your business. The banks didn’t give you any help either, so during the early days money was tight. Cash flow was always an issue, but somehow through hard work, maybe some luck, the business grew. You had to ‘Man-Up’ during those times, long before the term ‘Man-Up’ was used.
Fast forward to today. Your business is doing ok. Sure, with some belt tightening you could be showing more profit. You have thought about selling your business in the past. In fact, a day doesn’t go by that you don’t think about selling your business. You know it’s time to sell your business but selling your business is something new to figure out and that takes time.
Yes, it takes some effort to sell your business so you will have to ‘Man-Up’ if you want to make it happen. First thing, you want to be fairly compensated for the business you have built. You also want a seamless transition for your employees and customers. Everything needs to be confidential but you know you will need to disclose your financials.
So, like many business owners thinking about selling a business, here are your concerns.
You have done a good job of minimizing your tax liability by how you operated your business. Ok, maybe your accountant deserves some credit for the write offs and keeping your taxes low. But here are your concerns:
Q) By keeping the profit in my business low, will it keep the selling price low?
A) No. Your financials will be recasted or ‘normalized’ to add back discretionary expenses like travel and entertainment and this will show the prospective buyer a greater profit potential. Don’t worry, this information does not get shared with the IRS.
Q) How do I determine the fair market value for my business?
A) Leave business valuation up to the experts. The price you spend to get a professional 3rd party valuation will be the best money you spend to sell your business.
Q) There is a lot for a new owner to learn taking over my business. What commitments do I have to make to train the new owner?
A) Selling your business may require you helping the new owner for some period of time. This may be a short term employment contract for you or some commitment to help the new owners as part of the deal.
Q) How expensive will it be to sell my business?
A) The broker fee will be 10% of the sales price. Depending on the complexity of the deal, a fee for an attorney may be added to that.
Q) How long does it take to sell my business?
A) Expect 6 to 18 months to sell your business. You only need one buyer and if the business is priced and marketed correctly, it will sell.
Q) How can I advertise my business to get a qualified buyer?
A) That’s what we do at Confidential Business Sale!
So if now is the time to ‘Man-Up’ and sell your business, take the first step with Confidential Business Sale, Inc. today to discuss selling your business!
Written by: Jeff Young, Business Intermediary, Confidential Business Sale, Inc.