Biz Broker Florida: 2012

Wednesday, November 14, 2012

Buying A Business? Use This Checklist

CHECKLIST FOR BUYING A BUSINESS

When buying a business the following deal points should be covered before moving forward to closing the transaction:

● Always Buy Assets, Not Shares of an Entity. If the business is owned by an entity, such as an LLC or a corporation, a buyer should refrain from purchasing shares or interests in the entity. Instead, the buyer should purchase the assets, such as goodwill, inventory, equipment and intangibles. This shields the buyer from liabilities, creditors, claims by disgruntled employees, etc. of the selling entity, and will generally increase future tax deductions for depreciation and amortization.

● Study the Financial Statements. The buyer should examine the seller’s financial statements (or at least the tax returns) to verify the gross sales, salaries to owners, etc. Be wary of sellers who contend that the business is worth more than its tax returns would indicate because of unreported income. Remember, you need to be comfortable with the cash flow of the business that will reach you as the new owner. If you can’t recast the financial statement to determine the discretionary cash flow being produced, work with a business broker who can do this for you.

● Get a Non-Compete Covenant from the Seller. It makes no sense to buy a business only to have the value eroded by the seller starting a competing business. You can eliminate this risk by having the seller sign a non-compete agreement, which prevents the seller from competing for a reasonable period of time. Non-compete agreement can have unique differences based on particular industries, so ensure that this is also a part of your research.

● Research the Price. The value of most businesses is a multiple of annual gross sales, or profits disbursed to the owner. You can usually search for listing prices of similar businesses on the internet. Do your homework before you make an offer. However, remember a business broker will have access to data on what similar businesses sold for in your market, state, and nationally.

● Search for Liens. This is critical during due diligence. Sometimes the seller hasn’t fully paid for the equipment it is selling. Instead, the seller has mortgaged the equipment, and the lender has the right to repossess it if the debt is not paid. The lender’s right to repossess the equipment remains intact even if the equipment is sold. The solution is to do a UCC search for liens, and either insist that the secured debts be paid off at closing or the balance due be allowed as an offset against the purchase price.

● Inspect the Equipment. Equipment is usually sold “as is,” so the buyer needs to determine if the equipment is broken or worn out. It may be necessary to hire an inspector. Along the same lines, the buyer should confirm that the seller has transferable licenses for any software used in the business. If the software has been pirated or the licenses are not transferable, the buyer may be liable if it uses the software.

● Decide on Payment Terms. Usually for the seller, terms are more important than the final price. If you cannot pay cash for the business (and most buyers cannot), your offer needs to specify the down payment, monthly installments and interest rate.

● Do You Have Sufficient Cash? Many businesses fail because the buyer does not have sufficient cash to get the business started. This is especially true if there are up-front costs, and sales receipts lag weeks or months behind. For example, will you spend funds on remodeling or employee training before the business opens?

● Investigate the Lease. Without the lease of the premises, the business may have little value. Actually, many deal fail to close because of lease issues.It will be necessary for the buyer to either assume the seller’s lease or perhaps sublease from the seller. In either event, it will be necessary to obtain the landlord’s consent, which should be done in advance.

● Ensure Smooth Transition. Unless the buyer is thoroughly familiar with the business (as an employee, etc.), the sales agreement should contain a commitment from the seller that it will demonstrate use of the equipment, introduce the buyer to the customers, and answer various other questions unique to the business. Usually a minimum number of seller consulting hours are included in the price of the business, and hours in excess of this threshold are billed to buyer at an hourly rate.

● Agree on Accounts Receivable. It is unusual for a buyer to purchase the seller’s accounts receivable. A more common approach is for the buyer to collect seller’s receivables and remit them to the seller. The buyer is usually allowed a fee of perhaps 10% to cover the overhead involved in collecting the receivables and remitting them to the seller.

● Use an Entity. If you are buying assets, the buyer should be a corporation or LLC owned by you. Using an entity will help avoid personal liability for debts of the business. The seller and landlord will normally insist on personal guarantees, but the entity will provide protection from other creditors.

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call at 888-925-5055 ext.206. Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Basic Steps When Buying A Business

Basic Steps When Buying A Business

Buying a business is no easy task and never has been, so have a plan is crucial to a successful outcome. Here are some basic steps that should be core to the plan you develop.

Do your research. Many sectors have become strapped for cash in recent years, but some have actually benefited from the economy being turned on its head. The construction sector, for example, took a nose dive initially, but savvy business buyers are now finding some bargains and turning their fortunes around. Take some time to do some research and find out what areas of business interest you and offer a decent level of potential profit
Monitor a few possible acquisitions. Don't rush into things, have a look around the market at some businesses that might suit you and check out their prices. Work out what some reasonable expectations in terms of turnover and costs and make sure you have a good broad overview of the market.
Organize your affairs. Once you know how much you're going to invest in the new business it's time to triple check your own finances and paperwork to ensure that you can make a move when the right opportunity crops up. This involves everything from securing finance to having a business proposition in place.
Narrow your search. Start thinking seriously and close your search down to look for the right business for you.
Do the deal. Signing on the dotted line is the exciting part, but don't neglect things like diligence when you come to put a bid in for a business. This is your last chance to ensure this is the business for you, so don't be shy when it comes to asking questions about financial details and accounts. You will also need to consider handover arrangements at this point and think about whether or not you would like the seller to remain involved in the business in some capacity.

Wednesday, November 7, 2012

Reasons To Use A Business Broker

Why Use a Business Broker to SellYour Business?

In our "do it yourself" society, if there is a perceived way to save money by doing things ourselves few of us can resist. That explains why I built a deck on my house, fixed my own plumbing and unsuccessfully tried to build my own website. Something's are best left to the professionals like cutting your hair, dental work, tax returns and selling a business.

People invest mind, body and soul for 10 to 20 years to build a successful business, and then when it comes time to harvest their profits some choose to "save" the commission fee by selling it themselves. Often people don't realize that a qualified business intermediary, on average, sells a business for 20% more than a "by owner" sale. (International Business Broker Association Journal, Volume VIII, Number 1, 1998) Another real risk of improperly preparing and marketing a company is that the business will never sell and have to be liquidated.

Recently there was an excellent survey done ranking the various reasons business owners hire business brokers.

1. Brokers know how to sell businesses; most sellers don't	20%
2. Confidentiality preservation and knowledge of what/when to show buyers	16%
3. Seller doesn't want to be distracted from running business	16%
4. Access broker's database of potential buyers and investors	9%
5. Maximize price buyers will pay for the business	9%
6. Broker understands and can depersonalize negotiations	7%
7. Owner does not know how to find buyers	7%
8. Prepare owner to sell and prepare business for sale	7%

Most business owners will only sale their business once in their lifetime. That being the true, why risk receiving less than the maximum return on years of hard work and sacrifice by not using a professional.

Rules When Buying A Business

Ten Rules When Buying a Business

by Calia Roberts,

With the proper research, buying an existing business can be profitable.

Purchasing an existing business is often more attractive to entrepreneurs than building a business from nothing, as taking over an existing business can be much easier than growing a business from the ground up. While buying an existing business can be a bargain, there are some rules to follow to ensure you are not investing in more problems than profit.

Determine Expectations

Determine what your expectations are from the business, then analyze if the business is able to fit your expectations. This first step will avoid many headaches that come with owning the wrong business for your needs in the future.

Reasons for Selling the Business

Find out why the owner is selling the business. Reasons such as retirement are common and understandable, but reasons such as the business is too difficult to run or has a low return on investment typically indicate future problems.

Making the Transition

Arrange to have the owner stay on for a short time after the sale to make the transition between owners easier. This is especially important for sales-driven businesses, as the previous owner can familiarize the customers with the transition, which is beneficial to avoid losing sales.

Find Out the Problems

Research the business thoroughly to find out the problems of the business. While all businesses have problems, some are bigger and more costly than others. Determining the problems will help you determine the viability of the sale. Avoid purchasing businesses that owners claim are problem-free, as this is a definite indicator of future issues.

Determine Growth Potential

The goal of purchasing a business is to make that business a success and see a return on your investment. Determine the growth potential of the business by analyzing all relevant information, including its track record, to determine if the business has potential for success going forward.

Examine Documents

Become informed about the business by requesting to examine all pertinent documents, such as financial statements, partnership agreements, contracts, leases and tax returns. This information allows you to determine the obligations and the current success of the business.

Negotiate

When purchasing a business, it is essential to negotiate during every aspect of the purchasing process. Successful negotiating gives you the best start and the best options in the future. Enter the purchasing process with the mindset that everything is open to negotiation.

Evaluate the Location

Potential owners interested in a brick-and-mortar business must evaluate the location prior to purchasing. The location of a business is crucial to the success of the business, especially when relying on foot traffic for sales. Research the location and the surrounding area to become informed.

Employees

Before purchasing, determine if the best business move is to keep the existing employees or to hire your own employees after completing the purchase. If you intend to keep the existing employees, you become liable as an employer for all relevant obligations, such as vacation pay, insurance premiums and salary.

Have an Exit Strategy

Always have an exit strategy in place for when you are ready to move on to other ventures. Before purchasing, determine if the business will be difficult to sell. If the business has been on the market for a while, you might be purchasing the proverbial millstone around your neck.

Thursday, November 1, 2012

Why Some Owners Won't Sell Their Business

Why Some Convenience Store Operators (Business Owners) Won't Sell :

Although this article was written for an audience of convenience store operators, the reasons for not selling a business apply to all business owners that fall in that category.

This is an excellent article and a must read.

Read: Why Some Convenience Store Operators (Business Owners) Won't Sell :

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call at 888-925-5055 ext.206. Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Wednesday, October 31, 2012

Buying A Business - Start By Examining Yourself

Ask yourself these eight (8) questions before making an offer to buy a business.....

1. What do you want from being in business?

For lifestyle (to work fewer than 40 hours per week, with the freedom to go on holidays whenever you choose)?
To make a profit by building the business up (increasing sales)?
To generate more cash-flow than a 9-to-5 job?

Whatever reasons are important under this question, if your reasons are not listed on your list – don’t buy the business.

2. Why am I buying this particular business?

It’s in a prime location.
It has a massive customer database which is not being used to its full potential.
You’ve created a specific plan to massively grow the sales revenue using knowledge you’ve accumulated from being an manager in a similar business, or from a previous business(es) owned.
The business has ‘something’ (Intellectual property, branding, contracts, etc) that you cannot easily duplicate or purchase.
You can buy the business at a price much lower than the market value. The seller is highly motivated to sell.

3. What will be my exit strategy to get out of the business?

Sell the business for a profit
Sell the business to a major shareholder(s) and become a silent partner
Pass the business down to a family member
Franchise

4. What skills do I have that will make me successful in this business?

Please don’t think that all that is required to ‘improve’ the business is cosmetic – by changing some of the products, re-designing the store interior, etc. These ‘improvements’ won’t double sales.

Only very good marketing, a good sales team and good systems will increase sales significantly. Think MARKETING, SALES and DELIVERY of the product or service (using systems).

5. What skills will I have to "hire in"?

6. What cash flow do I need?

What’s my break-even cash-flow (to cover expenses, wages, etc)?

7. How much working capital do I have access to?

8. Will this business suit me i.e. hours, type of operation?

Who is a Strategic Buyer? - And Should You Be One

Who is a Strategic Buyer? - And Should You Be One:

A strategic business buyer is a person or corporation that is considering buying a company based on how that new acquisition will fit into their overall long-term business plans for their existing business or an entity they are looking to build. A strategic business buyer will purchase a business or a series of businesses with the end goal of what they want their empire to look like. For example: a strategic business buyer may first buy a small business that specializes in cleaning products for cars. They may then look into buying their own car wash. These two businesses can work together to create an even stronger business structure.

Strategic business buyers are, typically, more willing to pay more for a business than financial business buyers because they are looking at the potential synergistic benefits with what they already own. However, these buyers will scrutinize financial statement and only offer terms that meet their established criteria. However the better the business will work within their plan, the more a strategic business buyer is willing to pay for it.

Sell The Sizzle Not The Steak - What Buyers Are Looking For

Sell The Sizzle Not The Steak - What Buyers Are Looking For:

What motivates a buyer to purchase a business? Individuals who attempt to buy a successful business have decided that it is a better option than starting up. Why have they decided to pursue this avenue?

There is primary reason for a buyer seeking to purchase a business is because they anticipate that they can grow your business bigger than the current owner have been able to. In assessing a business potential buyers will look at two things: firstly, the business’s client base, and secondly, their industry niche. Both of these factors give a strong indication of the future potential for the business.

The focus for the seller needs to be that they are not selling how your business has performed while they were the owner of it - a buyer is not actually interested in your past performance. Therefore the seller shouldn’t dwell on past-profit figures. A buyer is looking for where the growth is. So the seller needs to create a vision for growth in the business. What should be highlighted is how the business can grow and prosper under the ownership of the buyer. This vision should be clearly articulated to prospective buyers. Owners of businesses that sell are able to make a buyer embrace where the buyer is going. So, first create a vision for the future of your business and then sell that vision to a buyer.

Friday, October 26, 2012

Why Buying a Business in a Sluggish Economy Is a Good Idea

Why Buying a Business in a Sluggish Economy Is a Good Idea
by Phil Miller

Learn why buying a business when the economy’s bad is a smart decision.

Our economy is the worst that it has been since the 1970s. Suggesting that someone buy a business when the economy’s doing poorly may go against conventional wisdom, but the state of the economy doesn’t matter very much when it comes to buying and running a business. What matters is what you do, not when you do it.

A business’s profit directly correlates to its management, and companies succeed and fail based on the qualities of their owners. That’s why it’s essential to buy a business that you’re capable of managing efficiently. Sure, the economy has some effect on a business’s performance, but a business owner’s experience, attitude, and actions are generally the best predictors of success. There are always customers, but you have to be willing to go out there and find them.

There are also some benefits to buying a business during a sluggish economy. Costs tend to decrease because suppliers may give you better deals, rent costs may be reduced, and people may be willing to work for less. Some types of businesses even thrive during economic downturns. Examples include accounting, debt collection, auto repair, healthcare, and bulk food services.

Don’t Play the “Wait and See” Game

Despite the fact that business isn’t necessarily bad when the economy’s bad, people seem to be more risk-averse when the economy isn’t doing well. As a result, fewer people are interested in starting and buying businesses. Many would-be entrepreneurs are waiting till the economy improves before they get their feet wet. However, a bad economy didn’t stop Microsoft and Apple from being founded in the mid-1970s – and look how far those companies have come.

No entrepreneur can succeed by playing the “wait and see” game for an extended period of time. Don’t sit around hoping things will get better because there’s no guarantee that the economy will improve any time in the near future. And if the economy gets worse, you’ll wish you bought a business sooner. Any time is the right time to buy a business as long as you, the buyer, have correctly assessed the opportunity.

Whether the economy’s good or bad, the buying process is essentially the same. Purchasing a business is a major decision and investment, so it’s important to ensure that you make the right choice. Determine what type of business will thrive based on your strengths rather than suffer because of your weaknesses. Moreover, choose a business based on its profitability while considering what you’ll be able to do with it. After all, there are good business owners and there are bad business owners. Even a business that is doing poorly can be turned around in the right owner’s hands.

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call at 888-925-5055 ext.206. Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Thursday, October 25, 2012

Why buy a business at a time like this?

Why buy a business at a time like this? :

The following fact is in this article - "A recent US publication stated that a study of 700 companies revealed that more than 20% of companies that were in the bottom quartile of their industries jumped to the top quartile during recession." Although this article is written by a Kiwi about buying a business there, it is still relevant for the U.S.

Read: Why buy a business at a time like this?

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call at 888-925-5055 ext.206. Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Sell Your Business - Confidentially Is A Must!

Selling Your Business - Confidentially Is A Must! :

When selling your business or company, the entire process must be performed confidentially to maximize your value. Vendors, customers, employees, your competition, and others should be unaware of your intentions.

If your customers learn that the business is for sale, they might go elsewhere on their own. If your vendors find out, they may change your credit terms, or level of service to you. If employees learn of a sale they may leave to work in a more stable environment or begin to spread rumors about the "demise" of your company. If your competitors learn that the business is for sale they may raid your customer base, start rumors that you are going out of business, slash prices temporarily to attract your customers or start an aggressive advertising or marketing plan aimed at your customer base. Every seller wishes to complete the transaction privately and confidentially and announce the sale at the appropriate time.

So, you as business owner are probably very concerned that the word will get out that your company is for sale. It is pretty tricky to sell an asset that you can't really let anyone know is for sale.

Well it is comforting to know that experienced professional business brokers/intermediaries sell many businesses in this type of confidential environment. They are trained and educated to accomplish this feat routinely. Business brokers/intermediaries actually thrive in this type of confidential environment.

Their services also include developing an appropriate value for your company and preparing a comprehensive profile of your business to put it in position to be confidentially reviewed by serious qualified buyers. Through their marketing efforts they carefully secure buyers and handle the entire process, working with your professional team to successfully complete the transaction.

The sale of your company will probably be the biggest financial transaction of your life. Seek out a professional business broker/intermediary to successfully achieve your goals. ... CONFIDENTIALLY!