Statistics reveal that out of about 15 would-be business buyers, only one will actually buy a business. It is important that potential sellers be knowledgeable on what buyers go through to actually become business owners. This is especially true for those who have started their own business or have forgotten what they went thorough prior to buying their business.
If a prospective business buyer is employed, he or she has to make the decision to leave that job and go into business for and by himself. There is also the financial commitment necessary to actually invest in a business and any subsequent loans that are a result of the purchase. The new owner will likely need to execute a lease or assume an existing one, which is another financial commitment. These financial obligations are almost always guaranteed personally by the new owner.
The prospective business owner must also be willing to make that “leap of faith” that is so necessary to becoming a business owner. There is also the matter of family and personal responsibilities. Business ownership, aside from being a large financial consideration, is very time consuming, especially for the new business owner.
All of these factors have to be weighed very carefully by anyone that is considering business ownership. Buyers should think carefully about the risks – and the rewards. Sellers should also put themselves in a buyer’s position. The services of a professional business broker or intermediary can help determine the relative pros and cons of the transaction.Read More
Many executives of both public and private firms get a physical check-up once a year. Many of these same executives think nothing of having their investments checked over at least once a year – probably more often. Yet, these same prudent executives never consider giving their company an annual physical, unless they are required to by company rules, ESOP regulations or some other necessary reason.
A leading CPA firm conducted a survey that revealed:
- 65% of business owners do not know what their company is worth;
- 75% of their net worth is tied up in their business; and
- 85% have no exit strategy
There are many obvious reasons why a business owner should get a valuation of his or her company every year such as partnership issues, estate planning or a divorce; buy/sell agreements; banking relationships; etc.
No matter what the reason, the importance of getting a valuation cannot be over-emphasized:An astute business owner should like to know the current value of his or her company as part of a yearly analysis of the business. How does it stack up on a year-to-year basis? Value should be increasing not decreasing! It might also point out how the company stacks up against its peers. The owner’s annual physical hopefully shows that everything is fine, but if there is a problem, catching it early on is very important. The same is true of the business.
Lee Ioccoca, former CEO of the Chrysler Company said in commercials for the company, “Buy, sell or get-out-of-the-way,” meaning standing still was not an option. One never knows when an opportunity will present itself. An acquisition now might seem out of the question, but a company owner should be ready, just in case. A current valuation may be as good as money in the bank when that “out of the question” opportunity presents itself.
One never knows when a potential acquirer will suddenly present itself. A possible opportunity of a lifetime and the owner doesn’t have a clue what to do. Time is of the essence and the seller doesn’t have a current valuation to check against the offer. By the time it takes to gather the necessary data and get it to a professional valuation firm, the acquirer has moved to greener pastures.
Having a company valuation done on an annual basis should be as secondary as the annual physical – it really is the same thing – only the patients are different.
A panel of some of GABB’s most active and successful members highlighted the Oct. 27 GABB meeting. The panelists discussed issues that came up during or after due diligence that created a potential problem in getting the deal closed and how those issues were resolved. GABB President Greg DeFoor moderated the panel. Listen to a recording of the panel discussion here.
Jeff Merry who has been GABB’s top producer in eight previous years, has been a part of the Million Dollar Club since its inception in 1999, and was honored with the GABB’s Phoenix Award denoting an individual who has earned Million Dollar Club status for 10 years. Jeff, owner and founder of the BUSINESS HOUSE, inc. of Gainesville, is a member of the International Association of Business Brokers. For more than two decades, his firm has specialized in serving the manufacturing, distribution, veterinary and medical industries. As a Business Intermediary, Certified Exit Planner and Consultant, Mr. Merry has been involved in more than 300 mergers and acquisitions that have ranged in acquisition price from $60,000 to more than $15 million. He has been an adjunct instructor for the MBA program at North Georgia College. Mr. Merry holds a Bachelor’s Degree from Mercer University, a Masters of Business Administration from the University of Illinois Edwardsville, and a Juris Doctorate from Atlanta Law School.
Kathryne Pusch, President of ConsultKAP, is a seasoned professional consultant and broker. She began her career consulting for a large international consulting firm in 1979. Since then, she has worked successfully within the framework of large corporations, and small enterprise, across a broad range of industries, private and public sector. Ms. Pusch has owned and managed two small businesses herself, in addition to her successful business enhancement, transitions, and brokerage practice. Her consulting work focuses primarily on preparing businesses for a successful sale, and exit and transition planning for owners. ConsultKAP intermediary services focus on helping individuals and companies who want to sell or acquire a business to do so with the greatest likelihood of success, as defined by the achievement of their unique objectives. Kathryne is the 2003 past President of GABB. She has a BS in Marketing and Marketing Research and an MBA. She serves on the Executive Advisory Network of the DBM International Center for Executive Options, is a published author, and a licensed Georgia real estate instructor.
Yasmine Jandali, owner and Managing Broker at Starwood Business Group, is the secretary of the Georgia Association of Business Brokers. Ms. Jandali founded Starwood Business Group in order to provide a boutique brokerage firm for clients seeking personalized service and specialized attention. As a certified Master Business Intermediary, she provides professional business intermediary services to both business sellers and buyers, including high-level business valuation services to business sellers. She has worked as a foreign exchange analyst at Wells Fargo, a marketing specialist at the Bank of America Corporation, vice president of Jandali Enterprises, Inc., and was managing broker and managing director of VR Business Brokers Mergers and Acquisitions. She has a B.A. in Business Administration Marketing from the McColl School of Business at Queens University of Charlotte, and also studied management at The Belk College of Business at University of North Carolina at Charlotte.
Eric Gagnon, former GABB president, became a Business Broker in 2001 after a successful career in the financial services industry for Bank of America, Bank of New York and KPMG. He founded We Sell Restaurants in the Atlanta marketplace. Mr. Gagnon is also a multi-year recipient of the GABB Million-Dollar Club recognition. Mr. Gagnon is a graduate of Francis Marion University and the University of Montreal. A frequent speaker and writer about the restaurant brokerage industry, he is co-author of the recently released book on restaurant brokerage, “Appetite for Acquisition.” Mr. Gagnon has been designated a Business Industry Expert by Business Brokerage Press and is a member of the International Business Brokers Association. He is a member of the Business Brokers of Florida (BBF), and is the preferred broker for Georgia Restaurant Consulting Group. Eric is a licensed Broker in both Georgia and Florida.
The meeting was held at 10:30 a.m. at the South Terraces Conference Center. The South Terraces Conference Center is at 115 Perimeter Center Place, Atlanta. Contact Diane Loupe at 404-374-3990 or firstname.lastname@example.org for more information, or visit the GABB webpage.Read More
Pratt’s Stats, published by Business Valuation Resources, LLC, is a great resource for GABB members.
While GABB no longer get complimentary access to this valuable service, members who submit qualifying sales can get free access from the company. GABB also requires Million Dollar Club members to submit their deals to Pratt’s Stats as a qualifying condition, and we encourage all members to submit their deals to Pratt’s Stats.
Business brokers find Pratt’s Stats a valuable tool. It offers market comparables, shows the Broker’s client the resources the Broker has, which helps clients trust the Broker’s experience, and provides a great gut check as to what businesses really sell for.
For example, when you are looking at a home, do you trust your Realtor with just giving you a number to buy a house? Or do you compare it to other homes in the area to see what the value should be
Some brokers have told us that they find it difficult to submit deals to Pratt’s States. A Pratt’s contact estimated “it would take a max time of 15 minutes for every deal. But for a broker who just finished the deal, is familiar with the deal and the organization of the file, I would say it takes less time.”
Pratt’s is willing to help brokers write up the deal for anyone who wants to submit. So if a broker has files on the computer (PDF, Excel, etc…) the broker can then email the files to Pratt’s and they will write up the deal.”
As of February, 2017, the Pratt’s Stats contact is Mitchell Cameron, Senior Financial Analyst at Business Valuation Resources, LLC.
Georgia Real Estate Commissioner William L. Rogers, Jr. talked about licensing and new training requirements at the Georgia Association of Business Brokers’s meeting on Sept. 29.
Roger serves as the Executive Officer for the Georgia Real Estate Commission and the Georgia Real Estate Appraisers Board where he oversees the day-to-day operations of the state agency responsible for implementing the license law regulating Georgia’s more than 82,000 real estate brokers and salespersons and the law regulating Georgia’s 4,700 real estate appraisers.
Under Georgia law, a business brokers must have a real estate license to buy and sell any businesses in the state that involve the transfer of the lease or ownership of real property. Under state law, neither business brokers nor their associates may “negotiate or attempt to negotiate or assist in procuring prospects for the sale of a business” where the sale “involves the transfer of any interest in real property, or where the payment of all or part of a commission or fee to the business broker or any of the business broker’s associates in the sale of a business is contingent upon the transfer of an interest in real estate.” (See the applicable law below)
Rogers told GABB that his office answers questions about licensing and investigates complaints. Recent laws also require his agency to ensure that everyone who holds a state real estate license is either a citizen or legally present in the U.S.
The commission offers coursework online and in person, and also occasionally pursues judgments against licensees, and maintains a recovery fund. Rogers said only one payment has been paid out of recovery fund in recent years, about $7,000. Georgia law was amended law in 2012 to make it easier for non-licensees to recover payments.
Most of the commission’s investigations involve trust funds and earnest money. Rogers said the commission backed law changed that enable licensees to do certain activities that are not considered illegal practice of law. For example, licensees may provide advice to clients about listing management, leasing optioning and any other conveyance of real estate without that advice being considered the practice of law. Rogers says this allows agents to fill in certain forms that had been prepared by an attorney. However, Georgia law does not give brokers the authority to give a legal opinion or to the authority to close a transaction.
Effective July 24, licensees, other than certain grandfathered license holders, must complete 36 hours of Commission-approved continuing education during each four-year renewal period, of which three hours must be on specific license law. The commission has approved 63 license courses. “Hopefully, this will be helpful to stop the violations and protect the public.”
Even at the rate of nine continuing education hours per year, Georgia is still below the national average of 9.3 hours per year. However, Rogers said real estate licensees should have training commensurate with other professionals.
Rogers urged licensees to take courses that are educational, and not to wait until the last minutes to take coursework. He also discussed new rules that make it easier for licensees to work as support persons for brokers in other towns.
The commission has been flooded with cases in which brokers representing buyers have presented offers directly to the seller. However, the listing broker needs to examine the offer first before showing the offer to the seller, Rogers said.
GABB member Kathryne Pusch provided this citation of the specific language related to business brokers in Georgia law.
520-1-.12 Business Brokerage.
Unless otherwise excepted from licensure requirements by O.C.G.A. Section 43-40-29, a person who brokers the sale of a business must hold an appropriate license issued by the Commission if the sale of the business involves the transfer of any interest (including, but not limited to, leasehold or ownership interest) in real property. A business broker and any of the business broker’s associates who do not hold licenses issued by the Commission may not negotiate or attempt to negotiate or assist in procuring prospects for the sale of a business where:
(a) that sale involves the transfer of any interest in real property,
(b) where the payment of all or part of a commission or fee to the business broker or any of the business broker’s associates in the sale of a business is contingent upon the transfer of an interest in real estate.
An unlicensed broker may not perform or attempt to perform the acts in the preceding sentence and then secure a person licensed by the Commission to approve that transaction.
see also O.C.G.A. §§43-40-1; 43-40-2; 43-40-29; and 43-40-30.
Authority O.C.G.A. Secs. 43-40-2, 43-40-14. History. Original Rule entitled “Examinations” adopted as ER. 520-1-0.1-.12. F. and eff. July 12, 1973, the date of adoption. Amended: Permanent Rule entitled “Licensee’s Duties Upon Surrender, Suspension, or Revocation of License” adopted. F. Dec. 7, 1973; eff. Dec. 27, 1973. Repealed: New Rule of same title adopted. F. June 4, 1980; eff. July 1, 1980, as specified by the Agency. Amended: Authority changed. F. Aug. 5, 1982; eff. Nov. 1, 1982, as specified by the Agency. Amended: F. May 9, 1985; eff. July 1, 1985, as specified by the Agency. Repealed: New Rule entitled “Business Brokerage” adopted. F. Nov. 12, 2003; eff. Dec. 2, 2003.