How to avoid ligitation: GABB Lawyer tells all on Feb. 23
Lawrence Domenico is the kind of lawyer you hire when you litigate, or sue someone. And he’s represented a lot of Georgia business brokers in disputes over the years.
On Tuesday, Feb. 23, Larry will offer advice worth hundreds, if not thousands, of dollars to members of the Georgia Association of Business Brokers and their guests. Namely, how NOT to need to hire Larry or someone like him. How to avoid legal disputes will be the topic of the GABB meeting on Feb. 23. The GABB, the state’s only professional association dedicating to buying and selling businesses and franchises, will meet at 10:30 a.m. at the South Terraces Conference Center, preceded at 9:45 a.m. by a free light breakfast and networking session. The South Terraces Conference Center is at 115 Perimeter Center Place, Atlanta, near Perimeter Mall. The meeting is open to the public at no charge.
Samantha Martin, SBA lending specialist with the Fifth Third Bank, is sponsoring the meeting.
Mr. Domenico is a managing partner of the law firm of Mozley, Finlayson & Loggins. He practices extensively in the areas of commercial and business litigation, products liability defense, and general litigation. Mr. Domenico also has extensive experience in assisting start up and existing businesses. In addition, Mr. Domenico has broad experience in alternate forms of dispute resolution including arbitration and mediation.
Mr. Domenico received a B.A., cum laude, from the University of the South in 1985. He attended the University of Georgia School of Law where he received a J.D., cum laude, in 1988. Mr. Domenico is a member of Phi Beta Kappa and Omicron Delta Kappa honorary fraternities. He belongs to the Atlanta and American Bar Associations, the State Bar of Georgia, and the Defense Research Institute. Mr. Domenico is active in a number of civic organizations and is a member of the 1995 class of Leadership DeKalb and the Rotary Club of Dunwoody.
The Georgia Association of Business Brokers (GABB) maintains a website that lists hundreds of businesses and franchises for sale throughout Georgia in a variety of fields, including automotive, business services, child care, cleaning, construction, electronics equipment, fitness, flooring, floral, food, gas stations, landscaping, manufacturing, medical, shipping, restaurants, retail, security, signs, and businesses related to the internet.
According to GABB President Greg DeFoor, selling a business is a complicated process with multiple steps and a lot of moving pieces.
“Our broker members are licensed business brokers, whereas everyone in the industry may not be properly licensed,” said DeFoor, who owns DeFoor Business Services, Inc. “GABB members benefit from continuing education, networking, promotion of professionalism and ethics in the industry, research tools, and forms prepared by a team of attorneys specifically for our association.”
“We are the go-to organization for business sales and acquisitions as a result of our dedication to the profession and our members being among the best in the state at what we do,” said DeFoor. “Our members have represented probably over a thousand transactions, and we have a dedicated membership of business brokers, lenders, attorneys and other professionals to assist business buyers and sellers at every step of the process. We work behind the scenes and go mostly unnoticed, but we’re an integral part of Georgia’s business community.”
For more information about GABB, email georgiabusinessbrokers@gmail.com or call 404-374-3990.
Read MoreHow to gain and keep customers, and other advice from a Selling Expert
For business brokers or other solo professionals, the most valuable resource is your time.
Outsource, outsource, outsource, was the recommendation of Christopher Lemley, the director of the Georgia State University Professional Selling and Sales Leadership Program, who spoke on Tuesday, Jan. 26, to the Georgia Association of Business Brokers.
Gaining and keeping customers was the topic of Lemley’s presention, which also covered the tension between sales and marketing and social media. Lemley opened by citing Peter Drucker, founder of modern marketing: “There is only one valid definition of business purpose – to create a customer. Companies are not in business to make things … but to make customers.”
Things tend to be relatively easy to sell, Lemley said. “Services are a bit more difficult to sell, as most of you know.”
The reason services are more difficult to sell is that “we are all in competition with each other, but at a high enough level, in firms we have all worked with one another and have somewhat the same background” he said As such it is hard for potential customers to see what differentiates one service firm from another.”
So how can you market commoditized services and get customers to stay with you over time? You must overcome four things: intangibility, perishability, inseparability, and variability.
Intangible items are harder to evaluate. The minute a service is created, it is consumed, meaning the producer cannot warehouse it.
“In your business, if you don’t fill your capacity today, the opportunity to make that money is gone,” Lemley said. “You can never recapture that capacity.” A movie theatre can never recoup the revenue lost from showing a film to a half empty theatre.
Inseparability means “the customer sees us making the service, the customer is part of us making a service.” A factory can “hide all the nastiness,” but in the service industry, the customer sees “every little twist and turn.”
Invariability means that customers experience the service in differing ways depending upon their circumstances. Lemley figured he enjoyed his favorite Italian restaurant more on nights when the traffic getting there wasn’t as bad.
Lemley presented a sample worksheet (See: Gaining and Keeping Customers) on how to calculate the lifetime value of a customer, including revenues, cost and referrals. Showing his academic credentials, Lemley also demonstrated Porter’s Arrow, a graphic developed by Michael Porter of the Harvard Business School. The arrow, also displayed in the Gaining and Keeping Customers PDF, covers five dimensions of competition, including inbound logistics, operations, outbound logistics, marketing and sales, and service. Although marketing and sales are listed in the same group, and SHOULD be friends, Lemley argues that, “They ain’t, They ain’t.”
Why? Lemley says the reason is as old as the story of Cain and Abel. When two people are “doing the same thing, with discrete resources, they will always get in a fight. They are competing to get resources to get their job.”
It’s basic economics. Marketing and sales are competing for scarce resources in many, if not most, business organizations.
The key to avoiding conflict is to recognize their differing strengths, which Lemley went on to discuss in relation to the roles of producer, entrepreneur, administrator and integrator. It’s important to know when a company is considering a move, and not just to get a call when the RFP comes in.
Marketing and sales are the strategic tools firms and individuals use to strive to create a sufficient number of transactions so the firm has the potential to survive and prosper in the short- and long-term, Lemley said.
In a coordinated marketing plan, tools such as social media help “soften the market” so that when “the sales troops come through, they know who you are and will be receptive to a call from you.”
Social media is a key, cost-effective way to market, Lemley said. He cited a company that spent millions on advertising, and gave $100,000 to a social media project. The social media turned it into one of the internet’s most popular business-to-business sites.
“Any business that doesn’t have a social media presence is already five years behind,” said Lemley. Some of the best in social media have a PR background.
Companies should develop a sales force targeted at what business needs, not with what the sales force wants. For example, most universities have been scheduling classes when it’s convenient for faculty members to teach. However in the next few months, GSU will be unveiling an innovative, new project based upon a robust analysis of data, aimed at scheduling classes when students want to take specific courses.
Lemley worked through undergraduate school writing advertising copy at a radio station. Tiring of the “tyranny of the empty page,” he picked up an MBA. Lemley is a 28-year veteran in the marketing field where he has served in senior management positions for two of the largest international advertising agency networks. He is also the former managing director of the Professional MBA program at the J. Mack Robinson College of Business at GSU.
Lemley has worked with major national and international clients including Sara Lee Corporation, Twentieth Century-Fox Films, Universal Pictures, The Hoover Company, the Southern Company, Los Angeles Times, Newsday, Wrangler Jeans, Polygram Entertainment, Bertelsmann Music Group, Siemens, Federated Stores and Jack Nicklaus Development Corporation. In addition to his teaching duties, currently he consults with CEOs in turn-around and high-growth companies on many marketing areas including organization, sales, marketing communications, strategic marketing planning and the use of new media in commerce.
The Georgia Association of Business Brokers (GABB) maintains a website that lists hundreds of businesses and franchises for sale throughout Georgia in a variety of fields, including automotive, business services, child care, cleaning, construction, electronics equipment, fitness, flooring, floral, food, gas stations, landscaping, manufacturing, medical, shipping, restaurants, retail, security, signs, and businesses related to the internet.
For more information about GABB, email georgiabusinessbrokers@gmail.com or call 404-374-3990.
Read MoreIs This the Right Time to Sell?
“Whatever the reason, there should be something other than dollars that motivates you to explore a sale. After all, if it weren’t more valuable to own the business than to sell it, no one would ever buy it.”
Mike Sharp, M&A Today, November 2002
The owner of a successful company is considering selling, thinking now may be a good time. However, he is told by an outside advisor that business is good and that if he holds on to it for several more years he will get a much higher price. On the surface, this makes a lot of sense. After all, when an advisor tells the owner that if he keeps it for three more years the price will double, that’s a terrific incentive to keep plugging away. However, there is another side to what would appear to be sound advice.
The most dramatic downside would be that the business could go downhill rather than uphill as the advisor predicted. Although no one can predict what the economy will do, there are a couple of possible scenarios. The industry itself might be impacted by some new technology or other companies might enter the field. It is also possible that the owner, having considered selling, is just worn out and can’t or won’t maintain the zeal necessary to keep the business competitive. After all, after many years of running the business, the owner may be tired, “burnt out,” or just plain ready to slow down.
There are other areas to consider as well. For example, equipment may need upgrading or replacement, products or services may be aging and need revitalizing. Additional capital may be necessary to keep the company up-to-date and competitive. Leases may be expiring and long obligations required to renew them. In short, what originally looked like a good strategy to increase the selling price, has backfired. The costs of continuing to operate the business have increased dramatically, the owner has lost interest – and now the company is offered for sale.
The right time to sell may be when the company’s industry, product line or service is at or near the height, of its success. There comes a point when the business or its industry is peaking and everyone wants “in” – and that is the time to sell. There is the old story that the time to sell the buggy whip business was just before Ford started producing the Model-T. As they say, “timing is everything.”
The right time might be when the company is at the top of its game. Sales are robust and growing, the balance sheet is squeaky clean, and the employees are productive and happy. Another good time to sell is when there is a solid buyer who is seriously interested in purchasing the company, or perhaps, when a manager within the company is ready to take over in a buy-out of some form.
So, when is the right time to sell? Perhaps when the owner first decided it might be time. However, there is really no best time to sell. No one can tell the owner when it is the time to sell. Outside advisors are well intended, but no one knows when it is time except the owner. And, when it’s time – it’s time!
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Tips on Avoiding the Dealbreakers
One of the most important steps is to hire the right advisors. This begins with the right professional business broker/ M&A specialist. The right attorney should be added to the team. The right one is an attorney who has been through the sales process many times – one who is a deal maker seeking solutions, not a deal breaker seeking “why not to” reasons. The accountants must be deal oriented, and if they are the firm’s outside advisor, they should be aware that they may not be retained by the buyer, and must still be willing to work in the best interest of putting the deal together.
Getting through due diligence
One of the three or four times a deal can fall apart is half-way into the due diligence phase, when the buyer finds something he or she did not expect. No one likes surprises, and they can’t all be anticipated. An experienced buyer will probably work his way through it, but a novice may walk away. Although sellers too often hope a potential problem doesn’t surface, it always does. Avoid the surprises by putting everything on the table even if it seems inconsequential. It’s much better to expose all the warts up front than to have them surface later.
Where is all the money going?
Prior to offering their business for sale, sellers should figure out what the net proceeds will be after paying off any debt not being assumed, current payables, closing costs and tax obligations. The middle of due diligence is no time for the seller to realize that the proceeds from the sale aren’t what he or she anticipated. On the buyer’s side, there are times when current sales and profits are suddenly going south. If the seller anticipates this happening, the buyer should be told up front the reason for the rapid decline. Otherwise, if it comes as a surprise to the buyer, it might cause some restructuring of the deal.
No chemistry between the buyer and the seller
If everything goes smoothly (a rare occurrence), the buyer and the seller don’t have to be good buddies. However, if problems or surprises develop, good chemistry can save the day. Sometimes a golf outing or a good dinner can bring the parties together. If both parties want the deal to work, having them get together socially – and privately – can, many times, overcome a stubborn legal or financial issue.
Obviously, not all deals work. However, the odds of the deal closing are greatly improved if both the buyer and the seller consider the areas discussed above. Surprises can work both ways, and the buyers too should place their cards on the table. However, when all else fails, it is the desire of both parties wanting the transaction to work that will ultimately close the deal!
Mistakes that Sellers Make
- Not being flexible in structuring the deal
- Not checking out the prospective buyer
- Not believing that time is of the essence
- Negotiating to win everything
- Nit-picking every item
- Not maintaining confidentiality – and failing to insist that the buyer proceed on a confidential basis
- Not retaining competent advisors
- Not meeting the buyer halfway
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