The majority of business sales include some form of seller financing. Typically, seller financing is when the seller provides a loan to cover part of the purchase price. The rest of the purchase price is covered by the down payment or often other financing sources are used as well. Summed up another way, the seller is essentially acting as a bank for the buyer.
When sellers offer financing, it often also helps them achieve a higher final sale price. Sellers who are not open to seller financing will likely limit their possibilities.
Performing Due Diligence
When a seller opts for seller financing, it is necessary to do much of the work that a bank would usually perform, for example, checking a potential buyer’s credit report, financial statements and other key financial information. After all, if you opt to offer seller financing, then you’ll want to ensure that your buyer will not default.
Usually contracts allow for the seller to take back a business in 30 to 60 days if financing fails. In this way, the buyer can avoid a potentially serious business problem.
There are often other contractual stipulations as well. A common clause for businesses involving inventory is that new owners need to maintain a certain level of supplies during the payment period.
Providing Benefits for Both Parties
It should also be noted that seller financing is of considerable interest to buyers. Sellers looking to attract as much attention to their business as possible will want to consider this route. Offering this type of financing sends a very clear message. When a business owner is open to seller financing, he or she is stating that he or she has great confidence that the business will generate both short term and long term revenue. That level of confidence speaks volumes to buyers about the health of the business.
What Due Terms Typically Look Like?
In terms of the length of seller financing, 5 to 7 years is typical. The issue of how much a seller is expected to finance is another issue that draws considerable attention. While there are no steadfast rules as to what percentage seller’s typically finance, it is common for sellers to finance up to 60% of the total purchase price.
Finally, seller financing does have a good deal of paperwork and points to consider. Opting to work with an attorney or business broker is absolutely essential to protect all parties involved.Read More
One of the the United States’ newest citizens is GABB broker Lara Van Pletzen. Van Pletzen, who was born in Bulawayo, Zimbabwe, became a U.S. citizen in a ceremony on Friday, Aug. 26. She is the ROI Business Development Manager for the Southeast of ROI Business Brokers.
GABB asked Lara about her road to becoming a U.S. citizen. She says she left her home country “in the 70’s just before Mugabe came into power.” She grew up with terrorism in the Rhodesian Bush war, and when her family traveled to South Africa for vacation, they were escorted by military convoys. Raised in South Africa, she left for Canada in 2002 and lived there until November 2003.
“I left Africa because of the high frequency of violent crime,” she said. “Yes, there is crime everywhere, but we lived behind electric fencing and burglar bars, home invasions were all too common and extremely violent. Although a tough decision to make, we decided to leave after my husband was held up at gunpoint at work. I personally didn’t want to raise my kids there, and I got tired of looking over my shoulder everywhere I went.
“Obviously some people don’t like to hear this point of view, but it was my view and it does not mean that I am not proud of my roots. I guess I just see the world as a smaller place with things that are humanly common to all people in a variety of lands. Everyone does what they think is best for their children, and there is no one right answer. For us this was the right thing and it was an act of our Christian faith.”
While living in Canada, her husband Andries was offered a wonderful work opportunity in the USA. Lara moved to Appleton, Wisconsin, with her family on an H1B/H4 visa in 2003 and lived there from 2003 until 2008. “I was allowed to live here but I was not allowed to work; only my husband was allowed to work.”
“I arrived on Thanksgiving 2003 and it felt wonderful,” she remembers. “I had grown up watching American TV–especially Dallas–and believed the entire USA was like Texas: cowboy hats, Texan accents.
“I also watched Full House as a kid and always found it strange that there were multiple V’s and phones and was amazed that kids had their own TV’s. I didn’t really believe it was true until I came here; our homes had one TV and one phone.
“For the first few Christmases, my husband thought I was being an extravagant Santa (we called him Father Christmas) when I bought what were small Santa gifts. He thought they cost more as a Santa gift here would be a main gift in South Africa.”
“In 2008 the company who sponsored my husband for his H1B visa told us their attempts to keep us here and get us green cards failed, and since the H visa was only a 6-year temporary visa, we left in 2008. We didn’t want to go back to South Africa; fortunately my husband was offered a job in Australia.”
“I moved there in 2008 on 457 visas, temporary 2-year visas that could then be converted to permanent status. We never got that far as we had only been there a year when, in 2009, with the global recession, the international company my husband worked for in Australia decided to close that unit. Since we had not been there two years, it once again meant having to leave the country.
“Today we are really happy with the way things worked out as our hearts were always in the USA anyway. We never imagined at this time there would ever be a way to come back, but at that time it just felt like our world was falling apart. Before the opportunity to come back here came about, we had to leave Australia, so we moved to New Zealand and I obtained student visas for my kids. I lived there on a guardian visa while we tried to figure out what to do.
“It was two unexpected major moves in two years. Our furniture was still in USA storage, finances tight with us both of us having had temporary work loss. We had been sleeping on air mattresses. Shortly after I arrived in New Zealand, my husband’s Australian company offered my husband a transfer to the USA unit on a L visa.”
“We came back to the USA in 2009 and moved to Atlanta, this time to be near the airport as my husband was expected to travel extensively, and Hartsfield had many flight options. I found Georgia a little harder to move to Wisconsin, but am settled with no plans to move again. My husband, on the other hand, has traveled more than we expected, and he uses that airport more than we had hoped.”
“During the past seven years I have been here, he has worked in South Africa, Botswana, Ghana, Zambia, Chili and now Mongolia. With 21 happy years of marriage behind us, cynics say it is because he isn’t here most of the time that we are happy. Sometimes they ask, ‘How do you do it?’ The truth is, we are a team, and every day and night apart has been worth it to give us and our kids the opportunity to live here. I remind them more than they like that I expect great things from them.
“We are not here to take but to give and make a difference. I have no regrets, and it would feel wrong to complain, we have achieved something we never thought possible.”
“I wanted to become a citizen because this is my country and I want to participate and embrace everything about it. I want to vote but most of all I want to feel secure that I will never have to leave. I also wanted to get it done before my son turned 18 to save him the trouble of converting his green card to citizenship,” she said. “My kids were very young when we moved here, they don’t feel foreign, they were 3 and 3 months when we first moved here. In their minds this is home, and I wanted to make it official.”
“I like the checks and balances that were designed in the constitution that prevent this country from ever becoming a dictatorship. I’m glad people here are free to disagree and don’t all think alike. It keeps the balance and protection; we should see it as a positive and not a negative.”
“I love the patriotism American’ feel for their country, the freedoms this country represents. Technically, I came here for the same reasons the first immigrants did: freedom of religion, freedom of speech, opportunity, life, liberty and the pursuit of happiness.”
GABB congratulates our new U.S. citizen. You can contact Lara at firstname.lastname@example.org, Office: 404-445-8322 ext 26, Cell:770-876-8162Read More
Buyers and sellers alike love recurring revenue. But what is it exactly that makes it so attractive? Recurring revenue is generally viewed as a very good factor as it indicates positive cash flow, the potential for growth, business success and business stability. Let’s take a closer look at how it can benefit you.
Show You’re in Demand
Businesses, including IT companies, are valued higher if they can show recurring revenue, such as monthly subscriptions, SaaS subscriptions, or a transaction that consistently occurs. If your business is centered on a subscription based platform and you have high subscription levels, then you can expect keen interest from prospective buyers.
If you want to show a prospective buyer that your business is a good bet, then recurring revenue is a great place to start. Recurring revenue indicates that you have ongoing consumers and that means ongoing revenue. But recurring revenue indicates something else as well, namely, it indicates that your business is providing a consistent service that is consistently in demand.
Take the Pressure Off Buyers
Buyers like predictability. Recurring revenue means that a buyer knows that he or she can buy a business and count on income from day one.
Sellers can often forget that most buyers get nervous when they are making any kind of business buying decision. The power of recurring revenue is, in part, psychological as it allows buyers to realize that there will be revenue no matter what. Even if they do little to develop the business, cash will flow in. In other words, the psychological value of recurring revenue is that it takes much of the pressure off.
Examining Your Annual Recurring Revenue
If your business has a strong annual recurring revenue or “ARR”, then you should place a good deal of focus on this fact. Many feel that a company’s ARR number is a powerful indicator of a company’s overall health.
Ultimately, recurring revenue indicates a great deal about your company. High recurring revenue doesn’t just mean that you have a reliable source of income every period. It indicates that your business is providing a service that is needed and valued. Strong recurring revenues also indicate that your business is doing many things correctly and that your goods and/or services are of such a caliber that you are generating repeat business.
Visibility and Transparency
Savvy buyers also value visibility and transparency. Thanks to this kind of consistent income, it is easier for buyers to plan for and manage future expenses and increase a business’s overall stability.
Part of properly showcasing your business is to emphasize your business’s recurring revenues if they do indeed occur. A seasoned business broker can be an invaluable ally in helping you reveal your business in the best light possible.Read More
Business has gone mobile. The top producers in business are those who have identified and use an organized mobile office system to stay productive, in communication and are responsive to clients’ needs.
Join the GABB on Sept. 27 for a Mobile Technology Boot Camp and explore some of the best and most effective ways mobile professionals can use their smartphones and tablets for efficiency worldwide.
The GABB Fall Conference will consist of a morning and afternoon session, each awarding three hours of C.E. credit. Attendees may sign up for the whole day, at $100 for members; $150 for non-members; or just one session for $50 for members, $75 for non-members. Registration will close on Sept. 23, so please register early to secure your space.
Breakfast 8:30-9 a.m. Provided by Kim Eells, Vice President, Business Development Officer of Brand Bank.
9-12 noon: Productivity, Social Media and the Mobile, Global Office
Learn about Cloud Apps, Social Media, managing listing photos for marketing and distribution with Google Multimedia, mobile calendar and document applications, and sharing data with Drive, OneDrive & Dropbox.
Lunch: Noon-1 p.m. Provided by GABB Platinum Sponsor Sarah S. Wheeler, Esq. of Moore & Reese, LLC
1-4 p.m. Time Management and Customer Relationships
This class will teach brokers how to effectively build and maintain a client relationship management (CRM) system as a process to attract, maintain and retain communications with consumers. Attendees will learn about how mobile technology and the cloud computing can help them become more effective at managing clients.
Instructor: G. William James (above) is one of the leading training professionals for handheld computing and mobile technology in the United States for retail, medicine, sales, business and real estate. A sales trainer and seminar presenter since 1986, thousands have heard his enthusiastic yet real-life approach to time management and sales excellence. James was an early user of PDAs, is devoted to handheld computing and has built his career on the technology. In 2003 he began teaching smartphones as well, and today teaches all platforms and devices on the Android, Apple iPad and iPhone, Blackberry, and Windows Mobile operating systems.Read More
If you’ve heard the term EBITDA thrown around and not truly understood what it means, now is the time to take a closer look, as it can be used to determine the value of your business. That stated, there are some issues that one has to keep in mind while using this revenue calculation. Here is a closer look at the EBITDA and how best to proceed in using it.
EBITDA is an acronym for earnings before interest, taxes, depreciation and amortization. It can be used to compare the financial strength of two different companies. That stated, many people don’t feel that EBITDA should be given the importance that is frequently attributed to it.
Divided Opinion on EBITDA
If there is disagreement on EBITDA being able to determine the value of a business, then why is it used so often? This calculation’s somewhat ubiquitous nature is due, in part, to the fact that EBITDA takes a very complicated subject, determining and comparing the value of businesses, and distills it down to an easy to understand and implement formula. This formula is intended to generate a single number.
EBITDA Ignores Many Key Factors
One of the key concerns when using or considering a EBITDA number is that it is often used as something of a substitute for cash flow, which, of course, can make it dangerous. It is vital to remember that earnings and cash earnings are not necessarily one in the same.
Adding to the potential confusion is the fact that EBITDA does not factor in interest, taxes, depreciation or amortization. In short, a lot of vital information is ignored.
Achieving Optimal Results
In the end, you simply don’t want to place too much importance or emphasis on EBITDA when determining the strength of a business. The calculation overlooks too many factors that could influence future growth and prosperity of a business.
Business brokers have been trained to handle valuations to determine the approximate value of a business. Since valuations take many more factors into consideration, they also tend to be far more accurate.Read More