Using Social Media To Improve Business Brokering
Social media expert Dr. Matthew Loop offered practical advice on using Facebook and other applications to boost your business when he spoke to the Georgia Association of Business Brokers (GABB) on June 28.
Loop offered highlights from his book, Social Media Made Me Rich, which offers a quick, practical, easy-to-understand, comprehensive reference guide for small businesses who want to learn how to generate income from the Internet.
Matthew Loop calls himself the highest paid social media revenue strategist in North America. He’s helped brands, celebrities, startups and small businesses increase their income, influence and impact through social media.
Loop discussed the pillars of social media outreach, including:
- Reputation / social proof management (Google Maps, Yelp, etc)
- Facebook organic –
- Pay per click advertising (Facebook, Adwords, etc)
- Search Engine Optimization (SEO)
- Online Video (YouTube) and live streaming apps (Periscope)
- Blogging / Microblogging
- Photo sharing (Pinterest and Instagram)
- Podcasting (iTunes)
- News releases and publicity
Facebook can be used profitably by small businesses who take the time to set up a page. More than 1.5 billion users, creating a page is free, and small businesses can purchase targeted advertisements inexpensively. Loop suggested these action steps”
- Create a Facebook personal account if you don’t already have one (after all, it’s 2016!) Then go to Facebook.com/pages to set up a “fan page” for your business, being very careful to create an accurate and descriptive title.
- Then go to Facebook.com/username to select a vanity URL
- Why is having a lot of Facebook fans important? It’s an indicator of popularity, immediately creates consumer trust in your business, and helps generate more website visits. Fan likes also boost SEO, or search engine optimization.
- To get lots of fans, have a promotion, give away items, or sponsor joint promotions with synergistic businesses.
How to get your first 3,000 fans quickly, according to Loop:
- Invite Your Email List and Subscribers
- Embed Facebook Fan Page Widgets on Your Website
- Add your URL to Your Email Signature Block
- Use Facebook as your fan page to like, comment, etc.
- Run Facebook Ads to a Your Facebook Page
- Run a Contest and Only Members of Your Fan Page can Participate
- Link to your social media profiles and post
- Use Facebook’s check-in feature and incentivize clients to participate
- Use Print Media, TV, or radio
- Timeline graphic branding
Action steps to improve your business’s prominence on social media:
- Update your social statuses on Facebook and other social networks at minimum of four times per day. Post high quality information, quotes of interest, pics, open-ended questions, tips, Facebook videos, blogs, and graphics to build liking and trust.
- GABB recommend members follow the GABB on social media, and you can easily repost information of interest to your clients.
- GABB on Facebook.
- Join GABB’s LinkedIn page
- GABB’s Twitter handle is @GABB_Brokers
- Send your original content to GABB, and GABB will repost it on its Social Media Account. Also, the GABB uses Buffer, (linked here), an application that allows a user to post frequently in minutes per day. Use this Buffer link, and you can get a free trial subscription that allows you to use a limited version.
Loop also said businesses should update your Google Maps profile. Google maps ranks business by the following factors, and a business who updates their status can immediately improve their ranking.
- Profile completed
- Proper category selected
- Keyword in business description
- Listing verified
- Citations
- Reviews
- Traffic to your business website
- Distance to town center
See Matthew Loop’s GABB PowerPoint Presentation.
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 MoreManaging Financial Risk: The Importance of Environmental Due Diligence
By Michael Wade and Keith Kaylor
BAT Associates, Inc.
Is there an environmental liability lurking in the commercial property your client is preparing to buy?
And how can you find out?
Many commercial properties do have potential environmental issues, and purchasers and lenders may unknowingly be taking on substantial risks from loss of property value or liability for remediation costs. That is why conducting environmental due diligence is crucial.
Fortunately, there are several types of investigations that can be done to minimize the liability.
The regulatory basis for these investigations is the “All Appropriate Inquiries” rule established by the U.S. Environmental Protection Agency (EPA) in 2005. The rule established the level of environmental due diligence required of buyers and/ or lenders wishing to qualify for liability protections from cleanup costs. The industry standard for conducting due diligence investigations is the American Society for Testing and Materials (ASTM) Standard E1527, last revised in 2013.
The most common types of investigations used are:
- Desktop Reviews
Desktop reviews are a low-cost alternative to a Phase I Environmental Site Assessment (ESA), and have a limited scope. They consist of:
- Reviewing environmental databases in order to find hazardous material sites on the subject property or nearby properties;
- Reviewing one historical land use source (usually aerial photographs); and
- Questionnaires filled out by the borrower and loan officer.
Desktop reviews do not include a site visit and do not meet the ASTM standard. Therefore, there is a possibility that environmental issues may remain undisclosed. In addition, if any issues are discovered, they cannot be fully investigated due to the limited scope, and will lead to a recommendation for a Phase I ESA. Unless the lender has other knowledge that the subject property is of low risk, a desktop review is probably best used as a screening tool only.
- Phase I ESA
A Phase I ESA is the industry standard for due diligence investigations. It consists of:
- A review of environmental databases in order to find hazardous material sites on the subject property or nearby properties;
- A review of all readily available historical land use information (aerial photographs, city directories and fire insurance maps, as available);
- A site inspection of the property;
- A review of local government records concerning the property; and
- Interviews of the site owner and/ or occupants.
- Review of environmental agency records to determine if the site is in compliance with regulations (especially important for sites handling regulated materials such as service stations or hazardous waste generators)
Phase I ESAs meet the ASTM standard, but do not include sampling of soil, groundwater, or building materials. This report will identify any potential or actual Recognized Environmental Conditions (RECs) on the subject property. The environmental professional developing the Phase I ESA report may also make recommendations for further investigation to evaluate the presence or absence of contaminants at the subject property, which may lead to a Phase II ESA.
- Phase II ESA
If environmental contamination of soil, groundwater, or soil vapor on the subject property is suspected, a Phase II ESA may be performed to determine if contamination is present. Sample locations should be selected based on areas considered most likely to contain contamination. Samples should be submitted to an accredited laboratory for analysis to ensure the legal acceptance of the analytical data. If contaminant concentrations are above state reporting levels, the property owner has the legal responsibility to report these results to the Georgia Environmental Protection Division (EPD). The EPD may ask for further investigation under the Underground Storage Tank (UST) program for service station sites. Most other sites (such as dry cleaners or auto repair) will be handled under the Hazardous Site Response Act (HSRA) Program.
- UST Investigations
Once a release from a UST site is reported, the EPD will usually require a Corrective Action Plan – Part A (CAP-A). The CAP-A may require additional groundwater sampling and additional research to determine nearby receptors, such as the nearest drinking water well.
Depending on the results of the CAP-A, additional investigations such as a CAP-B and remediation may be required, which can involve substantial costs. However, if the site owner has been contributing to the Georgia UST Trust Fund and is not found to be ineligible, the Trust Fund will reimburse the owner for remedial costs, minus a $10,000 deductible and the cost of the trust fund application. Therefore, it is crucial for lenders to ensure that owners of UST sites are in compliance with Georgia regulations before issuing a loan.
- Brownfields (HSRA) Investigations
When a reported release is minor, the Georgia EPD may issue a “No Further Action” letter. For more seriously contaminated sites, further investigation will be required. Unlike UST investigations, there is not a trust fund to help in remediation cost for HSRA sites, so the buyer may incur extensive liability. This cost liability should be a determining factor in the decision to buy a parcel and should be the driver for conducting environmental due diligence before acquiring land.
If the site goes into foreclosure or resale, the Georgia EPD Brownfields program offers incentives for subsequent owners to assess contamination and remediate the property. The program includes tax incentives, as well as relief from the liability to perform groundwater remediation, if soil contamination has been removed.
In conclusion, an environmental due diligence process can be implemented at various degrees of thoroughness. A buyer or lender should consider the potential liability associated with owning a parcel of land that is known to be contaminated. Liability can be limited through a better understanding of the severity and source of impacts prior to purchase. We recommend utilizing a knowledgeable and experienced environmental consultant and choosing the right level of investigation at the onset to help buyers and lenders to avoid substantial liability issues later.
Michael is the General Manager of BAT Associates, Inc., GABB Affiliate member. Michael is a graduate of Whittier College, earned his Master’s from San Jose State University, and his MBA from the University of New Mexico. Keith Kaylor, P.E., is a graduate of Cleveland State and is responsible for managing Phase I/II ESAs and remediation projects at BAT Associates. Both have performed environmental site assessments and provided environmental and engineering consulting services across several US states over the past 30 years.
5151 Brook Hollow Parkway
Suite 250
Norcross, GA 30071
Ph: 770-242-3908
Fax: 770-242-3912
Read MoreSBA Lenders Offer Advice on Getting Loans Approved
SBA lenders Kim Eells, Cheryl Beer and Susan Kite presented at the April GABB meeting.
If you want to get an SBA loan to buy or sell a business, get the information to lenders early, be honest up front about potential problems, and expect to pledge assets, including a home, to secure the loan.
That advice highlighted the presentation by veteran SBA lenders to the Georgia Association of Business Brokers on April 26.
Bob Smith of HealthMarkets.com was the breakfast sponsor.
The program was presented by GABB Platinum Sponsor Cheryl Beer, Vice President of SBA Lending at the Piedmont Bank; Susan Kite, SVP and Managing Director of SBA Lending at Signature Bank ; and Kim Eells, Vice President, Business Development Officer of the Brand Bank.
GABB SBA Power Point Presentation
SBA Loan Program Overview
- SBA 7(a) – $5,000,000 maximum loan amount
- Small by SBA Size Standards
- Operating Company must be “For Profit”
- 15X Debt Service Coverage, “DSC” (including all affiliates)
The SBA 7(a) program has a $5 million maximum, with 1.15 x debt service coverage, and operating company must be for profit.
Equity injection: minimum usually 20%, but other factors may affect the percentage, including cash flow, collateral and experience.
The maximum term of the loan is 10 years for purchase of a business only, 25 years for real estate, and a weighted average for combined business and real estate.
The maximum rate for the loan is prime plus 2.75%
Collateral required includes business assets and personal assets of guarantors.
SOP rules:
- The buyer must purchase 100% of the ownership interest in the business;
- The seller cannot remain an officer, director, stockholder or key employee of the business. If a short transitional period is needed, the small business may contract with the seller as a consultant for a period not to exceed twelve months;
- If the purchase price of a business includes intangible assets in excess of $500,000, the borrower and/or seller must provide a combined equity injection of at least 25% of the purchase price of the business. In order for the seller financing to qualify as equity injection, the seller note must be on full standby of principal and interest payments for a minimum of two years. If the total “equity” is greater than 25%, there can be two seller notes. For example, if the buyer has 20% equity and the seller provides 20% seller financing, there can be two seller notes, one for 5% on full standby for two years and one for 15% with immediate P+I payments;
- If there is business real estate as part of the change of ownership, the real estate cannot be financed separately by a non-SBA guaranteed loan (unless it is an SBA 504 project) to avoid the 25% cash injection;
- The lender must obtain a current business valuation from an independent third party chosen by the Bank to justify the purchase price.
How to get your loans approved quickly
- Get Seller Information as quickly as possible after signing listing agreement
- Last 3 years tax returns (if sole proprietor, get Schedule C)
- YTD interim statement to include Balance Sheet & Income Statement
- Previous year’s interim statement of same period
- Agings of Accounts Receivable and of Accounts Payable
- Listing of all assets being sold – and their market value (with serial numbers for any asset valued at $5,000 or more)
- 4506-T, properly signed
- Letter of Intent or Purchase Agreement
- Manage Seller expectations
- They will likely have to take a Seller Note of 10% to 15% of sales price
- They will need to update Interim Financials and Agings to keep them current (every 60 – 90 days)
Buyer Info
- Get Buyer information as soon as possible
- Last 3 Years Tax Returns – Personal and Affiliate
- Recent Personal Financial Statement – give them form 413
- Business Plan (good template is at sba.gov)
- Financial Projections (monthly for Year 1 / Annually for Years 1-3)
- Manage Buyer expectations
- They will have to put in cash equity of 10% to 25% of sales price
- They may have to pledge their home or other real estate
- They will need to assign us life insurance
- If your buyer has ever been arrested, they need to tell us early so we can get them cleared and processed
- The loan process is not like buying a home – it may take longer than they expect.
Lender Info
- Use a lender that knows business acquisition SOP rules
- Get with us early and use us as a resource
- Realize that to us, DSC is more important than SDI
- Have your Seller and/or Buyer prepared
- with an organized application package
- with realistic expectations about the loan process
- The process will be much faster when information is provided quickly when asked
The Panelists also discussed three examples of loans they encountered.
Example 1:
30 year old niche therapy practice that provides occupational therapy, physical therapy and Speech-Language therapy to school systems.
Buyer has owned a business in home health care.
Total Project Costs of $1,950M included Intangible Assets of $1,600M, Working Capital of $300M, Closing Costs including SBA Guaranty Fee of $50M – Seller Financing of $350M, Buyer’s Cash $100M – SBA Loan $1,500M
Only collateral was a 2nd lien on personal residence.
Example 2:
35-year old Commercial Landscaping company – 3 owners in 60s and retiring. Sales price of $1,605,000 included property, trucks, goodwill. Property valued at $600,000 assets valued at $280,000 with $805,000 goodwill. 2 loans: Building loan at P+2.5% for 25 years and business acquisition at P+2.75% for 10 years with 6-months interest-only for both. Financing structure: $540,000-property, $448,000-business and assets, $136,000-working capital and closing costs, $263,000 – borrower cash, and $360,000 seller note. Buyer was ready to close with out-of-state lender when his partner pulled out, changing deal. We closed 35 days after being notified that the buyer wanted us to consider the deal.
Example 3:
distributor of parts for communications companies that service cell phone towers.
Two husband/wife teams with varied sales and management experience
Total $1,211 included $918 GW, seller 225, equity $269, loan $717, 10 years, P + 2.5, $100 Capline
Collateral included personal assets of Guarantors
Why Loan Applications Get Rejected
Delinquent credit history – 650 minimum score
SBA eligibility issues
- 912 issues
- Presently under indictment, parole or probation
- Ever been charged with and or arrested for any criminal offense other than a minor motor vehicle violation? Include offenses which have been dismissed, discharged or not prosecuted.
- Ever been convicted, placed on pretrial diversion, or placed on any form of probation, including adjudication withheld pending probation for any criminal offense other than a minor vehicle violation?
- Not citizen or permanent resident
- Problems with Franchisor
- SBA failure rate for franchise
- Franchisor has reputation for not supporting its franchisees
- Talk to other franchisees
- Talk to financial institutions who have financed particular franchise
- Unrealistic projections
- Use financial advisor to prepare business plan and projections
- Breakeven analysis
- Other issues
- Insufficient working capital and equity
- Additional support
- Spousal income
- Strong franchisor support
- Strong location
- Strong credit history
- Liquidity
- Management experience
Finally, if you get turned down by a Bank, ask for the reason. The information may help you with another lender or for your next request
Contact information for presenters:
Susan Kite
404-256-7734
Kim Eells
770-339-2088
Cheryl Beer
678-576-9392
Cheryl.beer@piedmontbankonline.com
Read MorePersonal Goodwill: Who Owns It?
Personal Goodwill has always been a fascinating subject, impacting the sale of many small to medium-sized businesses – and possibly even larger companies. How is personal goodwill developed? An individual starts a business and, during the process, builds one or more of the following:
• A positive personal reputation
• A personal relationship with many of the largest customers and/or suppliers
• Company products, publications, etc., as the sole author, designer, or inventor
The creation of personal goodwill occurs far beyond just customers and suppliers. Over the years, personal goodwill has been established through relationships with tax advisors, doctors, dentists, attorneys, and other personal service providers. While these relationships are wonderful benefits, they are, unfortunately, non-transferable. There is an old saying: In businesses built around personal goodwill, the goodwill goes home at night.
It can be difficult to sell a business, regardless of size, where personal goodwill plays an integral role in the business’ success. The larger the business, the less likely that one person holds the key to its profitability. In small to medium-sized businesses, personal goodwill can be a crucial ingredient. A buyer certainly has to consider it when considering whether to buy such a business.
In the case of the sale of a medical, accounting, or legal practice, existing clients/patients may visit a new owner of the same practice; they are used to coming to that location, they have an immediate problem, or they have some other practical reason for staying with the same practice. However, if existing clients or patients don’t like the new owner, or they don’t feel that their needs were handled the way the old owner cared for them, they may look for a new provider. The new owner might be as competent as, or more competent than, his predecessor, but chemistry, or the lack of it, can supersede competency in the eyes of a customer.
Businesses centered on the goodwill of the owner can certainly be sold, but usually the buyer will want some protection in case business is lost with the departure of the seller. One simple method requires the seller to stay for a sufficient period after the sale to allow him or her to work with the new owner and slowly transfer the goodwill. No doubt, some goodwill will be lost, but that expectation should be built into the price.
Another approach uses some form of “earnout.” At the end of the year, the lost business that can be attributed to the goodwill of the seller is tallied. A percentage is then subtracted from monies owed to the seller, or funds from the down payment are placed in escrow, and adjustments are made from that source.
In some cases, the sale of goodwill may offer some favorable tax benefits for the seller. If the seller of the business is also the owner of the personal goodwill, the sale can essentially be two taxable events. The tax courts have ruled that the business doesn’t own the goodwill, the owner of the business does. The seller thus sells the business and then also sells his or her personal goodwill. The seller’s tax professional will be able to give further advice on this matter.
WavebreakMediaLtd./BigStock.com
Copyright:Business Brokerage Press, Inc.
Read MoreThe Three Ways to Negotiate
Basically, there are three major negotiation methods.
1. Take it or leave it. A buyer makes an offer or a seller makes a counter-offer – both sides can let the “chips fall where they may.”
2. Split the difference. The buyer and seller, one or the other, or both, decide to split the difference between what the buyer is willing to offer and what the seller is willing to accept. A real oversimplification, but often used.
3. This for that. Both buyer and seller have to find out what is important to each. So many of these important areas are non-monetary and involve personal things such as allowing the owner’s son to continue employment with the firm. The buyer may want to move the business.
There is an old adage that advises, “Never negotiate your own deal!”
The first thing both sides have to decide on is who will represent them. Will they have their attorney, their intermediary or will they go it alone? Intermediaries are a good choice for a seller. They have done it before, are good advocates for their side and they understand the company and the seller.
How do the parties get together in a win-win negotiation? The first step is for both sides to work with their advisors to settle on the price and deal structure positions. Both sides should be able to present their side of these issues. Which is more important – price or terms, or non-monetary items?
Information is vital to a buyer. Buyers should keep in mind that the seller knows more about the business than he or she does. Both buyer and seller need to anticipate what is important to the other and keep that in mind when discussing the deal. Buyer and seller should do due diligence on each other. Both buyer and seller must be able to walk away from a deal that is just not going to work.
Bob Woolf, the famous sports agent said in his book, Friendly Persuasion: My Life as a Negotiator, “I never think of negotiating against anyone. I work with people to come to an agreement. Deals are put together.”
Copyright: Business Brokerage Press, Inc.
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