It is always important to try and put yourself “in the other person’s shoes.” This fact is of paramount importance when dealing with prospective buyers. Thinking like a prospective buyer could, in fact, be the difference between selling your business and not selling your business. Yet, it is important to continue to put yourself in your buyer’s shoes during the entire sales process.
It is easy to think that because everything is going smoothly with the sale of your business that the tough part is behind you. That may be true, but then again there could still be problems ahead. Issues can come up at a moment’s notice when either your prospective buyer or his or her advisor raises a red flag. Additionally, the larger the business, the greater the complexity. This translates to the greater the risk of problems arising.
The “Little Things” that Could End Up Quite Big
Financial statements are of considerable importance. Quite often you’ll see contingencies regarding financial statements and/or business tax returns, so be ready and be organized. Lease issues is another common category for contingencies. Falling under the lease issue umbrella are topics such as whether or not the seller has agreed to stay on, or issues regarding the property or needs associated with the property if it is a rental.
Other common contingencies can include issues arising from equipment and fixtures that are being included with the sale. These are areas that could be easy to overlook, but they can serve to throw a major wrench into the workings of a deal. The so-called “little things” can cause a deal to fall apart.
3 Key Steps for Preventing Disruptions from Contingencies
Step One – Create a Comprehensive List
One easy move you can make to prevent disruptions from contingencies is to make a list of all FF&E or furniture as well as fixtures, equipment or any other items that could be included with the sale. If an item is not included be sure to remove it entirely.
Likewise, if an item is inoperable then repair it ahead of time. Or at the bare minimum, you could make a list of items that are currently inoperable and include those items in your list. Remember, you don’t want a last-minute surprise or misunderstanding to jeopardize your sale.
Step Two – Check Your Leases
Problems with leases can send deals spiraling out of control. It is a prudent investment of your time to look at things like your leases. You’ll want to make certain that there are no issues that could be viewed as problematic. If there are issues, then it is in the best interest of the deal that you disclose this information at the start of any deal. After all, you don’t want to waste anyone’s time, including your own.
Step Three – Predict Questions and Have Answers Ready
The time you invest in predicting potential questions and having the answers to those questions ready is time very well spent. You’ll look prepared and that helps build trust.
Be ready to answer questions that are likely to arise such as are you going to stay on with the business for a given period of time and what will be the cost, if any, of you doing so? What about employees staying on? Are there legal issues that should be considered? Being able to answer these kinds of questions is a prudent step.
Considering the needs of your prospective buyer will help you make a sale. In selling a business, there is no replacement for being organized and prepared.Read More
As President Donald Trump talks tough on trade, any actions he takes with China and Mexico will directly affect the Georgia economy, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business.
“We expect President Trump’s trade skirmishes to bite into Georgia’s transportation, trade, manufacturing and hospitality sectors,” Dhawan wrote in his quarterly “Forecast of Georgia and Atlanta,” released Feb. 22. “Georgia’s large corporations with international ties will also feel the heat.”
However, other promised policies expected from the Trump administration will benefit small business growth, which will lift the state’s economy, Dhawan said.
“Going forward,” he said, “small business growth will remain buoyed in the wake of some of Trump’s administrative initiatives. This will trickle down and buoy employment growth in construction, financial activities and wholesale, into retail trade and hospitality sectors.”
The corporate sector was a strong source of job growth at the end of 2016, especially in the metro Atlanta area. However, Dhawan expects this job growth to moderate in 2017.
“Policies of the new Trump administration with regard to trade could have impacts,” he said. “A trade skirmish with Mexico (Georgia’s No. 2 trading partner) has already started. Germany (No. 5) is getting drawn into it, and China (No. 3) is next on the docket. Thus, globally connected large corporations in Atlanta, headquartered mostly in the Midtown to Sandy Springs quadrant, may not benefit as much as the small business sector, which draws exclusively on the domestic consumer market.”
Despite poor corporate news, the construction sector has benefitted from the building of new stadiums, hotels and office buildings in the metro area. This will begin to shift as major projects are completed in 2017. The hospitality sector will benefit from the completion of these hotels, but also will be negatively affected by the strengthening dollar from the president’s trade talks.
The manufacturing sector, which has the biggest impact outside the metro Atlanta area, also stands to suffer losses, Dhawan said. He cited three reasons for the decline in manufacturing jobs.
“First, overall investment was anemic,” he said. “Second, our strong dollar made U.S. goods relatively expensive and, third, demand is weaker due to the combination of a stalled Chinese economy and economic weakness in Europe. Going forward, trade skirmishes could have major impacts in Savannah, Gainesville, Dalton and Columbus.”
There is some good news on the local front. As home prices rose, government jobs increased with property tax collections.
Also, as Dhawan pointed out, “If the Trump administration comes through with its promise to ramp up infrastructure spending, it will boost job growth at state and local levels going forward.”
At this point, Dhawan expects the new president’s talk on trade to have a negative impact on major corporations in the metro area, but he expects small businesses to benefit from the domestic commitment from the Trump administration.
“Expect our small businesses to continue to do fairly well as consumers continue to demand their goods and services,” Dhawan said.
Highlights from the Economic Forecasting Center’s Report for Georgia and Atlanta
- Georgia employment will gain 77,600 jobs (13,800 premium jobs) in calendar year 2017, 69,800 jobs (12,700 premium) in 2018 and 62,200 (11,900 premium) in 2019.
- Nominal personal income will rise 4.7 percent in 2017, 5.4 percent in 2018 and 5.5 percent in 2019.
- Atlanta will add 52,200 jobs (10,100 premium jobs) in calendar year 2017, 49,300 jobs (9,600 premium) in 2018 and 43,600 jobs (9,200 premium) in 2019.
- Atlanta permitting activity in 2017 will decrease 5.4 percent, grow marginally by 0.4 percent in 2018 and increase 2.7 percent in 2019.
ATLANTA-Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business questions the Federal Open Market Committee’s (FOMC) December dot chart in which the Federal Reserve calls for three rate hikes in 2017.
“Expect one rate increase this March before the trade ruckus breaks loose,” Dhawan wrote in his quarterly “Forecast of the Nation,” released Feb. 22. “The Fed will stand pat until the storm blows over. Then, they will resume their hikes. Growth numbers support this in 2018.”
President Donald Trump’s talks on trade are concerning to members of the Fed as well as to economists like Dhawan.
“President Trump has been sending a clear message to our trading partners, especially Mexico, China, and Germany, that running a trade surplus with us will cost you,” Dhawan said.
Trump’s tough talk on trade has contributed to the strengthening of the dollar which makes American goods more expensive and creates larger trade deficits with these countries. As a result, Dhawan expects the president to use his executive power to impose tariffs. The executive branch can impose tariffs for up to 150 days without congressional approval, and Dhawan expects the president to use this authority.
These actions also will have an impact on interest-rate-sensitive sectors.
“In a trade skirmish, other entities, especially foreign investors and Asian central banks, may decide to withhold buying treasuries,” Dhawan said. “As a result, interest-sensitive sectors such as housing starts and auto sales, as well as corporate investment, will experience subpar growth.”
Dhawan doesn’t see this lasting for long. He predicts that tariffs and trade restrictions will last for six months at most, with no serious reaction from China.
“We don’t have a substitute for Chinese-made products in the short run (or even the long run), and Mexico is extremely integrated into automakers’ supply chains,” said Dhawan. “Both sides will huff and puff but back off from a mutually injurious trade war.”
According to Dhawan, China is more concerned about keeping its factories running and people employed than hits from any potential short-term tariffs imposed by the U.S. A weakening Chinese yuan would make goods cheaper and keep Americans buying.
These trade skirmishes are expected to be over with by the end of the year, Dhawan said.
“The trade impediment not only gets reversed,” he said, “but also comes with a Christmas present for the general populace in the form of the long-delayed, promised personal income tax cut.”
This will boost overall GDP growth to 2.3 percent in 2018 and a better 2.5 percent in 2019.
Highlights from the Economic Forecasting Center’s National Report
- Following GDP growth of 1.6 percent in 2016, the economy will expand at 2.2 percent in 2017, 2.3 percent in 2018 and 2.5 percent in 2019.
- Business investment fell by 0.4 percent 2016. Expect positive growth of 3.8 percent in 2017, 4.3 percent in 2018 and 4.7 percent in 2019. Jobs will grow by a monthly rate of 157,000 in 2017, 150,000 in 2018 and 148,000 in 2019.
- Housing starts will average 1.192 million units in 2017, rise to 1.222 in 2018 and 1.267 in 2019. Expect auto sales of 17 million units in 2017, 16.6 in 2018 and 16.3 in 2019.
- The 10-year bond rate will rise to 2.9 percent in 2017, 3.4 percent in 2018 and 4.1 percent in 2019.
GSU Small Business Center Consultant Spoke to GABB on Feb. 28
Richard “Tres” Crow, III, a business consultant with the Georgia State University Small Business Development Center, spoke on Feb. 28 to the Georgia Association of Business Brokers.
The GABB is the state’s only association of professionals who help in the purchase and sale of businesses and franchises. The meeting will begin at 10:30 a.m. at the Dunwoody Public Library at 5339 Chamblee-Dunwoody Road, Dunwoody, GA 30338, preceded by a 10 a.m. networking session with coffee and pastries.
Mr. Crow works with the UGA Small Business Development Center at Georgia State University (UGA SBDC at GSU). He is an experienced marketing and sales professional with extensive skill in marketing, technology, entrepreneurship, and social media. Having worked successfully in a variety of fields—as a lender, banker, insurance agent, membership manager, marketing and copy-writing freelancer, as well as a sales and operations manager at both regional and national retail banks—he has a wide-ranging view of several key aspects of the business and entrepreneurial communities.Mr. Crow earned a Masters of Business Administration from the University of West Georgia, a B.A. in history from the University of Michigan, and an Associate of Arts in business from Young Harris College.
During his presentation, he mentioned the book Traction: How Any Startup Can Achieve Explosive Customer Growth by Gabriel Weinberg.
Attorney Larry Domenico, of law firm of Mozley, Finlayson & Loggins, sponsored the meeting. Larry practices extensively in the areas of products liability defense, commercial and business litigation, and general litigation. Mr. Domenico also has extensive experience as a business lawyer 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 serves as the firm’s managing partner.
The UGA Small Business Development Center at Georgia State University is a public service unit that provides consulting and training to people trying to start their own business, and for small businesses development for those that are already operational. It is a part of the Robinson College of Business and one of 17 Georgia SBDC Network locations.
The UGA SBDC at GSU’s professional business consultants have a combination of advanced education and “real-world” experience. They provide free, confidential consulting to established and emerging businesses on a variety of subjects including business plans, marketing strategies, financial analysis, management structure, access to capital, social media, and much more. The UGA SBDC at GSU presents a number of continuing education classes and special programs.
The meeting was at the Dunwoody Public Library at 5339 Chamblee-Dunwoody Road, Dunwoody, GA 30338. For more information about the GABB,contact GABB President Mike Ramatowski at 770-634-0428 or GABB Executive Director Diane Loupe at 404-374-3990 or email@example.comRead More
It is no great secret that sellers often aim high. The logic sellers use is simple, “I can always reduce my price.” While that is true, sellers do need to remember that if the asking price is initially too high, buyers won’t even take a serious look. In short, your selling price must be bound by reality and what the market will bear.
Pricing Does Matter
When an asking price is too high buyers will simply move on. But in the meantime, you may have lost a qualified buyer that would have been very interested at a lower price. Pricing isn’t a factor that should be played with, instead it should always be treated in as professional of a manner as possible.
Instant Millionaire? Maybe and Maybe Not
Some sellers want to become instant millionaires and sell their business for top dollar. Sometimes this is warranted and sometimes the numbers don’t support lofty valuations. Every situation and every business is different. It pays to be realistic.
Studies have shown that there is usually about a 15% difference between what sellers want and what the market will bear. For example, when a business is over $1 million, sellers usually sell for 90% of their asking price. Smaller businesses, valued under a million, usually sell for about 85% of their initial asking price. (Now, that stated, it is important to keep in mind that only data on sold businesses factors into this statistic.)
Business Brokers Help Determine an Accurate Valuation
A business broker has considerably expertise when it comes time to calculate a reasonable asking price for a business. They know that it is essential that they come up with a price that is fair. As a result, business brokers take many diverse issues into consideration. A few of the factors that business brokers consider are location, competition and annual sales variations.
Prospective Buyers Can’t Read Your Mind
An experienced business broker can help you determine the right value for your business and determining the right value is key. The last thing you want is to have an evaluation that is far too high as you will immediately eliminate many prospective buyers. While you may know that you are willing to negotiate and perhaps even reduce your asking price substantially, prospective buyers do not know this fact. A realistic and appropriate asking price is of paramount importance and a business broker can help guide you towards the best decision.
Market Forces Have the Ultimate Say
In the end, it is the market, not the seller, that determines the correct selling price. If no one is willing to pay a certain price than a given business is overpriced. That may be a brutal fact, but it is also quite true.Read More