Embracing Retirement and Selling: 4 Tips for a Smooth Transition
No one works forever. Regardless of how much you love your business, sooner or later you will have to step away. Owning a business can be very demanding, especially for owner-operators of businesses. And unless you’re a zombie, you won’t live forever. So, you’ll have to embrace retirement at some point, and you may not know how to prepare to sell a business.
Most business owners have never sold a business before and may not know what to expect. The good news is that prospective buyers usually like the idea of buying an established business directly from a business owner. It is key, however, to do everything possible to make selling your business, as well as the transition period, as easy for a buyer as possible.
Prepping your business for sale has many diverse parts that need to be taken into consideration. Prospective buyers want to feel as though they will have a seamless transition, so it’s in your best interest to evaluate what steps you need to take to make the transition smooth.
You are the world’s greatest expert on your business. As a result, you are perfectly positioned to evaluate your business so as to ensure that it is both appealing to a prospective buyer and ready to sell. Let’s take a look at the steps you can take to ensure a smooth transition.
The Top 4 Transition Tips
1. Automate as many processes as possible.
In this way, prospective buyers are less likely to be intimidated by the level of work involved in owning a small business. The odds are good that many of your prospective buyers have never owned a business before. One of the best ways to not scare prospects away is to make owning and operating your business as streamlined as possible.
2. Work with your employees, key customers and vendors to ensure a smooth transition.
Anything that can cause a potential disruption may scare off prospective buyers. Put yourself in the shoes of prospective buyers and think about what may cause you concern if you were evaluating a business. Once you locate those areas of potential concern, do what you can start to remedy them well before placing your business on the market.
3. Pick out your “second-in-command” before you sell your business.
Having a competent and proven “right hand man or woman” that can step in and essentially operate your business is a very attractive asset to have in place when it comes time to sell your business. Often, prospective buyers want to retain key employees, so they will be valuable assets when you prepare to sell a business.
4. Work with a business broker.
Brokers know how to negotiate the complicated maze of buying and selling businesses. They will be able to help you evaluate your business and address areas that need improvement so as to ensure a smooth transition. Working with a broker will also save you hours of time and ensure confidentiality during the process.
Taking these steps will not just make your business easier to sell, but it will also shorten the amount of time it takes to sell and maximize the sale price. The last thing you want when you are prepare to sell a business and retire is for the selling process to drag on forever.
Copyright: Business Brokerage Press
Read MoreIs It Time to Become a Business Owner? 3 Questions to Ask Yourself.
Many people know that owning a business isn’t for them. But for others, the appeal and lure of owning their own business can be powerful indeed. If you are uncertain as to whether or not this path is for you, there are a few simple questions you can ask to gain almost instant clarity. In this article, we will explore those key questions and help you determine if owning a business is in your future.
1. Are You Dedicated to Growing Your Income?
Quite often people like the idea of making more money, at least in the abstract. But when presented with what it takes, many people realize that they don’t want to do what is involved. Owning and operating a business can be a lot of work and it’s not for everyone. Yet, those who embrace it can find it rewarding in a variety of ways.
Being a business owner is radically different than being an employee. As an employee, you simply don’t exercise much control. Summed up another way, your financial fate is clearly in the hands of someone else: your employer.
However, owning a business means that you can take steps to control your own financial destiny. You can make decisions that will, ultimately, boost the success of your business and in turn increase your own income.
As an important note, statistics from 2010 show that the longer you own your business the more money you, as the business owner, will make. It is typical for those who have owned a business for ten years or more to earn upwards of six figures per year. If you have had more than one year of experience in running an organization, the yearly salary will likely range from $34,392 to $75,076. However, if you’ve owned your business for more than a decade, you will likely earn more than $105,757 per year.
While there are no guarantees, owning a business can be a path to growing one’s income and wealth.
2. Would You Like Greater Control Over Your Life?
Many opt to start their own business because they want more control. Business owners realize that unless they own their own business their financial fates rest in the hands of someone else. Some people are comforted with this feeling or don’t see a way around it and others are not so comfortable with the realization. If you want greater control over your life, then owning a business might be for you.
Owning a business increases the amount of control a business owner has over his or her life in many ways, not just financial. For example, business owners have more control over how they spend their time, where they work, when they work and who they work with on a daily basis. Instead of being part of a business, you help create, mold and shape it. Clearly, this is a lot of work and it isn’t for everyone, but again the rewards can be diverse and great.
3. What is Your Personality Like?
Owning a business translates to great control, but that control comes with a degree of risk. In the end, you’ll have to determine how comfortable you are in dealing with risk. As a business owner the “buck” stops with you. You’re risking your time, effort and, of course, money. You also don’t get a paid vacation, sick days or any of the other benefits so often associated with being an employee.
Other traits identified during a study by the Guardian Life Small Business Research Institute showed there are other ideal personality traits for business owners. These traits include collaboration, curiosity, focus on the future, and being self-fulfilled, tech savvy and action oriented.
Thinking about these three key questions is the perfect place to start when contemplating opening a business. Additionally, working with a business broker can help you gain clarity and determine if owning a business is right for you.
Copyright: Business Brokerage Press, Inc.
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Read MoreThe Top Two Ways to Purchase a Business without Collateral
Banks love collateral and for a very simple reason. If you have collateral, then the bank has something it can take if you fail to repay your loan. At its heart, collateral is a remarkably simple concept. However, unfortunately, many people who want to start a business lack it. All of this leads us to the simple question, “Can I start a business without a collateral.
1. Try the SBA
There are ways that you can start a business without collateral, but you will need some amount of money. The larger the business, obviously the more money you’ll need. Those interested in the zero collateral route will want to take a look at the SBA’s 7 (a) program. This program incentivizes banks to make loans to prospective buyers. Through this program, the SBA guarantees an impressive 75% of the loan amount.
Of course, the buyer still has to put up 25% of the money in order to buy the business, but for those looking to own a business without having to put up collateral, the SBA’s 7 (a) program is an impressive option. Perhaps best of all, the cash buyers used can come from investors or even a gift, helping to make this program a potentially great one for first time business owners.
2. Think about Seller Financing
Another option is seller financing. Sellers frequently get involved in financing. When a seller is motivated to sell, due to retirement or some other factor, things can get interesting. Most sellers do agree to offer some degree of financing, so asking for selling financing is not unheard of or insulting to a business owner. Prospective business owners may even be able to combine seller financing with the SBA’s 7 (a) program. Correctly used, this path could provide a powerful and useful option.
Speaking of retiring, according to The International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project, 33% of deals now take place when owners are retiring. This clearly demonstrates how it is in the best interest of many sellers to consider seller financing.
While the SBA’s 7 (a) program is potentially very useful to buyers, it is important to note that under the program, the seller cannot receive any payments for two years. Working around this potential problem may very well require some creativity and effort on the part of the prospective buyer. In the end, it may be necessary to offer the business owner some incentive in order to justify waiting two years for his or her money.
Attempting to buy a business without collateral may, at first, sound like too large of an obstacle to overcome. However, these kinds of purchases really do happen all the time. By staying focused, persistent and understanding your options, you will increase your odds of success. Finally, get as much professional help as possible. Prospective business owners should consult with S.C.O.R.E., experienced business brokers and others to learn the best way to buy a business without collateral.
Copyright: Business Brokerage Press, Inc.
Read MoreTwo Ways to Buy a Business without Collateral
Banks love collateral and for a very simple reason. If you have collateral, then the bank has something it can take if you fail to repay your loan. At its heart, collateral is a remarkably simple concept. However, unfortunately, many people who want to start a business lack it, and it can be difficult to finance a business without collateral. All of this leads us to the simple question, “Can I start a business without collateral?”
1. Try the SBA
There are ways that you can start a business without collateral, but you will need some amount of money. The larger the business, obviously the more money you’ll need. Those interested in the zero collateral route will want to take a look at the SBA’s 7 (a) program. This program incentivizes banks to make loans to prospective buyers. Through this program, the SBA guarantees an impressive 75% of the loan amount.
Of course, the buyer still has to put up 25% of the money in order to buy the business, but for those looking to own a business without having to put up collateral, the SBA’s 7 (a) program is an impressive option. Perhaps best of all, the cash buyers used can come from investors or even a gift, helping to make this program a potentially great one for first time business owners.
2. Think about Seller Financing
Another option is seller financing. Sellers frequently get involved in financing. When a seller is motivated to sell, due to retirement or some other factor, things can get interesting. Most sellers do agree to offer some degree of financing, so asking for selling financing is not unheard of or insulting to a business owner. Prospective business owners may even be able to combine seller financing with the SBA’s 7 (a) program. Correctly used, this path could provide a powerful and useful option.
Speaking of retiring, according to The International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project, 33% of deals now take place when owners are retiring. This clearly demonstrates why many sellers should consider seller financing.
While the SBA’s 7 (a) program is potentially very useful to buyers, it is important to note that under the program, the seller cannot receive any payments for two years. Working around this potential problem may very well require some creativity and effort on the part of the prospective buyer. In the end, it may be necessary to offer the business owner some incentive in order to justify waiting two years for his or her money.
Attempting to buy a business without collateral may, at first, sound like too large of an obstacle to overcome. However, these kinds of purchases really do happen all the time. By staying focused, persistent and understanding your options, you will increase your odds of success. Finally, get as much professional help as possible. Prospective business owners should consult with S.C.O.R.E., experienced business brokers and others to learn the best way to buy a business without collateral.
Copyright: Business Brokerage Press, Inc.
Read MoreTax Credits Can Lower the Tax Bill From Selling a Business
By Ben Zachariah, Director of Tax Credit Investments, Monarch Private Capital
The sale of a business can generate substantial tax liability. But by investing or purchasing transferable tax credits at a discount, the tax burden can be reduced.
Tax credits are created by governments to incentivize certain business activities that are deemed socially beneficial to communities. Historic preservation, low income housing and renewable energy are all activities that the Federal Government has promoted through the issuance of Federal Tax Credits. To further incentive these activities, many states have created tax credits that offset state taxes in a particular state (state income tax, insurance premium tax, franchise and excise tax). State tax credits are created by individual state’s legislature and vary state-to-state. Tax credits are a direct reduction of tax liability, not a deduction and are not a “loop hole” put together by creative accountants.
Georgia Tax Credits
In Georgia, there are film and entertainment tax credits, low income housing tax credits (LIHTC), and historic rehabilitation tax credits. Georgia’s film industry is estimated to have had a $6 billion impact on the economy in 2015, based on a multiplier.
FILM:
For the Georgia Film, Television and Digital Entertainment tax credits, production companies may be awarded a tax credit up to 30 percent of dollars spent on production in Georgia. If a production company has little or no Georgia tax liability, it can directly transfer or sell its tax credits to another entity or individual. These credits are purchased through a transfer agreement between buyer and seller where price and other matters are stipulated. A transfer tax form, IT TRANS, is filed with the Georgia Department of Revenue to record the transfer. Monarch Private Capital (MPC) acts as a broker between the film company and the buyer. MPC vets all film credit projects to make sure the studio or production company’s paperwork is in order and all certifications have been met and received from the state (DOR). For Georgia film credits, the buyer can purchase credits in the current year, but use them in prior years, as far back at the year the credit was generated.
LIHTC:
The Georgia Low Income Housing Tax Credit Program was established in 2000 and allocates state tax credits to investors and developers of qualified low-income housing developments who reserve all or a portion of their units for low-income tenants. MPC invests in partnerships with project developers to receive the tax credits generated by the low-income housing developments. Thereafter, MPC creates a fund that contains the tax credits. Investors invest in the fund to receive an allocation of GA low income housing tax credits. The credits are reported through a K-1 (partnership tax form). The state tracks all developments earning LIHTCs and which are tracked from developer, through the fund, up to the end user/investor. For LIHTC, the investor must invest in the current tax year to receive the credit. If the taxpayer has excess credits, they may carry them forward for three additional tax years.
FEDERAL:
Federal investment tax credits are offered by the United States government to promote specific types of developments in various fields. Federal tax credits are generally suited for corporations that carry an annual income tax liability of $500,000 or more. Corporations investing in federal tax credits will typically see a substantial internal rate of return on their investment. Additionally, individuals with substantial passive income may also benefit from federal tax credits.
Our team at MPC works with historic rehabilitation, Federal Solar Investment Tax Credit (ITC) and affordable housing federal tax credits. In some cases, the provisions may mirror state regulations, in some cases, not.
In addition to the tax benefits of tax credits, many such investments offer opportunities for positive public relations. When investing in solar tax credits, you help reduce the negative impacts on the environment through the creation of clean power. When you invest in historic tax credits, you restore a lifelong part of the community to vitality and create a new future for historically significant buildings. When you invest in affordable housing credits, you prove to your community that you care about their well-being by creating affordable quality homes. When you invest in film credits you are supporting the arts and entertainment industry which creates thousands of new jobs and boost, the local economy.
Contact us to learn more about how to benefit and make an impact today.
Ben Zachariah is a GABB affiliate and serves as Director of Tax Credit Investments for Monarch Private Capital. Zachariah helps businesses and individuals identify, underwrite, and invest in federal and state tax credit investment opportunities, which afford them the ability to effectively reach and optimize their tax and wealth planning goals. Zachariah works with wealth managers, RIAs, CPAs, attorneys, and advisors to assist them in driving value to their client’s overall financial plans and strategy. Zachariah is a licensed CPA in the state of GA.
Zachariah specifically focuses on individuals with liquidity events, real estate investors, hedge fund managers, private equity managers, high-income earners in general ($1M plus of net taxable income), banks, profitable portfolio companies with cash flow, financial institutions and trust companies, insurance companies, and corporations with federal and multistate federal tax liabilities.
Zachariah has facilitated the placement of over $70M federal and state credits since joining the firm in 2016.
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