Stephen “Steve” Mariani, owner of Diamond Financial Services and a board member of the International Business Brokers Association (IBBA), spoke to business brokers this week about compiling a listing or offering memorandum.
In a lively talk, which you can hear online, Mariani talked about the top things that buyers look for in a business-for-sale listing, and what lenders look for in an offering memorandum, a detailed description of a business for sale.Buyers are also interested in the location of a business as well as whether there is growth potential in the industry, Mariani said. Financing options, especially owner financing, are very important.
After the price of the business, most buyers will want to know about its cash flow and seller’s discretionary earnings. While it may be common to have family members on the payroll, claiming a personal home mortgage as a business expense is likely to attract unwanted scrutiny from lenders. And lenders are required by law to report instances of flagrant tax fraud, he said.
Listings that go through the effort to be pre-qualified by lenders, or eligible for SBA loans, are automatically more attractive to buyers, Mariani said. That means an objective professional has examined the business’s financials and brings “immediate confidence in the numbers presented.”
“If the listing can service the debt at the asking price, then cash flow after debt service becomes apparent to a potential buyer,” Mariani told the brokers. “Most buyers understand this and calculate it for themselves.”
Today’s borrowers are learning that they can purchase much more cash flow than they once thought, he said. Most high net worth borrowers are looking to maximize their ROI by using financing options. In Mr. Mariani’s PowerPoint Presentation: Compiling Offering Memoranda, he covered items every lender will look for, including purchase price, working capital, SBA fees and closing costs, etc. The GABB, an IBBA affiliate, is the state’s premier organization dedicated to professionals who buy and sell businesses in Georgia.
What three things should be left OUT of your offering document? Avoid listing specific qualifications a potential buyer must have to purchase the business, because this could scuttle a sale, Steve said. Although most lenders like to see three years of direct or one year of related experience in a field, this varies greatly.
Avoid listing personal add backs. If more than 20 percent of the seller’s discretionary earnings comes from personal add backs, the lender will be concerned.
Designating anyone at the business as a “key” employee, i.e., one that is critical to the operation and success of the business, raises a lot of red flags, may necessitate a form 1919 or a “required” personal guarantee of the employee, Mr. Mariani said.
Mr. Mariani’s company has helped small business owners realize their dreams by funding more than $1 billion in acquisition loans during the past 24 years. Diamond has become the nation’s largest privately owned non-bank SBA acquisition loan generator that serves only the broker markets. Steve has also been producing and presenting broker training webinars and workshops for the last 11 years at various conference events.
After witnessing the difficulty and challenges some business buyers experienced securing business loans to acquire a business, Mr. Mariani learned the intricate, complicated world of the Small Business Administration (SBA) loan process. He mastered the SBA SOP (Standard Operating Procedure) rules and regulations and has become a major source for many national lenders. Business Brokers, lenders and owners nationwide seek Steve’s advice and he has become the “expert” in SBA loans. His understanding of SBA rules also allows for providing the most aggressive financing available nationwide.
The GABB is the state’s largest and oldest association of professionals who specialize in brokering the purchase and sale of businesses and franchises. Broker members help owners determine the asking price of their business, create marketing plans and strategies for selling their business, identify and qualify buyers, and have the knowledge, experience and skills needed to help maintain the confidential nature of the process. The professionals of GABB relentlessly pursue professional development so they can provide superior, ethical services for all customers and clients. Affiliate members include bankers, lawyers, appraisers, insurers and other professionals who work closely with brokers to help owners and buyers get to the closing table.
For more information about GABB, please contact GABB President Dean Burnette at 912-247-3209 or firstname.lastname@example.org, or GABB Executive Director Diane Loupe at email@example.com or 404-374-3990.Read More
A major part of selling your business is getting the word out. After all, the more people that know your business is for sale, the better off you’ll be. Bob House, the president of BizBuySell, recently described how a well-written business-for-sale advertisement could attract higher offers from real buyers. His article for Inc. magazine, “How to Create an Effective Business for Sale Ad and Ensure It Gets the Best Result, ” offered tips on creating a listing that should attract stronger offers from more serious buyers while maximizing exposure.
Getting the Word Out
As House wisely points out, many sellers wait until the last second create a good sales ad. Unfortunately, many sellers fail to grasp the real importance of creating a quality and compelling advertisement. Imagine creating a good sales ad like you would going fishing with a group of friends. The more friends you have on your fishing trip, the greater the odds that someone catches a fish. In much the same way, the more people who know you are selling your business, the greater the chances that you’ll get some serious “bites.”
Tips for Receiving More Attention
Topping the list of five key tips for your sales ad: be descriptive. Your sales ad should give an excellent description of your business and its unique features. “If you provide only limited details, prospective buyers might lose interest or assume you have something to hide,” writes House. In other words, now is not the time for mystery. “Paint a clear picture of where the business is, where it’s going and what the buyer can expect upon purchasing,” he recommends.
To grab a prospective buyer, your headline should be “punchy, eye-catching and informative.” People have always skimmed, but the rise of the Internet has taken skimming to a whole new level. Your headline should capture people’s attention. Determine what your business’s best feature is and emphasize that feature in your headline.
Incorporate Top-Notch Images
Just as a great headline will capture people’s attention, a great picture will get prospective clients to read your ad. Consider having a professional photographer take the photo, as he or she may have tips to make your business look its best that you may simply not know. If confidentiality prevents you from taking pictures of the business, consider good quality stock photos. Websites such as Pexels are great resources for free stock photos.
Your ad should definitely include key financials such as balance sheets and cash flow and income statements. Any serious buyer will be very concerned, if not obsessed, with your financials. Many potential buyers will focus their business searches around these key financial metrics, and they will be suspicious if you omit them.
Don’t Forget the Final Step: PROOFREAD!
Finally, if there has ever been a time in your life to proofread, this is the time. In fact, you should consider hiring a proofreader to look over your ad for grammar and spelling mistakes. As House notes, you want prospective buyers to realize that you are detail-oriented and responsible. A simple grammar or spelling mistake could wreck a potential deal.
Creating a great sales ad is an art form. One of the best ways to ensure that you have a great sales ad is to work with an experienced business broker. Business brokers know what buyers are looking for, have great marketing professionals at their disposal, and can help you frame your business in the best light possible.
Atlanta –Georgia earned the top ranking for workforce development in the South Atlantic Region, according to Site Selection Magazine’s 2020 Workforce Development Rankings.
Site Selection is an internationally circulated business publication focusing on corporate real estate and economic development. In November 2019, the publication also ranked Georgia the number one state for business for a record-breaking seventh consecutive year.
In the announcement, Site Selection Editor Mark Arend pointed to ranking factors “relative to other states in the same region based on five national and objective measures” such as depth of the labor pool, availability of certified applicants for job openings, and legislatures that are committed to funding workforce programs.
“As I’ve said in communities throughout the Peach State, the hardworking Georgians who make up our workforce are the foundation of our competitive edge in attracting business – both in the Southeast and across the country,” said Governor Brian P. Kemp. “I’m excited that Site Selection Magazine has recognized yet another reason why Georgia is the best state in which to live, work, and raise a family.
“Working hand in hand, the University System of Georgia, the Technical College System of Georgia, and our leading workforce development program, Georgia Quick Start, have produced a top-notch workforce that companies can count on to get the job done. Looking ahead, we are committed to working with our partners throughout state government and in local communities to ensure that more businesses call Georgia home and continue to create opportunities for families throughout our state.”
Site Selection’s rankings are based on a combination of factors, including CNBC’s America’s Top States for Business 2019, Workforce and Education sub-ranking; Forbes’ most recent Best States for Business Labor Supply sub-ranking; U.S. News’ Best States for Education rankings; ACT National Career Readiness Certificates rankings; and the workforce preparation and development component of the State Economic Development Program Expenditures Database from the Council for Community and Economic Research.
“Workforce development is the number one issue for so many of the companies that we work with, and business decision-makers understand that training programs like our No. 1 Georgia Quick Start offer a readily available workforce that will help their businesses not only meet their goals, but carry them to new heights,” said Georgia Department of Economic Development Commissioner Pat Wilson. “Georgia’s partnership approach is working to support economic development across our entire state and keep it attractive to businesses and job creators. This exciting news is a great way to start a new year as we continue generating hope and new opportunities for Georgians.”
Georgia has long received recognition from leading companies and site consultants for its attractive business climate. The state’s workforce training program, Georgia Quick Start, is the best program in the United States. Logistics hubs like the Port of Savannah and Hartsfield-Jackson Atlanta International Airport connect businesses to their consumers across the globe, and the state’s pro-business policies make Georgia a competitive option for companies looking to locate or expand.
In fiscal year 2019 alone, the Georgia Department of Economic Development supported the creation of nearly 29,000 new jobs through the location of 332 projects, 74 percent of which were located ou
tside of metro Atlanta.Read More
GABB Board member Matt Wochele and his partner, J. Snypp, met Wednesday with six new members. The group spoke about the listing process and the follow up to managing a listing. Matt and J. shared some stories of listings; both are Million Dollar Club veterans. The brokers covered things that are expected and common and also how to handle the unexpected. Matt will host another informal Q&A session after the Feb. 19 GABB meeting.Read More
In his recent article in Smart Business entitled, “How to get your business, and yourself, ready for sale,” author Adam Burroughs explores the key points of getting your business ready to sell. Burroughs points to the truism that, at some point, almost every business owner must sell his or her business. For this reason, it is critical to think about what it takes to get your business ready to sell. Simply stated, it is best to explore and plan for selling your business long before you actually need to place your business on the market. Let’s explore some key points for selling your business.
Broadening Your Options
Burroughs interviews Scott McRill at Clark Schaefer Hackett. McRill notes, “The sooner you think about your exit, the more options you’ll have for yourself and the business when the time comes.” A savvy business owner will always want to give himself or herself as many options as possible. McRill wisely points out that early planning is key, and a failure to engage in early planning could lead to a lower selling price. If you want to get the best price for your business, then planning for the eventual sale as far in advance as possible is a good move.
Planning in Advance
According to Burroughs, business owners should start planning to sell their business at least 2 to 3 years before they actually plan to sell. Part of the reason for this is so that business owners will have enough time to make operational improvements designed to maximize the business’s overall value.
A Financial Review
At the top of every business owners “preparing to sell” list is to have a third-party review the business’s financial situation. This is excellent advice for, as frequent readers of this blog know, any serious prospective buyer will look long and hard at your business’s financials. Getting your business’s financial house in order means that you should turn to an accounting firm for help. You’ll want to review financial statements for at least the previous 2 to 3 years.
Burroughs points out that when it comes to selling a business, there are many variables that business owners often overlook. At the top of the list is the management team.
Your Management Team
Prospective buyers can get very nervous about the stability of the management team once ownership has changed hands. Often, the new buyer may only sign on the dotted line if the owner agrees to stay on after the sale during a transition period. Having a competent and proven team in place, one that is dedicated to staying with the company will help you get your business ready to sell.
There are a lot of variables involved in preparing to sell a business. The sooner that you get experts involved in the process, the better off you will be. A business broker can serve as a guide – one that can point you in the right direction. Find a broker with an abundance of experience, and you’ll have an invaluable ally who can help you navigate the process. It can take a lot of time and effort to sell a business. Working with a business broker can keep you from reinventing the wheel at every step of the process.