When buyers are looking to make a purchase, the most important step they can take is to perform due diligence on both the business and the seller. And yet, many sellers don’t their due diligence on buyers.
Deals fail all the time. Sadly, this means that all parties lose a tremendous amount of time and effort. Additionally, sellers not only waste time, but often lose money due to business disruptions while working with a prospective buyer.
Let’s look at a few warning signs that might identify a troublesome buyer. The sooner you spot these red flags, the sooner you can avoid potential problems.
Sellers should ask several key questions of buyers:. The list includes:
-What, if any, other businesses have you considered to date?
-How much equity will you be committing?
-Do you have any experience with my kind of business?
Sellers should look for warning signs early on to avoid wasting considerable time. Listen to your gut instincts. If you feel that a prospective buyer isn’t serious and may only be window shopping (or if you feel that the buyer is looking for a far greater deal than you are willing to provide), then simply move on. When you cut your losses early on, this frees you up to focus on prospective buyers that are a better fit.
What if your intermediary informs you that there has been no communication from the prospective buyer after they received the memorandum? Simply stated, this lack of communication could mean that the prospective buyer has changed their mind, or was never that serious in the first place.
Another red flag you might see is when the process is turned over to a junior member of the prospective buyer’s management team. Another is when the prospect doesn’t provide details or information concerning their financial capability to successfully complete the deal. If any of these three red flags pop up, you should consider being proactive. You and your broker might want to reach out to the prospective buyer and ask to meet to discuss the situation.
Warning signs can also occur just prior to closing. Even after the letter of intent has been signed, problems may arise. An inexperienced attorney representing the buyer, one that simply doesn’t understand what is involved in a deal, can doom what could have otherwise been a good deal. The same is true for an over aggressive attorney. One potential remedy for this situation is for your own attorney to intervene and discuss the situation.
Spotting warning signs is about more than not wasting everyone’s time. When you can observe these indicators and act effectively to address them, it can help keep deals on track. Working with a business broker or M&A advisor is an excellent way to not only spot red flags, but also to know how to respond appropriately. The end result will be more successfully completed deals.
Selling your business is likely to be the single most important financial decision you’ll ever make. Therefore, you must prepare far in advance. Let’s look at some of the key items you’ll want to consider before placing your business on the market.
Settle Legal Issues
When it comes to selling a business, legal issues should be at the forefront of your thoughts. After all, selling your business does involve the creation and execution of a complex and detailed legal agreement. There are many times in life where it is possible to cut corners, but hiring a good lawyer or law firm is not one of those times. Moreover, you’ll want to settle all litigation, environmental issues or other issues that could potentially derail a sale.
Deal with Serious Buyers
Working with a good business broker or M&A advisor is an essential part of the selling process, as these professionals will help you to weed out “window shoppers” as well as prospective buyers who are simply not a good fit for your business. Any serious buyer should be willing to submit a Letter of Intent. Everyone should be on the same page as far as price and terms as well as what assets and liabilities are to be assumed. This second point reinforces the first point. An experienced lawyer is essential to help guide you through various aspects of the sales process.
Be Flexible on Price
Be prepared to accept a lower price than you might ideally want. There are many reasons that this may occur, ranging from a lack of management depth and a lack of geographical distribution to a dependence on a limited number of clients. Reliance on a small number of customers and/or clients can give potential buyers pause, as it could raise concerns regarding the stability of your business. Addressing these issues years before placing your business on the market can help you achieve the price point you desire. This is yet another reason to work with a business broker in advance.
Improving Your Chances for Success
The are other steps you can take to enhance the value of your business. Increasing the visibility and profile of your business is always a savvy move. Consider attending trade shows, boost your online profile by stepping up your social media game and explore creating a coherent public relations program.
Finally, selling a business is often a waiting game. You have to be psychologically prepared to wait a considerable period of time before your business is sold. Most businesses sit on the shelf for a considerable period of time before they are sold.
Preparation, patience and good organization will dramatically increase your chances of selling your business and achieving a satisfying price. The sooner you begin organizing your business and working with experienced professionals, the greater the chances of success will be.
The post How to Optimize Your Chances of Selling Your Business appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Up your level of professionalism and impress your clients! Earn the Board-Certified Broker certification, developed to improve the knowledge and professionalism within the business brokerage community.
By earning this certification, you will tell potential clients that you are an expert in buying and selling businesses in Georgia. The certification program was developed by the GABB under the direction of GABB Board Vice President Judy Mims and GABB Executive Director Diane Loupe. The GABB operates a Real Estate School, license #8074 from the Georgia Real Estate Commission, specializing in training business brokers.
The BCB certification program will consist of 40 hours of training in the profession with hands-on teachers active in the industry.
Two classes will be offered during the GABB’s Oct. 27-28 Fall Conference that will be part of the BCB curriculum, although brokers may enroll in the class without being part of the BCB program. The first two classes are:
BUSINESS VALUATION BASICS, GREC Course #72444– Oct. 27, 9 a.m.-Noon. Students will learn how the market value of a business is determined and study fair market value, strategic or synergistic value, the market and income approaches to valuation, understanding ethical dilemmas in business valuation, and other concepts. Approved by the GREC for 3-hours of CE credit.
Instructor: GABB Affiliate DAN BROWNING, founder and President of DB Consulting, Inc. He holds a Master Analyst in Financial Forensics (MAFF) from the National Association of Certified Valuators and Analysts, originally awarded August 1999; he is Accredited in Business Appraisal Review (ABAR) from the National Association of Certified Valuators and Analysts, originally awarded March 2010; he is a member of the State Bar of Georgia (Active Member; Eminent Domain and Nonprofit Law Section Memberships); and was a member of the Editorial Board, Business Appraisal Practice (IBA Journal) 2013-2015.
BUSINESS BROKER PRACTICE APPROACHES, GREC Course #72445 – Oct. 28, 9 a.m. – Noon. Students will learn about the advantages and disadvantages to specializing in a particular field or being a business broker generalist, including identifying industry specializations, understanding and resolving ethical issues that may arise, and understanding how professional business brokers structure their practices. The GREC has approved this class for 3-hours of CE credit.
ROBIN GAGNON, Co-Founder of We Sell Restaurants and wesellrestaurants.com, the nation’s largest restaurant brokerage firm and the only national franchise specializing in restaurant sales. One of the most prolific restaurant brokers in the industry and a franchise resale specialist, she holds the Certified Business Intermediary (CBI) designation from the International Business Brokers Association or IBBA and is an MBA. She has also achieved the Certified Franchise Executive (CFE) designation from the International Franchise Association. Robin oversees the development and training of Restaurant Brokers nationwide and has created the industry’s only Certified Restaurant Broker coursework and testing program.
J. SNYPP III, a former GABB Board member and a life member of the Million Dollar Club, lives in Dunwoody, grew up in Atlanta and graduated from Georgia Southern University with a degree in marketing. Mr. Snypp spent more than two decades in the office furniture business before becoming a Business Broker and has been with Preferred Business Brokers, Inc. for more than 10 years. He has found success selling businesses in a variety of industries most recently selling a day care center, landscape company and distribution business.
Each class will be offered online via Zoom link. Students must be present for the entire class to get CE credit.
To enroll in the BCB Certification Program
Application to enroll in the GABB’s Board-Certified Broker Program: $195 + $40 for classes.
Cost for both classes for GABB Members – $75
Cost for both classes for non-GABB members – $100
The Georgia Association of Business Brokers is launching a new educational program which will enable our members to achieve proficiency in the profession of business brokering. The Board-Certified Broker designation, or BCB, is intended to make clear to prospective clients that the broker has the knowledge and skills to professionally represent them in future transactions.
The GABB operates Georgia’s only Real Estate School dedicated specifically to business brokerage. The BCB curriculum includes 40 hours of coursework designed to be completed over a 2-year period. During this extraordinary time in our nation’s economy, the GABB believes that an excellent use of time would be to strengthen the skills professionals need to represent clients fairly, ethically and responsibly.
Scroll to the bottom of the page to register for the program.
PROPOSED CURRICULUM FOR BCB CERTIFICATION
Introduction to Business Brokerage – 3 hours
This class is designed to familiarize a new practitioner with the basic concepts and terms used in business brokerage.
Elements of Value: An exploration of how a business broker analyzes a company. Defining those elements for a new practitioner.
- Cash Flow
- Assets, including real estate
- Ease of Duplication
- Intellectual Property
- Good will
- The broker should always think about what a lender, especially the SBA, will need to see to approve a loan.
Confidentiality Concerns: An exploration of the need for confidentiality in business transactions and best practices to keep a listing confidential.
Business Broker Process – 3 hours
- Finding sellers
- Preparing listings
- Finding qualified buyers
- Negotiating and closing sales
- Commission/Fee Structure and Getting Paid
Securing Business for Sale Listings – 3 Hours
- Researching comparable properties
- What information should you gather?
- Listing Agreement basics
- Negotiating the commission
- Understanding Co-brokering
Introduction to Accounting Terms and Federal Tax Returns – 3 HOURS
- Basic Accounting Terms – 90 Minutes: An introduction to accounting terms frequently used by business brokers, e.g. revenue, net profit, add backs, Seller’s Discretionary Earnings, EBIT, EBITDA, etc.
- Net Income Per Books – this is the number most lenders use to calculate cash flow for debt service.
- All Brokers should know that SBA requires lenders to use tax returns in underwriting.
- Introduction to Federal Tax Returns – 90 minutes
A basic look at business tax returns (Sub-chapter S corporations, C Corporations, partnership, etc.) and why they are crucial to the sales process. How these are used by bankers.
Understanding Financial Statements – 3 Hours
The basics of analyzing a company by looking at its financial statements.
- Profit & Loss statements
- Balance Sheets
- Tax returns
Recasting Financials – 3 Hours
- Recasting financials to get Seller’s Discretionary Earnings (SDE)
Business Valuation Basics – 3 Hours
How to Value Businesses (understanding multiples, other considerations
- The basics of business valuation. Understanding the role that the cash flow plays in a business brokerage transaction.
- Using business reference guide, I.e., Tom West’s Business Reference Guide
- Rules of thumb based on both sales and earnings (SDE)
- Pricing tips from industry experts
- Benchmark information that provides comparison data
- Industry resources such as associations and publications with websites
- General information providing industry data, surveys, and comments
- Facts about many different businesses and industries
- How to value inventory, brief overview
Financing a Business Sale – 3 hours
How business transactions are financed and the advantages and disadvantages of each method.
- SBA loans, requirements
- 7 (a)
- FDA loans
SBA Loan requirements in detail: cash injection, collateral, industry (or relatable) experience, cash flow, to name a few.
- Seller financing
- Conventional commercial financing
- Use of 401K and other retirement funds
- Developing a Business Plan
Understanding Business and Corporate Structures – 3 Hours
- Introduction to business entity types
- Discuss the many different business entity types, including corporations, LLCs, and partnerships
- Introduction to Corporate Structures and the advantages and disadvantages of each.
- How to work with corporations,
- Business Structures: and LLCs, and partnerships or LLPs.
- Ownership interests and authority
- Secretary of State web site: finding out if the company is a validly registered business, requesting a SOC certificate.
- Governing documents for various business and corporation types.
- Operating Agreements for LLCs.
- Partnership Agreement
- Corporations will have bylaws
- Which legal documents you should see before taking a listing
- How these documents will fit into the transfer of the business.
- Shareholder agreements and Buy-sell agreements and how they affect the sale of a business.
- Is there anything in these documents which will affect the sale of the business? Suggest we have a business broker co-teaching class with lawyer to discuss how it’s affected the class.
LEGAL ISSUES In Business Brokering – 3 hours
This class is designed to help the new broker understand business structures and how to transfer them using preprinted forms. It is also to cover what issues can be addressed by a business broker and what issues must be addressed by a lawyer
- Using GABB forms
- Asset purchase agreements VS. stock-purchase agreements
- Stock purchases aren’t as common, if there’s some kind of licensing or intellectual property in a company. Stock purchase, taking the liabilities of the business
- Non-compete agreements
- Liability for brokers
- Earnest money and settling disputes
Business Brokering Ethics – 3 hours
Ethical issues that are unique to business brokerage. Must meet the GREC requirements for ethics training.
- Rules, regulations, regulatory bodies that govern business brokers (Nick suggestion)
- Standards of care (Nick suggestion)
- Conduct (Nick suggestion)
- Duties to client
- Duties to customer
- Agency – Broker’s duty to buyer and seller depends on contractual obligations
- Co-brokering and splitting commissions
Business Broker Practice Approaches – 3 Hours
- Defining your market
- Should you specialize? Why or why not?
- Identifying industry specializations
- Understanding and resolving ethical issues
Setting up Your Business Broker Practice – 3 hours
What parameters should a new broker consider in setting up their practice? Class will examine various brokerage models.
- Finding Sellers
- Identifying the best buyer and reaching them
- Promoting your practice
- Growing your practice
- GREC Advertising Rules
- Buy side brokerage
Understanding LEASES in a Business Transaction – 3 Hours
Frequently, business brokerage includes a real estate component. Business brokers should have some knowledge of lease terms; and know how to identify comparable properties to provide Sellers with guidance on property value if the property is included in the transaction.
- Lease Terms & Conditions
- Subordination and Non-Disturbance Clauses
- Valuing below-market lease rates
- Lease assumptions
Valuing Real Property – 3 Hours
- Valuing Real Property for Sale
Negotiations – 3 hours
How to achieve the best outcome for you and your client. Negotiation techniques that work.
- Listing Agreement/asking price and commission
- Working with Buyers
- Getting to an Agreement
- Price & Deal Structure
Marketing Your Listings – 3 Hours
- Finding the “best buyer” for a listing
- Protecting your client’s confidentiality
- Offering prospectus
- GREC Advertising laws, including:
- Any advertising that is misleading or inaccurate in any material fact or in any way misrepresents any real estate is prohibited. Whenever a licensee becomes aware that a principal with whom the licensee’s firm has a brokerage engagement is advertising to sell, buy, rent, lease, or exchange real estate in such a manner that is inconsistent with this rule, the licensee must immediately take steps to stop the advertising until it complies with this rule.
- A licensee shall not advertise any real estate for sale, rent, lease, or exchange unless the licensee has first secured the written permission of the owner, the owner’s authorized agent, or the owner of a leasehold estate. When such permission is granted, a licensee advertising real estate that is listed with another firm shall clearly and conspicuously disclose that fact and the name of the listing firm unless the listing firm has expressly agreed in writing to waive those clear and conspicuous disclosures.
- A licensee shall not advertise to sell, buy, exchange, rent, or lease real estate when such advertisement is directed at or referred to persons of a particular race, color, religion, sex, handicap, familial status, or national origin. The contents of any advertisement must be confined to information relative to the real estate itself, and any advertisement that is directed at or referred to persons of any particular race, color, religion, sex, handicap, familial status, or national origin is prohibited.
Due Diligence – 3 hours
What to expect during the due diligence process.
- Proving cash flow/examining the books
- Examining real estate
- Examining corporate structure
- Customer lists/revenue streams
- Non-compete clause
- Warranties and guarantees
- Advance Payments
Proposed: To earn the BCB Certification, business brokers must:
- Earn 40 credits, including 30 hours of required classes, and 10 electives
- Each class will have a written test, and brokers must pass the final test to earn credit
- Have at least two years of business brokering experience.
- Be a member of the Georgia Association of Business Brokers
- GABB members who wish to obtain the certification may opt to pay a fee to take the final test of the course in lieu of taking the class. This option will not confer any CE credits.
- Pay a non-refundable enrollment fee: $195
- Final examination and certificate fee: $195
- Additional fees for taking BCB classes will apply.
- This curriculum is subject to revision by the GABB board and the GABB Real Estate School.
Register for the GABB Program here:
Clients who want to buy or sell a business want to know they are working with a business broker who knows what they’re doing. That’s why the Georgia Association of Business Brokers is preparing a certification program to help train business brokers to better represent their clients.
Business brokers and those who aspire to become brokers are invited to the GABBs’ virtual meeting on Aug. 4, 2020, at 10 a.m. to hear about the Board-Certified Broker or BCB proposal. Please register to receive the link to attend the meeting.
The GABB believes that to be a successful business broker, a person must understand issues beyond those typically covered by real estate schools. That’s why the GABB has acquired a license from the Georgia Real Estate Commission (GREC) to operate a real estate school, the only such school in Georgia dedicated to business brokering. The proposed BCB program will teach business brokers what they need to know about accounting terms, federal tax returns, understanding financial statements, recasting financial statements, business and inventory valuation, financing a business sale, understanding legal issues, understanding business structures, confidentiality, marketing, ethics, due diligence, securing business-for-sale listings, and setting up a business broker practice.
At the Aug. 4 meeting, members and others will be able to offer feedback on our proposal.
Under Georgia law, there is no specific licensing requirement to be a business broker. However, anyone selling or buying, offering to buy or sell, acquiring prospects to buy or sell or negotiating for the buying or selling of real estate for compensation must be licensed by the GREC. According to section 520.1-.19 of Georgia law, Business Brokers are covered by the same legal requirements as any Real Estate licensee if the sale includes the transfer of any interest in real estate, including leases.
For more information about GABB, please email email@example.com or call or text 404-374-3990, or contact GABB president Dean Burnette at firstname.lastname@example.org or (912) 247-3209.
Register in advance for this meeting:
After registering, you will receive a confirmation email containing information about joining the meeting.Read More