Entrepreneur Scott Ward has been on both sides of the negotiating table, both as a business buyer and a business seller. He will discuss better ways to work with prospective business sellers, to prepare a business to sell and other insights at the Sept. 24 meeting of the Georgia Association of Business Brokers.
The GABB, the state’s largest professional organization dedicated to buying and selling Georgia businesses and franchises, will meet at the auditorium of the Georgia Association of Realtors at 6065 Barfield Road, Sandy Springs, GA, 30328, and the meeting will last from 10:30 a.m. to noon preceded by a free light breakfast networking session at 9:45 a.m. The meeting will be sponsored by Kim Eells and Susan Kite, Senior Vice Presidents of SBA Business Development at Georgia Primary Bank.
Scott is a long time multistore franchisee of Winmark Corporation, the franchisor for brands Play It Again Sports, Plato’s Closet Once Upon A Child, Music Go Round and Style Encore. After 28 years as a franchisee, Scott recently sold his last Play It Again Sports location and will speak about his strategic five year plan he executed to enhance value, create potential buyers and market to sell for a premium. Scott worked with and without brokers during this process and from a small business owner’s perspective will provide us with tips and insights as to keeping the broker’s pipeline of prospects full.
Ward earned a grass roots MBA as a successful business owner for more than 20 years with proven ability to rapidly grow and profit despite enduring three recessions. He was a dedicated leader who mentored five employees to successfully own their own franchise businesses. He is especially skilled at gaining insight into stakeholders weaknesses and strengths through communication.
As the owner-operator of Play It Again Sports franchises, now publicly traded under Winmark Corporation, Ward maintained business growth through three recessions and contributed to the eventual stability of what is now one of the oldest and largest sporting goods entities in North America. He successfully sold his business for full valuation and continued to menter the new owner. Elected to the Winmark Corporation Franchise Advisory Council, he also was chosen chairman for seven years. He teaches speech writing, evaluation and idea generation for Toastmasters.
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 email@example.com, or GABB Executive Director Diane Loupe at firstname.lastname@example.org or 404-374-3990.
By C. David Chambless, president of Abraxas Business Services
Accountants routinely assist business owners to help accomplish the goal of minimizing taxes. But, to truly understand the value of the business and accurately project future cash flow, it is important to look beyond the tax returns to realize how the money is being spent.
Finding the money to start your own small business can be a challenge. Over the decades, countless people have turned to the Small Business Administration (SBA) for help. A recent Inc. Magazine article, “Kickstart Your Business Dreams with SBA Lending,” by BizBuySell President, Bob House, explored how SBA lending can be used to the buyer’s advantage.
The article covers the basics of an SBA loan and who should try to get one. House notes that the SBA doesn’t provide loans itself, but instead facilitates lending and even micro-lending with a range of partners. The loans are backed by the government, which means that lenders are more willing to offer a loan to an entrepreneur who might not typically qualify for one. The fact is that the SBA will cover 75% of a lender’s loss if the loan goes into default.
Entrepreneurs can benefit tremendously from this program. In some cases, an SBA loan even means skipping the need for collateral. SBA loans can be used for those looking to open a business, expand their existing business or open a franchise.
House points out that getting an SBA loan has much in common with receiving other types of loans. For example, it is necessary to be “bank ready.” By “bank ready,” House means that all of your financial documentation should be organized, clear to understand and ready to go.
Next, a buyer would need to check that he or she qualifies, find a lender and fill out the necessary SBA forms. In order to be eligible for an SBA loan, it is necessary that the business is a for-profit venture and that it will do business in the United States. Once the necessary forms have been submitted, it can take between 2 to 3 months for an application to be processed and potentially approved.
The simple fact is that the SBA helps thousands of people every year. If you are looking to buy a business or expand your current business, then working with the SBA could be exactly what you need. Of course, business brokers are experts on what it takes to buy. Working with a broker stands as one of the single best ways to turn the dream of owning a business into a reality.
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Where your money is concerned, myths can do damage. Tammie Miller, Managing Director of TKO Miller, explored five big M&A myths that can get you in trouble in a recent Divestopedia article, Crazy M&A Myths You Need to Stop Believing Now. Miller, who has more than 20 years of investment banking experience, says many of these myths are believed by CEOs despite having zero basis in reality.
Myth 1: Negotiating is Done After You Sign the LOI
The letter of intention is, of course, important. However, this is by no means the end of the negotiations and it is potentially dangerous to think otherwise. The negotiations are not concluded until there is a purchasing agreement in place. As Miller points out, there is a great deal that can go wrong during the due diligence process. For this reason, it is important to not see the LOI as the “end of the road.”
Myth 2: You Must Assume Seller Debt
Yyou don’t have to take a company’s debt as part of the purchase price, Miller says. Miller says her clients only “take seller paper when that debt bridges a big discrepancy in valuation.” She and other business brokers often recommend against seller paper “because it rarely comes with the appropriate protections professional debt holders (like banks) require.”
Myth 3: Everyone Who Makes an Offer Can Afford To
The idea that everyone who makes an offer has the money to follow through is, unfortunately, simply not true. Often people will make offers without securing the money to actually buy the business. Not only does it waste everyone’s time, it can derail your progress in selling your business. If you are not careful, it could actually prevent you from finding a qualified buyer. Check out any offers with an investment banker or trusted advisor.
Myth 4: I Can Sell Without a Deal Team
Somet sellers think they don’t need a deal team in order to sell their business. While it may be possible to sell your business without the assistance of an experienced M&A attorney or business broker, the odds are excellent that doing so will come at a price. Miller says working with an investment banker or business broker can add, on average, 20% more transaction value!
Additionally, there are other dangers in not having a deal team in place. A business broker can handle many of the time-consuming aspects of selling a business, so that you can keep running your business. It is not uncommon for business owners to get stretched too thin while trying to both run and sell a business and this can ultimately harm its value.
Myth 5: You Must Sell Your Entire Business
True, most buyers will want to buy 100% of a business, but a minority ownership position is still an option. There are many reasons to consider selling a minority stake, so don’t assume that selling your business is an “all or nothing” affair.
Ultimately, Miller lays out an exceptional case for the importance of working with business brokers when selling or buying a business. Business brokers can help you avoid myths. In the end, they know the lay of the land. To find a list of Georgia business brokers, visit the GABB directory.
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Before buying any business, a seller must ask questions, lots of questions. If there is ever a time where one should not be shy, it is when buying a business. In a recent article from Entrepreneur magazine entitled, “10 Questions You Must Ask Before Buying a Business”, author Jan Porter explores 10 of the single most important questions prospective buyers should be asking before signing on the dotted line. She points out to remember that “there are no stupid questions.”
The first question highlighted in this article is “What are your biggest challenges right now?” The fact is this is one of the single most prudent questions one could ask. If you want to reduce potential surprises, then ask this question.
“What would you have done differently?” is another question that can lead to great insights. Every business owner should be an expert regarding his or her own business. It only makes sense to tap into that expertise when one has the opportunity. The answers to this question may also illuminate areas of potential growth.
How a seller arrives at his or her asking price can reveal a great deal. Having to defend and outline why a business is worth a given price is a great way to determine whether or not the asking price is fair. In other words, a seller should be able to clearly defend the financials.
Porter’s fourth question is, “If you can’t sell, what will you do instead?” The answer to this question can give you insight into just how much bargaining power you may have.
A business’ financials couldn’t be any more important and will play a key role during due diligence. The question, “How will you document the financials of the business?” is key and should be asked and answered very early in the process. A clear paper trail is essential.
Buying a business isn’t all about the business or its owner. At first glance, this may sound like a strange statement, but the simple fact is that a business has to be a good fit for its buyer. That is why, Porter’s recommended question, “What skills or qualities do I need to run this business effectively?” couldn’t be any more important. A prospective buyer must be a good fit for a business or otherwise failure could result.
Now, here is a big question: “Do you have any past, pending or potential lawsuits?” Knowing whether or not you could be buying future headaches is clearly of enormous importance.
Porter believes that other key questions include: “How well documented are the procedures of the business?” and “How much does your business depend on a key customer or vendor?” as well as “What will employees do after the sale?”
When it comes to buying a business, questions are your friend. The more questions you ask, the more information you’ll have. The author quotes an experienced business owner who noted, “The more questions you ask, the less risk there will be.”
Business brokers are experts at knowing what kinds of questions to ask and when to ask them. This will help you obtain the right information so that you can ultimately make the best possible decision.
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