The business sale process can be complex, which is why it’s best to have expert help from a business broker. Brokers can help you avoid costly legal mistakes which can bring the entire sale process to a sudden and complete halt. Let’s take a closer look at what you can do to avoid these kinds of issues when selling your business.
Major Mistake 1 – You Skipped the Non-Disclosure Agreement
Nothing quite invites trouble like skipping the non-disclosure agreement. If a deal falls through, then you have the NDA backing you up. This document ensures that the prospective buyer doesn’t tell the world that your business is up for sale. Never assume that a deal is going through until it actually is 100% complete. There is plenty of room for things to go wrong when buying or selling a business, and that is why you always need to have an NDA in place.
Major Mistake 2 – You Don’t Work with an Attorney
Let’s be very blunt here, if you are selling a business, then you need an attorney. Just as there is no replacement for an NDA, the same holds true for working with a lawyer. It is also vital that you properly prep your business for sale, which means getting paperwork organized and making sure that you have legally checked all your boxes. Working with an experienced and proven attorney will help you ensure that your business is ready for sale. If you’re not prepared for the deal, it can make buyers nervous. Business brokers can recommend attorneys who are familiar with the purchase and sale of businesses in your state.
Major Mistake 3 – You Failed to Get a Letter of Intent
A letter of intent is a vital legal document. Some sellers are reluctant to use it, fearing that it will slow down the momentum of the deal. However this letter works to protect your interest and outlines expectations, so this step should not be skipped. For example, a letter of intent details the termination fee for the buyer, meaning that the buyer can’t walk away without consequences simply because he or she is having a bad day. Importantly, a letter of intent ensures that you are only dealing with serious buyers instead of wasting your time with window shoppers.
Many things can go wrong while selling a business. The more prepared you are before you begin the process, the greater the chances that you will not only avoid headaches, but also be successful. Long before you put your business on the market, you should begin working with a capable business broker and attorney. Their input and advice will prove to be invaluable and help you avoid a range of costly and time-consuming issues.Read More
When it comes to buying a business, nothing is more important than the factor of due diligence. For most people, this investment is the single largest financial decision that they will ever make. And with this important fact in mind, you’ll want to leave absolutely no stone unturned.
Let’s examine the three most commonly overlooked areas when it comes to buying a business: retirement plans, 1099’s and W-2’s, and legal documents.
1. Examine All Legal Documents
While it may sound like a “pain” to investigate all the legal documents relating to a business that you are vetting for purchase, that is exactly what you have to do. The very last thing you want is to buy a business only to have the corporate veil pierced. “Piercing the corporate veil” refers to a situation in which courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s actions or debts. Everything from trademarks and copyrights to other areas of intellectual property should be carefully examined. You should be quite sure that you receive copies of everything from consulting agreements to documentation on intellectual property. Your business broker can recommend attorneys who are familiar with legal issues involving the purchase of a business.
2. Retirement Plans
Forgetting about retirement plans when you’re buying a business is a mistake can quietly translate into disaster. Before signing on the dotted line and taking ownership, be sure that both the business’s qualified and non-qualified retirement plans are 100% up to date with the Department of Labor and ready to go.
3. W-2’s and 1099’s
If 1099 forms were given out instead of W-2’s, you’ll want to know about that and be certain that it was done within the bounds of IRS rules. Imagine for a moment that you fail to do your due diligence, buy a business and then discover that you have problems with the IRS. No one wants IRS problems, but a failure to perform due diligence can quickly result in just that. So do your homework!
There can be many skeletons hiding in a business, and you want to be sure that you protect yourself from any unwanted surprises. One exceptional way to protect yourself is to work with a business broker. A business broker knows what to look for when buying a business and what kinds of documents should be examined. There is no replacement for the expertise and experience that a business broker brings to the table.Read More
If you own or operate a Georgia business, you can get free confidential consulting services including helping with business plans, buying businesses and leasing space. Find out how on Sept. 25 when two experts with the University of Georgia’s Small Business Development Center speak to the Georgia Association of Business Brokers.
Area Director Jeff Patterson and Business Consultant Aysha Cooper will speak to the GABB at their Sept. 25 monthly meeting. The meeting is free and open to the public and will be held at the Atlanta Realtors Center at 5784 Lake Forrest Dr. NW, Atlanta, GA 30328. The meeting begins at 10:30 a.m., preceded at 9:45 a.m. by a free light breakfast and networking session sponsored by GABB affiliate and board member Kim Eells, Vice President and Business Development Officer of Government Guaranteed Lending for Renasant Bank.
The Small Business Development Center, a Public Service and Outreach Extension of The University of Georgia, is funded in part by the U.S. Small Business Administration (SBA). It provides tools, training and resources to help small businesses grow and succeed. Designated as one of Georgia’s top providers of small business assistance, the SBDC has 17 offices ranging from Rome to Valdosta to serve the needs of Georgia’s business community. Since 1977, the SBDC’s network of partners has helped construct a statewide ecosystem to foster the spirit, support, and success of hundreds of thousands of entrepreneurs and innovators. The University of Georgia Small Business Development Center is nationally accredited by the Association of SBDCs.
Mr. Patterson, an area director with the Small Business Development Center at Georgia State University, has extensive financial industry experience that includes leadership roles in credit administration, commercial lending, operations management, regulatory compliance, and audit administration. His expertise includes loan proposal and business plan preparation, cash flow management, budgeting, and customer satisfaction. He also has brokerage and financial planning training. He has an MBA from Brenau University, was President and Board member of the Bank of Hiawassee, Senior Vice President at Nantahala Bank & Trust and Executive Vice President of United Community Banks. He is the past Lt. Governor and Past President of the Rotary Club, past Local Board Chair of North Georgia Technical College and past Chairman of the Board of the Habersham County Chamber of Commerce.
Ms. Cooper has 20 years of experience either working with small business owners or being a small business owner herself. Prior to joining the SBDC, Ms. Cooper was an advertising representative in the yellow page and radio industry. In 2005, after moving to Georgia, she opened her first business in Duluth, Ga., with the guidance and expertise of the SBDC. She has attended GrowSMART and been a client of the SBDC throughout the start-up and expansion phase of her adult care facility. In 2011, she was recognized by Access to Capital for Entrepreneurs (ACE) Entrepreneur of the Year and in 2017, Outstanding Woman of the Year. Aysha has been an active member of her community as a graduate of Gwinnett Neighborhood Leadership Institute, a board member for Snellville Tourism and Trade and Friends of Gwinnett County Seniors. Her interests include marketing, operations and franchising.
The GABB is an organization of experienced professionals who work with Georgia business owners to help them in the process of evaluating, marketing, financing and selling their businesses. They also work with business buyers including many individuals who have decided not to re-enter corporate America, but want to become their own bosses by purchasing and operating a Georgia business.
For more information about the GABB, contact GABB President Mike Ramatowski at 770-634-0428 or firstname.lastname@example.org call Diane Loupe at 404-374-3990 or email email@example.com.
If you are NOT a GABB member, please fill out this form to let us know you’ll be attending the meeting.Read More
By Peter Siegel
If you want to become your own boss, but are having trouble finding the right business to buy, there’s another option. Find an enterprise to buy that appealed to him, but was not openly being offered for sale.
Peter Siegel, the Founder & Senior Advisor at California’s BizBen.com, described the experience of Steve, who was retiring from his accounting job and wanting to leverage his retirement savings into an income so that he and his wife could maintain their standard of living.
He decided to buy a small business but was concerned that responding to ads might take several months to a few years to produce results.
So how DO you buy a business that isn’t openly for sale.
Steve started by looking at the companies with which he did business, which led him to his oil-change franchise. The company looked successful and efficiently run and the owner appeared to be about ten years older than Steve. Those were good signs.
Here’s what Steve did to clinch the deal.
Gather Information on the Business
He learned from the franchisor that there were no other franchises that could be opened or purchased in his immediate area. And he got some basic information about the franchise company’s stores-typical gross sales, basic cost factors as a percent of gross, what the owners expect to earn, and an idea about the rules of thumb used for pricing the businesses. Next, he offered to save the time and trouble for friends and neighbors who needed to have their cars serviced. He would do it for them, always bringing the cars to the company he had targeted, and the car owners would reimburse him afterward for the cost of the oil, filters and service.
Contact the Owner
Then, with the business owner now recognizing him as a good customer (and curious why he showed up so frequently and always with a different car), Steve invited the man to lunch.
After assuring the owner that their discussion would be treated with complete confidentiality, Steve explained what he had in mind and learned that the owner had been thinking about selling, but had been so busy he hadn’t gotten around to doing anything about it. Steve presented document he’d prepared, called his “buyer’s resume.” It listed the money Steve had available, the assets on which he could borrow and it detailed his business experience.
The owner was immediately put at ease. He liked Steve’s professional approach and was impressed that this prospective buyer had done his homework and had some understanding of what was involved in running the company. Clearly, Steve was not there to waste his time.
The two met a few times afterward, and then sat down with their lawyers to start a negotiating and contracting procedure that culminated weeks later, in a successfully completed campaign for Steve, the new owner of the oil-change franchise.
There were buyer candidates who’d put their name on the list for a local franchise with the parent (franchise) company. And there were buyers asking their business brokers if there were any automotive service companies in the area that had been newly listed. In other words, Steve had competition among others who wanted what he wanted. But he wound up with the business.
And the way he went about it can be instructive for anyone wanting to purchase a good company and impatient because nothing appropriate has yet been found.
Prepare a Buyer’s Resume
Steve’s buyer’s resume is a very useful tool, not only to show to brokers and to prospective sellers selling a business who’ve been formally introduced by an intermediary, but also to business owners who are being directly approached about selling. It shows that the prospective buyer is serious, up-front and business like. And it lets the seller know what the buyer can and cannot do-a time saver for everyone involved.
Learning about a business of interest is another way the buyer demonstrates that he or she is being professional. That’s what Steve did by obtaining and studying the franchisor’s literature. And it also saves time, since the prospective seller does not need to go over the basics of the industry. The smart buyer-candidate can discover plenty of information that will help him or her be prepared, by contacting local business groups such as the Better Business Bureau or Chamber of Commerce, the associations representing the business’s industry, and by conducting a key word search on the Internet. And, of course, if the targeted company is a franchise, the interested buyer can find out from the franchisor much of what’s needed to know for initial discussions.
The smart buyer also is prepared by knowing the importance of exploring this idea with prospective sellers in a way that is private, respecting an owner’s usual need for confidentiality. Even if a business owner is interested in speaking with people who might want to purchase the company, anyone approaching that owner in a way that might expose the topic of conversation to others, is bound to get a negative response. Very few prospective sellers want customers, employees or vendors to learn that they are considering the idea of getting out of the business. If any outsiders hear someone ask a business owner “Do you want to sell?” they most likely will hear this answer: “No.” Even if that’s not the case.
Steve’s experience makes this process sound easy-a lot easier than it is in most cases. Of course his idea of checking out companies with which he did business is just one of many strategies a buyer can employ to find an appropriate business with a willing seller that isn’t officially for sale. A productive part of the network involves vendors in any industry of interest-people who know all of the owners in the market area for the businesses they sell to.
Furniture, gift and housewares wholesalers may know of customers-owners in the retail end of their business– who seem ready to retire. Commercial washer equipment sales people know all the owners of coin laundries in their territories, and may even want to encourage a less active owner to sell out to someone who may be more involved in the operation, particularly if the new owner is likely to purchase new equipment from that sales person. Similarly, route drivers calling on food and liquor stores have a pretty good idea about what’s going on with their customers. If someone is getting ready to sell out-perhaps because the next generation in the family doesn’t want to take over the business from aging parents-the guy, or gal, who makes deliveries to that business several times a month, is probably pretty well informed about the situation.
Speaking with these people is an excellent way to get tips about an owner who is getting in the mood to sell, before that owner contacts a business broker or posts a for-sale notice. The offer of a finder’s fee to people in a network might encourage them to pass along valuable information about likely sellers in their industry. They might even be willing to arrange the introduction, telling an owner about someone who might be a prospective buyer for the business, if the owner is so inclined.
Part of the network, of course, are the social, community and religious groups in which a buyer is involved. While visiting with other parents at a PTA meeting, or enjoying beers with fellow players on the local amateur soccer team, or chatting in the locker room at the gym or yoga center, a person who wants to find a small business to buy can put that fact into the “grapevine” in hopes the word will reach someone, who knows someone, who is getting ready to sell a good business. And the professionals who advise small business owners-lawyers, accountants and insurance brokers-represent a productive network. These people often are the first to learn when a client is planning a life change that involves selling a business. The buyer wanting to take advantage of this network should make sure to distribute a “buyer’s resume” with a carefully worded cover letter to some of these professionals. Days or weeks later, that information may come out of the counselor’s desk or file drawer to be shown to a client who begins expressing an interest in retiring or moving on to another enterprise.
Hiring a Business Broker
An effective strategy followed by some prospective buyers is to hire a business broker to approach specific business owners, or all business owners in a particular industry and market area. The arrangement between buyer and broker can vary, but usually is based on the understanding that the broker represents the buyer-the reverse of the typical circumstances-and the buyer pays the broker a specified fee-or percentage of the purchase price-upon completion of a successful transaction. Business Brokers will also know of businesses in your area that are for sale.
Once a buyer identifies an interesting business headed by a cooperative seller, and negotiations begin, it is useful if that buyer has planned out the steps that will lead to a completed transaction. What if the seller resists the offered price, expressing the idea that the business might command more money if exposed, through a listing broker, to the full marketplace of potential buyers? One intelligent response to that objection is to remind the seller that dealing here and now, with a ready, willing and able buyer, eliminates both the need for the seller to pay a broker’s commission, and the risk that the seller’s confidentiality will be compromised.
Most buyers are not likely to adopt the strategies suggested here-not when there are many brokers willing to help in the search, and a number of resources that list businesses for sale. But for the more impatient buyers, these comments suggest actions they can take today.
About This Contributor: Peter Siegel, MBAis the Founder & Senior Advisor (ProBuy & ProSell Programs) at BizBen.com (established 1994, 8000+ California businesses for sale, 500 new & refreshed postings/posts daily) works with business buyers, sellers, business brokers, agents). Reach him direct at 866-270-6278 to discuss strategies regarding buying a California business.Read More
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.Read More