Compiling an Offering Memorandum: GABB Feb. 19
Steve Mariani
Find out how your business-for-sale offering memorandum can help attracting buyers and obtain financing by attending the Feb. 19 meeting of the Georgia Association of Business Brokers.
Stephen “Steve” Mariani, owner of Diamond Financial Services and a board member of the International Business Brokers Association (IBBA), will speak to business brokers about compiling a listing memorandum. The GABB, an IBBA affiliate, is the state’s premier organization dedicated to professionals who buy and sell businesses in Georgia. The meeting will begin at 10:30 a.m., preceded at 9:45 a.m. by a free continental breakfast and networking session sponsored by GABB Affiliate Chris Fonzi of Logic Environmental, Inc. The GABB meets at the auditorium of the Georgia Association of Realtors building at 6065 Barfield Road, Sandy Springs, GA, 30328. GABB’s meetings are free and open to the public; please fill out the form below to attend the meeting as a guest.
Mr. Mariani will discuss what buyers look for in a business-for-sale listing, and why lenders read your offering memorandum. A complete and comprehensive memorandum is not only a great advertising tool, but lenders use them for internal write-ups. He will also cover items to be sure you leave out of your offering memorandum.
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 largest privately owned non-bank SBA acquisition loan generator in the nation serving 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 dean@b3brokers.com, or GABB Executive Director Diane Loupe at diane@gabb.org or 404-374-3990.
If you are not a GABB member and wish to attend the meeting, please fill out this form. GABB meetings are free and open to the public.
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How to Write an Effective Business-for-Sale Listing
Georgia Association of Business Brokers can now post business-for-sale listings on the new GABB website. But, as BizBuySell points out, it’s important to create a well-written online listing. You want to attract qualified buyers. According to BizBuySell’s latest demographic survey, business buyers tend to be college educated and earn over $100,000 per year. Buyers are more likely to respond to listings with these specific attributes, according to the website.
1. Specify a location.
Most buyers search for a business by state, many by a specific county. Confidential listings receive more views when they included a location.
2. The listing appears in their search category.
More than a third of prospective business buyers search in a specific category of business. You can improve that percentage by selecting two or more appropriate categories for your listing.
3. Include key financials.
Most buyers want to know the asking price, followedg by cash flow. Including these important financial details makes it easier for serious buyers to find your listing in a search and contact you.
4. A great headline.
“Profitable coffee shop in busy shopping mall,” and other headings with key details are better than “popular cafe.”
5. A well-written description.
A good description has all the essential facts, such as the business’s strengths and potential, number of employees, the owner’s reason for selling, and opportunities for expansion. Beware of exaggerations. A hyped-up listing will alienate serious buyers.
6. An attractive photo.
Even if you cannot use a photo of the actual business for confidentiality reasons, you should still post a stock photo. A good site to find generic, free stock photos is Pexels. The GABB administrator can also help you find photos. Buyers are more likely to notice listings with photos.
7. Seller financing!
Experienced business brokers know that financing is one obstacle in selling a business. So it’s a huge advantage if the owner is willing to carry part of the financing. Seller-financed businesses are more likely to sell than those that are not.
8. Broker contact details.
Your listing should include details on how to reach you easily. Every prospective buyer should receive a response from their inquiry within the first 24 hours. A slow response might mean you miss a qualified buyer.
The GABB website’s new listing feature is still undergoing improvements, so please let us know if you have suggestions for using this feature. To date, this feature is included in your GABB broker membership at no additional charge. For help with this feature, please contact GABB Executive Director Diane Loupe at georgiabusinessbrokers@gmail.com or GABB President Dean Burnette at 912-247-3209 or dean@b3brokers.com.
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Tackling Growth Delusions When Buying a Business
It’s exciting to buy a new business. However, it’s very important to be realistic about future growth. In most cases, if a business is poised to quickly grow substantially, the seller would be far less interested in selling.
When evaluating a business and talking to the owner, many buyers come away with a sense that enormous growth is just “sitting there” waiting to be seized, writes Richard Parker, President of Diomo Corporation – The Business Buyer Resource Center. In a recent article for Forbes entitled “Don’t Be Delusional About Growth When Buying a Business,” Parker seeks to instill a smart degree of caution into prospective buyers. Parker, who works with investors buying and selling small businesses, says buyers should be very careful if they are buying into an industry that they know nothing about.
Buying into an industry you don’t know comes with a lot of potential problems. The opportunities that you see may not have been tapped into by the existing owner for many reasons, Parker says. Without knowing more about the industry, you’re unlikely to spot those problems. Since you are an outsider, you likely lack the proper perspective and understanding. The seller may have already tried and failed at the growth opportunities you’ve identified. Until you actually own the business and are running it on a day to day basis, you can’t make a proper assessment of how best to grow that business.
The seductive lure of growth shouldn’t be the determining factor when you are looking for a business. A far more important and ultimately reliable factor is stability. “The key question to address is whether or not the business will maintain its revenue and profit levels after you take over,” Parker advises. A business that doesn’t have to grow to remain viable is a better value.
As Parker points out, the majority of small business buyers will buy in a sector where they don’t have much experience, and that is fine. It’s more important that the buyer “has the core skills to operate and drive the business than having direct industry experience.” What is not fine is paying a lot for a business because you believe you can greatly grow the business. If you can, that’s great and certainly icing on the cake. But Parker says you shouldn’t depend on that growth.
In the end, everyone has some ideas that work and some that don’t. You may take over a business and, thanks to having a different perspective than the previous owner, you find ways to make that business grow. Just realize that many of your ideas for growing the business may fail completely.
“To be a successful business buyer, your approach has to be effective, realistic and practical,” Parker says. “Don’t fall in love with the business or fall prey to your own sales job. You have to evaluate all scenarios and adopt the philosophy that stability is a top priority.”
A professional business broker will be able to help you determine what business is best for you, and to determine a fair asking price for that business. A business broker will help keep you focused on what matters most and steer you clear of the mistakes that buyers frequently make when buying a business.
The Theory and Practice of Business Brokerage within the Context of Real Estate License Law & Rules
Kathryne Pusch
By Kathryne A. Pusch, President & Consultant, ConsultKAP, Inc.
Potential clients and prospective business brokers often ask GABB “What are the legal licensing requirements of professionals assisting buyers and sellers of businesses in Georgia?”
I think I can answer this question because I was a business broker for many years, am a former Board Member and President of GABB, RE Instructor, and was a past member of the Georgia Real Estate Commission’s (GREC) Education Advisory Board.
Here’s what the law says:
GA Law 520-1-.12 Business Brokerage.
Unless otherwise excepted from licensure requirements by O.C.G.A. Section 43-40-29, a person who brokers the sale of a business must hold an appropriate license issued by the Commission if the sale of the business involves the transfer of any interest (including, but not limited to, leasehold or ownership interest) in real property. A business broker and any of the business broker’s associates who do not hold licenses issued by the Commission may not negotiate or attempt to negotiate or assist in procuring prospects for the sale of a business where:
(a) that sale involves the transfer of any interest in real property,or
(b) where the payment of all or part of a commission or fee to the business broker or any of the business broker’s associates in the sale of a business is contingent upon the transfer of an interest in real estate.
An unlicensed broker may not perform or attempt to perform the acts in the preceding sentence and then secure a person licensed by the Commission to approve that transaction.
Under Georgia law, 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.
While some interpret that to mean you don’t need a real estate license if you are selling a business and not any property (as in dirt or brick & mortar,) in fact, there are few instances in which this is the case.
Active businesses operate out of and occupy premises that are either owned or rented/leased, with the exception of a home-based business. Any business Purchase & Sale contract will contain a contingency that the RE interest (freehold or leasehold) must transfer from the seller to the buyer. (If it does not, the business will not have premises in which to operate after the sale.)
Any third party lenders of the funds to complete the transaction will also require a lease or RE purchase agreement to approve the loan for the business acquisition, which will be a contingency of the sale.
Therefore, anyone who is advertising a non-home-based business for sale listing is offering for sale a business that includes either a leasehold or freehold interest in real estate, whether or not the listing summary/web site ad has a box checked for “Real Estate.” In fact, unlicensed people who sell businesses will NOT check “Real Estate,” despite the fact that there is a business facility owned or leased, because they are NOT LICENSED.
Anyone who is negotiating with sellers and buyers for the purchase and sale of a non- home-based business for sale is involved as a broker in a transaction that includes either a leasehold or freehold interest in real estate. Therefore, that person must have a current Georgia real estate license under Georgia law.
The terms of the real estate purchase or the rent or lease terms (occupancy costs) are always a key factor in business expenses and profits, and therefore a key factor in the investment decision, so it is not possible to negotiate for the purchase and sale of a business without including the real estate factors.
The occupancy of a going concern cannot be separated from the operation of the going concern or from the profits of the going concern on which value of that going concern are based. Business brokers who are unlicensed are operating in violation of Georgia license law, regardless of how they “spin” their advertising.
Business brokers cannot assert that they are not violating license law by claiming that they have an attorney or a licensed broker to “handle” the real estate aspects of a “transaction” because of the above facts related to the inseparability of occupancy from the business going concern which is being offered for sale. The exceptions would be home-based business; non-operating businesses: sale of assets or inventory only from a closed business; or new franchises – sales by a franchisor to a franchisee of a not yet operating unit.
The GABB encourages you to let us know if you come across individuals who are operating as business brokers without the proper licenses. Contact any individual member of the board, or email the entire board at gabbboard@gabb.org.
Questions? Email: KAP@Consultkap.com
Main Office: 770-918-9390 Cell: 770-309-8580
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GA Law 520-1-.12 Business Brokerage.
see also O.C.G.A. §§43-40-1; 43-40-2; 43-40-29; and 43-40-30.
Authority O.C.G.A. Secs. 43-40-2, 43-40-14. History. Original Rule entitled “Examinations” adopted as ER. 520-1-0.1-.12. F. and eff. July 12, 1973, the date of adoption. Amended: Permanent Rule entitled “Licensee’s Duties Upon Surrender, Suspension, or Revocation of License” adopted. F. Dec. 7, 1973; eff. Dec. 27, 1973. Repealed: New Rule of same title adopted. F. June 4, 1980; eff.July 1, 1980, as specified by the Agency. Amended: Authority changed. F. Aug.5, 1982; eff. Nov. 1, 1982, as specified by the Agency. Amended: F. May 9, 1985; eff. July 1, 1985, as specified by the Agency. Repealed: New Rule entitled “Business Brokerage” adopted. F. Nov. 12, 2003; eff. Dec. 2, 2003.
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Buying and Selling Businesses Better By Keeping the Pipeline Full
Scott Ward
Entrepreneur Scott Ward has been on both sides of the negotiating table, both as a business buyer and a business seller. He discussed 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.
Ward said business brokers “enable people to succeed and bring in hard earned assets and turn it into cash.”
He said in the middle of negotiating a deal, sometimes he feels as though his client needs a marketing officer, a human resources officer, a financial analyst or even a psychiatrist, trying to work through some complex business and personal relationships.
“You’re so much more than just a business broker,” Ward told the members of GABB, the state’s largest professional organization dedicated to buying and selling Georgia businesses and franchises.
The key is for business brokers to build long-term relationships with business owners, what he called keeping your pipeline full.
“The number one thing with filling your pipeline and getting more people to think about you —because you guys have a long pipeline– you’re building relationships that sometimes take years before someone actually says, ‘You know I think I’m ready to sell this business,’ or ‘I’m ready to quit my corporate job.’ ” Ward said.
Watch the full presentation on the GABB’s YouTube Channel.
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.
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 dean@b3brokers.com, or GABB Executive Director Diane Loupe at georgiabusinessbrokers@gmail.com or 404-374-3990.