The Historic Levels of Small Businesses Being Sold Drops Slightly
The number of small business transitions continues to be strong for the first quarter of 2019, according to a leading market analysis. In fact, despite a small decline, small business transitions remain at historically high levels.
Looking at the Statistics
According to a recent BizBuySell article entitled, “Number of Small Businesses Changing Hands Dips Slightly, But Market Remains Ripe for Buyers and Sellers,” now is still very much the time for both buying and selling a business. It is true that the number of businesses sold in the first three months of 2019 dropped by 6.5% when compared to 2018. Yet, it is important to keep in mind that the number of completed transactions remains very strong. Likewise, inventory is increasing, with a 6.1% increase in listings in Q1 of 2019 when compared to the same period in 2018.
While the market is indeed strong, the BizBuySell article did note that some experts feel that there are signs that the market could become more challenging moving forward. In part, this is due to the prospect that interest rates and financing could become increasingly challenging and more expensive. These factors indicate that now is a smart time to both buy and sell a business.
Likewise, the financials of sold businesses in Q1 remains strong. In fact, the median revenue of sold businesses jumped 6.5% when compared to Q1 2018. Now, the median revenue stands at $540,000. However, cash flow continues to hover around the $100,000 for five years in a row.
What are the Top Regions?
Atlanta-Sandy Springs-Marietta ranked among the top ten markets in the top markets by closed small business transition, according sales reported on BizBuySell.com. The top markets were Miami-Fort Lauderdale-Miami Beach, Los Angeles-Long Beach-Santa Ana, New York-Northern New Jersey-Long Island, Tampa-St. Petersburg-Clearwater and Dallas-Fort Worth-Arlington. The Atlanta area ranked seventh, tied with the Washington, D.C. area, The top markets by median sale price are Charlotte-Gastonia-Concord, San Francisco-Oakland-Fremont, Denver-Aurora and Dallas-Fort Worth-Arlington.
A Consistently Strong Market
Overall, the experts at BizBuySell believe that the market remains very strong and active. They believe that the wave of retiring baby boomers looking to exit their businesses, historically low interest rates and the rise of the next generation of entrepreneurs are helping to fuel a great deal of activity.
According to Matt Coletta, Co-Founder and Managing Partner, M&A Business Advisors, “We are seeing more quality businesses coming on the market with good, clean books than I have seen in my 25+ years in the business.”
If you are considering buying or selling a business, then now is an excellent time to jump in. Working with a business broker is a great way to ensure that you find the right business for you at the right price.
Copyright: Business Brokerage Press, Inc.
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Read More5 M&A Myths and How to Deal with Them
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.
Copyright: Business Brokerage Press, Inc.
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Read More10 Questions Everyone Should Ask Before Signing on the Dotted Line
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.
Copyright: Business Brokerage Press, Inc.
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Read MoreA Step by Step Overview of the First Time Buyer Process
A recent article on Businessbroker.net entitled, First Time Buyer Processes by business broker Pat Jones explores the process of buying a business in a precise step-by-step fashion. Jones notes that there are many reasons that people buy businesses including the desire to be one’s own boss. However, he is also quick to point out that buyers should refrain from buying a business that they simply don’t like. In the quest for profits, many prospective owners may opt to do this, but it could ultimately lead to failure.
Step One – Information Gathering
For Jones, there are seven steps in the business buying process. At the top of the list is to gather information on businesses so that one has an idea of what kind of businesses are appealing.
Step Two – Your Broker
The second key step is to begin working with a business broker. This point makes tremendous sense; after all, those new to the business buying process will benefit greatly from working with a guide with so much experience. Business brokers can gain access to information that prospective business owners simply cannot.
Step Three – Confidentiality and Questions
The third step in the process is to sign a confidentiality agreement so that you can learn more about a business that you find interesting. Once you have the businesses marketing package, you’ll want to have your broker schedule an appointment with the seller. It is vitally important that you prepare a list of questions on a range of topics. There is much more to buying a business than the final price tag. By asking the right questions, you’ll be able to learn more about the business and its long-term potential.
Step Four – Evaluation
In the fourth step of the business buying process, you’ll want to evaluate all the information that you have received from the seller. Once again, a business broker can be simply invaluable, thanks to years of hands-on experience, he or she will know how to evaluate a seller’s information.
Step Five – The Decision
In the fifth step, you’ll need to decide whether or not you are making an offer. If you are making an offer, you will, of course, want it to be written and include contingencies.
If your offer is accepted, then the process of due diligence begins. During due diligence, you and your business broker will look at everything from financial statements to tax returns. You will evaluate the company’s assets. Again business brokers are experts at the due diligence process.
Buying a business is an enormous commitment. Making certain that you’ve selected the right business for you is one of the most critical decisions of your life. Having as much competent and experienced help as possible is of paramount importance.
Copyright: Business Brokerage Press, Inc.
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Read MoreCredits, CPAs and Cannabis: Issues for Georgia Businesses
Three CPAs from Frazier & Deeter spoke at the May 28 Georgia Association of Business Brokers meeting about the emerging cannabis industry as well as other tax programs that affect both buyers and sellers of businesses.
Matthew Foster, CPA, Tax Partner at Frazier & Deeter and the firm’s National Practice Leader for the Cannabis Industry, discussed the emerging cannabis industry in Georgia, including tax issues and obstacles to financing. Andrew Moore, CPA, Senior Manager of the Tax Department at Frazier & Deeter, discussed film credits, low income housing credits, opportunity funds, and syndicated conservation easement transactions, all of which can lower the taxes due after the sale of a business. Jennifer Gruner, CPA, tax partner in Frazier & Deeter’s Real Estate Group, covered opportunity funds.
Linked here is a copy of their presentation. Credits CPAS Cannabis Presentation To GAAB_05252019
Hear an audio of their remarks.
The Georgia Association of Business Brokers meets at conference room hosted by the Georgia Association of Realtors at 6065 Barfield Road, Sandy Springs, GA, 30328. The monthly GABB meeting is free and open to the public and is preceded at 9:45 a.m. by a free light breakfast and networking session. The meeting will last from about 10:30 to somewhere between 11:30 and noon. Please fill out the form below if you are not a GABB member but wish to attend our meeting.
While Andrew specializes in working with small and middle market companies and their related owners, his background allows him to serve a broad client base from smaller “mom & pop” type establishments to much larger corporate conglomerates. He has extensive experience helping clients recognize and implement tax saving opportunities and prides himself on recognizing opportunities often missed by others. Prior to joining Frazier & Deeter, Andrew led major initiatives that include helping clients implement the IRS Tangible Property Regulations and filing related accounting method changes which resulted in his clients saving millions of dollars in taxes.
At Frazier and Detter, Andrew is an active member on the pass-through team and participates in the overall delivery of tax compliance, consulting and planning services offered by the firm.
Before joining Frazier & Deeter, Andrew spent just over nine years working with clients in the automotive, manufacturing & distribution, trucking, legal, technology and service based industries at various other accounting firms in Atlanta.
Matthew Foster is a Partner in the Atlanta and Las Vegas office tax practices and serves as the firm’s National Practice Leader for the Cannabis Industry. He has over a decade of experience in public accounting, with the majority spent practicing at Frazier & Deeter, LLC.
Matthew’s primary areas of focus are middle market companies that are privately owned or backed by private equity. His tax expertise in this area has allowed him to help his clients with various opportunities, such as corporate structuring for tax strategies, mergers and acquisitions, joint ventures and ESOPs. His clients operate in a variety of industries including, but not limited to, manufacturing, distribution, technology, real estate and construction.
Jennifer Gruner has more than 11 years of public accounting experience, which includes five years with Ernst & Young’s real estate tax compliance department. Jennifer has a wealth of experience with tax compliance for small to large national real estate developers, builders, investors in commercial estate and the individual partners of those firms. In addition, she has signification experience with various types of investors of real estate deals, including foreign and domestic individuals, syndicators, foreign and domestic funds, including tax exempt investors and REITs.
Jennifer has extensive knowledge of limited partnerships, limited liability companies and family partnerships with multi-tier structures operating or investing in various states. She also has experience with complex partnership allocations and waterfalls, technical terminations, sale of assets, depreciation and federal and state withholding for foreign and domestic investors.
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 like Mr. Moore 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.
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