Learn How to Prepare Your Business to Sell-Feb. 26 GABB Meeting
Just before retirement is not the best time to prepare your business to sell for an attractive price. Savvy business owners spend years thoughtfully preparing to transition out of business ownership.
UGA Small Business Development Center consultant Daniel McCoy discussed ways that small businesses can prepare for the day when they want to sell their business.
Here’s a link to an audio recording of Mr. McCoy’s remarks.
His PowerPoint Presentation is here. How to Prepare a Business to Sell
The Tuesday, Feb. 26 meeting was preceded by a free networking breakfast sponsored by GABB Board member Kim Eells, Vice President of SBA Lending at Renasant Bank and Susan Kite, Vice President of SBA Lending at Renasant Bank.
Mr. McCoy was an SBA Lender from 2014 to 2017. He joined the University of Georgia Small Business Development Center (SBDC) in September of 2017, after starting his own business of tax preparation and loan packaging. His business experience consists of several years in retail upper management, 19 years in commercial lending, three years in insurance, and four yuears as a small business owner. He holds an MBA in Accounting from Benedictine University, a B.S. in Organizational Management from Covenant College and an Associates degree in Arts from Reinhardt University. His specialties include human resources, financial management, customer service, and business planning and forecasting.
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.
Read MoreDetermining Your Company’s Undocumented Value
Business appraisals are not one-dimensional. In fact, a good business appraisal is one that factors in a wide range of variables in order to achieve an accurate result. Indisputable records ranging from comparables and projections to EBITDA multiples, discount rates and a good deal more are all factored in.
While an appraiser may feel that he or she has all the information necessary, it is still possible they have overlooked key information. Business appraisers must understand the purpose of their appraisal before beginning the process. All too often appraisers are unaware of important additional factors and considerations that could enhance or even devalue a business’s worth.
There Can Be Unwritten Value
Value isn’t always “black and white.” Instead, many factors can determine value. Prospective buyers may be looking at such variables as profitability, depth of management and market share, but there may be more that determine value.
Some other factors to consider when determining value: How much market competition is there? Does the business have potential beyond its current niche? Are there a variety of vendors? Does the company have easy access to its target audience? What is the company’s competitive advantage? Is pricing in line with the demographic served? These are just some of the key questions that you’ll want to consider when evaluating a company.
There are Ways to Increase Both Valuation and Success
Successful businesses didn’t get that way by accident. A successful business is one that is customer focused and has company-wide values. Brian Tracy’s excellent book The 100 Absolutely Unbreakable Laws of Business notes that it is critical for businesses to have a company-wide focus on three key pillars: marketing, sales and revenue generation. Tracy also points out that trends can be seen as the single most vital factor and bottom-line contributor to any company’s success and, ultimately, valuation. For 2018 and beyond, projected trends include an increase in video marketing, the use of crowdfunding as a means of product validation, the increasing use of diverse payment options, increasing use of Artificial Intelligence, the influence of the gig economy, and more.
No Replacement for Understanding Trends
If a company doesn’t understand trends, then it can’t understand both the market as it stands and as it may be tomorrow. Savvy business owners understand today’s trends and strive to capitalize on the mistakes of their competitors while simultaneously learning from their competitors’ successes.
Tracy accurately states that while there are many variables in determining value, finding and retaining the best people is absolutely essential. One of the greatest assets that any company has is, in the end, its people.
Professional business brokers understand the nuances of business valuation and can help a business owner find value where they might not realize it existed.
Copyright: Business Brokerage Press, Inc.
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Read MoreNew SBA Loans on Hold During Government Shutdown
Business Buyers and Sellers and their Brokers may face an unusual stall on closing their deals due to the federal government shut down.
GABB President Dean Burnette says, “I’m in the final stages of closing a deal right now. Fortunately, our SBA Lender got an authorization number the night before the shut down so we will receive our funds.”
The Small Business Administration halted its program supporting 7(a) loans for working capital and 504 loans for commercial properties on December 22, the day the government shutdown began, The Washington Post reports. Usually, the SBA manages about 200 loans for working capital and 120 loans for commercial properties per day, amounting to roughly $200 million worth of loans every day for small and midsize businesses, according to a report on Inc. Currently, only funds for disaster-related loans remain active. The Post also reported that Linda McMahon, head of the Small Business Administration, has plans in place to expedite loans as soon as the government opens again, citing and unnamed source.
SBA Loans usually take at least four weeks to process, Burnette said. “Chances are if you are just at the stage of applying for the loan, and you’re working with a Preferred SBA Lender, you may not experience any delay.”
Susan J. Kite, vice president and SBA Business Development Officer of Renasant Bank, said an experienced Preferred Lender (PLP) does not need to go to the SBA until just prior to closing to get a loan number. Most lenders went ahead and got the loan numbers for their approved loans prior to the shutdown, so those loans will not be affected, said Kite, a GABB affiliate member. It is not unusual to take 60 to 90 days for an SBA request to be processed and closed. Depending on where your deal is on that spectrum, you may or may not be delayed, Kite said.
Claudia Wilson, Senior Vice President of SBA Lending for First Landmark Bank, said it’s “business as usual, unless you need a SBA loan number (SBA approval) to close a loan. We are accepting applications, can process them and prepare them for closing.”
Suggestions from Kite for Business Brokers during the shutdown:
- Work with an experienced PLP lender.
- Set realistic expectations with the Buyer and Seller as to when their deal would normally close and the implications if the shutdown drags on past that date.
- Let Sellers and Buyers know that they will need to keep their financial information updated, especially in regards to Seller and Buyer’s Affiliate interim business financials and Buyer personal financials.
- If a short-term loan is mandatory, work with your lender on the best alternative – since this changes the SBA loan to a debt refinance with different rules.
GABB member Leigh Milton, senior vice president of CenterState Bank, said brokers should “treat this shutdown like you still have a hard closing date. Moving towards the goal of getting all the docs ready to close always seems to preserve momentum. Be ready to go when this turns around.”
- prepare the buyer and seller to get updates sent dated within the last 60-90 days if possible to give yourself some cushion.
- While you can close with an SBA loan number issued prior to the shutdown, if there are any changes or corrections to the authorization, you will probably have to wait until the shutdown ends to get these changes approved and close. PLP changes made under the guidance of the “loan matrix” are allowed.
- Don’t forget to finalize items like life insurance during the delay as these items can hold up closings and but having them in place takes them off the checklist. Work your checklist and it should pay off when things finally get back to “normal”!
Wilson said a “bridge” or “interim” loan may be made available by PLP lenders only but it is up to the lender’s discretion. “I think this would be permitted under limited circumstances since the loan would be made at the lender’s risk of not receiving the SBA guaranty. The lender would have 90 days from approval of the interim loan to obtain a SBA loan number,” Wilson said.
“Although the Government shutdown is certainly not ideal, for those of us who have been in SBA lending for a while, we have weathered this storm before,” said David K. Brindley, Vice President, Business Development Officer of SBA Lending at Community Bank. “So my advice to lenders, Brokers, Buyers and Sellers is to stay calm, don’t panic, hang in there and keep moving forward with business as usual.”
The Importance of Understanding Leases
Leases should never be overlooked when it comes to buying or selling a business. After all, where your business is located and how long you can stay at that location plays a key role in the overall health of your business. It is easy to get lost with “larger” issues when buying or selling a business. But in terms of stability, few factors rank as high as that of a lease. Let’s explore some of the key facts you’ll want to keep in mind where leases are concerned.
The Different Kinds of Leases
In general, there are three different kinds of leases: sub-lease, new lease and the assignment of the lease. These leases clearly differ from one another, and each will impact a business in different ways.
A sub-lease is a lease within a lease. If you have a sub-lease then another party holds the original lease. It is very important to remember that in this situation the seller is the landlord. In general, sub-leasing will require that permission is granted by the original landlord. With a new lease, a lease has expired and the buyer must obtain a new lease from the landlord. Buyers will want to be certain that they have a lease in place before buying a new business otherwise they may have to relocate the business if the landlord refuses to offer a new lease.
The third lease option is the assignment of lease. Assignment of lease is the most common type of lease when it comes to selling a business. Under the assignment of lease, the buyer is granted the use of the location where the business is currently operating. In short, the seller assigns to the buyer the rights of the lease. It is important to note that the seller does not act as the landlord in this situation.
Understand All Lease Issues to Avoid Surprises
Early on in the buying process, buyers should work to understand all aspects of a business’s lease. No one wants an unwelcomed surprise when buying a business, for example, discovering that a business must be relocated due to lease issues.
Summed up, don’t ignore the critical importance of a business’s leasing situation. Whether you are buying or selling a business, it is in your best interest to clearly understand your lease situation. Buyers want stable leases with clearly defined rules and so do sellers, as sellers can use a stable leasing agreement as a strong sales tool.
Copyright: Business Brokerage Press, Inc.
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Read MoreGeorgia’s Business Climate Tops in the Nation
ATLANTA – Georgia’s business climate has been ranked No. 1 in the nation for the sixth consecutive year by Site Selection, a leading economic development trade publication, according to Gov. Nathan Deal. According to Site Selection, Georgia is the first state to hold this ranking for six consecutive years under leadership by the same governor.
‘For six years now, Georgia’s business climate has been ranked No. 1 in the nation, as people from all over the country have come to our communities to find opportunity, jobs, hope and prosperity,’ said Deal. ‘Earning this distinction six consecutive times speaks to the immense strength of our business-friendly environment and the value of the strategic investments we’ve made across our state. Today’s announcement is the result of exceptional collaboration between public and private sector partners who create economic opportunities in Georgia’s communities, as well as conservative policies that attract more and more business to our state each year. I appreciate Site Selection once again recognizing Georgia with this honor and we are proud of the foundation that we have built and maintained for over half a decade.
‘Here in Georgia, we have truly cultivated an economic environment that rewards hard work and innovation, generates investments in local communities and improves the overall quality of life for families. We have not been content to rest on our laurels, as we’ve cut taxes and made even deeper investments in our workforce since first earning this distinction. We are proud to be the No. 1 state for business and as we look to the future, Georgia will continue to take the steps necessary to attract industry leaders from around the world and help homegrown small businesses succeed. It has been the honor of a lifetime to serve Georgia as governor as we’ve led the nation in economic development and I look forward to Georgia retaining its position as an exceptional place to do business, work, learn, and call home for many years to come.’
Each November, Site Selection releases rankings for the top states in which to do business. Site Selection’s business climate rankings are based on a survey of corporate real estate executives and site consultants and an index consisting of tax burden criteria from the Tax Foundation and KPMG’s Location Matters analysis and qualifying projects resident in the Conway Projects Database, which tracks new and expanded business facility activity worldwide. Georgia has been ranked among the top 10 states throughout the last decade and has held the top spot for the last five years.
‘A six-year top business climate winning streak is highly unusual,’ said Mark Arend, editor-in-chief of Site Selection. ‘But it stands to reason, given Governor Deal’s commitment to making Georgia a competitive location for business early in his administration and every year since. Capital investors tell us the state delivers the fiscal soundness, logistics infrastructure, competitive business costs and workers they require today and in the future.’
Deal was joined at the news conference by Arend, Georgia Department of Economic Development (GDEcD) Commissioner Pat Wilson, and former GDEcD Commissioners Attorney General Chris Carr and Chris Cummiskey.
‘Being recognized by Site Selection magazine for having the best business climate in the nation for the last six years is a testament to the leadership of Governor Deal and the General Assembly, and will certainly be among the many accomplishments remembered by Georgians of this administration,’ said Wilson. ‘The last eight years have been unprecedented for our state in terms of economic development from job creation to located projects and investment. We celebrate this accolade with all of our economic development partners across the state who have played an important role in helping Georgia earn and maintain this ranking.’
Economic development highlights:
- In the past eight years, Georgia has seen the creation of roughly 750,000 new, private sector jobs.
- At 3.7 percent, Georgia’s unemployment rate is now at its lowest point since 2001.
- In October 2018 alone, Deal and GDEcD announced the creation of more than 2,500 jobs and over $215 million of private sector investment in Cobb, Emanuel, Fulton, Hall and Troup counties.
- Since 2011, GDEcD has worked on more than 2,900 economic development locations and helped to bring roughly 214,000 jobs and $39.6 billion in investment to Georgia communities.
- GDEcD’s Global Commerce Division helped to bring in $5.56 billion in new investments for Georgia during the last fiscal year.
- Since 2010, overall exports from Georgia have increased by 28.8 percent.
- Since 2012, 74 percent of GDEcD location projects were outside of the metro Atlanta area.
- When state tax cuts passed earlier this year are fully implemented, Georgia’s corporate and individual income tax rates will be reduced from 6 percent to 5.5 percent. State tax reforms will also double the standard deduction for hardworking individuals and families from $3,000 to $6,000.
- As a result of federal and state tax reforms, Georgians could save up to $5 billion over the next five years. These reforms are together estimated to lead to a $4,200 increase in wage and salary income for the average household.
- The percent of Georgia’s population living below the poverty line has decreased by 2.1 percent since January 2017 and is at its lowest point since 2006.
- Monthly initial claims for unemployment insurance in Georgia recently fell to their lowest level since 1974.
- Georgia has maintained a AAA bond rating for 21 consecutive years.
- The state’s Rainy Day Fund, which was once almost empty, has now topped $2.5 billion, ranking it the highest in the Southeast and one of the top ten highest in the nation.
About Site Selection
Site Selection, published by Conway Data Inc., delivers expansion planning information to 48,000 executives of fast-growing firms. The senior publication in the development field, Site Selection is also available via Site Selection Online. The publication also publishes or co-publishes e-newsletters, including The Site Selection Dispatch, Life Sciences Report, Aerospace Report and Energy Report, Site Selection International, The FDI Report, TrustBelt.com and the OnSITE Travel blog