An earnout is a type of payment agreement which is sometimes used in a business acquisition. An earnout is a buyer's commitment to pay the seller a certain amount of the money tied to future performance after a sale. Under an earnout agreement, the seller receives part of the purchase price up front, and additional funds over time. The terms of the earnout are written into the sales contract.

Earnouts will probably play a bigger part of deal structure in the months ahead.  If business recovers, buyers and sellers both come out winners.

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You are the heart of American commerce. You are a small business owner. You've built your business up over time.  We recognize and applaud your achievements.  We are much like you in that nearly all of us have walked in your shoes by owning and running a company ourselves. Now you are considering letting go.   You are considering your options for selling the business.  You understand the importance of confidentiality and wonder how you can market your business without disclosing sensitive information prematurely, or disturbing the status quo.

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Small businesses often operate as if their sole purpose is to fund the owner’s lifestyle, but the most valuable companies are run with financial rigor. You may be years from wanting to sell your business, but starting to formalize the operations now will help you build the future value of your business. Then, when it comes time to approach the market and put your business up for sale, you’ll fetch more for what you’ve built. Learn how to get top dollar when selling your business.

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“Not every business will sell and a significant number never make it to market because professional, ethical advisors won't take on an engagement with little-to-no chance of success. The Q1 2019 Market Pulse Survey reveals that, on average, advisors decline about 70% of the business opportunities that come their way because the business is considered "non-saleable." 

There are any number of reasons we might decline to take a business to market,” said Lisa Riley, principal of LINK Business-Phoenix. “Unrealistic expectations, meaning sellers place too high a value on their business, is typically the number one deal killer. Declining sales trends, dated business practices, over-reliance on the owner, and significant customer concentration issues can all impact your ability to sell.” 

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Selling your business will likely be one of the biggest decisions of your business life.

No doubt you have a good idea of what your business is worth. But there are many factors to consider when putting your company on the market. Is now the best time to sell? Should I look for a cash deal or should I consider certain terms? What about confidentiality?

Working with a professional business intermediary will provide the expertise to help you make those decisions. Consider teaming with a Certified Business Intermediary (CBI), a professional who fully understands what it takes to successfully sell a business. A CBI can bring significant value to the complex process and help you complete a sale that will include the best possible value and some peace of mind.

A Certified Business Intermediary, or CBI, is the designation awarded by the International Business Brokers Association (IBBA) to members that have met certain educational requirements and ethical standards. IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of business brokerage and mergers and acquisitions.

A CBI is an experienced, proven professional whose claim of competence is supported and documented. With the skills necessary to handle the marketing, negotiations and complex details involved, a CBI can successfully complete the purchase or sale of your business.

To earn the CBI designation, an IBBA intermediary must meet the following requirements:

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Did you know that Texas and many other States require you to have a license to be a locksmith, but has zero requirements to call yourself a business broker? Shocking isn’t it! In the face of no State regulation, how does a business owner know if the person who offers to help sell their business knows what they are doing? Following are ten compelling and measurable reasons to use a credentialed, certified Business Broker in the sale of your business.

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Recent studies indicate that retirement continues to lead as the number one reason for selling a company. Because a business often represents up to 70% percent of the owner’s overall wealth, it is critical that they take a proactive approach when preparing for their exit. Owners who succeed in harvesting years of hard work will not only financially benefit them on a personal level, but they will have more wealth to pass on to their families.

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Perhaps you’re planning to retire, or perhaps you’ve decided to pursue a different type of business venture. You realize this is the perfect time to sell your business, and you want to ensure you’ll receive a profit that reflects the time and dedication you’ve put into your business. A strategic and perfectly executed business exit plan is the cornerstone of intelligent and responsible entrepreneurship. 

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Optimism in the M&A market is at an all-time high according to findings from the Q2 2018 Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project. 21% of business advisors surveyed say 2018 is the best year they’ve ever seen for business owners to sell their businesses. Another 37% say it’s the best time in five years, and 17% say it’s the best in the last 10 years.

Consistent with general market optimism advisors believe seller advantage is growing, with year-over- year seller-market sentiment increases in all market sectors. In the Main Street market, for businesses valued at less than $500,000, seller market sentiment is at the highest it’s been since the survey started in 2013.

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It is human nature for business owners who are putting their companies up for sale would want to go to market with a higher price than what the valuation suggested, hoping buyers will still look at the opportunity.

Unfortunately, though, the right buyers are savvy, knowledgeable, and serious about their acquisition targets. These buyers know the marketplace and won't even look at a company if they think the price is out of line with economic realities.

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When you sell your business, it's common practice to provide training for the new owner.  But what does new owner training involve? What are your responsibilities? And how long will you will be "on the hook" after the deal has closed?

The whole idea of training the new owner may seem alien to the Seller.  After all, why would someone purchase a business they aren't capable of operating?  But in reality, people with relevant backgrounds, can and do, with limited training and experience regularly purchase small businesses. They probably have experience in either the industry or business management aspects, but maybe not both. Seller training gives them a crash course in their area of weakness and prepares them for the real world challenges of running the company on their own.

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Selling a company is no small feat. It can be time-consuming and stressful. It demands meticulous planning, competent advice, and a keen understanding of the dynamics of negotiation and deal-making. CEOs and companies inexperienced in the M&A process commonly make mistakes that can undermine a deal, resulting in a less favorable price—or even kill the deal outright.   These are the most common mistakes. Avoid them at all costs if you want to get the most out of your deal:  Having unrealistic expectations about the time and effort the deal will demand of you. Deal-making takes time and expertise.  Not creating a competitive bidding process. You must make your business appealing to multiple buyers to drive up the price.  Poorly-crafted or nonexistent NDAs. Confidentiality is money when it comes to deal-making.  An incomplete or nonexistent online data room. Buyers need ready access to key information to review for due diligence. If they can& ...

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Research shows optimism among small and medium business owners in Houston reaching an all-time high. This optimism can translate into results. Year 2018 might be the ideal time to sell your business in Houston.

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Years 2018 and 2019 may be ideal times to sell your Houston business. Values have never been higher, particularly for well-run companies. We’re also beginning an upswing in economic cycles.

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There are many factors that determine best timing for selling a small business -- the financial condition of the company, valuation, growth cycle, profit history, and the current market. 

Usually the best time to obtain the highest price occurs when sales and earnings are good and trending upward. A solid earnings trend will enable a buyer to pay a higher price and still meet his return of investment criteria. A history of good performance also gives the buyer confidence in projected future earnings. 

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Circumstances that give a business an advantage over its competitors, strengthen its strategic position, or can be leveraged for future gain boosts business value. Why? Because it increases the probability of the continued future profitability of the business and decreases perceived risk by prospective buyers.

As with all value drivers, it’s about risk. Lower risk achieves higher value. Buyers will pay a premium price for a business that has barriers to competitive entry.

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As an avid wine fan and wannabe aficionado, I can’t help but notice the parallels between winemaking and the principals involved in effectively building a successful transferrable business.  Frank and I often visit Napa Valley touring our favorite vineyards......and marveling at the amount of care and knowledge required to grow the perfect grape.

Each Grapevine Grows Differently

In business, there are a few universal truths that are required for long-term stability. For starters, you must have an excellent product or service targeted to a specific market at the right price point. The infrastructure necessary to build and deliver your product must have a solid, well-structured foundation on which to build your business and the right people in the right environment. Finally, sustainable success requires flexibility in meeting constantly changing business needs.

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There is little doubt that valuing a business is often complex.  In part, this complexity is due to the fact that business evaluation is subjective.  The simple fact is that the value of a business is often left to the mercy of the person conducting the evaluation.  Adding yet another level of complexity is the fact that the person conducting the valuation has no choice but to assume that all the information provided is, in fact, correct and accurate.

In this article, we will explore the six key issues that must be considered when determining the value of a business.  As you will see, determining the value of a business involves taking in several factors.

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A number of factors, including record-high 2017 M&A activity and the passage of tax reform legislation, indicate that 2018 will be an excellent year for business owners to move forward with transitioning out of their businesses. If you’re a business owner who is thinking about selling or transferring your business to someone else within the next few years, the time to start preparing is now!

Increased 2017 Q3 M&A Activity

2017 is on track to set a record for the highest number of businesses changing hands since 2007, according to BizBuySell.com's Third Quarter 2017 Insight Report. And, there was an increase in M&A activity by private equity and strategic corporate buyers in Q3 of 2017 compared to Q2, according to the Q3 2017 Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source, and the Pepperdine Private Capital Market Project. The report attributes the increased activity largely to the strong demand for add-on acquisitions.

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It would be nice to live in a world where every business-for-sale was sold at top dollar. While there is no such thing as a perfect business free from all defects, there are a number of problems that can hinder a sale that could be remedied, if given enough time. This article lists ten of the reasons which are often cited as contributing factors in an unsuccessful sale or a completed deal for less than potential value. Business intermediaries need to be up-front with their seller clients, educating them on the challenges faced, and the likely impact that one or more of these issues will have on completing a successful transaction.

 1.    UNREALISTIC EXPECTATIONS

 a.    Valuation/Listing Price

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This checklist outlines the most important variables that impact business value specific to landscaping and lawn care companies. Groom your business to achieve maximum value before putting it up for sale. 

Build a management team:  A business is more valuable if the owner is not the landscaper, the mower, the weeder, or the sidewalk edger.  If you have management and supervisory staff in place overseeing the crews, your business will be more valuable and much easier to sell. Don't be an owner-driven operation. Build your business so anyone can run it. The more important you are to your business, the less your business will be worth. Additionally, building your company so anyone can run it vastly opens up the universe of buyers that can purchase the business.

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Performing due diligence on a business being considered for purchase should be conducted much like a surgical procedure. The operation should be an organized examination of the vitals of the company. It should also be approached knowing that this is an invasive phase of the sale process for the owner.

This stage of buying a business begins once you have made your offer and the seller has accepted. A contractual agreement has been entered into between the buyer and seller outlining the price and terms of the sale. The contract is contingent upon the business passing "inspection," which is the due diligence period allotted to the buyer.

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The reasons for selling a business can be divided into two main categories. The first is a sale that is planned almost from the beginning or by an owner who knows that selling is or should be a planned event.  The second is exactly the opposite – unplanned; the sale is motivated by a specific event such as health, divorce, business crises, etc. However, in between the two major reasons, are a host of unpredictable ones.

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It’s no fun telling a songwriter his song is bad. Telling an author her novel won’t sell takes nerves of steel. Telling a business owner his business is overvalued is no way to make a friend, much less gain a client.

Marvin (not his real name) was flat P-O’ed at me. When I told him how a buyer would look at his business, he told me in no uncertain terms he was not going to hire me because I didn’t know the market and didn’t appreciate how hard he’d worked over the years.

After almost 30 years of buying and selling businesses, I understand that it’s common for a business owner to have an unrealistic valuation expectation. This disconnect can be exacerbated by a business broker who is not honest with the business owner. Too many business brokers will tell an owner what the owner wants to hear about his valuation in order to get the listing, hoping the owner will lower his expectation if an offer comes in.

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When selling a business, time is not your friend. Time is the enemy of all deals. In fact, "time kills all deals" is an expression that can be associated with a number of different industries, but is especially relevant to business acquisitions. So, the key to a successful deal is to prepare well, come out strong and maintain momentum throughout the business sale process. The deal clock is set in motion as soon as your company hits the business-for-sale market, not later in the process when a buyer presents the first offer.

So, to generate deal momentum, a business owner should be ready for the trip to the marketplace before the train leaves the station. This means organize your documentation and vet potential roadblocks that can derail or delay the process. 

Don’t let time work against you. Ready up with these tips to reach a timely closing:

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No matter how the real estate is held, many owners desire to sell the real estate with the business. There's only one problem. Many buyers that will want to acquire your business will not have the capital to also acquire the real estate.  Or they may feel that parking a significant investment in real estate makes a large portion of their investment capital unavailable for growing their new enterprise.  The ideal scenario that creates the largest buyer pool is for the seller to offer the real estate for sale or for lease at the option of the buyer.

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If you are looking for a profitable, well-run business to acquire, you are not alone.  Right now, there are not enough businesses for sale to meet buyer demand, as reported by a Market Pulse Survey in early 2017 sponsored by the IBBA (International Business Brokers Association) and M&A Source. The survey was conducted with support from the Graziado School of Business at Pepperdine University.

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The business sale process typically begins with an initial inquiry stage, during which owners try to get an idea of what their businesses are worth and whether selling makes sense. They are "sale curious" and have been thinking about it more than a time or two. When a business is sold, big or small, taxes are inevitable. Three reasons that selling a business in the Trump presidency might be beneficial...here's a look into Trump's proposed tax changes, and what they can mean for selling a business in the upcoming year. Three reasons that selling a business in the Trump presidency might be beneficial...here's a look into Trump's proposed tax changes, and what they can mean for selling a business in the upcoming year.

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A record number of small businesses were bought and sold in America in 2016, topping 2015's totals by 8.6 percent and 2014's previous high by 4.6 percent. Will this momentum be sustained? According to Deloitte's year-end report "activity is poised to accelerate, perhaps significantly." Primary factors for the bullish outlook are stock prices at historic levels, interest rates... despite the forecast for an increase...remain near or at historic lows, an improving business environment, more qualified buyers on the market, and much improved financing options.

The following data shows a snapshot of 2016 market statistics for the Greater Houston Metro Area. A total of 66 U.S. metro areas were represented in a report by BizBuySell from data provided by Business Brokers. Most businesses are valued based on a multiple of adjusted earnings.

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One of the most challenging aspects of valuing a small business is Recasting Financial Statements using cash flow adjustments, also known as “add-backs”.

Larger businesses tend to have CPA-reviewed or even audited statements and adjustments may be limited to officer compensation or bonuses.

However, for smaller businesses, it’s no secret that owners try to limit their tax liability by expensing personal or “non-operational” items through the business. The concern for outside parties is typically twofold: (1) will a lender accept this and (2) can it be verified?

Add-back acceptance is a grey area, most likely falling under prudent lender policy. Although there is no right or wrong answer, I would ask the following questions to help determine if the addback is reasonable from a financial point of view:

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Are you a business owner at that stage in your life where you are contemplating the potential sale of your company? Undoubtedly you have thought about selling a time or two and truth be told, 100% of all business owners have from time to time. It's perfectly normal to question why, when or how to sell your business. The main key to a successful sale is preparation. Keep in mind that whatever you put into the process is what you will get out of it.

Understanding the selling process and being prepared are the key indicators that will establish the tone of selling your business and help you be more comfortable when you are ready. The selling process is important and requires a huge amount of commitment. Selling your business needs to be a calculated decision based on many actors.

Therefore, when you are ready, recognizing "The 10 Do's of selling your Business" will position your company at the right place and help you understand the ins and outs of the process a bit better.

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When looking for a business to purchase, most prospective buyers have an initial list of qualifying questions they ask an owner of a business they are interested in. In addition to this baseline information, buyers may use the first couple of meetings or calls to get a clearer understanding of the business and to assess its risks and upside aspects.

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Deals fall apart for many reasons – some reasonable, others unreasonable.

For example:

• The seller doesn’t have all his financials up to date.
• The seller doesn’t have his legal/environmental/administrative affairs up to date.
• The buyer can’t come up with the necessary financing.
• The well known “surprise” surfaces causing the deal to fall apart.

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There are three major negotiation methods.

1. Take it or leave it. A buyer makes an offer or a seller makes a counter-offer – both sides can let the “chips fall where they may.”

2. Split the difference. The buyer and seller, one or the other, or both, decide to split the difference between what the buyer is willing to offer and what the seller is willing to accept. A real oversimplification, but often used.

3. This for that. Both buyer and seller have to find out what is important to each.  So many of these important areas are non-monetary and involve personal things such as allowing the owner’s son to continue employment with the firm.  The buyer may want to move the business.

There is an old adage that advises, “Never negotiate your own deal!”

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There are unique attributes of a company that make it more attractive to a possible acquirer and/or more valuable. Certainly, the numbers are important, but potential buyers will also look beyond them. Factors that make your company special or unique can often not only make the difference in a possible sale or merger, but also can dramatically increase value. Review the following to see if any of them apply to your company and if they are transferable to new ownership.

Brand Name or Identity

Do any of your products have a well recognizable name? It doesn’t have to be Kleenex or Coke, but a name that might be well known in a specific geographic region, or a name that is identified with a specific product. A product with a unique appearance, taste, or image is also a big plus. For example, Cape Cod Potato Chips have a unique regional identity, and also a distinctive taste. Both factors are big pluses when it comes time to sell.

Dominant Market Position

A company doesn’t have to be a Fortune 500 firm to have a dominant position in the market place. Being the major player in a niche market is a dominant position. Possible purchasers and acquirers, such as buy-out groups, look to the major players in a particular industry regardless of how small it is.

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Vacation - it's often an elusive concept for the owners of small businesses. Even when owners do take time off, chances are they're still checking in constantly, which has become increasingly easy to do in this age of the smartphone and ever-omnipresent Internet connectivity. The ironic thing is that this constant owner involvement can actually be detrimental to the value of the business from the perspective of potential buyers.

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The valuation of a restaurant is much like any other business valuation. But, there are certain factors unique to the restaurant industry. The universal drivers for many restaurants are pretty simple: quality, hospitality, consistency, value, cleanliness, and customer loyalty. 

You may have heard the saying that the three most important ingredients for a successful business are location, location and location. Obviously, there are other factors which are very important as well, but you cannot compromise on location.

In a 2005 publication of Cornell Hotel and Restaurant Administration Quarterly, the authors noted how successful owners were able to describe their concepts - and why people like it - in great detail - those unique reasons why people choose their restaurant over their competitor.

1. Location, Location, Location

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Serious buyers want to carefully look at the financials of a company under consideration and all of the other major aspects of the company. However, there are a few other areas that the serious buyer will investigate that sellers may overlook. The Industry – The buyer will want to take a serious look at the industry itself, the customers, the suppliers, the competition, etc. This investigation will cover the strengths, weaknesses, threats from competition, and opportunities of the potential acquisition. With the growth of the “big box” retailers, much power has shifted from the manufacturer to the retailer. A manufacturer may want to increase prices, but if Wal-Mart says no, it’s a very powerful no. Discretionary Costs – Some sellers will reduce their expenses in discretionary areas such as advertising, public relations, research and development, thus making for a higher bottom line. However, these cuts will hurt the future bottom line, and smart buyers will take notice o ...

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You may have been reading or hearing that conditions in the business-for-sale marketplace have been synchronizing and harmonizing. The stars are aligning, charting an agreeable economic climate in the acquisition universe for Baby-Boomer Business Owners.

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Concentration in the acquisition world is a bad word. Businesses with high supplier concentration attract fewer buyers and this lowers the price. What’s too high? Having a supplier with 40% of your business is too high. Diversify if at all possible.

When buyers look at a company for sale, they look at risk. Supplier concentration is one of the top risk factors that are examined. Why? Because if customers push the throttle, the suppliers furnish the gas. A company cannot sell its products to customers if it cannot secure what it needs from suppliers. Any adverse change in a company’s relationships with its key suppliers, or loss of the supply of one of the company’s key products, could have an adverse effect on the business. Therefore, the nature and stability of suppliers is an important consideration in identifying a company’s risk.

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If there’s one thing I’ve learned in my years of working as a Certified Financial Planner™, it’s that entrepreneurs are a special breed of people. They’re motivated. They’re inspired. They’re incredibly tenacious. They’re smart. They’re optimistic. And they know how to get what they want.

On the flip side, many entrepreneurs are guilty of being a little pie-in-the-sky—especially when it comes to their own businesses. Unrealistic expectations of the exit process can both hinder the sale of a company and affect the morale of an entrepreneur getting ready to sell. Be wary of the mistakes below and you’ll enter the exit-planning process better informed, better equipped strategically, and more likely to enjoy your sale process.

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By Jim Stauder The Dow Jones closed at an all-time high on Friday, September 19, 2014. And the NASDAQ and S&P were within ¼ of 1% of their all-time highs. As a result, corporations, private equity groups, and individual investors are flush with cash – trillions of dollars. Where can they go with all that cash? Interest rates are so low that fixed income investments are not attractive. Whereas it’s typical to have a stock market correction (10% tumble) about once every 1 1/2 years, it’s been almost 3 years since the last correction. With international tensions in Ukraine, Russia, Iran and the Islamic radical group ISIS setting its sights on terrorizing the US economy, how much longer can the (stock market) good times last? Where can that cash best be used to achieve adequate returns on investment? The answer – business acquisitions. The buyer demand for good businesses with good cash flow has always exceeded the supply of good businesses available for acquisi ...

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Selling your business is the most important transaction you will ever make. It would be a shame to spend 20 years building your business like a pro, only to exit like an amateur. By avoiding these eight common novice mistakes you’ll have a more profitable and satisfying experience.

1. Selling Because of an Unsolicited Offer To Buy

Got an offer from a competitor? Or, perhaps a Chinese company looking to buy a customer base in the U.S. These are not unusual occurrences these days. There are countless stories about a competitor coming in with a spontaneous, unexpected offer and after a little light negotiating the owner sells. Another common story is the owner tells his banker, lawyer, or accountant that he is considering selling. His well-meaning professional says, “I have another client that is interested your business. I will introduce you.” The next thing you know the business is sold. Believe me, these folks are buying your business at a big discount. If you previously were not considering this business sale, you probably have not taken some important steps to improve business value and optimize your exit. You may not have prepared for an identity and lifestyle to replace the void that will be left by the separation from your company. Wouldn't you rather be prepared and exit on your own terms….better terms.

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When getting ready to sell a house or a car, the first thing people do is clean it up and get rid of the clutter. It is not different when selling a business. The process just has to begin much sooner.

Buyers look at the past three or four years of financial performance, so that is when the cleanup process should begin. Sellers need to look at what the future buyer will be looking for and organize appropriately. It is important to consider the following before deciding to sell:

Are you taking out too much compensation, travel, entertainment or other related expenses? -- This may save you money on income taxes, but buyers have a difficult time differentiating between what is required for business and what is excess. A buyer may agree to pay x-times, so an additional $100,000 of expenses could cost you hundreds of thousands of dollars in sale value. With excess expenses, your bottom line or net income is lower, which makes the profitability and the amount a buyer will pay lower.

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As intermediaries, we always look to protect our clients. When a buyer wants access to employees before closing, the risks to the seller are numerous and obvious (loss of confidentiality, disruption to the business, concerned employees, etc.). However, if these are the only arguments made when representing a seller, the buyer may not see the entire picture and perhaps even feel that some of their concerns are being validated. The key is to express to the buyer why it is not in their own interest to let the cat out of the bag prior to closing.

Now, there may be some exceptions, such as a key employee, manager or member of a bona fide executive management team (rare for a small business). Even in these instances, you will want to carefully consider the timing and nature of bringing others into the fold. Also, please note this advice pertains primarily to main street transactions and some at the low end of the lower middle market.

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There is a general misconception in the small-business acquisition marketplace that a person could easily purchase any type of business through the SBA with a low down payment and get a loan for the rest. Most people also believe that SBA loans are a major source of small business financing. But data shows that SBA-guaranteed loans make up a small portion of the value of the overall small business lending market.

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Selling your business is no stroll in the park. You’ll need the right motivation, a ready mindset, and something attractive to sell. So, a key factor to a successful sale is preparation. The more effort you spend preparing your company for an eventual sale, and understanding the factors that make a business sellable, the more attractive your business will be to prospective buyers. Keep in mind that just because your business is making a profit, doesn't necessarily mean it's attractive.

Ready up with these 14 karats of knowledge to help you get a golden deal:

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When selling a business, time is not your friend. Time is the enemy of all deals. In fact, "Time kills all deals" is an expression that can be associated with a number of different industries but is especially relevant to business acquisitions. So, the key to a successful deal is to prepare well, come out strong, and maintain momentum throughout the business sale process. The deal clock is set in motion as soon as your company hits the business-for-sale market, not later in the process when a buyer presents the first offer.

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There are very logical reasons why you don't see public "Business For Sale" signs posted on reputable, profitable companies. Why? Because that sign would soon be replaced with "Going Out Of Business Sale." Consider the following points. First, even if the you don't actually hang a "For Sale" sign outside the window, trying to sell it on your own through classified ads, or, heaven forbid, by word of mouth, for instance, threatens the business' reputation and future.

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Having a formula and understanding the fundamentals of successful negotiation can help you make the best deal possible and avoid lost opportunities.

Negotiation may seem a daunting task, but when handled in a balanced manner, negotiation can be a positive experience rather than a negative one. The negotiation strategy should be one that results in a winning deal for both parties. It's not about who strong-arms the other. Nor is it a game with a winner and loser. It’s a complex process for sure.

A good deal is never one-sided. Negotiation isn't about capitulation, it's about finding a mutually acceptable solution. If the parties can determine the factors that are most important to each, the price and the terms of the deal can be structured to meet those needs.

The following are some key negotiating tips. While they can't guarantee that you will always get what you want in a negotiation situation, they will certainly enhance your chances for success.

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A few years ago I was a guest on KSEV Radio AM 700 with host Aubrey Thoede and had the opportunity to discuss a subject that many call-in listeners wanted to learn more about....starting their own franchise. But buying a new franchise is not the best way to go about achieving the "American Dream."

Once you've hit five years, your odds of survival go way up," Birch said. "Only two to three percent of businesses older than five shut down each year." http://usatoday30.usatoday.com/money/smallbusiness/columnist/abrams/2004-05-06-success_x.htm

Everyone reads or hears about big corporate mergers and large company acquisitions. However, big corporations aren't the only companies being bought and sold. Profitable, privately-held small businesses are changing hands everyday. These transactions are done behind the scenes and are not reported along with the daily stock market news. These business exchanges fly under the radar of the public at large -- which may be part of the reason that it is not commonly understood that buying an existing small business is the most viable path to being a successful business owner.

If you are considering your options for going into business for yourself, buying an already established profitable business should be the first option on your list and starting a new franchise the last. Here are six slam-dunk reasons why:

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Last week I met with a business owner after an introduction by his accountant. He was thinking of selling his profitable waste recycling business, a business he had been running for nearly 30 years. The business had a reliable management team, an enviable customer base and a strong balance sheet. Unfortunately, the owner had a vastly inflated idea of the value of his business.

His thought process went something like this:  “I’ve built this business over 30 years so it must be worth a lot of money.  A couple of years ago we built a nice place to retire to and need to clear the mortgage. We also need a couple of million to create a pension pot that will maintain our lifestyle. The business has provided us a very nice lifestyle and will do the same for the new owners – it has to be worth about $3 million.”

It’s difficult to be objective about something you’ve built from the ground up; a business that has shaped your life and underpins your standing in the community. Coincidentally, $3 million happened to be about the figure he needed to meet his retirement aspirations.

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Internal and external factors are important considerations when selling a business. Here are issues you should think about when trying to time your exit. There are many factors that determine best timing for selling a small business -- the financial condition of the company, valuation, growth cycle, profit history, and the current market. Usually the best time to obtain the highest price occurs when sales and earnings are good and trending upward. A solid earnings trend will enable a buyer to pay a higher price and still meet his return of investment criteria. A history of good performance also gives the buyer confidence in projected future earnings.

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Know why you want to sell your businesss.
Having a solid reason and a committed resolve to a sale is essential in achieving a successful transaction. In addition, one of the first questions buyers ask is, "Why is the owner selling?" They want to know that it is for a good reason and not because there's something wrong with the business that might be hiding in the shadows.

Know what you will do after your business is sold.
If you don't have a plan in mind, you might find yourself getting cold feet or feeling a little off balance when that first offer to buy the business comes along.

Know the value of your business.
Get a business valuation by a reputable firm to understand what you could expect in the current marketplace. This is an initial step in determining if the sale would meet your objectives.

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Identifying and articulating the goodwill in your business can have a significant impact on buisness value. Essentially, goodwill is the life force of the business. Tangible assets are just “stuff."

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Understanding a company's competitive position is an important process in determining business value. Therefore, a business owner who is considering a sale should understand what can be characterized as moat.

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How is your business perceived by your target market? What unique attributes do customers and prospects associate with your business? Is your business name trademarked? Are your logos or other intellectual property protected? Companies are not only recognized by their products or services, they can be identified by their logos, signs, commercials, or theme songs. These all represent your brand and are valuable. As a matter of fact, McDonald’s brand does not appear on the company’s balance sheet, even though it is estimated to account for about 70 percent of the firm’s stock market value. Just as your product or service needs intrinsic value in order to sell it to the end user, your business needs distinct attributes in order to sell it in the business-for-sale marketplace.

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Potential buyers who are considering the purchase of a business are interested in knowing how it can be grown once they bought it. The growth potential of a business plays a major role in its value. While buyers will purchase a business at a price predicated on current and historical cash flows, their main motivation is the opportunity to grow the business beyond its current size.

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A stable, skilled, quality workforce is one of the top value drivers that contributes to the purchase price of a business. Therefore, when a business for sale is being evaluated by a prospective buyer as a possible candidate for purchase, the quality of the human element will be considered. The staff is a major component and the backbone of any successful business operation.

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When selling your business, it is important to know that your customer base has a major impact on its value in the marketplace. A diverse customer base means your revenue comes from a number of clients or customers, not just two or three, and preferably comes from multiple sources other than your primary service.  Simply put, the more customers contributing to your sales revenue without a few dominating that figure, the more valuable your business will be. Why? Because it reduces the risk of serious cash flow issues if one or more customers do not stay under new ownership.

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According to Dr. Jerry Osteryoung, a professor at Florida State University, the purpose of business is to serve others who have a vested interest in its success, such as its employees and investors, because they are the ones who suffer the most if the business fails. To fully understand my response, one must first read the Professor's Full Article as follows: When I was in classes getting my PhD. in finance, my professors told me over and over, “The purpose of a business is to make money for its owners.” Unfortunately, I cannot tell you how many times I repeated this mantra to my students over the years. Now, however, I have a very different opinion on the subject. A firm cannot stay in business just to make money for its owners at the exclusion of everything or everyone else. If an entrepreneur takes the attitude that he or she deserves to make all of the money, the business will suffer and will most likely crash and burn. Just consider who stands to lose the most when a business fails ...

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Recurring revenue is the holy grail for business owners looking to have a valuable and sellable company. Learn how to secure stable and predictable cash flow in your business.

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Evaluate your company through the eyes of a buyer. Master these ten value drivers and sell at the higher range of the multiples normally associated with your industry.

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Prior to discussing confidential information about businesses for sale, business brokers require prospective buyers to complete certain forms that serve two purposes. They protect the interests of the business owners during the sale process and enables a business broker to competently assist buyers in their acquisition search. These documents are necessary to the process and are defined below.

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Non-compete agreements are typically included as part of the terms of a business sale transaction to protect the buyer from direct or indirect competition from the seller. A buyer would not want to purchase a business if the seller could relocate down the street. For this reason, buyers usually require that this threat be eliminated.

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Since the biggest part of the purchase price of a profitable small business is goodwill, it is important for a buyer to have knowledge and understanding of just what goodwill is and why there is value in it. Much of the value of a business is not to be found in its hard assets such as the fixtures and equipment, but in the intangibles that create the income. A simple way to describe goodwill is the difference between the current market value of the tangible assets of the business and the total value of the business.

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Performing due diligence on a business being considered for purchase should be conducted much like a surgical procedure. The operation should be an organized examination of the vitals of the company.

This stage of buying a business begins once you have made your offer and the seller has accepted. A contractual agreement has been entered into between the buyer and seller outlining the price and terms of the sale. The contract is contingent upon the business passing "inspection," which is the due diligence period allotted to the buyer.

Since it is the buyer's responsibility to uncover any potential problem areas of the business, it is important to be prepared. This is the time to cut to the chase with checklist in hand to confirm all material facts of the business and validate what the seller has represented. 

The following checklist represents vital aspects of a business that a buyer may wish to examine during the due diligence period. This checklist is not meant to fit all scenarios or to be all-inclusive, but to serve as a guideline.

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Most potential buyers would be averse to purchasing a business if the owner's shoes are too big to fill or if the owner's hand would be too difficult to unravel from the operation. When preparing to sell or build value in a business, the owner should not be so involved in the business that it would be difficult for would-be buyers to see the business as being productive under new ownership. Buyers want the owner to be replaceable. A business is more valuable when perceived risk is low. A business is less risky when it is making money without its owner's involvement in daily operations.

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Inventory (stock held for resale) is a significant part of the tangible assets of most businesses. It is customary to include a normal inventory level in the purchase price of a business for sale that can sustain current revenues being generated by the business.

Just as tangible assets like machinery and equipment are included in the purchase price of a business for sale, the same holds true for inventory. Such assets as these are needed to generate the profit upon which the business is valued.

If a buyer is required to replenish the inventory or purchase additional equipment after purchasing the business, this additional working capital requirement would need to be taken into consideration prior to the initial valuation of the business if the sale is to be successful.

The agreement that both the buyer and seller sign into contract for the purchase of the business usually outlines the details of how inventory will be handled. The following are several aspects of inventory that are usually covered:

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An articulated, working marketing plan is a sign of an organized business and provides a roadmap for a new owner to follow. A marketing plan that is tailored to reach a defined target audience instills confidence that growth can be achieved in an effective, predictable manner under new ownership. In other words, by increasing the probability that the business will continue to perform and grow into the future, the risks associated with acquiring the business are significantly reduced in the eyes of prospective buyers. Less risk means a better value. Therefore, the efficiency with which you attract customers will increase the purchase price paid for your business.

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A decline in the number of small businesses means an increase in unemployment and an uncertain economic outlook for the next generation. Everyone loses when small business fails. When a business is sold, the former owner pays Uncle Sam a capital gains tax based on the profit gained in the sale. Unless Congress acts to extend the current Bush-era tax rate, the capital gains rate of 15% will increase to 20% at the beginning of next year. As of this date, it seems we will have to play the wait-and-see game hoping that someone in Washington will tackle this onerous tax increase on small business owners. Another tax of which many may not be aware is the additional Medicare Tax on investment income that comes into play as a result of the 2010 health care reform act. The Medicare Tax adds an additional 3.8% tax for most types of investment income, including capital gains. It applies to single taxpayers earning more than $200,000 and married taxpayers with combined income of more than $250,000. Theref ...

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Taking the time to research the financing and tax implications of a sale can provide you with a strong advantage come negotiation time.

Before you can understand the importance of negotiating a final small business sale agreement, it pays to brush up on facts about how sales are financed and how proceeds are taxed. Why? Because every decision regarding the payment structure affects when and how money transfers from the buyer to the seller and how the payments are taxed.

No one is asking you to become a financing or tax pro. That's what your sale advisors do, and you'll want to call on their advice through every step from here through to the closing of your deal and the transition of your business to its new owner.

But knowing some basic information will help you understand the advice you're receiving from those who are trained and up-to-date on the legal, financial, and tax implications of small business sales.

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Selling a business is usually a very intimidating and time-consuming process. There may be legal, tax, accounting, and regulatory issues to address. Business brokers and agents deal with these issues and negotiate business deals on a daily basis. They are professionals with a fiduciary duty to you, and they are authorized to act on your behalf in coordinating the transaction. Experience and Skillful Negotiators For many people, selling a business is not an event that occurs often. A competent business broker has spent several years developing an understanding of the current market and acquisition process, and he or she can assist you in pricing and marketing your business. A broker has access to recent sales histories on similar companies which help to determine an unbiased and accurate assessment of your business. Furthermore, a broker handles the technical aspects of the sale such as structuring the transaction and liaising with other professionals that help in the selling process. Profession ...

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The World's Largest Organization of Middle Market Intermediaries The June 2012 M&A Source Conference was the place to meet fifty plus Professional Buyers with available funds to invest. It was apparent there are more funds available than there are good companies to buy. Repeat, there is no shortage of buyers with money. I would estimate there are about 16 buyers for every seller. So why aren’t buyers doing more deals? As we all know, so many companies are not as profitable as they once were, so sellers are not willing to sell at lower values right now. But another problem I learned from the Private Equity Groups (PEGs) at the Conference was that sellers are not prepared to sell. Sellers need M&A Source Intermediaries more than ever to prepare their companies for sale. Unfortunately, many sellers resist this process. Why should sellers love the M&A Process? They will make more money! In my thirty years o ...

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Business branding has become an art and it all starts with a vision! A little moxie can go a long way if your business is in a competitive market. A unique brand identity that distinguishes your business from your competitors is the route to success for all companies. The better the brand position you have in the marketplace, the better you will perform over your competitors, which lowers the risk of taking over the business by a new owner. This translates to higher value. How is your business perceived by your target market? What unique attributes do customers and prospects associate with your business? Is your business name trademarked? Are your logos or other intellectual property protected? These all represent your brand and are valuable. Not only do you recognize companies by their products or services, you can identify them by their logos, signs, commercials, or theme songs. Branding does not have to mean spend lots of money. Beating the competition means a better bottom line, which means ...

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Customarily, escrow fees are split 50/50 between the buyer and the seller and vary depending on the size of the transaction. Escrow cost is less than 1% of the purchase price of the business. However, there is a minimum fee for unusually small deals. Other charges may apply to one party or the other for specific services such as lien filings, lien searches, non-standard documents, and real estate closing documents (if property is part of the sale). The escrow agent is an independent agent who's role is to facilitate the close via a written process that is documented in an escrow agreement, or earnest money contract, that is agreed to and executed by both the seller and buyer. We all know the name of the game in business is to minimize risk; the use of an independent escrow agent substantially minimizes both the seller’s and buyer’s risk resulting from the closing process. An independent third party escrow agent works for both the Seller and the Buyer and, as such, is i ...

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Most business owners, have thought about selling their business a time or two. They've imagined, dreamed, and wondered what it would be like to be free of all the trappings, headaches, and burdens of running their company. They probably also wonder how cumbersome the sale process might be and what it entails. While we can't tell what their imagination dreams up at the thought of freedom, we can tell them that selling a business requires a substantial commitment and should be a calculated decision. As with most endeavors, whatever effort is put into the process is what will come out of it. A fundamental element to a successful sale is preparation. Knowing what to expect, understanding the motives of the most probable buyer, anticipating their questions, and vetting potential problem areas of the business that might inhibit or delay an eventual sale are key to a positive selling experience. Once business owners feel comfortable with these basics they just might st ...

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This is a common question asked by business owners who are thinking about putting their business on the market for sale. They want to understand the parameters of a business deal and what to expect from prospective buyers. Negotiation may seem a daunting task, but when explained in a balanced manner, negotiation should be deemed a positive approach rather than a negative one. When a serious qualified prospective buyer comes along, the negotiation strategy should be one that results in a winning deal for both the seller and the buyer. It's not about who strong-arms the other. Nor is it a game at which you either win or lose. It’s a complex process for sure. A good deal is never one-sided. Both parties should work as allies since the goal of one will achieve the goal of the other. If the parties can determine the factors that are most important to each, the price and the terms of the deal can be structured to meet those needs. The short answer to the title question is that "a ...

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Over the past 38 years our firm has been involved in many discussions with business owners considering the sale of their businesses. There are a few particular myths that have repeatedly surfaced during these discussions.

Since a typical small business owner will sell a business only once in his or her life, it is not surprising that the complexity of the process is often underestimated.

Therefore, an understanding of fact vs. myth is important if an owner of a profitable small business wants to achieve a successful sale and get the best deal the market will bear. 

Myth #1 – I Can Sell My Business Myself

Many owners believe they’re qualified to sell their business without professional assistance based on the skills they’ve acquired running their companies. Many owners are entrepreneurs with solid selling skills, and many function as the key salesperson for their company. However, what many don’t anticipate is that selling a business is nothing like selling a product, service or anything else they’ve sold before.

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A business valuation is not about what a company is worth in the current owner's hands, it's about the company's transferable value. It's about the probability that the business will sustain its profitability and continue to grow with a new owner at the helm. Therefore, the factors that contribute to the company's stability and consistency will be examined by prospective buyers to determine the risks associated with taking over the business. A strong brand, which is an intangible asset and an element of goodwill, is a desirable attribute to have in the business-for-sale marketplace.

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Due Diligence is the final hurdle of the business sale process. It is the time when the buyer requests from the seller any documents and materials needed to verify that all representations made by the seller are accurate and occurs after a purchase contract is signed by both parties in the transaction. The contract is contingent upon the business passing due diligence inspection by the buyer, which is usually scheduled to last about two weeks to a month, depending on the size and complexity of the enterprise.

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This is the question I get more than any other and my answer is YES, Absolutely Yes!! My answer may surprise you, and some may even want to argue, but if you have been in the lending or business brokerage industry for more than 6 or 7 years I think you will agree. When I look back to the 1990's and early 2000's when I was asked, "What does it take to get a business acquisition loan?" I would tell them a borrower must be able to CONVINCE the lender of the following: The ability and willingness to pay all of their obligations on time. The specific experience needed to own and run the business. They had enough cash to make a substantial investment into the business. They had some tangible assets to back the loan should things go bad. Today when I am asked "What does it take to get a business acquisition loan?" I tell buyers and brokers exactly what I did 10 and 15 years ago. The trouble with many individuals today is they are sitting around waiting for things to get back ...

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While the first question a business owner asks is, "What kind of price can I expect in the marketplace if I sell my business," the real question is not the price paid for the business, but how much will you take home. The Federal Tax Laws determine how much money you will actually be able to put in the bank. How your business is legally formed can be important in determining your tax status when selling your business. For example: Is your business a corporation, partnership or proprietorship? If you are incorporated, is the business a C corporation or a sub-chapter S corporation? There are some tax rules that impact certain businesses on seller financing. The point of this tip is that before you consider price or even selling your business, it is important that you discuss the tax implications of a sale of your business with a tax advisor that is experienced in business transfer transactions. A business broker will be able to recognize potential problems and can refer you to ...

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When selling a business, maintaining proper inventory levels is essential to maximizing value.  Don't let poor inventory management drag down the value of your business. 

Inventory is an ever-renewing, moving, and perishing thing. The longer it hangs around, the less valuable it gets, and eventually dies as a viable product.  If it's not turning over fast enough, the inventory begins to stop-up cash flow and drain capital coffers. Inventory is a dollar-for-dollar part of the buying and selling process and buyers will make a close assessment of it prior to closing a deal.

So, when operating a business, the goal is to tie up as little cash as possible in inventory, while having enough inventory to meet ordinary business needs. And, when selling a business, prospective buyers looking at your business as a possible acquisition would rather see fully flexible cash, not less flexible inventory weighing profits down. Any free cash flow that can be found to help bottom line earnings when selling a business will be rewarded by a higher price when the business is sold.

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"A major competitor made an unsolicited offer to acquire my small business. The amount seems significant, what should my next step be?" While the offer may sound great, the real question is whether or not it is an offer that truly reflects the value of the business you have built. So, in order to make an informed decision, the first step is to seek an independent valuation from a firm who knows the marketplace. Secondly, you need to educate yourself about what drives value and what motivates buyers. The fact is that competitors usually pay the least for a business. There are other types of buyers that would probably pay more. Each category of buyer has distinctive characteristics and motives for making an acquisition. The price each is willing to pay is directly proportional to their motive. Should a valuation determine that your competitor's offer is less than it should be, then you should let the marketplace compete for your business in order to achieve the best possible deal. &nbs ...

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Family and private businesses are sold in an environment that is unlike the selling environment of anything else you can imagine! Sound surprising? After you review the following ten reasons that make selling a business different than selling anything else, perhaps you will agree. When the decision is made to sell and the sale is properly conducted, a business is sold for the best price and terms without anyone ever having known it was for sale. (1) Confidentiality Making the decision to sell one's business is a difficult enough task in itself. However, once the decision is made how do you sell it without anyone knowing it's for sale? Adverse things can and do occur when people know, or think they know, a business is for sale. Confidentiality must be maintained. Here's why. Employees get nervous and may leave for more stable employment. They believe that the "new broom will sweep clean." That may be true in public company acquisitions but is generally not true in private small business ...

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This is a common question from business owners who are thinking about selling. While there are many ways to increase business value without incurring costs, the following quote sums it up in a nutshell. It is relevant to any business and will spark the thought process for a DIY project. "Every business has something that drains resources without delivering value back. This is dead weight the business is fighting against to stay afloat. Dead weight could be the rock star sales rep of three years ago that now spends more time on Farmville than rainmaking. It could be a product that never launched but is held onto for sentimental value. It could be an expensive vendor that no one takes the time to replace. The dead weight that's the hardest to recognize and drop, though, is a philosophy that no longer matches the reality of the business or its customers." -- Charlie Gilkey Copyright 2007-2013. All articles are authored by Rose Stabler unless otherwise noted. Certified Business Brokers, Texas All Rights ...

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How long does it take to sell a business? The average time on the market for around 82% of businesses is four to 12 months. Fewer than 10% of businesses sell more quickly, and a little over 8% are on the market for more than 12 months. Why does it take so long to sell a business? Price and terms are the biggest reasons. Not overpricing the business, partial owner financing, and an owner training period are factors that are attractive to prospective buyers and can lead to a more timely sale. Preparation for the information a buyer may want to review, and having answers to the questions they will ask is key to a making the process more efficient and timely. Using advisors who are transaction-experienced can also shorten the time it takes to close the sale. These are some documents that a seller would want to gather and have available. Copies of  financials statements for the past three years. A list of furniture, fixtures and equipment included in the sale. Note: try to remove exc ...

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While all transactions are as unique as the parties involved, in most small business sale transactions the seller keeps the cash and outstanding receivables. They pay off the bills and any other outstanding payables and deliver the business free and clear of debt to the buyer.

In somewhat larger business sale transactions, there are many reasons why buyers consider acquiring the receivables.

• Purchasing the accounts receivable offers the buyer the advantages of having control over the collection of the receivables and continued cash flow from the business, thereby removing the need to acquire additional working capital.
• By acquiring the receivables the buyer immediately begins dealing directly with the most important element of the business - its customers.
• The sale of the accounts receivable also offers the seller a clean break from the business and the ability to cash out. This approach leaves no open-ended accounting issues after closing.
• Valuing the receivables depends on the future risk and resources necessary to collect the outstanding receivables. Therefore, the aging report of the accounts receivable would ordinarily be reviewed for history of late paying or uncollectible accounts so both buyer and seller could come to agreement on what should be paid for the outstanding receivables by the buyer.

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Recapturing Profits This question was asked by a business owner who is considering the sale of her business. An addback is an expense that is not a normal one for the business and is, therefore, taken out of the equation when performing a valuation and calculating a company's earning power. The goal when presenting financial information to a potential buyer is to clearly represent the business earnings. This is done by Recasting the financial information into a spreadsheet that we call a "Normalized Income Statement," a reconstructed representation of the company's performance and the owner's "Discretionary Earnings" across several years.   The IBBA (International Business Brokers Association) defines Discretionary Earnings as follows: "The earnings of a business enterprise prior to the following items: Income taxes, Non-operating income and expenses, Non-recurring income and expenses, ...

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Business owners who extend financing to a buyer for the purchase of their business often ask, "What happens if the purchaser defaults on the loan?" Should that happen, the seller would be able to exercise whatever rights are defined in the security agreement that is associated with the promissory note. The seller would usually have the right to get the business back, which may not always be the best scenario if the business has declined under the buyer's management and is not performing well. In addition, if the buyer is using the business' assets to get a bank loan, the seller will have to take a second position behind the bank. A seller should try to negotiate a personal guarantee by the buyer as part of the terms of the promissory note. The seller can also require the new owner to provide periodic financial reports on the performance of the business as part of the terms of the promissory note.

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Two of the most common questions business owners ask is, "How much is my business worth," and "What information is required to do a market valuation of my business." The answer to the first question is ultimately answered by the market itself. What we do is approximate the range of the most probable selling price a business might achieve in the current market. In order to determine the most probable selling price range, we ask for the following information. This is the bare minimum of documentation needed: three years of tax returns three years of income statements (profit/loss statements) interim (current year-to-date) income statement current balance sheet a list of Furniture, Fixtures, and Equipment (FF&E) included in business operations an estimate of fair market value of FF&E Tax Returns (Corporate or Schedule C) We use tax returns in combination with income statements to help determine owner's discretionary cash ...

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Some people are just born with it!

These are traits that successful business owners commonly share. Above all, however, business owners need to have strategic thinking skills, time management skills, and know the job.

No one can embody all these traits if they are part of the human species, but varying degrees of these characteristics is the stuff that success is made of.

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The following information explains the tax consequences of buying or selling a business. Be sure to see the Seller/Buyer Comparison Table at the bottom of this article.

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Certified Business Brokers (CBB) Represents Houston Top-Tier Graphic Design Firm, Gateway Design, Inc., in Sale of Business HOUSTON, TX--(Marketwire - April 14, 2011) - Gateway Design, Inc., established over 20 years ago, was sold by founder and owner Connie Senter to Chris Norton and Sanjay Parikh of Houston, partners at Norton and Park, Inc. The Company, headquartered in Houston, is a pioneer of the graphics design industry with a Fortune 500 client list. They provide a complete portfolio of graphic design and marketing services across a broad spectrum of online and print media. "After 22 years of overseeing daily operations of the firm, my age told me it was time to sell the business," said Senter. She engaged Frank Stabler of Certified Business Brokers in Houston to market the business and represent the Company during the entire sale process. Gateway was very attractive to buyers because of its history as a pioneer in the graphic design industry. The Company was instrumental in the advent of com ...

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The decision to finally sell the business is just the beginning of the sale process. While it is common for business owners to feel emotionally fatigued and ready to move on by the time the business is up for sale, it is important that they stay engaged during the entire sale process and not turn away from the day-to-day operations of the business. Why? The tell-tale declining revenue trend is a lurking danger that usually strikes when the owner is not looking.

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Just as an athlete might get a physical to determine their preparedness for a marathon, you should also measure your Company's fitness for the marketplace. A valuation is an unbiased examination of your company's marketability and helps you pinpoint where your company is in its business cycle. It is the foundation, the meat and bones, on which a business owner can base their readiness to sell.

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The following are factors that can have a negative impact on the value of a business and some are issues that can rear their ugly head during the due diligence investigative period. Keep in mind that this list is a compilation of potential problem areas and do not apply to all types of businesses. Accidents New competition in the market Changes in technology Equipment obsolescence Facility obsolescence Market shifts Declining Revenues Poor Financial Records is one of the biggest reasons businesses do not sell or sell at a value considerably less than market value. Interest rate flux Low margins Capital improvements needed Lack of Supplier Diversity Lack of Customer Diversity - If too much business is concentrated in too few customers, the risk factor is increased. Should one or more of the customers discontinue patronage of the firm, revenues will be seriously impacted. Uncollectible receivables Low backlog Restricte ...

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There's always been lots of discussion about what, exactly, defines a lifestyle business. You can ask 10 people and you'll have 10 different answers.

But is it an antiquated term that has no bearing in the world today? There are many small business owners who are living proof that you can work much less than popular traditional wisdom would have you believe and still run a very successful, multi-million dollar business -- and still have time for coaching your kid's sports team, playing golf or tennis during the week, growing a vegetable garden, taking karate lessons, or socializing with people other than business associates.

With trends as they are today, will the next generation make the term the norm as the definition of small business?

Read More - NY Times Blog Post

Due Diligence is the when the buyer reviews all aspects of the company to uncover any warts, wrinkles, and....skeletons in the closet. This step is necessary in evaluating what risk is involved for the buyer in making the acquisition. Skeletons found in due diligence, however, should not normally break a deal but they will be negotiating points on the way to an agreement.

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It's not just about the price tag. The terms and structure are what makes a deal. An old saying in negotiating the sale of a business goes like this: The buyer says to the seller, "You name the price, and I get to name the terms." Another saying used to explain the actual value of the term full price: "If we could find you a business that nets you $250,000 a year after debt service, and you could buy it for $100 down, would you really care what the full price was?"

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An earnout is a type of payment agreement which is sometimes used in a business acquisition. Under an earnout agreement, the seller receives part of the purchase price up front, and additional funds over time. The terms of the earnout are written into the sales contract.

An earnout can be used for different reasons:

To tie the acquisition payout to future performance

An earnout, in a business acquisition context, is an arrangement in which the buyer doesn't pay the entire purchase price up front but agrees to pay a certain amount now and more later depending on how well the business performs in the future.

To bridge the pricing gap

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Your customer base is the foundation of your company. Knowing who they are is crucial to your business, which is why potential buyers will want to know as much as possible about your customers.

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When selling your business, it is important to know that your customer base has a major impact on its value in the marketplace. A diverse customer base means your revenue comes from a number of clients or customers, not just two or three, and preferably comes from multiple sources other than your primary service.

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We get email alerts every other week or so from the SBA saying that the 7A guaranteed loan program for buying a business only requires a proven history of stable cash flow that can support the debt payments, which means that goodwill (an intangible asset) can be used as collateral. These SBA email updates also tout that banks using this loan will be backed by the SBA with a 90% guarantee. If the loan defaults, the bank would only be responsible for 10% of the default value, the government would cover the rest. However, this has not been the case in reality, just the opposite is true. Many banks are requiring a high-percentage collateralization of any SBA guaranteed loan in tangible assets such as real estate, equipment, inventory, and accounts receivable. The reason for this disconnect is that banks want more than just the government guarantee these days. They are being more careful and want more security. Many businesses do not have enough hard assets to cover a loan and real estate values aren't cutti ...

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Potential buyers who read about a business for sale are interested in knowing how it can be grown once they bought it. The growth potential of a business plays a major role in its value. While buyers will purchase a business at a price predicated on current and historical cash flows, their main motivation is the opportunity to grow the business beyond its current size. Therefore, in order to get a premium price on the sale of a business, the seller should outline a tactical growth plan that would delineate open opportunities that can be tackled and exploited by a buyer to increase sales and profit. It is important that existing growth opportunities be realistic and clearly communicated in writing.

This document would serve as a template for discussion during initial buyer meetings. It would cohesively paint the larger picture of your business and translate into added value.

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Lost Interest or Drive in Your Business? Consider Selling Now.

Many business owners have operated their companies for too long and have lost their interest or drive. As a result, the business may flounder or stop growing. Not only will revenues and profits suffer, the value of the company will as well. And it only gets worse in a down economy. When a business owner hits burnout, he or she must overcome or take steps to sell the company. Click here for "Inc. Magazine Article - Overcoming Burnout."

Many buyers looking for acquisitions today in the small business marketplace struggle with the decision whether to buy or lease the real estate for their business operations. With real estate values having been softened by the economy, now may be the best time to evaluate the pros and cons of small business real estate ownership. Following are some of the major considerations in making that decision. PROS: An owner can accumulate equity with long term real estate ownership through paying down the mortgage and experiencing market appreciation in the value. As landlord, you don't have someone else dictate rent increases or uses of the property. The property owner can lock in a fixed overhead cost for their facility. Excess space can be used as the business grows or may be used to produce incremental income from rents. There may be significant income tax savings from depreciation. Financing options are more numerous for real estate than for other capital assets. The buyer ...

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Recurring revenue is the holy grail for business owners looking to have a valuable and sellable company. A customer base with a subset of recurring revenue that is contractual and repeating in nature increases the probability that the business will have stable, predictable revenues and cash flow into the future. From a buyer’s perspective, this reduces future risk and therefore enhances perceived value. The value associated with acquiring the available cash flow is directly related to risk. The lower the risk of losing that cash flow in a transfer of ownership, the higher the price will be to acquire it. Any factor that reduces risk is rewarded with transaction value.  Although all recurring revenue will have a positive impact on business value, some forms are more desirable than others.

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Burying excessive personal expenses in the business financials can lower business value!

The most popular method of valuing a business uses a multiple of earnings over a period of years. Business owners should be aware of that while attempting to reduce the bottom line with personal expenses to minimize taxes. Though there are a number of deductions that may be added back to determine true cash flow, not all add-backs are considered legitimate by buyers or lenders. Being too aggressive in minimizing taxes today may cost a business owner big dollars at closing.

If you plan to buy an existing business, be sure to get a Certificate of No Tax Due. Failing to do so makes you, the purchaser, liable for any past due state taxes or fees, plus any interest and penalties that are owed by the business.

CBB will assist a buyer in obtaining this certificate prior to closing the sale of a business.

Read complete information from Texas Comptroller of Public Accounts

Not all businesses need to have cutting edge technology, but a company can't fall too far behind. Buyers will be concerned if they must make a large investment in the latest technology to get the company to a competitive level. A business owner should do the research and purchase the necessary technology to keep the company on par in its industry or be prepared to accept a lesser value for the business.

Also see: A Strong Online Presence Adds Value

When a business for sale is being evaluated by a prospective buyer as a possible candidate for purchase, the quality of the human resources element will be considered. The staff is a major component and the backbone of any successful business operation. Any aspect that reduces risk in the continuity of the business under new ownership adds value. A stable, skilled, quality workforce is one of the top value drivers that contributes to the purchase price of a business for sale. It is important, therefore, that you, as the business owner, keep your key employees, they are your business. Buyers look for situations where management and / or key employees want to stay for the long term. The quality of the workforce, including experience, expertise and depth of knowledge will be considered. An in-place team that can provide continuity and assist in the growth of the business under new ownership is a valuable asset. If a company’s success is reliant on capable, well-trained employees – not the owner ...

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The capital gains tax rate is presently at historic lows at 15%. However, effective Jan 1 2011, this rate will increase to at least 20%, which represents a 33% increase overnight. Congress has not yet finalized the amount of the increase and it may be significantly higher. This does not include any other taxes that kick in on Jan 1, 2011. It is not too late for business owners considering a sale to get the business on the market with the goal of selling by Dec 31 2010 in order to keep more of their proceeds.

Most small business owners are not familiar with the dynamics of selling a business because they have never sold one before. Most people only buy or sell a business once in a lifetime. While there are lots of potential deal breakers, avoiding the following ten mistakes will mitigate the possibility of an aborted transaction.

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Making a business acquisition is a team effort, and your business broker, also known as a business intermediary, is the quarterback. The broker drives the deal by acting as the buffer and go-to guy with the buyer, the seller, the attorney and the accountant. We do everything to move the deal along, including coaching and, on occasion, tactical anxiety therapeutics.

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Think of the bottom line cash flow of your business as the first introduction to a prospective buyer. If that bottom line is not attractive, buyers will look elsewhere. The right strategy towards achieving a successful sale is to pin your bets on improving cash flow to stand out in the marketplace when it comes time to sell. Working IN the business vs Working ON the Business Most small business owners spend their time trying to beat their competition by building the latest and greatest gadgets or providing the best customer service. They can become so focused in the daily details of working in the business that they lose sight of the end game. The most important thing an owner can build is value so they can one day sell the business. The more value created the more money a buyer will pay. So, how do you create that value? Value is determined by available cash flow and the risks associated with obtaining it. Yes, the other aspects of the business that drive value, such as product, service, market, and ...

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When selling a business, it is important to know who the buyers are for privately-held businesses and why they buy.

Most owners of small and medium-sized businesses do not think about exiting their business nor do they plan for that inevitable day. They enjoy their work and their lifestyle. Many of them do not even realize that their business may be an attractive acquisition target.

If you have been thinking about selling, this article will help you see your company as a potential acquirer might see it. Understanding who the buyers are and their respective acquisition criteria equals better preparedness when the time comes to sell. Having realistic expectations and understanding the factors that drive value in the marketplace will further bolster an owner's readiness for a successful sale. Proper valuation and presentation to the most likely buyers is crucial to achieving a sale for the best price in the shortest time frame possible.

There are three main categories of buyers of privately-held small to midsize businesses: 

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The answer is a resounding NO! Confusion and misunderstandings often occur if the soon-to-be new owner takes over or works in the business before closing. In our experience this has never been a winning scenario. There are times when the buyer and seller think it would be a great idea if the buyer began operation of the business prior to the closing of the sale. Why? Here are some typical reasons: The buyer needs the income. The seller has really "had it." The time it takes to close a deal has been excessively long. The seller is in poor health and can't operate the business (or something similar.) The buyer feels the business is deteriorating and wants to get in before it all goes too far downhill. These sound reasonable because both the seller and the buyer have a shared goal - to maintain the business and transfer ownership successfully. In analyzing the reasons for early possession, does the end justify the means? The answer is a resounding NO. Sellers, who often ...

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When you have closed the deal and are now the new owner of the business, there are a few things to take care within the first month to put your new enterprise on the right path. Nothing drasticPut Your Staff at EaseHave a group meeting with the employees. It is likely that they did not know the business was for sale and are now concerned if they still have a job. Let them know you bought the business, that they are part of the deal, and you need their help in growing the business into the future. Meet with each employee individually as well to fully understand their roles, their ideas, and to guage their value. Key employees should be rewarded or encouraged, monetarily perhaps, to be sure they stick around.Transitioning with the Previous OwnerDepending on what the terms were in the purchase agreement you had with the previous owner, there will be a transition period, whereby the previous owner will help you learn the ropes of operating the business to make sure the business changes hands as smoothly as possib ...

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How can you nail that inevitable meeting with your employees when the time comes?

The issue of what you tell your employees when you’re trying to sell your business is a tricky one that requires careful thought. Maintaining confidentiality surrounding the sale typically takes precedence over other concerns, yet it may be impractical — or even impossible — to keep employees in the dark.

The most common approach is to keep information about the sale limited to as few people as possible. “The general public typically knows nothing about the small-business-for-sale marketplace because it happens below the radar,” said Rose Stabler, managing partner of Certified Business Brokers in Houston. The primary reason for strict confidentiality is to prevent customers, vendors and employees from assuming that there is something wrong with the business and putting a successful sale at risk.

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Financial statements and tax returns for most privately-held businesses are prepared for tax purposes, not for business sale purposes. The objective of business owners and their financial advisors is to use all available accepted accounting methods to minimize taxable net income. This is effective for minimizing taxes, but may paint an incomplete picture for business valuation purposes….and for showing the company’s true profitability to a potential buyer. The goal when presenting financial information to a potential buyer is to maximize net income by clearly outlining the owner benefits, net income, and cash flow of the business.  Since bottom-line earnings is the primary factor that influences business value, a proper presentation of the financials is essential. Prospective buyers must be able to appreciate the full benefit of owning the business and be able to understand its actual income-generating ability. By recasting, or adjusting, the financial statements, the actual financial performance of the business can be demonstrated.

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Diversify Your Customer Base Before You Sell Your Business

Many companies have a few large customers that dominate their overall sales. After all, nobody wants to turn down business! But when it comes time to sell the company, this becomes a huge problem. Most buyers won't look at a business whose revenues could drop dramatically from the possible loss of one or more of those customers. Business owners have to find a way to diversify their customer base before they ever decide to sell their business.

In today's business climate a strong online presence is vital. Prospective buyers of your business are googling you and your competitors to determine your standing. Today's buyers of businesses are much more sophisticated than they used to be. One of the very first places a potential buyer will go to be introduced to and learn about your business is the Internet. What will the potential buyer find? Is your website getting top rankings in search engine results? Are you actively using Internet marketing to keep your clients and customers engaged? Dominating the major search engines for your profession or industry is an important asset when it comes time to sell the business. It takes time, perseverance, and dollars to get there and is viewed favorably by prospective acquirers of the business. Keeping in tune with modern technology is key to staying relevant and competitive. If today's buyers, and your customers for that matter, cannot find you on the web, your business is loosing out. Lack of an I ...

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With rent typically being the second largest expense after salaries for small businesses, the property lease becomes a very important document if you are thinking about selling your business.  When was the last time you reviewed the lease on your business premises? When you signed it years ago? The following aspects of your lease should be reviewed before selling:

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Most people will purchase or sell only one business in a lifetime. Therefore, as business brokers, a large part of what we do is educate buyers and sellers about the intricacies of the process. People rely on us to help them understand the steps involved in buying or selling a business. They understand that the better informed and prepared they are the more likely they are to achieve their goal. Therefore, in the beginning stages, we're the ones doing most of the talking.

When it comes time for the buyer seller meeting, however, our role is to make the introductions, be an observer, and be quiet for the most part. We may interject questions or comments when appropriate to guide the flow of information. This meeting is an important event for the buyer and seller. It is their time to understand each other's objectives, establish a rapport, and size each other up.

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Small business owners often run their companies and treat their employees like a family — which has cultural meaning. A successful small business 'family' has clear core principles and goals that directly impact growth. When we talk of a strong "corporate culture," that’s what we’re talking about, shared values, shared goals, and a single vision directed from the top. If the culture fosters revenue generation that is repeatable under new ownership, the business is more valuable and will bring a higher price when it is time to sell. According to a new Bain & Company 10-year study of more than 2,000 companies, there are five key principles that the most successful companies had in common. These principles help companies create a repeatable formula to stay focused on what really makes them profitable: Principle #1—having a well-defined core to your business, and understanding how you have made it work for you Principle #2—having up to 10 non-negotiable principl ...

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There are three major negotiation methods to bring a buyer and seller together in the business sale process. Keep in mind that negotiating means working with each other, not against each other, towards bridging the gap between the two sides. 1. Take it or Leave it A buyer makes an offer or a seller makes a counter-offer – both sides can let the “chips fall where they may.” 2. Split the Difference The buyer and seller, one or the other, or both, decide to split the difference between what the buyer is willing to offer and what the seller is willing to accept. A real oversimplification, but often used. 3. This for That Both buyer and seller have to find out what is important to each. So many of these important areas are non-monetary and involve personal things such as allowing the owner’s son to continue employment with the firm. Or, the buyer may want extended consulting privileges with the current owner after purchase. There is an old adage that advises, "Never neg ...

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You've made the big decision to put your business on the market. Your reasons for selling are valid, carefully-considered, and "good" - the kind that won't make a prospective buyer shy away. Now, you may tell yourself, comes the fun part. You'll come up with a price - maybe a little high, but why not? - and let gut instinct (an attribute common to successful business owners) lead the way. Wait just a minute.....or maybe a quarter of an hour. However long it takes you to bone up on your negotiation skills using the following steps as a guide. Being a smart negotiator is tantamount to effecting the successful sale of your business. Gather Your Forces The first step is to engage the help of a business broker professional. He or she understands the sales negotiation process as well as strategies for marketing the business. Before sitting down with your business broker, however, you should gather the following information: profit and loss statements (for three years), current federal income tax returns, a ...

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If you are like most business owners, you have thought about selling your business a time or two. It's perfectly normal to dream and wonder what it would be like to be free of all the trappings, headaches, and burdens of running your company. You probably also wonder how cumbersome the sale process might be and what it entails. While we can't tell you what your imagination comes up with at the thought of freedom, we can tell you that selling your business requires a substantial commitment and should be a calculated decision. As with most endeavors, whatever you put into the process is what you will get out of it. A fundamental element to a successful sale is preparation. Knowing what to expect, understanding the motives of your most probable buyer, anticipating their questions, and vetting potential problem areas of your business that might inhibit or delay an eventual sale are key to a sound selling experience. Once you feel comfortable with these basics you just might stop wondering and take the lea ...

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Setting goals and achieving them are so important in every aspect of business, but many businesspeople and entrepreneurs do not pay enough attention to the gap between where they are and where they want to be. Gap analysis is the process of looking at the difference between your goal and where you currently are. Typically, when entrepreneurs look at the various goals they want to achieve, they often evaluate them incorrectly. If the strategic goal of a firm is to have sales of $15 million for 2010, the focus is on the wrong metric. Rather than focusing on total sales, the emphasis should be on the gap between the $12 million in sales they had in 2009 and the $15 million in sales they want to achieve in 2010. The $3 million shortfall is the performance gap, and gap analysis focuses on that amount as opposed to the total $15 million, presenting a much clearer picture of what must be done to achieve the goal. This approach assumes that everything required to maintain the current $12 million sales level is als ...

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As markets continue to stabilize, 45% of CEOs interviewed for Pricewaterhouse-Coopers’ Private Company Trendsetter Barometer survey are optimistic about the US economy over the next 12 months (up two points from the previous quarter), and 47% who market abroad are optimistic about the world economy. Additionally, an increasing number plan to raise operational spending over the next 12 months (62%), despite concerns of legislative and regulatory pressures. The gap in projected revenue growth and hiring for small (less than $100 million in annual revenue) versus large (more than $100 million in annual revenue) private businesses has continued to widen this quarter with smaller firms projecting revenue growth at 11.7% versus 3.9% for large firms; hiring was cited at 56 % versus 34%. However, large private firms are planning for major capital investments at a larger percentage – 33% versus 26% among small firms. "The higher projected revenue growth rates and hiring for smaller companies versus l ...

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The closing is the formal transfer of a business. It usually also represents the successful culmination of many months of hard work, extensive negotiations, lots of give and take, and ultimately a satisfactory meeting of the minds. The document governing the closing is the Purchase and Sale Agreement. It generally covers the following: A description of the transaction – Is it a stock or asset sale? Terms of the agreement – This covers the price and terms and how it is to be paid. It should also include the status of any management that will remain with the business. Representations and Warranties – These are usually negotiated after the Letter of Intent is agreed upon. Both buyer and seller want protection from any misrepresentations. The warranties provide assurances that everything is as represented. Conditions and Covenants – These include non-competes and agreements to do or not to do certain things. There are four key steps that must be undertake ...

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"Whatever the reason, there should be something other than dollars that motivates you to explore a sale. After all, if it weren't more valuable to own the business than to sell it, no one would ever buy it." Mike Sharp, M&A Today, November 2002. The owner of a successful company is considering selling, thinking now may be a good time. However, he is told by an outside advisor that business is good and that if he holds on to it for several more years he will get a much higher price. On the surface, this makes a lot of sense. After all, when an advisor tells the owner that if he keeps it for three more years and the price will double, that's a terrific incentive to keep plugging away. However, there is another side to what would appear to be sound advice. The most dramatic downside would be that the business could go downhill rather than uphill as the advisor predicted. Although no one can predict what the economy will do, there are a couple of possible scenarios. The industry itself might be impacted ...

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One of the very first questions that business owners really want to know is: How Much Is My Business Worth?

A fair determination of a firm's market value is essential to insure proper compensation for years of hard work and personal investment. The following are some key factors that add value to your company and would be part of what is considered in the business' overall assessment for the marketplace.

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"My Business could be a Gold Mine for a New Owner!"

More small businesses in Houston were sold in 2009 than in any other city in the U.S. Why? Because buyers are positioning themselves for the future. We have been bragging about Houston's economy and the engine behind it for a long time. Pick your industry, we've touted it. Houston Business Journal last week reported, "Houston-area small business sales outpace nation," which is the message we've been delivering and the trend we've been experiencing for years. Here's the HBJ article: Small business owners in the Houston area who wanted to sell their companies in 2009 were more successful in finding buyers than entrepreneurs elsewhere in the United States. Local owners also got more money for their businesses than sellers nationwide, according to statistics from BizBuySell.com, a large online marketplace for selling businesses. A total of 107 companies in the Houston area were reported sold by business brokers in 2009, down by 7 percent from 115 sales reported to BizBuySell in 2008. In comparis ...

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The 2010 new year brings with it the time when business owners review their strategic plan and business goals. Many of the owners we talk to are wondering if this is the year to consider selling the business. In Texas, there are five specific reasons why it would make sense to sell in 2010. There are many factors that determine best timing for selling a small business -- the financial condition of the company, valuation, growth cycle, profit history, and the current market. Usually the best time to obtain the highest price occurs when sales and earnings are good and trending upward with a history of good performance. This gives buyers confidence in projected future earnings. Value is dynamic and proper timing makes a big difference in the prices paid for business acquisitions. External factors such as the economy, industry trends, stock market volatility, competition, investor confidence, interest rates, and geopolitical considerations are cycles of constant change that impact value. Internal condi ...

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On Thursday December 10th, Sens. Landrieu and Snowe introduced S. 2869, the Small Business Job Creation and Access to Capital Act. This new bill contains a series of measures that were separately introduced by Sens. Landrieu and Snowe earlier this year. The Senate Small Business Committee will mark up S. 2869 Thursday, December 17th. Highlights of the legislation include: Increase the loan limit on 7(a) loans from $2 million to $5 million. Increase the loan limit on 504 loans from $1.5 million to $5.5 million. Increase the loan limit on microloans from $35,000 to $50,000. Allow the 504 loan program to refinance short-term commercial real estate debt into, long-term, fixed rate loans. Extend the authorization to provide 90 percent guarantees on 7(a) loans and fee elimination for borrowers on 7(a) and 504 loans through December 31, 2010. Direct the SBA to create a website where small businesses can identify lenders in their communities. Increases the maximum guaran ...

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Know that your asking price is based on reality...a reality that buyers and their lenders can believe in. The buyer will look at return on investment and their lenders will require that the deal makes sense in terms of debt repayment. A multiple of Discretionary Earnings is one method that can be used to establish a reasonable price range.

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As I mentioned in one of my previous blogs, the Small Business Administration (SBA) has relaxed some of their policies in regards to lending. I said before that they “became a lot more flexible by making changes to the acquisition policies impacting purchases which included Intangible Assets. These changes give “Preferred Lender Providers” (PLP) more flexibility to provide business loans WITHOUT going through the SBA for final approval. In addition to providing PLPs with greater flexibility, the changes give buyers more leeway in the minimum amount of equity they must invest for the project.” So, how does this benefit sellers and buyers? Well, sellers whose businesses: (1) have good financial records (normally three (3) years worth of tax returns) ; (2) generate enough cash flow to cover the repayment of the SBA loan AND the buyer’s life style and; (3) are selling their business for at least $300K, may get lenders to Pre-Qualify their listing for an SBA loan. Note: I used the $300K, because most lenders l ...

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The pundits would have you believe deal making has all but dried up in this dismal, credit-starved economy. Take a closer look, though, at the market for smaller companies and the picture isn't so dire. According to Thomson Reuters, the dollar value all of mergers and acquisitions in the U.S. totaled $1.1 trillion through Nov. 30, 2008--a painful 30% drop from the same period just a year earlier. Yet while overall volume is down, the number transactions worth $100 million and below have held up. The Deal Pipeline estimates that the number of deals in that range during the first three quarters of 2008 increased by 15% over the same period in 2007. And valuations, while down slightly, have held up reasonably well relative to transactions involving larger firms. Reason for this resilience: Smaller companies still fuel the growth of larger acquirers. Moreover, many of those smaller firms are privately held--meaning that there's less pressure to choke down a modest valuation to appease antsy shareholders. ...

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Over the past 20 years, private-equity groups (PEGs) have become key players in business acquisitions. PEGs offer flexibility as a liquidity source, giving entrepreneurs the ability to take some cash off the table, recapitalize their company or simply sell and move on. Private equity refers to buyout groups that seek to acquire ongoing, profitable businesses that demonstrate growth potential. The private equity market had traditiaionlly been restricted to acquing larger companies. But increased competition for those larger operations, greater growth potential for smaller firms and an easier path to exiting the investment in the future have played a role in attracting PEGs to smaller companies. PEGs are typically organized as limited partnerships controlled and managed by the private equity firm that acts as the general partner. The fund invests in privately held companies to generate above market financial returns for investors. The strategy and focus of these groups varies widely with differe ...

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Who says there’s an age limit on the question "What do I want to be?" According to a recent study, a large number of small business owners weren’t bit by the entrepreneurship bug until they graduated from college or started down a completely different career path. Nearly one-third of respondents to Ace Hardware’s Entrepreneurship Study made the decision to become self-employed during their post-college career lives -- a time when many of their peers were immersing themselves in their chosen professions. "I don’t think it comes as much of a surprise that small business owners decide to become their own boss later in life when you consider the benefits of financial accumulation coupled with the managerial and business insight they develop," says John Venhuizen, vice president of business development for Ace Hardware Corporation. "In general, these older entrepreneurs have a greater knowledge of the inner-workings of the business world -- in addition to strong leadership and manager ...

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With negative economic news grabbing the headlines, business owners are inclined to believe that it is not a good time to sell their company and that they will have to put their retirement plans on hold. While this rationale makes sense for some, waiting for better economic times does not necessarily equate to a higher value when the business is sold. The reality is, in many instances, the business value declines during this delay because the owner is not as energetic and gung ho as in previous years and the business starts retiring before the owner does. This usually results in less revenues and a lower bottom line. Consequently, the business owner can lose several years of retirement yet not add any additional value to their net worth. The sale of a profitable company in this environment is a viable strategy for business owners who are ready to sell. Value is dynamic and proper timing makes a big difference in the prices paid for business acquisitions. Quality sells in any economic environment and p ...

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While the economy is expected to remain weak throughout 2009, there will continue to be plenty of opportunities for individuals and businesses in a position to buy, according to a recently released survey. The report, published by the International Business Brokers Association, found that 61 percent of the survey participants, professionals involved in selling businesses, believe that more businesses will go up for sale in 2009, while 66 percent say they will sell more businesses this year compared to 2008. This is no surprise. In April 2008, just nine months ago, Inc Magazine published "The Most Valuable Businesses in America" issue, which spelled out the Seller's market that has historically existed but would change as baby boomers started retiring. So, we have, indeed, been anticipating the change of the business-for-sale marketplace. But it was predicted to occur steadily over the next decade. Economic turbulence has accelerated the natural process. “While the economy has put a damper on ...

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Private Equity Groups have excess capital to invest and are looking for business acquisitions. One of the major market shifts for the acquisition of privately-held companies has been the growth in the number of Private Equity Groups (PEGs) over the last decade, they number in the thousands. PEGs have become key players in business acquisitions. They offer flexibility as a liquidity source, giving entrepreneurs the ability to take some cash off the table, recapitalize their company or simply sell and move on. Private equity refers to buyout groups that seek to acquire ongoing, profitable businesses that demonstrate growth potential. The private equity market had traditionally been restricted to acquiring larger companies. But increased competition for those larger operations, the greater growth potential of smaller firms, and an easier path to exiting the investment of smaller firms in the future have played a role in attracting PEGs to smaller companies. PEGs are typically organized as limit ...

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With negative economic news grabbing the headlines in the United States, business owners may think it is not a good time to sell their company. But fortunately for owners looking to sell, that is not necessarily true. Business sales are still taking place with sellers capturing attractive prices and favorable terms, when the deal is structured properly. One of the the most important foundations of constructing a successful deal has always been a solid buyer, one that is creditworthy. Whether it is an individual, another company, or a Private Equity Group, qualifying criteria are demonstrated business acumen, significant assets to pledge as collateral, or a committed fund behind them. With a proven, credible buyer at the negotiating table, lenders are more likely to support the transaction. In today's environment, some seller financing should be expected to get the deal done. It is not uncommon during a tight economy that sellers must share the risks with the buyer and the lender in order to achieve ...

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There are more than 15 million family businesses in the United States, ranging from giants like Wrigley and Marriott to the local corner grocery store. Yet, history tells us that less than one-third of family owned companies will make it to a second generation.One reason for the disheartening statistic may be that business owners tend to forget about succession planning. It’s often not a priority and it definitely can be an emotional issue. Many owners just can’t imagine the business succeeding if they aren’t involved or they may be too busy with day-to-day operations to take the time to adequately plan for someone else to take the reigns when it’s time to step aside.But as more and more baby boomers approach retirement age, the time for succession planning is today. Tomorrow may bring a serious illness, disability or even death. Having a well thought out plan is critical to the continuation of a business, particularly for a small, family-run operation.Plan early. Developing a succession plan early will help ...

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Selling a business and walking away can be very difficult. But in many cases, as part of the sale, there's a transition period that can be as short as a month or as long as a year or two, depending on the size of the company and the role of the owner. In most situations, once the seller passes the baton to the buyer, the new owner wants the seller to remain on board as part of the team. It helps shorten the learning curve and provides a seamless transfer of key relationships. In the typical business sale, a transition period of several weeks is included. Sometimes a telephone consulting period is added that can span six months or so with specific time limitations alloted so the seller is not overly burdened. Also, the seller may additionally be retained as a consultant at a negotiated rate. In some instances, a long-term employment contract is transacted and the seller maintains daily involvement for a much longer period of time. For the owner who wants to sell the company and leave quickly, the fo ...

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An essential part of any business is its plan for success. Your business plan lays the foundation and groundwork for your new venture.

Business Plans are a standard requirement by lending institutions, including SBA lenders, when pursuing financing for a business acquisition. However, business plans should be looked at as part of the bigger picture, as an architectural blueprint, the guide that will elevate your enterprise to the level you envision.

The discipline of constructing a business plan gives you the opportunity to examine and understand the challenges ahead and generate realistic expectations for your new business. This involves cohesively organizing your business ideas and financial needs and aligning them with detailed marketing and management plans that conform to your budgetary constrictions.

How far ahead should business plans look? A three year prospectus is standard since circumstances can change over long periods of time. Business plans should also include contingency plans since investors or lenders will want to know how the company will continue operations should something happen to the owner.

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There are many factors that determine best timing for selling a small business -- the financial condition of the company, valuation, growth cycle, profit history, and the current market. Value is dynamic and proper timing makes a big difference in the prices paid for business acquisitions. External factors such as the economy, the mergers-and-acquisitions marketplace, industry trends, competition, stock market volatility, investor confidence, interest rates, and geopolitical considerations are cycles of constant change that impact value. Internal conditions within a company also change. Often in combination with external factors, sometimes independent of those factors. Changes do, and will, occur and they always tend to impact business value -- sometimes eroding value and sometimes increasing value. So how should you start thinking objectively about the best time to sell? A good visual of right-timing would be to imagine the life of your business plotted as a bell curve with the peak being the t ...

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When it comes time to sell your business, knowing how to enhance its value and PLANNING AHEAD are key to doing it ON YOUR TERMS. Selling a business can be complicated and very time consuming. Since the average business sale transaction takes anywhere from FOUR TO TWELVE MONTHS, business owners need to be in the right frame of mind when they embark on the process. A big mistake that is often made is not planning well enough in advance to optimize its value and not having a strategy for exit. THE CONCEPT OF VALUE was set forth as early as the first century, B.C., when Publilius Syrns wrote his Maxim 847: "Everything is worth what its purchaser will pay for it," or as an early British economist, Samuel Bailey wrote in 1825, "Value, in its ultimate sense, appears to mean the esteem in which an object is held." So, a closely held business may have a high value to its owner resulting from the efforts expended to build it, but it may have a lower value to a potential buyer who may be more interested in return ...

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Keynote speaker at the recent International Business Broker Association last week in Denver, Jerry Osteryoung, Executive Director of Global Entrepreneurship at FSU, was kind enough to allow this reprint of his report concerning the future economic changes that will be necessary in our society and the way we do business in order to cope with rising fuel prices and the diminishing oil supply. "The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency." ~Bill Gates With gasoline hitting $4 a gallon and no end to the increase in sight, it is time to start thinking about the structural changes that we are going to experience in our economy and in our businesses. With the exception of the internet revolution, this is one of the most dramatic changes that has come along in the last 50 years. A recent report showed that if th ...

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Keeping the Process Moving and Keeping the Deal on Track helps Seal the Pact.

Many factors can bog down the sale of a business. In fact, more than purchase price or structure, time is the most likely reason that a business sale may fail.

Time can breed frustration and fatigue. As a potential sale drags on, the owner is left in an uncomfortable state of flux. The buyer may also become frustrated as fees mount. The deal can reach the point when one party declares…“It just wasn’t meant to be.”

National figures indicate that the average business sells in nine to 12 months from start to close. Once a letter of intent (LOI) has been signed, the final due diligence and closing process usually takes 30 to 90 days.

So how do you keep the sales process moving forward?

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The Indo-American Chamber of Commerce of Greater Houston (IACCGH), as part of their Small Business Success Series, will be hosting a moderated dinner event at Bombay Brasserie Restaurant in Houston, Texas, on June 24, 2008. Tara Energy, headquartered in Houston and one of the largest independent retail electricity providers in Texas, is sponsoring the event. Frank Stabler, CEO of Certified Business Brokers (CBB), has been invited to serve as a distinguished panelist for the event to answer questions on the following topics: How To Sell Your Business How To Buy An Existing Business How To Finance Your Business and other related questions from guests and attendees Since 1999 the IACCGH has been a powerful advocate and important resource for businesses looking to capitalize on the tremendous opportunities presented through international trade. This organization has made a significant impact on the rich, diverse and prosperous Houston economy. For more information about this e ...

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"I have a medium sized company which I have owned for about 20 years. We specialize in the manufacture and distribution of chemical products and have built a good business over the years. However, none of my children is involved or interested in the business so I am considering selling it. The problem is that I have no idea how to begin the process." Since most people only sell a company once in their lives, the dialog above is not unusual and represents a of our initial contact with most business owners. While I will attempt to answer the question as fully as I can, bear in mind the following points when considering the answer. • If you decide to commence a sales process, you must engage financial advisors experienced in the process to assist you from the beginning of the process • There are whole books written on selling a business so this article only highlights the main points • I have not discussed tax issues. Valuation The starting point is a valuation of the business. ...

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May 27, 2008 (New York Times) A Crippling Year For Small Business: Few Sales, Tough Cash Flow Small businesses think the economy is falling apart with little light at the end of the tunnel. The Discover's Small Business Watch index of confidence showed that "only 28 percent of business owners said that economic conditions were improving for their businesses," according to Reuters. Cash flow was a major issue, especially with bank credit hard to come by. Thirty-nine percent of the firms surveyed had cash flow problems over the last 90 days. For small business owners trying to sell their companies, the news was probably more troubling. One of the reasons is that more and more small operations are for sale. Perhaps owners want to cash in before the downturn begins in earnest. According to The New York Times "The country’s largest listing site, bizbuysell, has 50,000 businesses for sale — up from 43,000 this time last year, said Michael K. Handelsman, the site’s general manager.". All ...

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What would happen if all the baby-boomer business owners closed their businesses instead of selling them. The implications to our economy are alarming. It would bring about drastic changes to every sector of the U.S. landscape. But they are only a minute part of the picture. When a firm closes its doors, revenues from business and payroll taxes are lost, suppliers lose a source of income from their former customer, landlords lose rent, employees are out of a job, the income taxes those employees pay are lost, and those employees lose buying power. Consequently, sales tax revenues are lost as well. Everyone in the community loses. No one wins. But now let's look at the larger view. Let's look at the landscape of the entire country's economy if all business owners closed their doors.Eight Thousand Americans are turning 60 every day, which means about 20% of baby-boomer business owners will be ready to retire, close their business, or sell it within the next couple of years. About 65% to 75% will be ready ...

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HOUSTON, TX -- May 2, 2008 -- Certified Business Brokers' M&A Group (CBB) announced the sale of a privately-held, multi-state non-destructive testing company with headquarters in Houston and regional offices in three other states in the U.S. to a multi-national strategic acquiror. The Houston-based non-destructive testing (NDT) company, which has been providing inspection services to the energy and fabrication industries for over 30 years, engaged CBB to sell the company. Terms of the transaction were not disclosed. The sale was made to a privately-held corporation headquartered in New Jersey that is well-known for providing complete NDT solutions to satisfy industry, academia and advanced NDT needs worldwide. The acquisition was part of the New Jersey company's continuing growth strategy to strengthen their overall position in the marketplace by expanding through niche acquisitions in the markets it serves. Certified Business Brokers (CBB), which has sold more companies in Houston than anyone fo ...

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It's all about supply and demand. Potential buyers and sources of capital for the acquisition of profitable privately-held companies is plentiful while the supply of businesses on the market is not. This makes a profitable, established business a hot commodity and in demand. Inc. Magazine spells it out in this month's issue, "The Most Valuable Businesses in America." During my first conversation with Darren Dahl in February, in preparation for his writing the article for Inc. Magazine, he wanted to understand what drives the value of a business and why some businesses are more desirable than others. I first described the Houston marketplace, which enjoys one of the top economies in the nation. Location, location, location is always a value driver, and a business location is no exception. I've been writing about Houston's hot economic climate for over a year now and told Mr. Dahl that Houston is a "bulls eye" target for business acquisitions because of it. We cannot satiate the marketplace of buyer ...

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Certified Business Brokers (CBB) will host a breakfast Exit Strategy Seminar on April 10, 2008 in Houston's Galleria Area. The seminar team will consist of CBB's M&A Group, Merrill Lynch Wealth Management Advisors, as well as Tax, Legal, and Accounting professionals. The seminar will cover key issues surrounding the successful sale of a privately-held company: Maximize your company's value. Who would be the most likely buyer? Understand the sale process. Plan for retirement. When is the right time to sell? Minimize post-sale taxes. The seminar is free. Breakfast will begin at 7:00 AM and the presentation will begin at 7:30 AM and be completed by 9:00 AM. For details about location and to reserve your seat, please email rose@certifiedbb.com or call our office at 713-680-1200. People put tremendous thought into launching a business. They should put equal planning into selling one. Typically, business owners are so busy handling daily operations that they give lit ...

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Back in March 2007 I wrote an article touting Houston's booming economy. In revisiting that article, while there is certainly economic turmoil on today's national scene, Houston is still hot! The reason for this blog post is to share some of our current hands-on observations and experiences that keep us aware of the climate in Houston. And, I'm not talking about green house gases or other global warming theories. These are facts straight from the microeconomic level. Our firm is like a barometer for the Houston business marketplace. We know what business owners are feeling and thinking -- they talk to us. Everyday, we visit with these entrepreneurial people who are keeping Houston's economy as one of the best in the nation. And, we also serve as the information source for those who want to become business owners. Yes, they talk to us too. They are calling from New York, California, Ohio, Canada, England, well -- in other words, we are seeing international interest in Houston for business acquisitions. ...

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Last Friday afternoon I was a guest on KSEV Radio AM 700 with host Aubrey Thoede and had the opportunity to discuss a subject that many call-in listeners wanted to learn more about....starting their own franchise. But buying a new franchise is not the best way to go about achieving the "American Dream." Everyone reads or hears about big corporate mergers and large company acquisitions. However, big corporations aren't the only companies being bought and sold. Profitable, privately-held small businesses are changing hands everyday. These transactions are done behind the scenes and are not reported along with the daily stock market news. These business exchanges fly under the radar of the public at large -- which may be part of the reason that it is not commonly understood that buying an existing small business is the most viable path to being a successful business owner. If you are considering your options for going into business for yourself, buying an already established profitable business should be t ...

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If you are looking to buy or sell a business in Houston, 2008 will see a wave of activity and be a year of great opportunities.We have already kicked off the New Year with a bang, closing four businesses between New Year's Eve and the day after the Holiday. And, we currently have a record number of businesses scheduled to go to the closing table over the next two months.The celebrating, enthusiastic freshly-crowned business owners are bullish on the Houston economy and have grand plans for growing their new acquisitions. As for the former proprietors, now retired former baby boomer business owners, are to be congratulated for their successful achievement and having been in the driver's seat that has helped steer our city's economy to its top status as one of the best in the nation. The diversity of our small business community is the backbone of the city's robust commercial health.We fully expect business transfer activity to continue its uptrend here. We have seen accelerated momentum over the last few years ...

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Ayn Rand's John Galt could not have built a better machine than Houston's sturdy economic engine of today. In her epic novel, "Atlas Shrugged," published 50 years ago, manufacturing and transportation were Rand's focal points in the plot to stop the engine of the world. Rand understood the importance of business growth, entrepreneurialism, and free market capitalism as the sparks that empower commerce and economic health of a society. The same precepts are true today and are alive and well in Houston. Houston's current standing as one of the "hottest cities for business in the nation" is due, in large part, to its business-friendly culture, its position as the No.1 manufacturing employer, having one of the most rapidly growing populations, and its strategic geographic location for conducting international commerce and transportation. Between 1990 and 2005, a time frame long enough to encompass an entire business cycle, Texas' overall factory output eclipsed all other major manufacturing states and is ...

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If you want to be successful in making a business acquisition, you want to work with a brokerage firm with a large inventory of businesses for sale and an experienced staff of professionals who are focused ONLY on selling businesses and have the training and experience to successfully close the deal.

While most first-time buyers may initially think it is a simple undertaking, they quickly find out that it is not. It is definitely not simple, and it is not similar to searching for a home. Except for the fact that there are Brokers to help you and market trends involved to assist in valuations, there is no comparison between buying a business and buying a home. So don't make the mistake of using a Real Estate Broker to buy a business.

Stick with a Business Broker to buy or sell a business. They are specifically trained in structuring business sales and have an extensive network of professionals, such as attorneys, accountants, and SBA and other lending institutions, who are experienced in business transfer transactions.

It is important that you have performed a self assessment and are aware of the sequence of steps involved in the process of buying a business before beginning the search. Try to concentrate your efforts on businesses that you can realistically afford to purchase and fit your specific needs and goals.

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Leadership November 26, 2007, 11:35AM EST text size: TT Are You the Best Boss for Your Business? Bakery Barn saw explosive growth in five short years, becoming a $6 million company. Now the founder thinks it's time for a new leader by Kerry Miller The way Sean Perich tells it, the history of his company, Bakery Barn, is a typical entrepreneurial success story. He was a CPA and longtime weight lifter who turned sweat, determination, and a homemade protein cookie into a $6 million business in less than five years. For Perich, the breakthrough moment came in 2003, when Bakery Barn started selling its baked protein products through contract manufacturing deals with larger brands. The company's first and biggest client, Apex Fitness, now sells Apex-branded Bakery Barn protein cookies and cookie bars at hundreds of 24-Hour Fitness gyms and other major outlets such as GNC and 7-Eleven. Perich's senior management team at Bakery Barn is the same "ragtag bunch" that has been with him since the beginning: ...

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Can You Sell Your Home-Based Business? The value of a business depends mainly on the earnings it produces, with the expectation that those earnings will continue into the future should a new owner take the helm. It also depends on having something valuable to sell that allows those earnings to be produced. So, if you have a small home-based business, here are some questions that can help you determine if your business has value in the marketplace. Can a qualified person walk into my business, take over, and earn the same amount that I do? If the business IS the owner, it would be an impediment to the chances of a sale. For example, if your business is derived from your personal reputation and/or relationships whereby the day you leave the business, so do the customers, it is not worth a dime to a buyer. The more you are separated from the ongoing viability and continued operations of the business, the better the odds of a new owner being able to keep it alive and well. So, if you've developed methodo ...

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The International Business Brokers Association is having its 46th Semi-Annual IBBA and M&A Conference this month, November 11 -17, 2007, in Dallas - Frisco, Texas. The International Business Brokers Association® (IBBA®) is the largest international non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of business brokerage and mergers and acquisitions. Today, the IBBA has more than 1,950 cooperative business brokers and intermediaries across Canada, Mexico, Asia, Europe, Australia and the United States. The association represents professional, ethical and practice standards by which its members operate. This semi-annual event is seven days of professional development and top-notch education and networking. Educational and Workshop courses number close to 100 and include such topics as: Up-to-date legal and tax issues that impact business transfer transactions Analyzing and recasting financial statements Techniques f ...

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When you are selling your business you should be prepared for the different types of deal structures that may be proposed from various buyers. A business sale often consists of multiple elements like cash at close, seller notes, non-competes, books and records adequate enough for business financing by lending institutions, allocation of assets, capital gains, etc. More often than not a first time seller will actually put out his or her hand in a stop gesture and reply, “I only want the full price in cash at close.” This article will discuss some of the selling company characteristics that directly effect both the selling price and the terms. Selling Company Revenue Composition - This is a very important factor in determining how much a buyer will pay for your business and how much will be in cash at closing. If 80% of your annual revenue is a result of contractually recurring revenue, you can command both a premium price and a deal heavily weighted in cash at close. On the other hand, if you have little or no ...

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Selling Your Business - The Hardest Sale You Will Ever Make & 9 Keys to Making It Countthe 9 Keys to maximizing The Price and Minimising the StressThey say the three most stressful times in a person’s life are when they get married, buy a house and change jobs. Well, try selling a business? It’s your baby, the thing you have built over 15 years. You have put your heart, soul and an incalculable number of hours into it. Now you are going to sell it.There are many things you need to do and consider, but these seven areas are of immense importance when it comes to finding a buyer, selling the business and getting the most value for it.1. Think about who would want to buy your businessDo you have employees that have the management ability and the mindset of an owner and the ability to access capital to pay for the business? If these people aren?t working for you now, do you have time to recruit them and teach them the business with an understanding that they might take over?What about your suppliers, customers or ...

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What are the odds of your business actually selling once you have made the decision to sell? Well, national statistics indicate that the odds of your business selling are only 25 to 30 percent. What does this mean? To put it bluntly: if you are thinking of selling your business, you have, on an average, about a one in three chance of it actually selling. This obviously begs the question: Why are the odds so poor? One would think that if you put your business on the market, it should sell in a reasonable length of time. Here are some reasons why some businesses don't sell.  The business asking price is too high. A buyer must be able to make a livable wage, make loan payments on the debt incurred from the purchase, and make a reasonable return on the investment. Lending institutions address these very same issues when analyzing the financeability a business acquistion. The economics of the deal are not doable, and the seller is unwilling to negotiate on the terms of the deal str ...

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Business Owners Should Prequalify Their Business For Potential Buyers Before Putting It On the Market. Whenever we advise our business-owner clients this, they look at us sideways wondering if we have lost our minds! They usually reply, "isn't it the buyers responsibility to get prequalified and get financing for the purchase of my business?" Nothing could be further from the truth. It makes good sense for business owners to have their business financial records, tax returns, deal structure, and price reviewed by lending institutions before marketing the business to prospective buyers for several reasons. 1. Based on the financials and tax returns from the previous three years you need to know if your business is eligible for potential buyers to get a loan to buy your business. If you know that your business is not eligible for financing, then you know that the deal structure for selling your business will be very different without bank financing involved. 2. You also won't waste time with buyer ...

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National statistics show that over 70% of all businesses on the market, are not sold. Why is this? The two strongest reasons for failure are lack of preparation and an unrealistic selling price. Valuing a business correctly tends to resolve the unrealistic selling price problem. Know when to hold the price and when to change the price also helps businesses sell quicker. But, what about the preparation points? Lets discuss the various factors that can help you get fully prepared when selling your business. The decision to sell – People decide to sell their businesses for many different reasons. Another truly legitimate reason is if a business owner’s health is going down hill. Lastly, sometimes it is just time to retire, and play golf or travel. Whatever your reason, it is important to identify exactly what the reason is that you want to sell your business, and to be totally honest with yourself and others on this point. The reason you might be selling does not adversely affect t ...

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Building a business is like running a marathon, not a 40-yard dash. It requires hard work, a well-conditioned work ethic, a high pain threshold, and taking measured steps one mile at a time. But remember to save some kick for the final stretch to the ultimate goal.......the exit. If you want top dollar for your business, you can't appear to be coasting listlessly to the finish line. So how can you kick your business into a higher gear during the last few months or years of ownership? Visit Your Accountant. Remember your silent partner.......Uncle Sam! Before negotiating any deal, it's important to understand the tax implications inherent in a business transfer transaction. Make sure all tax obligations and filings are current and your business accounting records are clean for potential buyer review. Accurate financial statements not only adds to a buyer's comfort level, it more likely will result in a higher sales price. A potential buyer is typically looking for a predictable cash flow from the bus ...

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There are many factors that determine right-timing for selling your small business. The financial condition of the company, valuation, growth cycle, profit history, and the current market. But there is one single thing about timing that comes into play that makes all other factors make little difference....it is the business owner's emotional readiness to sell. However, if your only criteria in the decision to sell your business is when you are emotionally ready to go, you will be in a weaker bargaining position and you may miss the boat. Value is dynamic and proper timing makes a big difference in the prices paid for business acquisitions. External factors such as the economy, the mergers-and-acquisitions marketplace, industry trends, competition, stock market volatility, investor confidence, interest rates, and geopolitical considerations are cycles of constant change that impact value. Internal conditions within a company, of course, also change – often in combination with external factors, som ...

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http://www.sme-blog.com/?p=264 July 8th, 2007 by Stefan Töpfer While most people believe that most small businesses and home businesses fail, this is not true. The Small Business Administration or SBA reports that at least two thirds of new businesses survive the first two years. While 44% are able to complete their fourth anniversary. A survey by Murphy Associates, Your Marketing Department, states that there are several reasons why small businesses fail and the most common being the lack of cash flow and the inability of manage funds in an effective manner. In fact 82% of businesses that fail do so due to this reason. The survey also states that 78% of businesses fail because they don’t have a viable business plan and have not considered financial and management aspects of the business in an organized and thorough manner. 60% of small businesses that have closed down state that it is because they have not been able to follow their business plan in a practical manner. Some of the ...

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One of the most time consuming tasks performed by business brokers in the process of selling a business is filtering through the mass of inquiries and databases of registered buyers to find qualified prospects. So, why does it take such a considerable amount of time in the qualifying process? Some people may think the quantity of buyers interested in buying a certain type of business is most important. Others may think the quality of buyers is most important, regardless of quantity. But, in reality, both are very important, keeping in mind that the key word is "qualified" buyer. You need to start with quantity to get to quality. In the interest of highlighting key factors considered in the qualifying process we utilized a simplified scenario and used national industry statistical data to help tell the following story. Let's assume we are selling a $1,000,000 commercial janitorial service on the north side of Houston and have a field of 100 active buyers interested in buying a B2B service company ...

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Do you buy the stock of the company or the assets? This is a very important decision. If a business is set up as a corporation, the owner may want to sell you the shares of the business. This is called a stock sale. Sellers like this type of deal because their profits get taxed at capital gains rates instead of income tax rates which is often higher. An asset sale on the other hand is a sale in which you buy the underlying assets of the business. For example if you are buying a restaurant you would buy all the equipment, assume the lease on the property, the business name, recipes, or purchase the building if that is an option. So what’s the big difference to you - the buyer? Buying stock not only transfers the assets, but it also transfers the liabilities. If someone slipped and fell two days before you buy the stock you would still be on the hook for the liability. Another benefit of an asset sale is you get to depreciate all the assets by class. This can be tax-advantageous. If you do a stock pur ...

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Something interesting happened at the bank yesterday. Sadly, it wasn’t that I noticed an extra $100,000 in my account. I was at the teller window and the young guy next to me was probably in his mid twenties, with his little toddler in tow. He was inquiring about the best way to set up regular $25,000 deposits. After a few minutes, he left and the middle aged woman who was the next customer at the window wanted to put $75 from her credit card into her checking account. I would assume this was to avoid bouncing a check. This dichotomy was very interesting to me. These two individuals were obviously at very different places in their financial lives. It brilliantly illustrates the importance of proper financial health. The young man was, from outward appearance, not much different economically from the woman. In fact, the woman was more nicely dressed than the man was, yet was seemingly a gnat’s whisker away from financial disaster, living paycheck to paycheck. The other person however, was explor ...

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The International Business Brokers Association is having its 45th Semi-Annual Conference this week, June 3 through June 9, at the Memphis Cook Convention Center in Memphis, Tennessee. The International Business Brokers Association® (IBBA®) is the largest international non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of business brokerage and mergers and acquisitions. Today, the IBBA has more than 1,800 cooperative business brokers and intermediaries across Canada, Mexico, Asia, Europe, Australia and the United States. The association represents professional, ethical and practice standards by which its members operate. This semi-annual event is seven days of professional development and top-notch education and networking. Educational and Workshop courses number close to 100 and include such topics as: Up-to-date legal and tax issues that impact business transfer transactions Analyzing and recasting financial statem ...

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Investment groups and baby boomer corporate executives looking to get into action with companies of their own are making small businesses hot prospects these days. Buyers have money to spend and are turning more frequently to the local landscaping company or delivery company as good investments. There's no question that Houston-area small businesses are becoming more frequent targets for seasoned buyers currently combing the marketplace for investment opportunities. Houston's business-friendly climate is an attractive incentive for these categories of buyers who are more sophisticated about gauging the risks of acquiring small businesses. As a result, they are going after privately-held, well-oiled enterprises with an annual profit of at least $100,000. Manufacturing, trucking, distribution, and service-sector businesses are a few on the list of popular targets. Proof that the buying spree has heated up in Houston is partly in the growing ranks of business owners consulting with business brokerage firms ...

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We report on economic conditions and other issues that affect the Small Business Community and its future outlook. This survey is important because it is essentially an interview with the generations that hold, in their hands, the future impact of small business on our economy. The outlook is encouraging. Let's preface the Survey with why Small Business is so important to our economy. Small Businesses make up 97% of America's exporters and produce 26% of all export value. (Fred Smith, FedEx Corp. CEO May 2006) Small Businesses employ 50 percent of the country's private sector workforce (U.S. SBA June 2006) Small Businesses have generated 60 to 80% of net new jobs annually over the last decade (U.S. SBA June 2006) The estimated 25.8 million Small Businesses in the United States represent 99.7% of all employer firms. (U.S. SBA June 2006) In a Head-to-Head Match-Up Generations Agree Experience Gives Boomers the Advantage in Business; Gen Y More Passionate but Baby Boom ...

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Once a business owner has decided to sell the business, he needs to determine who will handle the process. The likely team of experts to get the deal done will consist of a business broker, an attorney, and an accountant.  Utilizing professionals to facilitate the process is key to successfully selling the business within the shortest time frame for the most favorable price in the optimal confidential environment. The right professionals are those who specialize in business transfer transactions. Each understand the role they play in the deal.

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When it comes time to sell your business, knowing how to enhance its value and planning ahead are key to doing it on your terms. Selling a business can be complicated and very time consuming. Since the average business sale transaction takes anywhere from four to 12 months, business owners need to be in the right frame of mind when they embark on the process. A big mistake that is often made is not planning well enough in advance to optimize its value and not having a strategy for exit. THE CONCEPT OF VALUE The concept of value was set forth as early as the first century, B.C., when Publilius Syrns wrote his Maxim 847: "Everything is worth what its purchaser will pay for it," or as an early British economist, Samuel Bailey wrote in 1825, "Value, in its ultimate sense, appears to mean the esteem in which an object is held." So, a closely held business may have a high value to its owner resulting from the efforts expended to build it, but it may have a lower value to a potential buyer who may be more ...

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VR Business Brokers in Dallas Helps in Ownership Transition of Fisher Cabinet Works TYLER, TX -- (MARKET WIRE) -- 11/06/2006 -- VR Business Brokers announces the sale of Fisher Cabinet Works, which designs and manufactures custom cabinets and offers several lines of pre-finished cabinets. Pete Fisher Jr., the founder of Fisher Cabinet Works (http://www.fishercabinet.com/), engaged VR Business Brokers in Dallas to sell the company. Terms of the transaction were not disclosed. Fisher Cabinet Works, based in Tyler, Texas, was established in 1992 and employs approximately 50 workers. New owner, Tami Wolfe, plans to keep the headquarters in Tyler and has launched an expansion with a new showroom in Plano at Lakeside Market on Preston Road. "I was attracted to Fisher Cabinet Works because nobody in the Dallas / Fort Worth area offered their high-quality craftsmanship at an affordable price," said Wolfe. "Now that we've opened in Plano, builders and homeowners are learning what we can do to improve the aestheti ...

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Kissing your business goodbyeExperts say it’s never too early to start thinking about selling. In fact, they suggest developing an exit strategy long before that next business opportunity beckons or it’s time to retire. “Things can be done today that can have big impact on how valuable the business is 20 years from now,” says small business expert Jeff Cornwall. David Doyle, director of the Tennessee Small Business Development Center at Southwest Tennessee Community College in Memphis, agrees. “Grow the business to sell it,” Doyle says. “Don’t let the day-to-day activities of the business prevent you from being able to focus on business growth.” Doyle and Cornwall also say it’s vital that business owners position businesses to run without them. “If all of what is in your business is based on you and your relationships, it doesn’t have real value in the business world without you,” Cornwall says. “You have to make sure the business is independent of needing you over the long term. If you have an accounting fir ...

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Whether you are buying or selling a business, your accountant can make or break the deal. If you choose to engage advisors, such as a CPA, to assist you in the sale or purchase of a business, it is important that they be deal friendly and transaction experienced. They must have a clear understanding of your objectives and seriousness in getting the transaction completed. In many instances, the sale of a business fails to close because of a CPA's actions or lack thereof. For instance, the buyer's accountant makes too many demands of the seller due to the lack of understanding of the due diligence process or the documentation that should typically and reasonably be provided by the seller. Certainly, you want your accountant to look out for your interests, but not to the point where the demands are so strenuous that the other party walks away from the deal. The failure of the seller's accountant to provide financial records and information in a timely manner to the buyer is another way to kill a deal. ...

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Whether you are buying or selling a business, your legal counsel can make or break the deal. If you choose to engage advisors, such as an attorney, to assist you in the sale or purchase of a business, it is important that they be deal friendly and transaction experienced. You must articulate your objectives and seriousness in getting the transaction completed. In many instances, the sale of a business fails to close because the attorney for one side makes too many demands of the other side. Certainly, you want your attorney to protect your interests, but not to the point where the demands are so strenuous that the other party walks away from the deal. The buyer, seller, and their advisors involved in the transaction must have a mutual understanding of the price and terms of the deal.......who is getting what and for how much......or the sale may be doomed before it starts. Business brokers can refer you to legal professionals if you don't already have one that is experienced in legal issues related to b ...

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Family and private businesses are sold in an environment that is unlike the selling environment of anything else you can imagine! Sound surprising? After you review the following ten reasons that make selling a business different, perhaps you will agree. (1) Confidentiality Making the decision to sell one's business is a difficult enough task in itself. However, once the decision is made how do you sell it without anyone knowing it's for sale? Adverse things can and do occur when people know, or think they know, a business is for sale. Confidentiality must be maintained. Here's why. a) Employees get nervous and may leave for more stable employment. They believe that the "new broom will sweep clean." That may be true in public company acquisitions but is generally not true in private company sales. Your staff represents a significant portion of your company's value. Should your key employees leave, most buyers of private companies will not buy. b) Competitors may take advantage by using the ...

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Getting Cold Feet? Closing the deal can be the most challenging part of buying or selling an operating business. Valuations, investigations, and negotiations are complete and now it's a matter of getting everything into writing in a form that satisfies everyone so that the transfer of ownership of the business can take place. However, you can definitely count on someone getting cold feet just before the closing. Be prepared for this! Anticipate it happening and then work through it logically, reasonably and unemotionally. "Seller’s Remorse" doesn't happen at any specific stage of the process. It can occur at any time and the usual symptomatic thoughts start going through the seller's mind. “Do I really want to sell my business?” “At this price, am I just giving my business away?” “What if the new owner mistreats my long-time customers and loyal employees?” "What if I’m bored as soon as I retire?” “Who is this new potential owner? "Will he maint ...

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A growing number of investors are selling properties and paying taxes later through a deal structure called a 1031 exchange. Section 1031 of the U.S. Tax Code permits a seller of commercial properties to defer the capital gains obligation if it identifies a replacement property within 45 days of closing the sale. The seller must then close on its new purchase within 180 days of the first closing. In a typical transaction, the property owner is taxed on any gain realized from the sale. However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date. Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a business owner who has outgrown a company-owned building, for example, can defer the tax liability as long as the proceeds are used to buy another building of equal or greater value within a spe ...

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The following serves as an excellent checklist for a Buyer in compiling questions to ask the Seller about his business during the Due Diligence period. Potential Problem Areas to be Addressed Changes in law, New competition, Change in technology Foreign imports, Drop in demand, Equipment obsolescence Facility obsolescence, Market shifts, Down trends Employee theft, Interest rate flux, Labor problems Tax liens, Increased repair costs, Low margins Capital improvements needed, Single supplier position, Single customer position Bad receivables, Low backlog, Shipping problems Political instability, Restricted credit, Lavish facilities Closed business, Customer problems, Supplier problems Regulatory violations, Utility rate changes, Insurance cost changes Obsolete inventory, Slow moving inventory, Obsolete advertising Key talent leaving, Lease about to expire, Employee promised equity High lease escalation, Product liability claims, Patent ex ...

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Business is thriving in Houston........and No Wonder! Houston is the fourth-largest city in the United States, located in a culturally diverse metropolitan region of 4.8 million residents – and growing at more than twice the national pace. It has a low cost of living, a well trained and educated workforce, has one of the largest ports in the nation for the expansion into the international marketplace, has no state income tax, and is one of the top business-friendly states in the nation. Houston is booming and is ranked #3 best Metro Area for doing business by Forbes.com. Texas has the #6 best Business Tax Climate in the nation according to the Tax Foundation's 2007 State Business Tax Climate Index. The Tax Foundation, established in 1937 in Washington, D.C., provides unbiased tax information and presents facts and figures to educate the public about America's tax burdens and its impact on our economy. As reported by the Texas Workforce Commission (3/8/07), Houston's job growth rate was double t ...

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Clear A New Lease With The Landlord Before You Sell Your Business.

A lease is a contract that represents the right to operate a business from rented premises. It is a legally binding contract between the landlord and the tenant. It sets out the terms, conditions and rights as well as the obligations of both parties in relation to the occupancy.

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Getting Cold Feet? Closing the deal can be the most challenging part of buying or selling an operating business. Valuations, investigations, and negotiations are complete and now it's a matter of getting everything into writing in a form that satisfies everyone so that the transfer of ownership of the business can take place. However, you can definitely count on someone getting cold feet just before the closing. Be prepared for this! Anticipate it happening and then work through it logically, reasonably and unemotionally. Many Buyers, particularly first-time Buyers, experience a pre-closing nervousness known as “Buyer’s Remorse.” It generally occurs during the Due Diligence phase. During this period the Buyer may begin to have second thoughts about the wisdom of buying the business. The train of thought may go something like, “Am I doing the right thing?” “Do I really want to get into this venture?” “Is this the right time?” “What if the curren ...

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6 Steps in the Buying Process Step 1: Self Assessment When you meet with a Business Broker, be prepared to discuss your background, work experience and financial ability to purchase a business. A Business Broker cannot adequately help you find a company that meets your needs without this knowledge. A personal resume and financial statement will also be required by lenders, landlords and others who will be a party to your business acquisition. The following are examples of the questions you may be asked by a Business Broker: Why do you want to buy a business? What are your special skills and educational background? What is your work and/or business ownership experience? What are your hobbies and areas of special interests? Assuming suitable sources of financing are available, what is the maximum amount of your personal funds you can invest as a down payment to purchase a business? If you plan on including an equity partner/investor, how much do you expect them t ...

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Center for Rural Entrepreneurship http://www.ruraleship.org/index_html?page=content/ruralenews.htm _______________________________________ GENERATIONAL SMALL BUSINESS TRANSFER -A Development Strategy for Rural Communities- By: Craig A. Schroeder, Senior Associate Sustaining established family-owned businesses into the next generation is an important issue for rural community leaders. Many small rural businesses are family-owned, but statistics show that few survive beyond retirement of the current owner. According to the U.S. Small Business Administration, only 30% of all family businesses succeed to the second generation. And of these, only 15% survive into the third generation. These facts combined with the realization that many new businesses fail in the first five years demonstrates that losing established small businesses can severely impact economic sustainability. Many small town leaders are particularly concerned about retaining businesses considered essential to the community such as ...

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A Simplified Checklist When Selling A Business & Closing A Deal - Adjust purchase price This would take care of prorated items such as rent, utilities and inventory up to the time of closing. - Review documents required to be provided by the seller This would be a corporate resolution approving the sale, evidence that a corporation is in good standing, any tax releases that may be been promised by the seller. Check with your local department of corporations or secretary of state. - Sign promissory Note In some cases the seller will financing part of the sale price, so have an attorney review any Note documentation. - Security Agreements These documents may be necessary if you are going to finance your purchase. A Security Agreement lists the assets that will be used for security as a promise for payment of the loan. - UCC Financing Statements These documents are recorded with the Secretary of State in the State in which you have purchased your business. Again, these documents are nece ...

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Preparation for putting a business on the market is like rehearsing for a stage performance....as the main character....in the spotlight. When entering the center stage spotlight, both a business owner and a star performer must know their roles, the script, the story, as well as the other major players and the roles they will play. The goal of both are to achieve a certain response for their portrayal of the story from their own specific audience. Whether it be rave reviews for the actor or offers to buy the business for the owner, an experienced director is key to making the presentation a success. Putting metaphoric pros aside, directing and orchestrating the behind-the-scenes activity for the successful sale of a company, is a business brokerage firm. The Business Owner's Role in a Sale Before dressing up the company for its debut, be ready to share its best features, as well as its blemishes. All will become visible under the due diligence spotlight. As in the classic tale, "The Emperor's Ne ...

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In the purchase of a business, the end result of negotiation is not winning an argument, but reaching a mutually beneficial agreement between buyer and seller.

The most common mistake people make in negotiation is thinking that their goal is to win at the expense of the other party. Adopting this win-lose approach almost always results in a failed, or less than optimal, negotiation. A win-win approach, where each party gets its needs met, is the most successful way to negotiate.

To better accomplish this end, the prudent business Buyer should understand the Seller’s position, establish a harmonious relationship with the Seller, and pave the way for negotiations which will lead to the successful purchase of a business.

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Proper planning for the sale of your business is key to an enjoyable sail into your next adventure in life.

Surfs up! A wave of business buyers has flooded the Houston marketplace looking to take part in its promising future economic growth. Houston is booming and is ranked #3 best Metro Area for business.

Texas is home to almost one million privately-held small businesses with revenues under $100 million and less than 500 employees. As the largest city in Texas, Houston is home to one quarter of those small businesses (Source: InfoUSA) and it is estimated that less than 50 percent have had a change in ownership in the last 15 years. For many of these business owners, developing and executing a timely exit strategy is key to achieving the rewarding outcome they expect.

As 80 million baby boomers around the country move toward retirement, more than 7 million business owners are expected to exit their businesses over the next 10 to 15 years.

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THE SUCCESSFUL CLOSING

Now that all of the contingencies have been satisfied and removed from the Contract, it’s time to draft the final closing documents. These documents may be prepared by the Seller’s attorney, Buyer’s attorney or a third party attorney employed by the business broker.  The basic documents associated with the transfer of a small business generally include:

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Due Diligence is the last phase in the buying process. This is the time when you will have access to all of the company's books, records and files. You will have a pre-determined period of time to investigate the information that you have been given so far to verify its accuracy.

The goal of an effective due diligence is to validate what the seller has represented and to allow you adequate time to review all of the other key issues of the business. The following is a checklist of information and documents that a buyer may wish to review during the due diligence period:

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The Answer -- in a Nutshell: The best time to sell a business is when the business has upward trending revenues, when the industry is in an upturn, when the economy is strong, when there is a multitude of buyers looking for business acquisitions, and when interest rates are low. There are many questions that need to be answered before an informed decision can be made. Is selling the business your best alternative? Will one of the kids want to take over the business? Timing is everything. Is now the right time? You figure that you don't have to sell or decide right now. You are quite busy so maybe you will look into it after.....or maybe tomorrow.....or next year...... Facing the issue of succession or continuation of one’s business is not addressed with much enthusiasm by the average small business owner. But only one of three eventual fates exist for a business: Transfer to family, employee, customer, or vendor Sell to an outsider Close down Although the overwhelming majo ...

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Who are the Buyers for Privately-Held Companies and What is Their Acquisition Criteria? Understanding who the buyers are and their acquisition criteria will enable business owners to be better prepared when the time comes to sell. Unrealistic expectations of value and factors that drive value result in many business owners being unable to sell their business. When a business is on the market for a long period of time, pre-disclosure to employees, customers and suppliers can be detrimental to the business. Alternatively, proper valuation, packaging and presentation to the most likely buyers enhances the probability of a sale within a reasonable period of time. Already addressed in Part 1 of this subject was the Individual Buyer Category. Discussed here will be the Financial Buyer (sometimes called investment buyer) and Synergistic Buyer categories. Each have specific identifiable acquisition criteria. THE FINANCIAL BUYER There are approximately 200 well-known financial or investment buyers ...

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The Individual Buyer Category represents the largest number of prospective buyers for small to midsize privately-held businesses. Understanding who the buyers are and their acquisition criteria will enable business owners to be better prepared when the time comes to sell. The individual buyer category encompasses a variety of buyer types that include wealthy individuals, corporate executives, engineers and salespeople working for large firms, and immigrants entrepreneurs who have recently moved to the US. There are two other buyer categories that will be discussed in a future post: Financial Buyers (sometimes called investment buyers) and Synergistic buyers. Each buyer category differs in their purpose for making an acquisition and the types of businesses they target. Wealthy Individuals often are people who have taken early retirement from corporate America and after a brief period of being nonproductive decide to get into their own business. They tend to acquire midsize companies grossing in excess of ...

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SBA prequalified businesses get more attention in the businesses-for-sale marketplace because it saves potential buyers a lot of effort and time to secure financing. More importantly, however, they know the business is financially sound. The more interest generated in your business, the better the chances for a quicker sale.

If your business is eligible for SBA financing, it will usually get a higher price.....especially if you provide a small amount of additional financing to the buyer. It makes the buyer feel more secure about purchasing your business knowing that you have enough confidence in the performance of the business to provide a loan. Or, based on the buyer's financial capabilities, you may get all cash instead of having to provide any portion of the financing yourself.

When your business is prequalified for financing, you will also get advice on what types of buyers would be approved for financing for your type of business, potential terms, and deal structure. You will also get a Letter of Prequalification you can present to qualified potential buyers.

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"Texas is a land of buccaneering capitalism."- The Economist, 12/19/02 In addition to having a low cost of living and a great quality of life, Texas has one of the nation's most favorable business environments. By 2030 the U.S. Census Bureau projects Texas population will increase by 60 percent compared with 2000 and will be one of the three other states that account for nearly one-half of total U.S. population growth between 2000 and 2030. So........with all the environmental infrastructure in place, it's not surprising that we're off to a running start. Noted in New York Times article last week, Houston is experiencing its strongest resurgence in more than 20 years. The article cites energy, real estate development, and real estate investment as leading the way for the boom. There are, however, many other drivers contributing to the diverse economic health of Houston. The international trade and logistics sector is trucking along in the speed zone and will not be putting on the brakes anytim ...

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If you are an owner of a privately-held small business.....

You are the heart of American commerce. You are part of the engine that drives our economy and creates jobs. You have built your business up over time. We recognize and applaud your achievements. We are much like you in that nearly all of us have walked in your shoes by owning and running a company ourselves.

Now you are considering letting go. You are considering your options for selling the business.

You understand the importance of confidentiality and wonder how you can market your business without disclosing sensitive information prematurely, or disturbing the status quo. Your trusted advisers, such as your CPA, have helped you manage your business to minimize your tax liabilities. Now, however, you wonder if the income statements negatively impact your eventual asking price for the business. You wonder if you could discreetly line up a buyer yourself. Problem is, you know what you don’t know. You know about running your business, but in your heart you know this deal is the deal of your life. You need to know you’re getting the best possible exposure and price. You need to know how to qualify your buyer prospects and their offers. You don’t have the time or resources for a misfire. You know you will need help.

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"Companies to service cargo and vessels at the Port of Houston and along the Houston Ship Channel will be in high demand for the foreseeable future and will continue to provide impetus to our city's economic vitality." -- Above is a quote from one of my posts earlier this month touting Houston Growth in International Trade and Logistics. Another major firm expanding operations to Houston's commerce hub Marlink, an international satellite communications provider, announced this week a visible step in its global business strategy. It is opening a Regional Headquarters operations center in Houston to meet growing demand from its maritime and offshore industry customers throughout North and South America. It will be located near the South Shore Harbor complex, with access to the ports of Houston, Galveston and the primary offshore oil and gas support bases in Louisiana. (Full Article in Houston Business Journal: "Marlink Picks Houston for Americas Headquarters" 03/12/2007) Houston's Gulf Coast has lon ...

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Most sellers are unaware of how much the interest on the sale increases their actual selling price. For example, a seller carry-back note at eight percent carried over nine years will actually double the amount carried. $100,000 at eight percent over a nine year period results in the seller receiving $200,000.

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There are business marketing firms out there that tout themselves as business brokers. These firms usually snag their prey through mass mailings around the country. Business owners should be suspicious of these types of mailings from out-of-area companies making big promises. They charge exorbitant upfront fees for a "comprehensive valuation" of a business and listing it for sale. (A full text article of two real business owners' experiences with one of these listing firms is described in detail below). However, these firms are usually not local to the businesses they list and the agent is a salesperson who receives his payment from the large upfront fees collected from business owners. This salesperson has no interest in the actual sale of the business and will never be heard from again. Your representative will be someone back at the office in some other state who you have never met and who knows nothing about the market in which the business is located. For these reasons, the business is overvalued and ...

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Job and Population Growth Bode Well for Small Business in Houston as its Economy Expands A revised report issued on March 8, 2007 by the Texas Workforce Commission (TWC), says Houston's job growth rate was a full percentage point higher than the initial estimate released seven weeks ago. Houston's 4.2 percent job growth during 2006 is well above the 2.6 percent growth statewide. The biggest revisions from the initial report were increased growth rates at the professional, higher-paying job levels in manufacturing, architecture and engineering, and computer systems jobs. This TWC report redoubles the U.S. Census Bureau December 2006 report indicating that Texas saw its population grow by 579,275 - the biggest increase in the nation. The higher-than-national-average growth rates are the result of favorable business conditions in Texas. The state ranks second on Forbes' list of best states for doing business and is ranked the 9th Friendliest Entrepreneurial Environment in the U.S. by the Small Business ...

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Former Chairman of SCORE® Houston, a Nonprofit Organization, Takes Mission to Private Sector -- the Small Business Marketplace HOUSTON, TX -- (MARKET WIRE) -- February 21, 2007 -- After serving three years as Chair and Vice Chair of Houston Chapter of SCORE®, Thomas Pence, an expert in global trade and logistics, shifts back into the small business marketplace to take part in Houston's dynamic growth in international trade and distribution by joining Certified Business Brokers, the largest business brokerage firm in Houston. Increased international trade is spurring development of industrial properties in the Port of Houston areas to support operations of warehousing, containerization, and distribution hubs. In addition, many logistics and distribution companies are either relocating to Houston or are expanding their operations into the Houston market. The recently opened Bayport Terminal is recognized as the most state-of-the-art container terminal in the US and will triple Houston's existing ...

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