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From the monthly archives: March 2010

We are pleased to present below all posts archived in 'March 2010'. If you still can't find what you are looking for, try using the search box.

The Property Lease is a Factor When Selling a Business

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:

  
  • Is the lease transferable / assignable to a new owner?  An assignment is very similar to a sublease, except the new tenant takes on the rights and obligations of the entire lease for the rest of the time remaining on the lease.   The original tenant is usually still liable for all the obligations of the original lease until it runs out.
  • Is there a transfer fee involved?
  • What does the Landlord require to approve the new owner on the lease?
  • Is there an option to renew the lease after the current term?
  • When does the Landlord have to be notified to renew?

You want to get this part of the sale process done relatively early. Landlords don't like surprises. A deal can fall apart quickly if a Landlord is informed at the last minute that a new owner is about to take over the current business. It is better to work with the Landlord to iron out the details before you get too far into the deal. Determine the Landlord's willingness of renewing or transferring the lease to a new owner and what qualifications of such new owner are expected.

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The Initial Buyer Seller Meeting in the Business Sale Process

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. An appointment for a buyer and seller to meet is usually made when a buyer is considering making an offer to purchase the business. The buyer wo ...

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Core Principles That Increase Business Value

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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Friends and Family: A Financing Option for Buying a Business

The first job facing many prospective business owners is rounding up the cash necessary to make the purchase. They may find that banks have made borrowing difficult (or all but impossible), and that even SBA loans have requirements too stringent to meet. One viable option is obtaining financing from the seller; another is to seek help from family and friends. Borrowing money from family members and/or friends is one of the most frequently-used methods of small business financing. The pluses are obvious--there is trust, familiarity, and a general comfort level when dealing with those you know. The drawbacks are self-evident as well: "doing business" with family and friends comes with cautionary notes of legendary proportions. Everybody knows that family ventures can be complex and stressful, stirring up "bad blood" and lingering ill will. However, by taking the right preventive steps, buyers can take advantage of friendly financial help. 1. Set up an informal meeting to introduce your ideas. This is t ...

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Three Ways to Negoitate a Successful Business Sale

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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Be a Winning Seller: Good Negotiation is Key

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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The Three-Phase Process of Selling a Business

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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Gap Analysis - How to Strike Your Business Goal

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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Small Businesses Will Lead Economic Rebound

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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SBA Legislation Special Update

Extension of SBA Recovery Lending Programs Will Support $1.8 Billion in Small Business Lending Agency plans to restart Recovery loan approvals on March 10 WASHINGTON – President Barack Obama signed legislation Tuesday extending until March 28 the U.S. Small Business Administration’s ability to provide small business loans that are enhanced with special provisions of the American Recovery and Reinvestment Act (ARRA), including a higher guarantee of SBA-backed loans and a waiver of loan fees normally paid by borrowers. SBA estimates the additional funding will support about $1.8 billion in small business lending. New approvals of eligible loans with the higher guarantee and reduced fees made possible by the Recovery Act are expected to resume on March 10. Loan applications from borrowers in SBA’s Recovery Loan Queue will be funded first, followed by new loan applications. “These key loan programs have been successful in helping jump-start the economic recovery for America& ...

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