There is a direct relationship between the asking price and the amount of cash on the table at the time of the sale. Buyers and sellers alike should keep one fact in mind. Most businesses involve some level of seller financing. It is customary for both buyers and sellers to have concerns regarding this kind of financing; after all, sellers don’t want to take their businesses back from the buyer. Buyers want to generate enough money to help the business thrive and make a living. One proven way to ensure the successful sale of a business is to turn to the experts.
Screen out Window Shoppers
The simple and very established fact is that when you choose to work with the professionals, it can streamline the entire sales process. Business owners are typically very busy people. That means they don’t have time to waste with window shoppers. They also don’t want to divulge confidential information to parties that don’t possess the means to actually follow through with a successful sale.
Business brokers and M&A advisors know that most prospective buyers are just dreamers or will ultimately fail to qualify. When you work with the professionals, it means that you have a shield to protect you and your valuable time. Experienced brokers have a range of techniques that screen out unqualified candidates and match you with buyers who are the best fit.
Anyone who has ever sold a business, or even contemplated selling a business, knows all too well that confidentiality is of the utmost importance. Sellers need to know that the information they reveal will not spill out all over the web. Brokers are experts maintaining confidentiality and impressing upon prospective buyers the tremendous importance of honoring the agreements they sign.
It is important to note that leaks regarding the sale of a business can cause a range of often unexpected problems. Key employees may get nervous about their future prospects and begin looking for a new job, competitors may begin attempting to poach employees, or customers and key suppliers may get nervous and turn to your competitors. In short, serious buyers and sellers alike benefit from maintaining confidentiality.
Matching the right seller with the right buyer is truly an art and a science. Many factors are involved ranging from financing to psychology. When the right match is made, then it is possible to move through the process of seller financing more quickly and with fewer roadblocks or complications. Working with a business broker or M&A advisor is the single most important step that any buyer or seller can make to help ensure that seller financing, and in fact the entire sales process, progresses as smoothly as possible.
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There is no doubt that the COVID-19 situation seems to change with each and every day. The disruption and chaos that the pandemic has injected into both daily life and business is obvious. Just as it is often difficult to keep track of the ebbs and flows of the pandemic, the same can be stated for keeping up to speed on the government’s response and what options exist to assist companies of all sizes.
In this article, we’ll turn our attention to an overlooked area of the government’s pandemic response and how businesses can use a whole new lending platform to navigate the choppy waters.
As the pandemic continues, you will want to be aware of the main street lending program, which is a whole new lending platform. It was designed for businesses that were financially sound prior to the pandemic. Authorized under the CARE Act, the main street lending program is quite attractive for an array of reasons. Let’s take a closer look at what makes this program almost too good to be true.
This lender delivered program is a commercial loan. Unlike the PPP, there is no forgivable component. However, the main street lending program does have one remarkable feature that will certainly grab the attention of all kinds of businesses. It can be used to refinance existing debt at a rate of around 3%. With that stated, it is also important to note that businesses cannot refinance existing debt with the current lender. Instead, a new lender must be found. Generally, loans are a minimum of a quarter million dollars and have a five-year term. In another piece of good news, there is a two-year payment deferment period.
The main street lending program can be used in a variety of ways. In short, the program is not simply for refinancing existing debt. Additionally, there is no penalty for prepayment. The way the program works is that lenders make the loans and then sell 95% of the loan value to the Fed. This of course means that the lender is only required to retain 5% of the loan on their balance sheet. The end result is that lenders can dramatically expand the amount of loans they can make.
Whether it is the PPP or a program like the main street lending program, there are solid options available to help you. Businesses looking to restructure debt or put an infusion of cash to good use may find that the main street lending program offers a very flexible loan with great interest rates.
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In her recent April 20th, 2020 Forbes article, “Three Keys to Engaged, Productive Telework Teams,” author Rajshree Agarwal, who is a professor of Strategy and Entrepreneurship, explored how to get the most out of telework. This highly timely article covers some very important territory for many companies dealing with the COVID-19 pandemic. Let’s explore Agarwal’s key points so that you can help your team get the most out of telework.
Agarwal notes that people may tend to shy away from sharing personal information and feelings while in the office. But via video conferencing, the story can be different. For this and other reasons, it is necessary for employers to keep in mind that the dynamic between you and your employees may be different when you use video conferencing. This will also often be the case when your employees speak with one another.
She prudently cautions business owners from taking a “business-as-usual” approach to the COVID-19 situation, as it can make them look both unnecessarily cold and out of touch with reality. On the flip side, however, it is also important to not dwell on the negative aspects of the pandemic. Offering some sense of normalcy during the COVID-19 pandemic is a smart move as well.
How you use telework and video conferencing is, in part, about developing the correct balance. On one hand, you’ll want to acknowledge that the situation is serious and must be addressed. But on the other hand, you don’t want to dwell on the pandemic. After all, not effectively handling the work at hand could undermine your business and cause other problems for both you and your employees.
It is in everyone’s best interest to be smart, safe, and acknowledge the bizarreness of the current situation while striving to achieve business goals. The keyword here is “balance.” Agarwal states that “The combination of empathy and purpose unifies individuals, allowing team members to channel their efforts towards shared objectives and values. This is the best antidote for anxiety.”
From Agarwal’s perspective, there are three keys to making telework effective: communication, socialization, and flexibility. First, there has to be good communication. For example, people can’t simply ignore one another’s emails because they are working virtually. She points out that real-time meetings via Zoom or Skype can eliminate some communication issues, but not all.
The second factor to consider is socialization. As Agarwal points out “Engaged, productive teams also take time to socialize.” Working from home alters the typical modes and methods of socialization, but virtual interactions can be used to help people form and develop their social networks.
In short, socialization doesn’t have to end once telework begins. Used judiciously, socializing, and the bonds it creates between co-workers can still continue.
Agarwal’s third key is flexibility. Flexibility is critical, as all team members must adjust to what, for some, may be a fairly radical restructuring of their day-to-day work experience. Those who haven’t worked virtually before may find adjusting to be quite a challenge. Management should strive to be more flexible during telework caused by the COVID-19 pandemic. Trying to maintain the same top-down approach could prove to be problematic.
It goes without saying that telework presents challenges. However, the challenges it represents are not insurmountable. There are benefits to teleworking, and teams can use it to generate solutions that they might have not reached in the typical work environment.
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Thinking about whether or not you are ready to exit is an important question. It’s something that every business owner will have to address at some point. Importantly, you don’t want to wait until the 11th hour to prepare to sell your business. There are far too many pieces in this particular puzzle to wait until the last minute. You’ll want to begin the process sooner by asking yourself some key questions.
First, you’ll need to determine the actual value of your business. It is a harsh truth, but what you think your business is worth and what the market feels that it is worth may be two very different things.
This point serves to underscore the importance of working with a business broker or M&A advisor early in the process. An experienced broker knows how to go about determining a price that will generate interest and seem fair. Remember that at the end of the day, it will be the marketplace that determines the value of your business, but working with a seasoned professional is an excellent way to match your offering price with what the market will ultimately bear.
Secondly, you’ll want to consider whether or not you truly want to sell. It is not uncommon for business owners to begin the process of selling their business only to realize a few hard facts. Wanting to sell and the time being right to sell are often two different things.
Upon placing your business on the market for sale, you may learn that you’re not emotionally or financially ready. If this happens to you, consider it a learning experience that will serve you well down the line.
Get Your Ducks in a Row
If you have done a financial assessment, a little soul searching and have begun working with a business broker or M&A advisor to determine that now is a good time to sell your business, then there are several steps you’ll need to take. You can be sure that any serious prospective buyer will want a good deal of information regarding your company.
At the top of the list of items potential buyers will want to see are three years of profit and loss statements as well as federal income tax returns for the business. Other important documents ranging from lease and lease related documents, lists of loans against the business and a copy of a franchise agreement, when applicable, are all additional documents that you will need to provide. You should also have a list of fixtures and equipment, copies of equipment leases, lists of fixtures and equipment, and an approximate amount of inventory on hand. A failure to not have this information organized and ready to present at a moment’s notice could be a costly mistake.
Working with professionals, such as accountants, lawyers, and brokers, is a savvy move. Owning and operating a business can be a complex process, and the same holds true for selling a business. Investing the time to seek out experienced and professional advice is the first step in selling your business.
The post It’s Time to Exit. Are you Ready? appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Business acquisitions are red hot, and all kinds of businesses are being snapped up. Some people are under the impression that only large businesses are being acquired, but this is far from the reality of the situation. It would surprise many to learn that so much of the “action” is, in fact, small businesses buying other small businesses.
In his Forbes article, “Take Advantage of the Golden Age of Business Acquisitions,” author Christopher Hurn explores the true state of the “acquisitions game.” His conclusions are quite interesting. In Hurn’s opinion, there has never been a more active time in the realm of business acquisitions.
If you own a business and are looking to grow, then you may want to consider acquiring a competitor in order to consolidate the market. As Hurn points out, there are many reasons that you might want to consider acquiring a business in addition to consolidating the market. These reasons include acquiring a new product or service, acquiring a competitor that has superior technology or even identifying a business that you believe is primed for substantial growth.
Yet, there are other forces at work that are combining to make this moment the “golden age of acquisitions.” At the top of the list of why now is a good time to investigate acquiring a business is demographics. According to a 2019 study by Guidant Financial and Lending Club, a whopping 57% of small business owners are over the age of 50. The California Association of Business Brokers has concluded that over the next 20 years about $10 trillion worth of assets will change hands. A mind-blowing 12 million businesses could come under new ownership in just the next two decades! As Hurn phrased it, “The stars are aligning for the Golden Age of business acquisitions.”
This all points to the fact that now is the time to begin understanding what kind of acquisition would best help your business grow. Hurn believes that turning to the Small Business Administration in this climate of rapid acquisition is a savvy move.
In particular, he points to the 7(a) program and a host of reasons that the SBA can benefit small businesses. Since the SBA lowered equity injection requirements, it is now possible to finance a staggering 90% of business acquisition deals with loan terms up to 25 years and lower monthly payments. Additionally, the SBA 7(a) program can be used for a variety of purposes ranging from expanding or purchasing an existing business to refinancing existing business debt.
Hurn truly does have an important insight. Baby Boomers will retire by the millions, and most of them will be looking to sell their businesses. With 12 million businesses scheduled to change hands in just the next 20 years, now is a highly unique time not only in the history of acquisitions but also in the history of business.
Business brokers understand what is involved in working with the SBA and acquisitions. A seasoned business broker can point you towards opportunities that you may have never realized existed.