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Questions about Business owners Ask when selling their Business

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Frequently Asked Questions

WHY SHOULD I CONTRACT A BUSINESS BROKER?

Business Brokers understand the market and the quickest path to achieving a closed transaction. SO YOU CAN STAY FOCUSED ON RUNNING YOUR BUSINESS - This is important so your business stays profitable and marketable. Having a third party involved allows you to keep an arm's length in the negotiations.

MARKETING AND ADVERTISING

Designing a marketing plan specifically targeted to the types of buyer that would be interested in the business is a key factor. Business brokers use data bases of buyer prospects professional associations, and investment groups. Target marketing through trade publications, direct mail, and Internet sites specifically for business transactions may be used to reach buyers. Advertising in newspapers both local and national are typically used.

QUALIFYING BUYERS

The business broker will focus on those prospects who are financially qualified and who are genuinely interested in the type of business.

PRESENTING THE BUSINESS

The professional business broker is experienced in handling negotiations. The broker also offers the seller convenience of continuing to manage the business while the selling process is underway.

MAINTAINING PRIVACY AND CONFIDENTIALITY

Business owners are extremely concerned about confidentiality. A professional broker is skilled at protecting the confidentiality from the employees, suppliers, creditors, and customers of the business.

NEGOTIATING THE BUSINESS SALE TRANSACTION

The business broker will be a vital advisor during the sale transaction. Knowledgeable about negotiating price, terms, and other key aspects of the sale, the broker will guide the seller each step of the way. Proper deal structure will greatly affect the net amount that the seller will end up keeping after selling the business.

HOW MUCH IS MY BUSINESS WORTH?

The value of your company depends on many factors such as: Who is buying the business, what is the cash flow, asset values, financial history, condition of equipment and premises of the business. Are there favorable lease terms, what is the competition, location and the economy? As you can see analyzing your business and comparable sales in your industry is imperative. Solutions Consultants Business Brokers can advise you on the proper pricing strategy for your business based on all of these factors.

The biggest mistake you can make is to over or under price your business!

It is Imperative to do a third party valuation. Not only for you to know the true market value of your business so you can price it right, but most financial institutions insist on a business valuation before they will consider financing. In addition, businesses that have third party valuations sell more frequently at the asking price than those that don't have one. It provides the buyer with the confidence that the business has been analyzed and priced. Why not sell my business myself? It is extremely difficult to maintain your business while engaging in the selling process.

Most owners do not know the time and expense involved in marketing their own business. They will often spend wasted hours working with unqualified buyers. In fact, because the business owner does not have access to a network of qualified buyers, they often end up selling their businesses for much less than they could have. It is very hard to maintain confidentiality as well as negotiate a deal if the business owner is working directly with the buyer. Using a Broker can ensure the highest dollar.

WHEN IS THE BEST TIME TO SELL?

The best time to sell is at the businesses peak. Buyers put most of their focus on the future prospects, if your business has been a steady performer and they can see growth potential, the higher the purchase price.

WHY SHOULD I USE SOLUTIONS CONSULTANTS BUSINESS BROKERS AND THE SCBB TO SELL MY BUSINESS?

Solutions Consultants Business Brokers will help you get the best value for your business. We will save both buyers and Sellers money by avoiding costly mistakes in the selling process. Our National Affiliation with the SCBB network enables us to utilize our affiliate offices worldwide to aid in selling our listings. Solutions Consultants Business Brokers will help you get the best value for your business. We will save both buyers and Sellers money by avoiding costly mistakes in the selling process.

- Bottom Line, by using us to sell your business you get:

- Maximum Exposure

- Confidentiality

- Qualified Buyers

- Advertising and Marketing

- Financial Guidance

- Negotiating Power

- Ability co-broker with our affiliates

- Experience Proven Results

WHAT ITEMS DO I NEED TO PREPARE IN ORDER TO SELL MY BUSINESS?

- Gather Documents for Evaluation:

- Three Years of Income Statements or Tax Returns

- Current Balance Sheet

- Current Asset List with replacement value

- Copy of Facilities Lease Agreement

- Organizational chart

We assist you in putting together a professional marketing package. A professional business broker is never the expert in your business or the industry. That expertise comes from the business owner. The broker is the marketing expert. Preparing a marketing package for your business requires that the owner and the broker work together to determine the strengths and weaknesses of a company and how they could impact the marketing of your business.

WHEN SHOULD I DEVELOP AN EXIT STRATEGY?

The sooner the better. The ideal time to develop an Exit Strategy for your business is when you start or purchase the business. However, industry statistics indicate that 85% of all business owners do not have a defined exit strategy although, on average 75% of their net worth is tied up in their business.

IS MY COMPANY READY FOR SALE?

The company's financial records and operations must be evaluated and analyzed to determine the strengths and weaknesses of the company. Proper planning will help you address and hopefully minimize any operational or financial weaknesses of the company before launching the marketing phase of the disposition process.

WHAT IS MY COMPANY WORTH?

The market price range of your company is estimated after consulting with all of your team members (accountant, valuation expert, M&A specialist) and evaluating all of your goals and objectives. Timing considerations, proposed transaction structure, industry conditions and lending market conditions are all key elements to consider in estimating the market price range for your company.

HOW LONG WILL IT TAKE TO SELL MY COMPANY?

The industry average for selling a business is 6-12 months. The size of the transaction, the pricing structure, and specific marketing strategy will directly affect how long it will take to sell your company.

HOW DO I MAINTAIN CONFIDENTIALITY IN THE MARKETING PROCESS?

Confidentiality in dealing with internal personnel and external sources is strongly encouraged and is critical to achieve a successful transaction. For the Seller's protection, Solutions Consultants Business Brokers requires a Buyer's Confidentiality Agreement to be signed by the potential buyer before the release of the Business Memorandum.

HOW DO I PREPARE TO BUY A COMPANY SHOULD THAT BE MY INTEREST?

We will assist you in determining your acquisition goals and objectives. Before the acquisition search begins, it is important to narrowly define and target a specific industry, business size, develop an integration plan if applicable, understand your financial purchasing parameters and explore your financing options.

WILL SOLUTIONS CONSULTANTS BUSINESS BROKERS HELP ME ARRANGE FOR FINANCING?

Yes, we assist Buyers in obtaining transaction financing through our extensive financial institution network. We counsel you on the variety of transaction financing options that are available and assist you in evaluating these options as they pertain to and your specific potential business acquisition.

DOES SOLUTIONS CONSULTANTS BUSINESS BROKERS ASSIST IN STRATEGIC ACQUISITIONS?

Yes, we will formulate with you a definitive acquisition plan to target both single and multiple acquisition candidates. If you prefer, we will help you remain anonymous and maintain confidentiality until the appropriate time in the transaction.

WHAT IS A BUSINESS VALUATION?

A business valuation is an estimate of the value of a business or of an interest in a business.

Should the value of a business have any relationship to the value in the marketplace?

A business valuation should consider the market value that a buyer could reasonably be expected to pay, and that a seller could reasonably be expected to accept, if the business were exposed for sale on the open market for a reasonable period of time, both buyer and seller being in possession of the pertinent facts, and neither being under compulsion to act.

WHY ARE VALUATIONS DONE?

A valuation may be necessary to sell a company, to buy a company, to sell shares of a company to key employees, to settle estates, for divorce property settlements, insurance purposes or to simply keep informed of the company's value as growth takes place.

WHAT INFORMATION SHOULD BE USED TO COMPLETE A VALUATION?

Solutions Consultants Business Brokers uses proprietary information for valuations such as tax returns and accountant prepared financial statements for up to five fiscal years. We also incorporate interviews with the principal and employees, tours of the business facility, reviews of customer lists, tangible business assets, general operating and management information, and other information concerning business operations. Analysis is also done to compare the company's financial performance to others within the same industry.

WHAT IS DONE WITH ALL OF THIS BUSINESS INFORMATION?

The basis of any valuation should be the analysis and reconstruction of business earnings, an assessment of current business assets, and an opinion of the future of the business. The valuation considers the continuity of business income, market competitiveness, industry growth, company longevity and reputation, financial trends, management depth, customer mix, the quality of the products and services offered, and the general desirability of the business.

WHAT ARE MORE IMPORTANT, BUSINESS EARNINGS OR BUSINESS ASSETS?

It is true that earnings must support the purchase of business assets. It is also true that assets must be available to serve as financial or even "psychological" collateral. A common finding is that the mix of assets and earnings will vary considerably among businesses. This mix is then judged accordingly for that particular business.

HOW ASSETS AND EARNINGS ARE BEST DISPLAYED?

In most valuations it is necessary to reconstruct the tax oriented income statement and balance sheet to display the information as it would appear to a new owner.

For example, the income statement may need to be adjusted to better show the pre-tax earnings that a business can generate. This is necessary since an income statement is prepared for tax purposes and in general will attempt to lower taxable earnings. For example, a business may show a non-cash expense such as depreciation, in excess of what would be necessary for a reasonable replacement fund. Also, an owner may be receiving a salary that is either too high or low for the work that is being performed. Both of these cases will require adjustment. Another adjustment is usually required for interest expenses since a new owner will have a different debt and equity structure than the current owner. There may also be other adjustments on expense items which are not necessarily important for business operations but considered important to the owner as additional benefits or compensation.

In addition, a company's balance sheet may display equipment that is fully or almost fully depreciated, but that has a higher fair market value. The balance sheet may also display certain assets such as franchise fees or real property at cost, but they may actually have appreciated in value. Conversely, there may also be unrelated business assets that should be eliminated. These and other adjustments to a company's book value of assets need to be made in order to show the current fair market value.

What are the Top 10 reasons why businesses don't sell?

1. Priced too high.

2. No justification for the price.

3. Business cannot be financed.

4. Poor record keeping (tax returns).

5. Not packaged correctly.

6. Need to explain full value of the company in writing. Buyers want to leverage their money.

7. Desirability (owner's responsibility and hours required to operate successfully).

8. Management and employee not staying after the sale (family owned).

9. Out dated service and/or product (i.e., payphone business).

10. Too much working capital required.

SOME ADDITIONAL POINTS TO CONSIDER:

Asking Price Must be reasonable and fair to both seller and buyer.

DEAL STRUCTURE AND FINANCING

Is owner financing a consideration? Does this company have the potential for SBA approved financing? Sales and Earnings Are revenues going up, down, or flat? What are the trends in expenses and margins? Company History

IS THIS COMPANY A STARTUP OR IS THERE A LONG, STEADY HISTORY?

Marketing Strategies Is there an opportunity to improve sales through a more aggressive marketing campaign? Industry Trends? How are revenues trending in the industry as a whole? Is there a consolidation movement within this industry? Employees Is there a stable workforce? Do the employees know the business is for sale? Is the owner willing to stay on as an employee? Facilities Is there a long-term lease? Is real estate included in the deal? Assets and Liabilities

Exactly what assets and liabilities are to be transferred with the sale of the company? Does it make sense to include accounts receivable and accounts payable? Are there some assets or liabilities that it makes sense to exclude?

As you can see, there are many things to consider when selling your business. We are ready to help you if you have the need.

Paul L. Kush - Solutions Consultants Business Brokers - Houston, TX - 281.333.0052

Very successful Small Business owners 5 Habits

Have you ever wondered what the difference is between a business that consistently grows and another that struggles just to make ends meet? Or why a business that was started in a basement of a home can outperform some of the best-run "big" companies in sales and profits?

Two businesses, operating in the same marketing arena and selling the same products or services, can have extraordinarily different results. How can one business continually grow and prosper, while the other struggles? How can one business owner run a highly successful business while still spending a good portion of his or her time away from the business on trips and vacations with the family, and another owner work day and night only to see his business fail?

Such questions have always intrigued me. In my quest to answer them, I sought input from successful business owners. I became a student of business. I read every business book I could get my hands on. I enrolled in seminars and courses across the country. I listened to audio and videotapes of some of the greatest minds in business.

What I learned has been truly transformational. In this article, I will impart to you some of what I have learned. For the most part, there is no such thing as a successful or unsuccessful business; there are successful or unsuccessful people, entrepreneurs who run businesses. Becoming a successful entrepreneur requires a certain self-image, a certain mindset. I like to refer to this mindset as the

"5 Habits of Highly Successful Small Business Owners."

Here they are:

Habit #1: Have a clear vision of their business, and commit their vision to paper

"A man to carry on a successful business must have imagination. He must see things as in a vision, a dream of the whole thing."

Charles M Schwab, American stockbroker

The chances of your small business' success improve substantially if you have a clear vision of what you want your business to look like, and what you want it to accomplish for you in the future. Your vision is your dream for the future of your business and it should delineate the path you will take to turn that dream into reality. You need a crystal-clear vision, one that you can communicate clearly, with vitality and a strong sense of commitment. Everyone involved in your business must comprehend your vision and, even more important, must believe in its success as much as you do.

Setting direction and guiding the business toward reaching your vision will make it successful. Vision is the owner's business philosophy. It's his "double vision" - his ability to keep the business' long-term dream in mind while micro-managing the business on a day-to-day, hour-by-hour basis.

Successful entrepreneurs commit their vision to paper. In all my years in business, I have found that not doing so is the single most fatal error a business owner can make. There's a direct correlation between having a well-thought-out, written vision statement and the success of your business.

Your vision should be a written statement of what your business will be when it is complete. It is a detailed picture of the future - what your business will look like, act like, smell like, feel like, and how it will perform when it is fully developed. Some of the things your written vision statement should include are: (1) the line of business you are in, (2) your company size, (3) the markets it will serve - demographics and psychographics, (4) the number of employees you will have, (5) the number of locations that you will operate from, and (6) what competitive advantages will differentiate your business from your competitors'.

Habit #2: Put the proper systems in place

You need systems to be able to deliver a product or service in a predicable and consistent way. All successful businesses have a "how we do it here" manual, also referred to as a "policy and procedures" manual. Standardize your procedures so that everyone knows what they are and how to do them. These procedures involve production systems for your products or services, systems to deliver those products or services, systems to track new customers or clients, systems to help you keep up with your finances, systems to hire and train new employees, and the list goes on.

Look at the systems that operate within the McDonald's chain. A McDonald's in the Bronx operates exactly the same way as a McDonald's in Palm Beach. It runs just as predictably and profitably in either place. Why? Because there is absolutely no area in which procedures are not specifically spelled out through documented systems. Every procedure is outlined so clearly that anyone can be put into the system and taught to function at an extremely efficient level in a very short time.

Documented systems can make a difference to your own time, as a business owner. Without such systems in place, everything depends on you. If something happened to you, even for a short period, the entire business would be thrown into chaos. With properly documented systems of management and organization, a key employee (even you!) could leave suddenly, and the business would not suffer. You could replace the employee with minimal disruption. As new problems come up, you can adjust the systems you have in place to accommodate the needed changes.

If you set up the right systems from the start, they help run the business. You can be free to spend your time however you wish: more personal time for yourself, more time for your family, your community, and more time to enjoy a richer, more balanced life.

Habit #3: Know what they don't know and then quickly get the help to fill the void

Most small business owners don't realize that having an occupation or skill does not necessarily equate to building a successful business around it. It takes different skills to build a business. Let me give you an example. A personal friend of mine, John Chang worked as an engineer for 12 years before he started his own engineering firm. He was considered to be one of the best engineers in his firm before he went on to start his own engineering company. But John had never run a business before, and he did not have the knowledge and skill to operate his new company successfully, despite his engineering expertise. There is a lesson to be learned. The sooner you, the business owner, develop entrepreneurial skills, the sooner you will turn your expertise into business success!

You will need a number of different skills; financial, marketing, management, and customer fulfillment skills are among those required if you want your business to run like a finely tuned machine.

Can you imagine an athlete training for the Olympic competition without a coach? Of course not! Nor can you develop these skills without qualified help. A business coach will help you think in a new way, show you how to stay on track with your plans, and ultimately achieve your vision.

Habit #4: Have a mindset of preeminence

Preeminent (adj.): excelling others, outstanding.

The business owner has to have the mindset to view his business as a product - not the product or service he is producing, but his whole business as the product. It's an entirely new way of thinking, and as soon as such thinking is adopted in any business, the business begins to make massive leaps forward.

As the business owner, you have to learn how you can give your customers or clients the best possible experience; to enable others to see your business as a trusted, valued, respected, and expert advisor. This mindset can be applied to any type of business. You have the responsibility and the obligation to provide guidance and direction to your customers, and to give them the best short-term and long-term outcome.

Many times, I have seen business owners make one simple, but momentous, mistake. Instead of "falling in love" with their customers, they fall in love with the size of the company, growth of the company, number of employees, or the market share. The way to greatness today is to transfer your ultimate passion away from products and services, and toward people! By doing so you will begin to look at your business as a whole, and any interaction that the customers have with any parts of your business, as part of an overall experience. If you as the business owner are focused on making it the best, most rewarding, most fulfilling, most enjoyable experience for the customer or client, you will dominate everyone else in your business sector.

A strategy of preeminence - of excelling - along with the approach of looking at your business as a whole, is truly transforming. If this is the only idea from these 5 habits that you take to heart and adapt and implement, you will see a significant improvement in your business.

Habit #5: Work on their business, not just in it

The successful small business owner understands the real value and reward that is derived from working on the business rather then just working in the business. She understands that working on the business means viewing her business as a whole. She sees her business made up of various parts that integrate seamlessly to function as a whole.

Working on, instead of "in" the business is strategic work. It is the way businesses transform themselves from vision into reality. It requires asking strategic questions and then doing everything to find answers to those questions.

Smart entrepreneurs do the necessary strategic work, and regularly ask the following questions:

What is my market share?

Who is my ideal customer?

Where is my industry headed?

Who are my competitors?

What are my competitive advantages?

What are other successful businesses in my industry doing?

How do they market their product or service?

What are other successful businesses outside my industry doing?

What is the "experience" my customers are having with my business?

What is the "experience" customers are having at my competitor's place of business?

"Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning." --Albert Einstein

Salim Omar, CPA is the author of the newly published book, Straight Talk About Small Business Success In New Jersey.

More free information can be accessed on his website http://www.OmarGroupCPA.com