Seven things that you need to know the company's sales

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1. Alternatives to Selling

The IPO

If you business is large enough, you can consider an initial public offering (IPO) in which you will sell your company's shares publicly on the open market. This can be a good alternative to selling the business, but IPO's require the outlay of large sums of money that may be out of reach for your company. If you have money available to finance an IPO, research the IPOs of similar-size companies in your field and look at their track record and whether they experienced accelerated growth.

An IPO for your company will mean that you will lose a significant amount of control. You will be face outside investors, strict Securities and Exchange Commission regulations and record-keeping rules. Your company information will become a matter of public record.

Selling Corporate Assets

Sometimes it becomes difficult to cut back or restructure your business into a smaller business by selling some of your corporate assets, but this may be the best alternative to selling the business outright. If you consider selling off part of your business, hire an outside financial advisor to appraise your assets and determine a fair market price for the assets you are considering selling. Choose assets that are not directly tied to your core business. Choose assets for which there is a strong market. Obtain input from legal and accounting experts.

2. Ways to Determine The Value of Your Business

If you decide that you must sell your business, there are a number of ways to value your company and determine your selling price.

Informal and formal appraisals

Find out the selling prices of similar businesses in your area and compare their companies to yours. You can also contact the national trade association for your industry. You can also hire a professional business appraiser. This method is the most credible and your potential buyers will be more likely to accept the formal appraisal.

Market-based valuation

One commonly used method of valuation is based upon past experiences selling of similar businesses. A business broker may recommend an asking price based on the sale prices of similar businesses in your area and industry. This is similar to find comparable sales for residential real estate, and it is the least expensive. It is commonly used for the sale of small businesses.

Asset-based valuation

Your business assets may be considered at book value to determine the liquidation value of the business. The result is a fire-sale price that will be the bare minimums value.

Earnings-based valuation

Your company's historical financial results will be considered and future income projections will be calculated and multiplied times a "Cap Rate," the interest rate usually earned in the market.

Price Building

Price building is a valuation method that looks at the assets, leases, real estate, and goodwill of the business. It considers the value of the tangible assets on the balance sheet and the valuable intangibles that create the company's value in determining the amount a buyer would be expected to pay for the business. The intangibles include location, unique product or service, profitability, favorable lease, goodwill, and good employees. The tangible assets will be real estate, equipment, and inventory.

After you inventory the tangible assets and calculate their value, you will estimate a value for the intangible assets. The rule of thumb for valuing these intangibles is that their combined value should be approximately one year's net income. Add together the value for the tangible assets, the intangible assets, the agent's commission, and other costs of sale to calculate your asking price.

Return on investment (ROI)

Consider your annual business net profit to calculate the buyer's return on investment. Divide your net profit by the buyer's original cash investment, and the result is the return on investment. The typical ROI is 12 to 25 percent. The higher the ROI, the higher the sales price is likely to be.

3. Prepare Your Business for Sale

Prepare in advance

The best results come from an owner who starts preparing his or her business for sale at least one year in advance. The owner should carefully review the financial statements and have a cleare understanding of the company's revenue and growth potential.

Prepare company records and contracts

All company records must be entered to clearly document all company transactions so that potential buyers can review and evaluate the company's financial status. Examine all supplier and customer contracts to be sure that their terms and conditions will not require renegotiation by the new owner and to be sure that they are financially good for the company. Review your real estate leases to find out if they require renegotiation upon sale. Analyze the equipment leases and other material contracts from the buyer's perspective.

Write a policies and procedures manual and consider employees

Create a procedures manual that documents the best way to run the business and deal with its employees. Remember the importance of keeping key employees during a sale and whether they will be crucial to the new owner's success. If they are, the new owner will want to know which employees will stay with the company after the sale. Have a company meeting to explain to employees that your are selling the business and tell them what effect the sale will have on their jobs.

Evaluate and update company assets

Do a complete inventory or all assets, equipment, and inventory. If your computer systems are obsolete, upgrading the system will make it easier to sell your business. If company assets include real estate, decide whether you should or sell the real estate before the company is listed for sale.

4. Legal Consequences of Selling a Business

Disclosure

You must make a complete disclosure to the buyer about all aspects of the business.

Open up the books for inspection. Show them all leases and other relevant contracts. Do not withhold any information from a potential buyer. Your failure to disclose material information could be considered fraud.

Will the Bulk Sales Law Apply to your business?

"Bulk sales" laws were enacted to prevent business owners from defrauding creditors by transferring their assets to another individual or entity to keep their assets away from creditors. When one corporation receives the assets of another company, it is expected to assume its debts and accountable for the debts. If, however, one business transfers all of its assets to another business, but the receiving business does not assume all of the debts, you must consult an attorney to be sure you comply with the law.

5. Collect Outstanding Accounts Receivable

Create an aggressive collections plan

You should make collections a top priority and devise a systematic method for collections. Put your collections plan in writing and share it with the employees who are part of the collections team. Make sure everyone consistently carries out the plan. Contact your past-due account holders by email to remind them that their account is overdue. Tell them how many days they are late and the precise amount that they owe.Ask recipients to acknowledge your e-mail. If you do not receive a response on your first e-mail, send another email advising them that you will contact your attorney.

Hire a collections agency or attorney

Hiring a collections agency as a last resort may be the only way to recover your money. When you create your aggressive collections plan, collect some names of reputable firms and make some initial inquiries to know what to expect. Their fees will be between 25 and 40 percent of the amounts collected. If you have very large overdue accounts, you may want to hire a collections attorney with experiece in collecting outstanding accounts receivable.

6. Define your priorities

Sales price and terms

Decide exactly what you want from the sale. Do you have to have an all-cash deal or can you finance part of the sale price? Is it important to you that the buyer continue your business traditions? Decide on the minimum price that you will take. Do you have to have a lump sum at closing or can you accept payments over time?

Time your decision to sell

When the national economy is strong and your business is having its best year, you will receive the highest dollar value for your business. keep an eye on what the national economy is doing and be flexible about when you will sell. Sell early if you can avoid being caught up in a bad economic cycle.

Prepare to sell

The average time for a businesses to sell is approximately one year. Start planning two years in advance of the date you want to sell. Also, prepare your business for the sale by cleaning, painting, and doing whatever you can do to make your business premises more attractive. Keep your clean and attractive every day, because you never know when a potential buyer will drive by.

Get professional help

Do not make the mistake of thinking that you can sell your business without help from professionals. In the course of the sale, there are numerous federal, state, local, and tax issues to consider. Use your time wisely and spend your time running your business successfully to increase its sales appeal. Ask for help from your accountant; lawyer; business broker; and business appraiser.

7. Consider the tax consequences

How income is taxed

If you owned your business for at least one year, the increased value of your business will be taxed as a long-term capital gain at approximately 20 percent. If you owned your business for less than one year, the increased value will be taxed as personal income at more than 30 percent. When you sell the company's assets, they are classified as capital assets and will be taxed as long-term capital gain or ordinary income. When you sell inventory, the proceeds will be classified and taxed as ordinary income or loss.

As you prepare your business for sale, you should make succession-management plans. Prepare the firm's next generation of leadership to include capable managers. The absence of a succession strategy is considered to be a company weakness. The lack of a practical succession plan can complicate a potential IPO, discourage a buyout, and be less desirable for underwriters or institutional investors.

Jo Ann Joy, Esq., MBA, CEO

The future of your business starts here!

You may contact Jo Ann by phone at (602) 663-7007, by fax at (602) 324-7582, by email at joannjoy@Indigo Business Solutions.net, and by mail at 2313 East Ocotillo Rd., Phoenix, AZ 85016. I have many published articles, and I will send any article to you free of charge. Most consultations are free.

For information about other important legal, tax, and business topics, free copies of articles, or EBooks, please visit our website at http://www.IndigoBusinessSolutions.net Copyright 2006. All rights reserved. Indigo Business Solutions is a registered trade name.

Jo Ann Joy is a strategic business attorney and the CEO and owner of Indigo Business Solutions. Indigo Business Solutions is a “one stop shop” for businesses. We differ from other business consulting firms, because we offer legal and business counseling. We work with our clients to create value and gain competitive advantage.

Jo Ann has a law degree, an MBA, and a degree in Economics. Her legal background includes commercial, corporate, bankruptcy and real estate law. She has expertise in accounting, business planning and strategies, mortgage lending, marketing, and product development.

Jo Ann ran a successful business for 10 years, and she is a published author on many different legal and business subjects. Her company, Indigo Business Solutions, strives to help businesses make decisive improvements. It is our goal to inspire enterprising people to make their goals a reality. If you are not getting what you want from your business or if you want to reach higher goals, please visit our website [http://www.IndigoBusinessSolutions.net] to see how we can help you.

Business Brokers will sell the business role

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On liiketoiminnan kerääjää myydä yrityksen rooli. Pohjimmiltaan ne tehdä se tapahtuu nopeammin ja usein parempaan hintaan kuin olet voinut saanut oman.

On olemassa monia syitä käyttää liiketoiminnan kerääjää liiketoimintaasi myytäessä. Yleisin syy on, ne myyvät yritysten liiketoimintaa. Ne yrityksen markkinoinnissa ja saada mahdollisten ostajien projektikokoelmien käyttäjän käsitellä Ohje. Ne auttavat asetettaessa asking-hinnan perusteella ja kokemusta. Jos ne ovat menneet sertifiointiohjelman kautta niiden hinta pidettäisiin asiantuntija silminnäkijän todistus ja näin ollen annetaan suuren määrän creditability. Pitäminen omistajan viitehinnan niiden liiketoimintaan tai yli hinnoittelu niiden yrityksen on oikeutettua tehtävänsä niiden asiakkaalle osana. Koska he tietävät löytää ostajia, jotka ovat päteviä ja valmis jakamaan niiden mielemme mukaan liiketoimintaansa (tämä artikkeli saattaa olla englanninkielinen), ne voivat osaltaan liiketoiminnan on oltava markkinoilla aika lyheni. Johdonmukaisesti liiketoiminnan kerääjää siirtyvät liiketoiminnan tehostamiseksi ja yleensä hyvin käypään hintaan.

Mitä liiketoiminnan kerääjää tehdä

Niiden avulla saat tarvittavat ostaja voi tehdä päätöksen ostettaessa yrityksen tiedot myyjän. Tämä rooli on tärkeä, sillä mitään ei tapahdu, kunnes hintaa ja liiketoiminnan tosiseikat ovat tiedossa. Esittäessään ammatillinen muodossa on toisen yhteinen palvelu, jonka liiketoiminnan kerääjää antaa asiakkaalle. Tämä palvelu voidaan tehdä käsitellä myyjän ja menossa Etelä käsitellä välinen ero. Asiaankuuluvia tietoja yrityksen ammatillinen esittäminen on tarpeen houkutella mahdollisia ostajia. Se on tässä asiatietoja, joka auttaa päättämään älykäs tällaisten ostojen ostajille. Koska liiketoiminnan kerääjää tekee tämän tyyppisen työn ympäri vuoden tiedot näytetään positiivisin muodossaan. Käytännössä tehdä täydellinen tässä tapauksessa.

Liiketoiminnan välittäjällä on myös ostajan ja myyjän välillä läpipääsyn sijaitsee. Tämä mahdollistaa paremman viestintä- ja ostajan ja myyjän välistä yhteistyötä. Disinterested kolmannen osapuolen tehtävänä on tehokas vuokraus siirtää koskevan liiketoiminnan myyntiin liiketoiminnan kerääjää. Liiketoiminnan välittäjällä on käsiteltävä molemmille puolille oikeudenmukaisesti, hänen seuraavan asiakkaiden on antanut olemassa olevien asiakkaiden viitteinä työstään. On välttämätöntä, että oikeudenmukaisuuden ongelman toimitetaan seuraavan asiakkaan. Koska kaikista seikoista, jotka kulkevat kerääjää, tämä puolueettomuus on tärkeää ja myös sopimus molemmin puolin annetut neuvot.

Yrityksen markkinointi

Ilman broker myyjän olisi markkina-ominaisuus ja ei pääsevät allas mahdollisia ostajia. Ostaja ei tarvitsisi käyttää myyjien allas välittäjällä on käytettävissä. Molemmat osapuolet tarve on siitä syystä, että useimmissa yrityksissä myydään liiketoiminnan kerääjää avulla. Niiden asiantuntemusta auttaa määrittämään myyntihinta liian suuriksi. Varattu kerääjää ajan mittaan auttaa myymään monenlaisia yritysten ja reaaliajassa kokemus on arvokkaita päätökseen tulevien prosessiin. Toimivaltainen kerääjää myös tietää monenlaisia yritysten oikeudellisten vaatimusten että välittäjät maantieteellisellä alueella. Tämä estää ongelmat, joka voi estää toteuttamasta paikka ja päätökset tehdään ilman kaikkia tosiseikkoja.

Jos hän ei ole todistettu kerääjää, jossa myyntihinta, hän on käsiteltäväksi vakuutuksenvälittäjän tai CPAs, joka on tämän tunnistetieto. Myyjälle etuna on, liiketoiminnan asetetaan myyntihinta, joka on loogisesti puolusti kun kysyttiin, miten hinta on määritetty. Se ei ole vain hinta, joka myyjän poimia wish luettelohinta ohut ilma.

Broker tukialueilla neuvottelu

Koska välittäjällä yleensä tiedä, mitä ostaja on valmis maksamaan ja mikä myyjä on valmis hyväksymään, välittäjällä voi johtaa molemmin puolin hinta, joka on jossain alueella että molemmat ovat halukkaita kanssa. Ilman, että tämä voimassa ulkopuolella kumpikin osapuoli voi koskaan lähestymistapa tämän hinnan.

Välittäjällä on toisen kyky toimittaa joka tekee niiden palvelun kustannukset arvoinen. Ehkä liiketoiminnan on yksi kiltti liiketoiminnan ja ole yksi, joka on markkinoiden joka päivä. Tällä tavoin yritysten on vaikea arvioida niiden markkina-arvoa, ja jopa vielä tärkeämpää ei ehkä tarvitse myydä yrityksen yksilöllinen markkinointisuunnitelman keksivät. Hyvä välityspalkkiot yritys voi tehdä molemmat ja ratkaista ongelman virustorjuntaohjelma menestys kuin yrityksen omistajille voi tehdä itse. Niillä on pääsy verkon välittäjät, jotka käsittelevät kaikentyyppiset yritykset, jotka ovat myyntiin.

Yrityksen saattaa olla yksilöllinen maantieteellisellä alueella se sijaitsee, mutta voi hyvin olla yksi maa, joka oli onnistuneesti kaupan kyseisellä alueella kerääjää toisessa osassa. Verkon käyttöä on kerääjää yhteisön yksinomaiseen ja yksityishenkilöiden ei ole pääsy tietoihin, jotka saadaan verkosta. Tiedot on valta ja tällaista apua voi olla liiketoiminnan voidaan onnistuneesti markkinoida ainoa tapa. Miten muut suoritukset myydään samanlaista liiketoimintaa voi johtaa tekemään suunnitelma, joka on hyvä mahdollisuus työskennellä kyseisen kerääjää. Tämän palvelun myyjälle on korvaamaton ja voi tehdä n: o myyntiä ero ja myydään. Myyjän voisi olla tuhlata paljon aikaa ja rahaa strategiasta, joka toimisi. Ferreting pois potentiaalisten ostajien on pelin nimi. Väärä lähestymistapa voisi helposti tulla tyhjä. Kaikki tämä on riittävä syy työllistävät ja asiantuntija, liiketoiminnan myytäessä.

Päätelmät

Se, että ne aktiivisesti markkinoilla yrityksesi on lisättynä. Nykyinen omistaja ei ole aikaa tai tietämyksen löytää ostajia ja määrittää käypään hintaan. Ne yleensä määrittää niiden hinta liian suuri tai liian pieni. Jos heillä on tulossa tahansa ostajien kanssa kova aika, tämä nostaa turhautuminen ja tarpeettomia vähentämisestä myyntihinta. Se väärä ostajat ovat näkemästä yrityksen mainoksen sitten vain halvemmalla houkuttelee niiden tietoon. Ostajan, joka ymmärtää yrityksen helposti nähdä kohtuullisesti hinnoiteltua tarjouksen arvo. Tämä on hankalaa ja tulos voi vaikuttaa jyrkästi pro palkkaamisen avulla auttamaan myyntiä.

Toinen syy pro käytettäväksi on, ne puhua ostajat saatettava myynti-välitys ammatillinen ihmiset kieli. Jos ehdot, jotka ne viestimään ymmärretään, ostajan neuvonantajien ei olla vaikuttunut ja voi tappaa myyntiä. Vuokraus ammattimainen yritys liiketoiminta-kerääjää estää älykäs keskustelun puute. Hän tietää, ehdot ja niiden merkitykset ja antaa tarvittavat vastaukset siirtää myyntiä. Tämä tietämys ja asiantuntemus on siitä syystä, että tällaisen henkilön palkattiin auttamaan sinua tekemään yrityksen myynti. Mahdollisuuksiin käyttää edellisen myynti ja miten ne ovat täyttyneet on suojaustoimi niiden knowledge base. Nykyinen omistaja voi nostaa että neuvottelupöytään millään tavalla.

Ja nyt haluan tarjoavat voit vapaa pääsy tehokkaan yhdennetyn järjestelmän markkinointi-, myynti- ja mainonta tietoa, joten menestymään sijasta hengissä nykypäivän talousympäristössä.

Henthorn on presidentin spiraali Markkinoijat, kaupan pitämisen sijoituspalveluyrityksen, joka sisältää kumppanuuksia, jotka alkaen kehittyneet ohjelmistokehitys, liiketoiminnan ja henkilökohtainen parantaminen valmennus, verkossa sähköisen kaupankäynnin yritysten ja enemmän.

Hän oli aiemmin oli pääasiallinen kerääjää keinona / kaupallisten kiinteistöjen välityspalkkiot Honolulu, jotka erikoistunut edustavien myyjien liiketoimista, $50 MM.

Lisätietoja puolestaan $1 $6 iltaan nyt:

Haluatko, että yrityksen myynti on onnistunut - riippumatta siitä, mikä on "talouden"? Hanki työkalut sijoittaminen yrityksellesi, joka (myynti-, markkinointi-, mainonta- ja PR) Suurenna myynti menestysmyynti

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

Sale of Business-12 steps to success

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Simply put, selling a business is complex. Business owners who decide to sell their business should be prepared, patient, responsible, and realistic about the process. When owners strategically plan the sale of their business, from start to finish, they put themselves in a much better position to succeed. Below are some essential steps required for successfully selling a business.

Commitment to selling

Deciding to sell a business is one of the greatest challenges that a business owner will face. When debating your company's future ownership, it is imperative that when the business owner makes a rational decision to sell, they see the plan through. It is only human nature to question if it's the right time to sell, but those owners who see their calculated decision through, will be successful in the end.

Bring in professionals

The sale of your business will require the expertise of many professionals. In order to maximize deal value, terms and closure seek out trusted advisors to protect your best interests. In most business transactions, this team would consist of an attorney, business broker, and CPA. Mixed into these roles and responsibilities is that of a business valuator. More times than not, CPA firms do not specialize in business valuations and getting the price right from the start is a must to maximize seller's value.

Selling a business is a long, arduous process full of hurdles and bumps in the road. It is at the business owner's peril if they try to go at it alone. Not only will they most likely encounter unforeseen challenges and mishaps, but their business will most likely deteriorate while they're trying to juggle all of the responsibilities involved in successfully selling a business.

Conduct a business valuation

An independent, third party business valuation is expected in today's business selling marketplace. The objective and value of a business appraisal is to set a fair asking price so that your business assets (both tangible and intangible) are fairly valued and attractive to savvy buyers. The business valuation will validate your asking price, enabling a seller to significantly reduce buyer negotiations and confidently stand by their asking price. In some cases, the professional broker will have access to a reputable business valuation firm and may be able to facilitate the process of preparing your company for a business valuation. Many brokers do offer an opinion of value, but using the expertise of a credible, business valuation firm can be one of the best decisions a business owner will make; inaccurately valuing a business (high or low) can be very damaging to a business seller.

Confidentiality, Confidentiality, Confidentiality

It is obvious that the majority of business owners do not want to hang a for sale sign on their business, alerting employees, customers, and vendors of their intentions. Maintaining discreetness during the sale of your business is a must. All parties advising you on the sale of your business should first sign a confidentiality agreement. You can prepare a simple mutual NDA or ask these professionals for their boilerplate agreements. In addition, all potential buyers will need to sign a non-disclosure agreement before any material information about the business is shared. Once the business is being listed, your broker should operate carefully as a blind business listing is meant to peak buyer interest, not to give them enough details to figure which specific business is for sale. It is at the owner's peril if they do not ensure confidentiality is maintained throughout the process; if a prospective deal goes south or if the seller changes their mind about selling, the business will be protected going forward when confidentiality has been preserved.

Get your affairs in order

When entertaining prospective buyers, they will want to closely analyze your financial statements, both past and current. It is important that all adjustments and reporting be made prior to presenting balance sheets as any material change prior to closing will have an impact on the final purchase price. In addition, larger operations with $5MM+ in annual sales should have their financial statements audited. While this is not cheap, it reassures buyers that your asking price is fair based on legitimate financial reports and studies have indicated this serves as a value driver in purchase price. Other areas you should focus on include lease agreements (if you do not own real estate), key employee contracts, key client contracts, etc. Finally, get your physical business location(s) in presentable order by cleaning, organizing and preparing for VIP visitors.

Package the business

Presenting your company's information to buyers is going to be important to ensure they are informed, educated and more importantly disclosed about the state of your business. They'll want to learn about your operation, industry, financial performance and future prospects. A confidential, presentation package is needed with most buyers. Professional business brokers should be able to extend these types of value added services in order to properly package your business for a professional presentation.

Market the business

Finding qualified buyers that meet your criteria is absolutely critical. This step requires an added layer of discretion. Take time to use the right marketing channels for your type of business, discreetly promote the business to buyers, and rigorously qualify interested parties. The more popular outlets for business listings include local/national newspapers, internet directories, direct mail and networking. Your intermediary should facilitate and execute this step so that you can do the next step. Your representative's role in this phase is to attract, identify, qualify and introduce appropriate buyers for your business.

Keep Running Your Business

While selling your business may prove distracting, it is imperative that the owner continue to run his or her operation; almost as if it wasn't for sale. While you will be making sure your ducks are in row and ready to put on its best face for potential buyers, taking care of your employees and your customers is important. It is to the owner's detriment if business sales decline, staff begins asking questions, and if the sale takes longer than anticipated. Maintain business as usual and let your business selling team run the ball to the goal line.

Entertain multiple buyers

A business seller who is entertaining several qualified buyers is in a position of strength leading up to the sale of a business. Not only will this inherently solidify the value of a business with the prospects of a bidding war, it will ensure the most appropriate buyer is found for the future health of the company. Selling a business is not just about money, it is also about a simpatico with a buyer and their intentions with the business operation. Looking out for the overall best interests of your employees, customers, and brand should be an emphasis for a responsible business owner.

Due Diligence is a two-way street

Following an Offer to Purchase or Letter of Intent, your qualified buyer is most certainly going to conduct due diligence on your business, its financials, customer lists, employee contracts, vendor relationships and other elements you claim to be in place with the sale of the business. While this is a normal process, typically lasting a couple of weeks (sometimes longer based on deal size), due diligence should not just be from the buyer.

You, the business owner, should be conducting due diligence on the potential buyer. Beyond financial buying power and purchase price, you should be interested in their background, intentions with the business and its key employees, management philosophies, maintaining culture, etc. Instruct your business broker to find out why inquiring buyers are interested in your business, ask for a resume, and dig for answers.

Close the Deal

The professional team you assemble to help execute the sale of your business, should serve as a buffer between you and potential buyers when it comes to negotiations. Common areas that are negotiated are purchase price, terms and deal structure, non-competes, owner training/support, etc. Your business broker is a conduit and should be able to effectively represent you when it comes to terms, inclusions, and exclusions. Above all else, it is critical that you not only rely on your broker, but also your attorney, when negotiating, drafting and accepting terms in the Purchase Agreement. The seller's attorney and buyer's attorney will need to actively communicate with one another to get everyone to the closing table and seal the deal.

Don't fumble the handoff

Most buyers will seek assistance from the seller in the transition of the business. The involvement and seller participation is going to significantly vary by industry and type of acquisition, but you should prepare to stay on board for a reasonable period of time. This is an essential step in the successful transfer of a business so that the company's operations, employees, customers and overall stability are protected. Just as a quarterback has to mechanically hand the ball to a running back, so does a seller hand the business off to a buyer. If this is rushed or done in a nonchalant manner, the business could stumble, take a dip and experience rough road ahead. A responsible business seller will dedicate time to work with the new owner, at no cost, typically lasting several weeks to a couple of months. Any period longer should come at the business buyer's expense and a previously agreed upon rate of compensation.

There are all types of complexities in planning and executing the sell of a business. The smart business owner will enlist the services of professionals who can help them carry out a full exit strategy which will most often lead to: securing a higher purchase price, selling to the most qualified buyer(s), ensuring the business is prepared for a handoff, and protecting the futures of existing management, employees and clients.

Contact Fair Market Valuations at 877.VALU.BIZ today to learn more about our business valuation services and to schedule an in-person, no obligation meeting with one of our professional experts.

Scott Gardner is President of http://www.FairMarketValuations.com, one of the nation?s largest networks of business valuation consultants. Scott has been working closely with business owners for more than 10 years, ensuring their sales, marketing, financial, and exit objectives are successfully executed. With more than 400 experts serving all major US markets, Fair Market Valuations delivers face-to-face business valuation to small business owners seeking a future exit from their companies. He can be reached at sgardner AT fairmarketvaluations.com or 877-VALU-BIZ for more information.

Ground rules for dealing with successful Your Business

Sooner or later you are going to exit your business. The question isn't whether or not you will be ready. The sixty four thousand dollar question is whether or not your business will be ready.

It is estimated that seven out of ten privately held businesses have no succession plan to transfer the business to the next generation of owners. What does that mean to you? It means that if you do not currently have a plan in place to transfer your business to family members, existing partners, management or employees, someday you will think about selling your business.

That day might come sooner than you anticipate. Don't make the mistake of thinking that just because you are not currently ready to retire that you have plenty of time to prepare your business for sale.

As a business broker, I have been involved in a number of transactions (and potential transactions) where the business owner wanted to sell, or in some instances, was forced to exit the business earlier than expected. In fact, retirement is NOT the number one reason why businesses sell.

Here is a list of the most common reasons why owners sell (or otherwise discontinue) their businesses:

Burn-out (the number one reason for selling)

Health issues

Personal diversification

Retirement/semi-retirement

Death

Divorce/partner disputes

Business growing too fast

Second generation not up to the task

Loss of market share

TAKE GOOD CARE

The sad truth is that many business owners do not take good care of their most valuable asset: the business. They don't groom someone to continue the business in their absence, and do not keep the business in salable shape during the time they operate the business.

Business owners tend to get too bogged down in the day to day business operations to worry about--or plan for an event that they perceive won't occur until sometime in the distant future; selling the business.

Unfortunately, fate sometimes dictates circumstances beyond your control, and tough decisions must be made. If your business isn't ready to sell when the time comes, what are your alternatives?

1. Liquidation of business assets--may be a solution, but one that usually returns very little money to the business owner. If the business had been an operating business, the underlying assets (except for real estate) may be outdated and of little use to anyone. At auction, the assets will bring only what the attending bidders are willing to pay. In some instances, underlying assets are sold to liquidators (or scrap) for only pennies on the dollar. Liquidation of a going business often occurs where the owners have become ill or disabled, or need to retire and have not planned adequately for their exit from the business.

2. Closing the business--is even less attractive than liquidation. That is because many who find themselves in this situation have a tendency to "put off" liquidating the underlying assets in hope that maybe someone will come along to buy this business. This almost never happens.

BUILD WEALTH NOW BY PLANNING FOR THE SALE OF YOUR BUSINESS

Okay, so you think you have enough to do without throwing more onto the pile. Am I right? That is why I have written this article for you. It provides a "down and dirty" overview of things that you ought to begin thinking about and planning for right now. Doing so will provide you with an additional safety net that will help safeguard your valuable business asset.

Here are just a few of the benefits of planning now:

A planned sale allows for your goals and objectives on your timetable

You may begin to identify potential buyers

You may be able to create an attractive acquisition candidate

You can begin to understand why a buyer may want to buy

You might learn why buyers would not want to buy--and be able to fix the problems

You may begin to realize the worth of your business now, and learn how to increase the value as part of your retirement planning

BUSINESS VALUE HOUSEKEEPING CHECKLIST

Record All Sales

Business owners often invent remarkable ways to beat the tax collector. But the taxman can be a business owner's best friend when it comes to selling one's business. Income taxes are a great investment in the years immediately preceding an anticipated sale of the business.

Paying income tax proves to the buyer AND the banker that your business operations have been profitable.
Nobody wants to pay more income tax. But consider this example: Ronald Bunk systematically underreported business income by an average of $20,000 per year. Assuming a combined tax rate of 40%, Mr. Bunk saved $8,000 in taxes per year. But, the underreported income also reduced the company's earnings base by $20,000 per year. If, for example, the business could be sold for a multiple of 5x the company's reported earning base---the company would sell for $100,000 less ($20,000 average earning base not reported times the price multiple of 5) than it is really worth!

Without considering the time value of money, it would take in excess of twelve years of (illegal) tax savings to make up for the loss of $100,000 in business value. The lesson: In trying to screw the government, business owners often find themselves on the short end of the stick; often in more ways than one.

Eliminate co-mingling of business and non business assets

A common practice among closely held companies is to co-mingle non business assets and expenses with business assets and expenses. I have seen businesses owning motor coaches, boats and airplanes; all reported as business assets. The costs of maintaining and operating the assets were expensed as regular business operating expenses.

It is true that those businesses (not audited by the IRS) are saving a certain amount of income tax, and providing an extra "fringe" benefit for the owners of the company.

Wise business owners should endeavor to separate non business assets from the business in the three to five years before a planned sale of the company. Doing so will make it much easier to accurately measure and reflect the true earning power of the business, as it will be unfettered by the capital investment in non business assets and the associated costs.

Buyers of your business are generally purchasing future income and benefit streams that will be produced by your business. The leaner and more productive your business is--the more it is worth. It is never too early to begin segregating non business assets from your business, as it may take some planning and time.

Do your own due diligence

Some executives of both public and private firms get a physical check-up once a year. Many of these same executives think nothing of having their personal investments reviewed at least once a year, if not more often. Yet, these same prudent executives never consider giving their company an annual physical, unless they are required to by company rules, regulations or some other necessary reason.

Anyone interested in purchasing your business will perform "due diligence" procedures on your business before closing on the purchase. All too often, sellers are surprised at the skeletons purchasers can find in the closet. These skeletons can reduce the value of your company, and in some cases, kill any chance at closing a sale. What skeletons are your company's closets?

Why not give your business a periodic physical? In essence, I am suggesting you would do well to treat your business as if someone else owned it--and you were the potential purchaser. What problems would you discover that could cause you and your advisors to reduce or withdraw your offer?

Spending the time and money to discover and fix your company's problems now will pay huge dividends in the form of increased company value--which is exactly what you want when it's time to sell.

Compliance with taxing and regulatory authorities

Mountains of regulation often seem to impede a company's growth and profitability. Some regulations might seem rather easy to "slight" or ignore.

Take for example one of my recent sellers who swore to me that the business had no regulatory violations of any type. I reminded the seller that anything "hidden in the closet" would most likely be discovered in a buyer's due diligence (investigatory) process. "Nope--no problems of any kind" I was assured.

Well, guess what the buyer's due diligence turned up? Seems the seller had a couple of shipping/storage containers sitting behind the building--which the sellers KNEW were in violation of local zoning ordinances. How did they know? They had received four previous "reminders" from the trustees about the containers, and the need to remove them.

"Why didn't you mention that to me, or disclose that fact on your disclosure statement?" I asked. "Gee, nothing ever happened and the township never did anything--so we just figured it was no big deal." Was the seller's reasoning.

No big deal, except when the purchaser turned up the non compliance issue, it threw a few extra wrinkles into the mix. In that case, the issue was easily resolved (yet, much to the additional cost and chagrin of the sellers). But, sometimes known violations are not so easily remedied. In those instances, a seller runs the risk of blowing a good deal.

What's the bottom line?

Clean up any tax, industry, OSHA, EPA or zoning issues with which your company does not comply.

Organize and keep records available. One never knows when opportunity might knock. If and when it does knock, will you be ready to strike while the iron is hot? How many times have you heard someone say something like, "I'd sell anything, including my business for the right price?"

Maybe you have even said it yourself. But would you know what paperwork and documents a serious buyer will immediately need in order to pursue the purchase? When a qualified buyer is ready to begin serious due diligence, they will need a variety of company documents.

Following is a partial list of things a buyer will ask for:

o Three to five years income tax returns

o Copies of one to three years quarterly payroll reports

o Three to five years CPA prepared financial statements

o Current year to date financial statements

o Detailed depreciation schedules listing each fixed asset owned by your company

o Corporate Minute Book with updated minutes

o Recent aged accounts receivable trial balance

o Recent aged accounts payable trial balance

o Company organization chart

o Copy of the Summary of Insurance Coverage (provided by your carrier)

o Information about Employee Benefits provided by the company

o Information about Employee Retirement Plans

o Copies of labor contracts

o Copies of other contracts to which the company is a party

o Copies of licenses, registrations for patents, copyrights, trademarks, etc.

The foregoing list is an example of the types of records your company should have up to date and on hand at all times. These records are extremely important to speed the sales process along. Though this advice sounds basic, I often encounter companies whose records are not complete and up to date. This situation can dramatically affect a potential sale.

I suggest using a three ring binder to keep the basic updated records available at all times. This also makes other business needs for the documents much more manageable.

CONCLUSION

You can increase your wealth by knowing a few simple ground rules for successfully selling your business. Just like other owners of closely-held businesses, you know how to operate your business on a day to day, month to month and year to year basis. But your experience in running the business has not prepared you to know how to sell your business.

While the information I provided in this article is not all inclusive, it should help you get started in preparing your business for a successful sale--no mater when the business might be sold.