Using a Business Broker when selling a business?

By: Jhayne Santucci, Business Broker for Central Florida Business Brokerage, and Tax Strategist for Excelsure Consulting LLC

CHALLENGES

If you are a business owner who is thinking about selling your business, your focus is to make sure you maintain your revenue level until such time when you can give the keys to the new owner.  This is not the time to be out of focus.  No one can do a better job than you in running your own business.  Whether you are an owner of a restaurant, grocery store, insurance agency, law practice, chiropractor’s office – your expertise is most likely not in the area of buying/selling businesses therefore consider allowing experts to handle such tasks so that you can continue to focus on generating consistent revenue and not allow the selling process get in the way of managing your business.  It’s important for the owner/seller to remain vigilant and not be complacent when going through the sales process as deals may fall through for whatever reason.

Business owners/sellers should have exit strategy and succession plans developed way in advance prior to selling so they can utilize available tax and financial strategies that will minimize taxes at the time of the sale.  If the business is anything but corporate structure, what will happen if one of the partner/member/shareholder of an LLP/LLC/S-Corp passed away prematurely or he/she become disabled?  Most business owners don’t plan for these events as they are focus in managing and growing their business.  Unfortunately, not having a plan can result to surviving partners suing the family of the deceased/disabled partner, or vice versa.

Business owners/sellers have an established relationship with their trusted partners who knows their business, their entity structure, their company and owner’s goals. Their trusted partners are their CPA’s, Attorney’s and Financial Advisors.  Unfortunately, these trusted partners are not the experts in business valuation.

VALUE ADDED

The following describes how a Business Broker can add value to the owner/seller.  A Business Broker understands the market, has access to information regarding recent sales, and can apply various strategies to guide sellers on the most probable selling price. A Business Broker maintains confidentiality and identifies the business only to prospective buyers who qualify. A Business Broker advises on preparing the business for sale and can also undertake a marketing program to give maximum exposure. A Business Broker is a vital advisor to the seller at any stage of the sale transaction.  A Business Broker is knowledgeable on negotiating price, terms, and other key aspects of the sale. A Business Broker is trained in the legislation and documentation necessary to protect the parties involved.  A Business Broker has a role that the owner/seller cannot do effectively. 

PROCESS

Below are the step by step process of selling a business:

1. Pre-listing appointment.  Business Broker meets with the owner/seller
2. Business Broker analyze financials and tax returns
3. Listing appointment. Business Broker presents the business valuation to owner/seller
4. Business Broker prepares a draft listing and presents to owner/seller for review
5. Business Broker post listing on MLS and utilize various marketing strategies. 
6. Business Broker qualifies prospective buyers
7. Business Broker sets up meeting between seller and prospective buyer
8. Business Broker sets up a second meeting with seller and prospective buyer to answer additional questions.
9. Business Broker prepares Asset Purchase contract
10. Owner/Seller accept or counteroffer, and sets closing date
11. Due diligence process begins
12. Buyer signs off, or walks away with deposit returned
13. Owner/Seller’s attorney prepares closing documents
14. Closing day

SUMMARY

Going back to the question:  When to use Business Broker when selling a business? Ideally, establishing a relationship with a Business Broker should happen way before owner wants to sell so proper planning can be established.  In this article, I addressed some of the challenges that owners may face when planning to sell their business, how they may not be able to rely on their trusted partners, how Business Brokers can ease the challenges identified, and the right time to retain a Business Broker in the process.

For more information on selling your business, please contact Jhayne Santucci with Central Florida  Business Brokerage at (407) 520 3586.

Coronavirus – What is the effect on Small Business?

The Covid-19 pandemic has sent national economies around the world into a tailspin. We are no different here in the US as businesses continue to be operating on limited hours and minimal staff if they are even open at all. What do we do now as we wait for everything to pass by us. This is a difficult time and we understand that your focus has likely shifted away from creating value in your business, to staying afloat, paying staff and overhead expenses, and planning to reopen if your business is closed. However, now is a good time to plan for the future when you have the time to do so. 

This will come to an end and our government is committed to getting small business back on track to profitability again. I have been through the recession of 1980 when we had extremely high interest rates, 9/11, and the recession of 2008-2009. All of these seemed like the world was coming to an end, however every single instance proved that the entrepreneurial spirit of the business owner would overcome these challenging events. Every time we came back stronger and I feel that this is no different than those times. We will get through this and be as strong as ever.

Valuations of existing businesses may have been negatively affected on current businesses. Valuations will discount these events if the businesses come back to where they were post Covid-19. It is important that business owners be ready for this period. Marketing your business post Covid-19 has never been more important than right now. We have to get back on track and get our economy rolling as it was before this pandemic. If this happens values of businesses will come back to where they were prior to all of this.

If you have been thinking about buying a business, you are probably questioning whether now is the right time to do so.  As we all know, the Coronavirus/Covid-19 outbreak is affecting the economy. It’s understandable that people are concerned about what the future holds. This is a good time to buy a business. Sellers are still motivated, interest rates are lower, and banks are looking to lend money. If you want to buy a business, please contact us to search out the business that best fits you. These times may bring some attractive selling prices and post Covid-19 will be the time to start looking. Call us at (407)403-4455 and we will schedule a time to talk.

Programs to Help Small Businesses

It has been some unusual times of late dealing with COVID-19. Businesses are struggling with decisions involving what to do with their employees and also how they are going to survive financially moving forward.

There are programs being developed, both on a State level as well as a Federal level to help small business navigate the financial challenges they are faced with. I will be a resource for you to help navigate the various programs that are available to businesses to help get you through this unprecedented situation.

On Friday, the U.S. House of Representatives passed and President Trump signed a bipartisan bill to combat the public health and economic crisis caused by COVID-19. Included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act is a pro-worker, pro-business measure to support small businesses and help reduce employee layoffs around the nation. According to the latest estimates, the measure will provide roughly $55 billion in support to businesses who pay their employees rather than lay them off.

“This bipartisan package provides a strong response to the unprecedented public health and economic crisis posed by COVID-19. American families and small business owners struggling as a result of this pandemic need immediate assistance to overcome this crisis, and this bill provides them with the direct financial support to put food on the table and keep their businesses afloat.

Some of the provisions in the CARES Act include:

• Direct Payments to Working Americans: the bill includes direct cash payments of $1,200 for each adult. An additional $500 cash payment is available per child under the age of 17. The full payment is available for individuals making up to $75,000 (individual) and $150,000 (married). The amount begins to phase out for individuals earning more than those amounts.
• Unemployment Insurance ($260 billion) the bill includes a massive investment in the UI program as well as critical reforms to make the program more effective for workers. In the wake of the economic recession caused by the coronavirus the UI program is an essential long-term lifeline for millions of laid-off workers during this crisis. It provides full paycheck replacement in the form of a $600 increase for every American, which equates to 100 percent of wages for the average American without a paycheck struggling through the crisis. It gets money in people’s pockets sooner by providing federal incentives for states to eliminate waiting weeks, and ensures an additional 13 weeks of federally-funded unemployment insurance benefits are immediately made available. Finally, it allows part-time, self-employed, and gig economy workers to access UI benefits.
• Marshall Plan For Health Care System ($150 billion): the bill makes a historic investment in our health care system to help in its fight against the COVID-19 pandemic. The new $150 billion fund is widely available to all types of hospitals and providers most affected by COVID-19, and it will be available to fund whatever is needed to defeat this virus. This includes personal and protective equipment for health care workers, testing supplies, increased workforce and training, new construction to house patients, emergency operation centers and more. Additional funding is also dedicated to delivering Medicare payment increases to all hospitals and providers to ensure that they receive the funding they need during this crisis, and new investments in our country’s Strategic National Stockpile, surge capacity and medical research into COVID-19.
• Small Business Rescue Plan ($377 billion): $350 billion in loan forgiveness grants to small businesses and non-profits to maintain existing workforce and help pay for other expenses like rent, mortgage, and utilities; $10 billion for SBA emergency grants of up to $10,000 to provide immediate relief for small business operating costs; $17 billion for SBA to cover 6 months of payments for small businesses with existing SBA loans.
• State and Local Coronavirus Expenditures Fund ($150 billion): To assist states and local governments that must pay for new expenses related to COVID-19 response, the bill provides $150 billion.

The key provisions of the ERTC (Section 2301 of the CARES Act) are as follows:

• The credit is equal to 50 percent of qualified wages (including health expenses) paid to an employee after March 12, 2020 in each calendar quarter, up to a total of $10,000 in qualified wages per employee for all quarters.
• The credit is taken against employment taxes, with any excess refunded to the employer.
• For employers with 100 or fewer employees (measured by average employment in 2019), the credit applies if the employer had to fully or partially suspend operations due to an order from a governmental authority, or had a decline in revenue for any calendar quarter in 2020 of 50% compared to the same quarter in 2019.
• For employers with over 100 employees, the same conditions apply but the credit applies only to wages paid to employees who are on payroll but not working.
• The credit covers qualified wages paid after March 12, 2020 to December 31, 2020. The credit expires when (1) the full $10,000 per employee maximum is reached, or (2) when revenue for a quarter in 2020 is above 80% of gross receipts for the same quarter in 2019.
• The credit applies to tax-exempt organizations, including non-profit organizations.

I encourage you to keep up to date with the ever-changing financial landscape. We are hopeful that state, local and federal actions will continue to find ways to mitigate some of the hardships that businesses are facing. 

Are you considering buying a business? Buying a business is a very involved process whether you are planning to utilize an SBA loan or plan on other funding methods to fund the purchase. If you are considering buying a business, I would suggest a meeting with a Business Broker. I welcome you to contact Central Florida Business Brokerage at [email protected] or call us at (407)261-9001.

SBA New Programs to Help Small Businesses

It has been some unusual times of late dealing with COVID-19. Businesses are struggling with decisions involving what to do with their employees and also how they are going to survive financially moving forward.

There are programs being developed, both on a State level as well as a Federal level to help small business navigate the financial challenges they are faced with. I will be a resource for you to help navigate the various programs that are available to businesses to help get you through this unprecedented situation.

On Friday, the U.S. House of Representatives passed and President Trump signed a bipartisan bill to combat the public health and economic crisis caused by COVID-19. Included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act is a pro-worker, pro-business measure to support small businesses and help reduce employee layoffs around the nation. According to the latest estimates, the measure will provide roughly $55 billion in support to businesses who pay their employees rather than lay them off.

“This bipartisan package provides a strong response to the unprecedented public health and economic crisis posed by COVID-19. American families and small business owners struggling as a result of this pandemic need immediate assistance to overcome this crisis, and this bill provides them with the direct financial support to put food on the table and keep their businesses afloat.

Some of the provisions in the CARES Act include:

• Direct Payments to Working Americans: the bill includes direct cash payments of $1,200 for each adult. An additional $500 cash payment is available per child under the age of 17. The full payment is available for individuals making up to $75,000 (individual) and $150,000 (married). The amount begins to phase out for individuals earning more than those amounts.
• Unemployment Insurance ($260 billion) the bill includes a massive investment in the UI program as well as critical reforms to make the program more effective for workers. In the wake of the economic recession caused by the coronavirus the UI program is an essential long-term lifeline for millions of laid-off workers during this crisis. It provides full paycheck replacement in the form of a $600 increase for every American, which equates to 100 percent of wages for the average American without a paycheck struggling through the crisis. It gets money in people’s pockets sooner by providing federal incentives for states to eliminate waiting weeks, and ensures an additional 13 weeks of federally-funded unemployment insurance benefits are immediately made available. Finally, it allows part-time, self-employed, and gig economy workers to access UI benefits.
• Marshall Plan For Health Care System ($150 billion): the bill makes a historic investment in our health care system to help in its fight against the COVID-19 pandemic. The new $150 billion fund is widely available to all types of hospitals and providers most affected by COVID-19, and it will be available to fund whatever is needed to defeat this virus. This includes personal and protective equipment for health care workers, testing supplies, increased workforce and training, new construction to house patients, emergency operation centers and more. Additional funding is also dedicated to delivering Medicare payment increases to all hospitals and providers to ensure that they receive the funding they need during this crisis, and new investments in our country’s Strategic National Stockpile, surge capacity and medical research into COVID-19.
• Small Business Rescue Plan ($377 billion): $350 billion in loan forgiveness grants to small businesses and non-profits to maintain existing workforce and help pay for other expenses like rent, mortgage, and utilities; $10 billion for SBA emergency grants of up to $10,000 to provide immediate relief for small business operating costs; $17 billion for SBA to cover 6 months of payments for small businesses with existing SBA loans.
• State and Local Coronavirus Expenditures Fund ($150 billion): To assist states and local governments that must pay for new expenses related to COVID-19 response, the bill provides $150 billion.

The key provisions of the ERTC (Section 2301 of the CARES Act) are as follows:

• The credit is equal to 50 percent of qualified wages (including health expenses) paid to an employee after March 12, 2020 in each calendar quarter, up to a total of $10,000 in qualified wages per employee for all quarters.
• The credit is taken against employment taxes, with any excess refunded to the employer.
• For employers with 100 or fewer employees (measured by average employment in 2019), the credit applies if the employer had to fully or partially suspend operations due to an order from a governmental authority, or had a decline in revenue for any calendar quarter in 2020 of 50% compared to the same quarter in 2019.
• For employers with over 100 employees, the same conditions apply but the credit applies only to wages paid to employees who are on payroll but not working.
• The credit covers qualified wages paid after March 12, 2020 to December 31, 2020. The credit expires when (1) the full $10,000 per employee maximum is reached, or (2) when revenue for a quarter in 2020 is above 80% of gross receipts for the same quarter in 2019.
• The credit applies to tax-exempt organizations, including non-profit organizations.

I encourage you to keep up to date with the ever-changing financial landscape. We are hopeful that state, local and federal actions will continue to find ways to mitigate some of the hardships that businesses are facing. 

Are you considering buying a business? Buying a business is a very involved process whether you are planning to utilize an SBA loan or plan on other funding methods to fund the purchase. If you are considering buying a business, I would suggest a meeting with a Business Broker. I welcome you to contact Central Florida Business Brokerage at [email protected] or call us at (407)261-9001.

SBA Loans – Effects from a Government Shutdown

As everyone is aware, we are in the middle of a partial Federal Government shutdown since December 22, 2018. The offices of the Small Business Administration (SBA) are one of the government functions that has been temporarily closed until the government reaches a funding solution.

If you are a business owner with an application in process and was not approved by SBA prior to the shutdown, the application will be on hold until the budget negotiations are complete, and the government shutdown ends. Anything that comes in to the SBA during the shutdown will go into a queue until federal funding becomes available again.

For those entrepreneurs that are looking to fund a new business purchase with a SBA guaranteed

loan, what should they do? I suggest continuing looking for a business, negotiate the sale price, and put it under contract subject to approval using an SBA guaranteed loan. There are banks and lending organizations that are continuing to process SBA guaranteed loans, despite the shutdown. The lenders that are PLP (preferred Lender Program) lenders typically make all the credit decisions, process underw

riting, and perform closing functions in house. These lenders will process the loan, then once the shutdown is over will only need the SBA to assign a PLP number to it. The process may move a little slower than normal, but it is not coming to a complete stop.

Are you considering buying a business? Buying a business is a very involved process whether you are planning to utilize an SBA loan or plan on other funding methods to fund the purchase. If you are considering buying a business, I would suggest a meeting with a Business Broker. I welcome you to contact Central Florida Business Brokerage at [email protected] or call us at (407)261-9001.

The Process of Selling Your Business

Every day small business owners make the decision to sell their business. Sometimes planned and sometimes not, businesses get sold for various reasons. Here are some of the reasons that an entrepreneur plans the sale for;

·         Desire to retire

·         Relocation

·         The want for a lifestyle change

·         Next generation is not going to take over

·         Desire to pursue other business opportunities

Other times the sale of a business can be unpredictable and often sneaks up on the owner. Some examples of that are;

·         Health issues or health scare

·         Family illness

·         Increased competition

·         Family Disputes

·         Divorce

·         Burnout

·         Disputes with partners

·         Losing a Key employee

·         Losing a major customer

·         Divorce

Since we never know the right time to sell our business, we always want to be ready. A well-planned exit strategy will come in handy when the time comes.

The selling process is straightforward and in general is structured as follows;

1.      You make the decision to sell.

2.      Decide to hire a professional to assist in the selling marketing, process and paperwork.

3.      Get a valuation or Comparative Market Analysis on the business. This will tell you what the business is expected to sell for.

4.      A Confidential Business Review is written on the business. This contains all the facts and figures of your business.

5.      Potential qualified buyers are sought out to assess and look at your business in a confidential manner.

6.      Price and terms are negotiated for the business.

7.      An asset purchase agreement is executed between the seller and the buyer outlining all the specific terms, price, and conditions of the sale.

8.      There is a Due Diligence period allowing the buyer to verify that all the records and contingencies are what was expected.

9.      Business assets are transferred.

10.  Help to train the new buyer to run the business.

A question that is often asked is how long it takes to sell a business. There is no exact answer to this question as the time depends on the individual business and the terms of the deal. The historical data shows that on average it takes 8 – 10 months to sell a business. Some businesses sell in weeks, some take months. Price is a major determining factor.

Buying or selling a business is a very involved process. If you are considering buying or selling a business, I would suggest a meeting with a Business Broker. I welcome you to contact Central Florida Business Brokerage at [email protected] or call us at (407)261-9001.

The Top 10 Ways to Increase your Business Value

Small Business Owners sell their business for a variety of reasons. Proper preparation of an exit strategy can help to maximize the value of your business when the time comes to sell. Here are 10 strategies to help increase your market value of your business.

1. Realistic Value – Having a current business value will help identify specific changes that need to be made, then you can determine how they will impact the value of the business.
2. Exit Strategy – Planning for the sale of your business is important. A well-planned exit strategy can put your business in the best salable condition.
3. Gross Margin – Determine areas of the business where you can increase your gross margin. This will have a direct impact on the value of the business.
4. Accounting Practices – Typically a business maintains its financial records in a manner to minimize the tax obligation of the business. Assess the bookkeeping policies to keep records in a manner to maximize the value of the business.
5. Sales – Seek out opportunities to increase revenues for the business.
6. Business Challenges – Identify obstacles the business faces and develop a plan to overcome them.
7. Management – Minimize owner’s importance to the success of the business by putting management positions in place. The business should be able to operate efficiently with the owner not playing an active role.
8. Customer Base – Position the business to have a diversified customer base. It is important that no single customer represents greater than 5% of the revenues of the company.
9. Business Plan – Have a 3-year business plan in place to prepare the new ownership for growth.
10. Competitive Advantage – Develop a “niche” in your industry to set yourself apart from the competition.

Selling your business is a process. If you are planning to sell your business in the next 3 years, I would encourage meeting with a professional to help with an exit strategy. I welcome you to contact Central Florida Business Brokerage at [email protected] or call us at (407)261-9001.

Why a business doesn’t sell

Not every business listed for sale will be successful in finding a buyer. Some trade groups have stated that less than 10% of businesses that are listed “For Sale by Owner” will sell. These same groups claim that businesses listed with Business Brokers will have a 50% probability of selling which is 5 times the rate of success. I have identified 9 reasons businesses fail to sell. A seller can raise their probability percentage of selling their business by addressing these items.

Here are the top 9 reasons businesses don’t sell;

1.      Unrealistic expectations – Owners do not know what the realistic value is of their business and what they can expect a buyer to pay for it.

2.      Inadequate financial reporting – Inaccurate or incomplete books and records are kept. Buyers are willing to pay based on the numbers that they can verify.

3.      Lack of consistent revenue stream – Sales and profits are on a downward trend.

4.      Business atmosphere – The business market is changing, and the owners have not reacted to the changes.

5.      Customer concentration – A large percentage of the business is derived from a single customer.

6.      Owner dependency – The owner is the business.

7.      Credibility – It is perceived that the sellers are not honest about the business or its success.

8.      Partners – There may be partners that have different goals.

9.      Taxes – The seller is unaware about the tax implications of selling a business.

Buying or selling a business is a very involved process. If you are considering buying or selling a business, I would suggest a meeting with a Business Broker. I welcome you to contact Central Florida Business Brokerage at [email protected] or call us at (407)261-9001.