In a study recently conducted by the Business Journal, it was reported that woman-owned businesses will account for 39% of all businesses in the US by next year. This fast growing segment of business ownership also tends to be locally focused and in services industries and is more inclined to see businesses as having social and environmental roles and responsibilities in their communities. See a recap of the study results here: […]
The U.S. Small Business Administration’s lending year ended on September 30th, 2015. More than $23.5B was loaned nationally under SBA programs. Approximately 90% of this capital was used by people to acquire an existing business.
There are distinct advantages for a business buyer to utilize an SBA loan verses conventional lending: a higher loan to value ratio, the term of the loan may be fully amortized for 10 years or more, a loan may include proceeds to be used for working capital and arguably most notable, goodwill is a financeable asset.
These statistics should excite most business sellers contemplating exiting their businesses as this is a viable method to fund the sale of your business – up to $5M. However not every business will qualify.
Following the suggestions below will help to ensure that your business will meet SBA / lender requirements:
1) Don’t waste time verifying personal expenses run through the business to increase SDE. Many of these that you may have enjoyed or benefited from in the past will be disallowed by the lender, lowering adjusted earnings (EBITDA or SDE) therefore lowering value. […]
By David M. Kauppi
The purpose of this article is to demonstrate the importance of the tax impact in the sale of your business. It’s recognized that our responsibility as business intermediaries is to recommend that our clients use attorneys and tax accountants for independent advice on transactions.
The general rule is that a deal structure that favors a buyer from the tax perspective normally lies counter to the seller’s tax situation and vice versa. For example, in allocating the purchase price in an asset sale, the buyer wants the fastest write-off possible. From a tax standpoint he would want to allocate as much of the transaction value to a consulting contract for the seller and equipment with a short depreciation period. A consulting contract is taxed to the seller as earned income, generally the highest possible tax rate. The difference between the depreciated tax basis of equipment and the amount of the purchase price allocated is taxed to the seller at the seller’s ordinary income tax rate. This is generally the second highest tax rate (no FICA due on this vs. earned income). […]
By STACY COWLEY
Dan Bizzarro and Bill Jordan were still in college when they went to work at the Bimac Corporation, a castings manufacturer in Dayton, Ohio. After graduation, they joined full time as manufacturing and engineering executives. And eventually they teamed with a third employee to buy the business.
They had a good ride. The company, with 40 employees, has annual sales of about $5.5 million. But as the two men entered their 60s, after nearly three decades as owners, they began to wonder how long the arrangement could endure.
Their partner, Roger Reedy, had been talking for several years about retiring and moving to Florida. After considering various options, including buying Mr. Reedy out, Mr. Bizzarro and Mr. Jordan decided their best choice would be to join with him in finding a new owner.
“The three of us aren’t that far apart in age,” Mr. Jordan said. “At some point in time, Dan and I will be looking at slowing down ourselves.”
There are some very important things to consider when selling a business to ensure that the process goes smoothly and that an owner receives maximum value at the time of sale:
1. Clearly define your goals, objectives and time frames for selling your business. It is critical you understand what your priorities are as it will influence any subsequent plans.
2. Consider what you will do after selling your business. Do you want to stay with the business, make an immediate departure, or do you desire somewhere in-between? Is retirement really for you? Many ex-business owners feel stranded post sale.
3. Have up-to-date information. Robust financial information should be available for the previous three to five years, as well as your year-to-date management accounts. A detailed business plan and
quality budgets or forecasts will assist you and your advisers in gaining an accurate view of your business prospects and range of values.
4. How do I kick-start the process? Start by engaging a qualified business broker to help guide you through this complex process – a small investment in advice at the outset makes for a much smoother
process. A business broker will work alongside your existing advisers (lawyers, accountants etc) and will provide the advisory and transactional services required to achieve an optimal outcome.
5. Develop a tailored transition plan. A specialist adviser can help match your objectives with a tailored transition plan to get the job done and help you achieve your goals.
6. Who is going to buy my business? You may have some ideas already and your business broker should have a network of qualified buyers – national and/or international – actively seeking quality business
BizBuySell.com's First Quarter 2015 Insight Report shows strong transaction activity and robust business financials as the service and retail industries continue to drive market growth. BizBuySell.com reported that small business transactions continued at a strong pace in the first quarter of 2015, growing 6 percent from the first quarter of 2014. A total of 1,830 small businesses were reported sold in Q1, continuing a two-year trend of exceptionally robust activity in the business-for-sale market. The full results are included in BizBuySell.com's Q1 2015 Insight Report, which aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide.
BizBuySell.com survey of small business owners and business brokers shows many owners are unaware of what to expect when it comes time to sell their businesses. San Francisco, CA - BizBuySell.com, the Internet's largest business-for-sale marketplace, today released a new study on how small business owners' perceptions of the sales process compares to what business brokers actually see within the market. The survey, which polled more than 500 small business owners and 300 business brokers from across the nation, revealed some key gaps in owner expectations compared to broker experience and insight. Owners Say They Want Best Fit Buyer, Brokers Say Money Wins in End When it comes time to sell a small business, one of the first steps a seller takes is to determine their top sale goal. The survey findings highlight a disconnect between small business owners' highest sale priority and brokers' experience. Forty-one percent of small business owners listed "a good buyer fit (future success of the business)" as their top sale priority, while an identical 41 percent of brokers said getting the best price is the main goal when approached by sellers today. Brokers are also more than twice as likely as owners to believe the primary value of using their services during a business sale is their "effectiveness in getting the owner more money." Sellers, on the other hand, put more emphasis on brokers' networks, with nearly half (47 percent) listing it as the main driver for using a business broker.
According to new data from business-for-sale marketplace BizBuySell, the median number of days it takes to sell a small business has been on a steady decline since mid-2012.
San Francisco, CA – BizBuySell.com, the Internet’s largest business-for-sale marketplace, released a new report on business sale times, which found that small businesses are selling faster than ever in today’s market. The data offers a new perspective for analyzing trends in the small business market. BizBuySell reviewed its database of businesses sold from 2007 to 2014 and analyzed the median length of sale, which is based on the time a business is listed for sale on BizBuySell.com to the date it is reported as sold.
According to the report, the median business sale time declined 23% from its peak of 200 days in Q2 2012 to just 153 days in Q4 of 2014 – the lowest of any quarter since BizBuySell first began tracking sales data in 2007. While there was the usual seasonal increase in sale times in Q1 2015 (likely due to carryover from the holidays each year), the overall trend over the last three years is clearly downward. […]
As part of my job to help small businesses implement Saas software solutions, I have counseled thousands over the years. As a part of this conversation, I often came to know the business in more depth, and I have visited many of the great ones in person. These are the lessons I learned, which seem simple, but like most simple things, extraordinarily difficult to execute well. I have seen first hand the hard work and delicate balancing act entrepreneurs perform in order to create a successful small business. These business owners are my heroes, some of them are my friends, and this blog is written in honor of those things they do amazingly well every day.
1. Customer Service
As a small business, you cannot afford to be merely as just as good as the guy down the street. You have to be better. All other things being equal, the point of differentiation is the service you offer. Every single experience a customer has with your business is a part of customer service. If you have a storefront, or even just a virtual one on your website, it should be welcoming, open and inviting. Customers should be greeted warmly and given attention throughout their time with you. Time and care should be taken to understand their needs and to exceed their expectations whenever possible. Customer service is both a mindset and a skill. If you don’t emphasize it, and spend time practicing as a team, your employees will grow complacent and service will suffer. […]