Take it to the Bank: Buying and Selling a Business

Some of the first questions potential buyers ask a business brokerage specialist are: “How much is it?” “How much can I make?” And then, “How much money do I need to buy it?” Many sellers expect, or at least want, an all-cash sale. Interestingly, when asked if they paid cash when they purchased the business, most respond with a “no”. Most business sales are financed either by an outside source, by the seller or most often both. ‘Seller Financing’ also known as ‘Vendor Take Back’ has several pluses:

1. There is a better chance the business will sell.

2. Sellers usually receive a much higher price when willing to finance a portion of the sale.

3. Interest realized from a seller-financed note can substantially increase the total paid for the business.

4. Seller financing may provide a higher rate of return than conventional investing.

5. Positive tax consequences are, in some cases, another benefit of seller financing.

6. Financing the seller tells the buyer—and the bank—that a seller has sufficient confidence in the business.

7. Without vendor take back, many banks will not agree to finance, or will fund only a fraction of what they would otherwise.

Other than needing the cash to purchase another business, the biggest obstacle to seller financing is the seller’s concern that the new owner can pay off the loan from the profits of the business. Some sellers check the buyer’s work history, obtain personal references and a credit report. Creative financing can also be helpful. Example: a toy store does 40 percent of its business in October, November and December. Make financing payments higher in those months and lower in the summer. Seller financing or vendor take back has been the mainstay for many successful business sales.

How the sale is structured is important to the best deal for the buyer and seller. A professional business broker can be the key player in accomplishing this goal. Business brokers can’t provide legal advice, but their deal-making knowledge and experience can greatly assist in ensuring a win-win transaction.

If you are interested in exploring business opportunities or are contemplating the sale of your business, feel free to contact our office.

Selling Your Business?

Any business owner who has sold a business on his or her own will tell you it’s a long, tedious and stressful process.  It consumes time and distracts you from daily operations. When your focus should be on maintaining the value of your business, much of your time is directed to the sale process. That’s where an experienced Business Broker can pay huge dividends. Even after commission, owners that use Business Brokers sell their business for better value than those who don’t.  Here’s 7 ways how a business broker’s expertise pays ($) off:

 

• Valuing Your Business—Putting a value on a business is far more difficult and complex than valuing a house.  Each business has hundreds of variables that have an impact on the value.
• Reaching Potential Buyers—Business Brokers have the tools and resources to reach the largest possible base of buyers who are then screened for their suitability. Experienced Brokers even have an existing database of Buyers looking to acquire.
• Marketing—a Business Broker can present your company in the best light to maximize the sale price. They can also identify changes that can lead to a better selling price.
• Confidentiality—a Business Broker will protect the company’s identity and only qualified buyers will receive detailed information.
• Business Continuity—the Owner can maintain focus on business operations while the Broker is working on the sale.
• Closing a Deal—Business Brokers lower the risk of employee problems, customer defection and predatory competition.
• Balance of Experience—Most corporate buyers have acquired multiple businesses while business owners usually have only one sale. Experienced business brokers can level the playing field for a business owner making his one and only business sale.

 

Utilizing the services of an experienced, professional business broker allows the owner to focus on running the business reducing the risk of business erosion during the sale process.  A sale facilitated by a business broker helps maximize sales proceeds by involving a large universe of buyers in a confidential, competitive bidding process. If you’re thinking of selling, contact Sunbelt at 1-877-289-0969—we can help. Or visit our websites, www.bcbusinessbroker.ca, www.sunbeltnetwork.com.

 

Thanks to Sunbelt, Good Company Steakhouse Finds Perfect Buyer

From left to right: Steve and Cynthia Shann (Former Owners); Michael Naprawa, President of Sunbelt Business Brokers in Nanaimo; Francis Hoogendoorn and Edwin van Duist (New Owners)

From the Netherlands to Canada!  A successful European restaurateur embraces the beauty of Vancouver Island.  Edwin van Duist is the previous owner of the renowned river-floating pancake restaurant on a ship and the new owner of Good Company Steakhouse in Duncan.  It was a fairy tale transaction but the happy ending didn’t come without a few bumps in the road.

Edwin and his family originally made the continental voyage for another business, but the deal fell through. After months of searching, Edwin contacted Sunbelt Nanaimo. Here’s where the story accelerates. “Early one Saturday morning, I received an inquiry from Edwin about one of our business listings,” says Michael Naprawa of Sunbelt. “We met that morning spending two hours discussing his needs & skill set…it was clear that the business he had first inquired about was not a good fit. But I knew of a potential match—only a couple weeks earlier we had a call from a Duncan restaurant owner who wanted to sell, but the listing process had not even begun!  By that Friday, an offer was prepared, accepted the week after, and the entire transaction closed within 7 weeks of that first meeting!”

Michael Naprawa who is the owner of Sunbelt Nanaimo says that after five years in the business brokerage industry, Sunbelt has established relationships with a pool of qualified buyers. Their “matchmaking” process between buyers and sellers of businesses makes timely transactions like this one increasingly common.  “We were prepared to wait 1-2 years for the business to sell and couldn’t believe it sold so fast,” says Steve & Cynthia Shann of Good Company Steakhouse, who are exceedingly pleased with how Sunbelt handled the smooth transaction.  Both parties describe their experience with Sunbelt Nanaimo as “very efficient” and highly recommend Sunbelt Nanaimo for selling or buying a quality business.

As for Good Company Steakhouse, the original owners will stay on during training and transition and business will continue as usual.  Drop in for a good meal and experience a warm Dutch welcome from the new owner, Edwin! This is just one of the many success stories that buyers and sellers have had with us.

If you are contemplating the sale of your business, or considering small business ownership, contact the Sunbelt Nanaimo office at 250-751-7917 or toll-free 1-877-289-0969.

Waiting to Sell? Don’t Wait Too Long…

As the Baby Boomers continue to enter retirement, our economy faces one of the most dramatic demographic shifts in history.  A sellers’ market and an aging baby-boomer population is causing many entrepreneurs to consider exiting.

Many business owners wait until retirement to sell, and as baby boomers are getting older, the number of businesses for sale is rising. In fact, 57% of business owners identify their age as the main motivation for considering a sale. Over 30% of all business owners in BC are already over the age of 60.  “There’s a whole generation of owners that will need to convert their businesses into cash,” says Michael Naprawa, President of BC Business Brokers, a Vancouver Island-based business brokerage firm.  Fortunately for business owners, the market is ripe.  Mergers and acquisitions is a cyclical industry, and we’re in one of the largest sellers’ markets that has ever occurred. The current combination of low interest rates and favourable capital gains taxes is making it easier to acquire than grow organically, which means buyers are eager.

Yet business owners tend to procrastinate during the good cycles. According to a recent survey of business owners, 35% held off from selling their business because they anticipated continued growth. Unfortunately, waiting too long is probably the single biggest factor in reducing the proceeds from the sale of a privately held business.What the majority of business owners don’t realize is that you can’t outgrow interest rates, and you can’t outgrow capital gains. The time to sell is when the market is flush with buyers – and the market is flush now.

If you are interested in selling your business and would like more information, contact our Nanaimo office at 250-751-7917, toll-free 1-877-289-0969 or email us at nanaimo@sunbeltnetwork.com.

The New Job Security

When you think of going into business, what comes to your mind? Most people conjure up visions of a brilliant idea and building a company from scratch—successful for some but not usually without deep pockets, substantial risk and a workaholic lifestyle. There are no existing customers, no sales and little to no immediate revenue. You need to market your business, hire and train employees and hopefully establish a cash flow… all without a track record or reputation to go on.

These are some of the benefits of buying a business instead of starting one:

• Less Risk. You walk into an operation that already has revenue and profit.
• Relationships. You have a well established customer base, a good track record and a competitive edge because of the company’s tenure.
• Financing. The banks are more willing to provide financing to buy an existing business versus funding a new venture.
• Employees. Included in the purchase of a business are loyal employees who know every aspect of the company. You don’t have to reinvent the wheel by developing procedures, systems and policies, since the blueprint for running a profitable business is already in place.

Best of all, you don’t have to compete for that ever elusive “secure” corporate position that could evaporate, in the name of downsizing, restructuring or reorganization… taking your benefit package with it. That’s what the new owners Detlev and Anke Braatz considered with their recent purchase of Paulette’s Cleaning Services, a commercial cleaning business on Vancouver Island.  “Despite our years of experience and education, we just couldn’t find jobs” says Anke. “So we looked for a business that was up and running, something we could easily do.” Thankfully,” she adds, “our business broker helped us protect our interests with a Due Diligence Checklist, a step-by-step process that was invaluable. Our clients are happy as are our 9 employees and we continue to have the support of the previous owner.”

Working for someone else is trading time for money, but doesn’t build equity. As an entrepreneur, you are the master of your own destiny.

If you are considering business ownership or the sale of your business, we can help.  Visit our local website at www.bcbusinessbroker.ca or www.sunbeltnetwork.com/vancouverisland or phone 1-877-289-0969.

Consider More Than Money When Selling Your Business

Sure you want a big payoff, but when it comes to selling your business, money should not be the only consideration.  You don’t want just any buyer, you want the best buyer. Surprisingly, sellers don’t always choose the buyers offering the most money. Would you consider a lower price for a buyer that fits the company’s culture?  Would you consider an offer that’s considerably lower if it meant the difference between years of seller financing and cash at close? It’s common for deal structures to include a variety of options which must be carefully evaluated, long before you get to the negotiating table. You may not realize it, but you’re positioning and negotiating from day one of a sale. Be sure your priorities are well thought out or you might give a buyer the wrong impression. A prospective buyer may ask how long you’ll stick around after the sale and you may casually respond that you’ll be around as long as needed.  Then you find out that the buyer is thinking about a two-year transition when you and your wife had been discussing a potential move to Florida. Something like that could blow up a deal. Had your initial response been that you would be around three to six months and then could provide consulting services from Florida, the buyer would not be counting on long-term support. As a seller, here are 7 important questions to ask yourself:

1. Financing – Do you prefer a higher offer with some seller financing or a lower offer with cash at close?

2. Transition – Are you looking for a quick exit?  Does the buyer expect a lengthy transition?

3. Employees – Sellers are often very protective of their employees.  Will the buyer relocate or replace staff?

4. Ownership – Are you looking to maintain a minority stake for yourself or your family?

5. Legacy – Most sellers don’t want to cash out and watch the company erode. Ten years from now they want to look at a successful business that they had a hand in building.

6. Real Estate – Is the buyer interested in your building?  Some sellers prefer to keep the real estate and draw rental income. If the buyer doesn’t want your facility, how soon can you fill it?

7. Trust – Do you trust the buyer?  Some sellers will pass up higher offers to work with a buyer they feel better about.

Even if you know your preferences, you may not get everything you want when making a deal.  A reputable Business Intermediary will be sure that the right questions are asked to help you organize your thoughts, review your priorities and understand what the market will bear.  In the end, you’ll find yourself in a better position to negotiate and close the deal—without sacrificing your goals. Contact the Sunbelt Nanaimo office @ 250-751-7917 or visit our local website at http://www.bcbusinessbroker.ca/.

How To Grow Your Business Through Franchising

Do you think your business is unique? Have you considered replication through franchising? Do you have the necessary skills to use franchising as an expansion strategy? While it’s not the right strategy for everyone, for some companies the explosive potential that franchising affords is unparalleled in the world of business growth. Franchising has many attractive features, particularly when compared with more traditional methods of expansion such as opening more outlets on your own. Typically referred to as company stores, you own and operate these locations yourself. You provide the entire investment for the startup, and while you earn all the income, you are also responsible for the expenses. That’s why more and more entrepreneurs are choosing franchising as the best way to expand a great business quickly with minimal capital and risk. Here are a few reasons why:

• Franchise owners are highly motivated operators
• Franchisees assume the risk of succeeding or failing
• Franchises can open quickly, gaining an edge on the competition
• Franchisees are responsible for all hiring, leases, and unit-opening expenses, reducing your risk
• Franchisees are easily attracted because buying into a proven concept minimizes their risk

Is your business “Franchisable”? Before making the decision to franchise, you must first determine whether franchising is a viable strategy for your particular business.

BC Business Brokers, an affiliate of Sunbelt, can help you analyze your business and perhaps, take it to the next level. If you are contemplating the sale or expansion of your business and would like to discuss your options, contact our Nanaimo office at 1-877-289-0969 – we can help you. Feel free to visit our local website at http://www.bcbusinessbroker.ca/ or www.sunbeltnetwork.com/vancouverisland.