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Keeping the Sale of Your Business Confidential

August 23, 2012

Keeping the sale of a business confidential is most commonly the number one concern for business owners. Employees may become worried about the security of their employment, and clients may become concerned about quality and service.

Confidentiality stampBusiness brokers specialize in confidentiality. Every business they sell is a confidential transaction. A broker acts on your behalf allowing you to remain anonymous. It’s important to maintain confidentiality.

When should you tell your employees about the sale?

Our considerable experience has proven that it is best to tell your employees about the sale after the sale is complete. Of course, if there is an employee whose expertise will be needed after the sale, you should introduce the buyer to this employee shortly before closing.

We have found that once employees find out that the business is for sale, they often just assume that their position will be replaced with the new owner’s personnel. However, this is far from the truth. Current employees are a wealth of knowledge. After the transaction has occurred and the seller is no longer there, employees become a real asset to the business. It usually is best if employees are introduced to the new owner right after closing the sale. This enables the new owner to tell about his background and to take time to assure the employees of their value and that no one is going anywhere– all without distressing anyone.

If you have a business you would like to sell, please contact our office at 250-751-7917 or toll-free 1-877-289-0969.  We will be happy to discuss how we can meet your goals as a seller while maintaining confidentiality.

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Pros of Seller Financing: Getting More For Your Business

August 16, 2012

As baby boomers begin to hit retirement age, many who are business owners are ready to sell. It’s created a market that has many businesses for sale. At the same time, concerns about the economy had made it tough to get financing for many potential deals. Seller financing is one option that could be the solution to get many deals done.

There are a number of benefits for business owners who are considering seller financing:

  • Faster sale – Seller financing provides an attractive option for buyers which means that sellers can sell their business quickly.
  • Flexibility – Seller financing enables the seller to create a payment schedule, interest rates and loan period that fit their personal needs. 
  • Tax breaks – Taking a note for part of the business purchase price may provide a tax break for the seller. The seller can defer some of the tax due on the sale of the business until full payment is received, which could be several years down the road.
  • Protections – Asking the new owner to keep the seller up to date with information like monthly profit and loss statements, workforce numbers, order backlog, inventory levels or other items with the monthly payment can be in the sale contract. The additional information allows the seller to keep track of the business and step in to offer advice or help if any problems are detected. 
  • In First Position to Be Paid:  If SBA is not in the picture you are in 1st position if there would be a default.  We encourage a personal guarantee from the buyer to ensure you being paid.

Working with a qualified business transaction professional, like a Certified Business Broker (CBI) or Mergers & Acquisitions Master Intermediary (M&AMI) is also recommended. Certified brokers and intermediaries at Sunbelt BC Business Brokers can provide the guidance you’re looking for when considering seller financing or other financing options.

The Benefits of Buying vs. Starting a Business

August 8, 2012

An existing business already has a base of revenues to build upon.So you want to be your own boss.  Consider the options – starting your own business vs. buying an existing company. Starting a business of your own can pay great dividends, but it’s important to understand that the risks are significant.  According to Michael Gerber, author of The E-Myth Revisited, 40 percent of new businesses fail in the first year and 80 percent fail within five years.
On the other hand, purchasing an existing business reduces an entrepreneur’s risk while creating opportunities for tremendous profit.

There are a number of reasons to consider the purchase of an existing business rather that starting one:

  • Risk.  An established business with strong cash flows is far less risky than a startup.
  • Branding. The ongoing benefits of any marketing or networking the prior owner has done will transfer to the new owner.
  • Proven Concept.  A business with a track record is more likely to qualify for credit.  A bank can rely on historical financials, not just projections.
  • Key Personnel.  The employees have already been trained and assimilated into the company culture. You will have an easier time implementing growth strategies.
  • Focus.  The seller has already laid the foundation and taken care of the time-consuming, tedious start-up work. You can focus on improving and growing the business immediately.
  • Goodwill/Relationships.  You will have an existing customer base and vendor base that took years to build.  It’s very common for the seller to transition with the business for a short time to transfer those relationships to the buyer.
  • Cash flow. Typically, a sale is structured so you can cover the debt service, take a reasonable salary, and have some left over to take the business to the next level.  On the other hand, start-up businesses aren’t expected to profit for the first three years.

Becoming your own boss always involves a risk.  When you buy a business, you take a calculated risk that eliminates a lot of the pitfalls and potential for failure that come with a startup.  “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.”

10 Aspects to Consider to Choose the Right Business

July 26, 2012

Buying a business with a strong financial and operational track record is usually a strong indicator of future success, but is no ‘guarantee’ that you will experience similar success as the new owner of the business. In a small to medium-sized business, those results are often a record of what the previous owner did, and may be only a limited predictor of how you will perform in the business. By way of example, you may not want to purchase a hospitality business if you have no experience in dealing with the public, or buy an engineering business if you are a gold seal chef, just because it was profitable for the previous owner. Below are some suggestions to help you successfully locate a business that suits your background, skills and desires.

1. Enjoyment
Small businesses often require the input of long hours and great enthusiasm to motivate staff and to deal successfully with clients.

2. Qualifications or experience

Choose a business where you will have an advantage by way of qualifications or experience.

3. Reason for selling

Check the seller’s reason for selling. There are many legitimate reasons for selling a perfectly good business, such as retirement, marriage or partnership difficulties, health issues, and other business interests. Every business has its problems; the trick is to know what they are, and have a strategy for dealing with them. This is where it could be advantageous to have someone experienced working on your side.

4. Nature of company

Understand clearly the nature of the business you are interested in, and what role you see yourself playing.

5. Cash flow
Understand cash flow characteristics and any seasonality of the business. A year-end profit does not necessarily mean that there will be cash available at critical times to meet necessary costs, such as interest, taxes and your living expenses.

6. Funds to Purchase and Operate
In addition to the cost of purchasing the business, you need to have sufficient capital to finance inventory, accounts receivable and overhead costs. Understand how much capital is required to run it.

7. Growth and Development
Aside from the initial purchase and general operating expenses, assess your ability to fund any planned growth or development of the business.

8. Get to know the seller
Try to get to know the Seller, to gauge whether you can successfully “fit into their shoes” and run the business at least as well as s/he did.

9. Assess the employees
Try to meet the key employees to make sure they intend to stay, and that there will be no major personality clashes. In many cases, sellers will not want you to talk to the staff until negotiations are at a fairly advanced stage. If this is the case, you may wish to include appropriate provisions in the purchase agreement.

10. Avoid major changes during the transition period
Avoid major changes to the business during the transition period, unless you are very sure of what you are doing. A smooth changeover with minimum customer impact is the usual road to success.

Owning A Seasonal Business: Pros & Cons

July 18, 2012

What about owning a small business that only operates at certain times of the year—say a tour boat line in Canada?

The Pros

  1. During the off season the owner can work on business planning, marketing programs, operating systems and procedures, documentation, research and so on without the pressure of managing the day-to-day operations.
  2. The off season provides time for rest, contemplation, leisure travel and activities, and to get re-acquainted with family and friends.
  3. The off season provides time for meeting with industry peers, trade associations, suppliers, strategic partners, and for traveling to research potential business improvements.
  4. The off season may allow the owner to escape unpleasant weather conditions.
  5. Recruiting and training can be done in advance of the busy season when there is time to do it well.
  6. Servicing and upgrades to systems and equipment can be done during the off season without time pressure.
  7. Some people thrive on being the hare rather than the tortoise.

The Cons

  1. Start up at the beginning of the season requires working capital in excess of what a non-seasonal business would require.
  2. Start up requires a significant expenditure of energy is a short period of time.
  3. The resources allocated to the business are only earning a return during part of the year.
  4. A system or machinery breakdown during the busy season is more costly and thus the risk is higher.
  5. It is more difficult to retain good employees in a seasonal business.
  6. The level of activity in a seasonal business must be much higher during the season to offset the slow or down time and so may require long hours and greater endurance from the owner.
  7. The level of stress dealing with a flurry of activity during the season can be higher.

In the end it is a personal choice based upon the owner’s values and what he or she enjoys.

How about you? Have you operated a seasonal business? What did you like best about it? What did you dislike?

 

Source: http://sbtrealdeal.wordpress.com/2012/01/25/seasonal-businesses-your-pace-or-mine/

New Opportunity: Passive Food Production Business On Vancouver Island

July 12, 2012

 

BCBusinessBrokers has an exciting, new business opportunity–“Passive Food Production Business” (VANISBC001-N135).

Traditionally grown in the purest of Japanese streams, authentic wasabi (Wasabia Japonica) has been notoriously difficult to grow in any other environment. Following decades of research and development, the patent pending proprietary process of growing semi-aquatic wasabi in a greenhouse environment has been perfected. With four sites successfully operating for six (6) years, the company is expanding its commercial production. Limited opportunities are now available on Vancouver Island. This is a passive business opportunity with strong expansion potential.  Full time site management will ensure that greenhouse construction and crops are monitored, managed and cared for. A Grower’s Unit includes a license to purchase wasabi plantlets; guaranteed sales; and three (3) fully-erected greenhouses (20,000 sq ft) ready for planting. Demand for high-grade wasabi greatly exceeds supply in the culinary market worldwide; fresh wasabi is sold out weekly. New orders cannot be filled. The limited supply has been further affected by elevated radiation levels in the wake of Japan’s 2011 earthquake and nuclear fallout. Merely replacing the culinary production lost in Japan represents an enormous market demand. Customer requests far exceed what this site can produce based on wholesale prices to culinary markets only. There is also an increasing demand for wasabi in the multi-billion dollar anti-aging and biomedical industries. Research validates compounds found in wasabi which are known to be effective in treating stomach cancer, just one of wasabi’s many applications and upsides. Being involved in commercial wasabi production on Vancouver Island is a sound and lucrative business opportunity. With only one commercial wasabi operation in North America and an unpenetrated global demand, this is the ideal time to secure your position as a Grower.

For more information on this business or to learn about other opportunities, contact Michael Naprawa at 250-751-7917 or visit our website at www.bcbusinessbroker.ca.

Selling Your Business? 10 Commandments to Avoid Wrecking the Deal

July 5, 2012

Selling a business is not as simple as selling a house.  According to Tom West, “the ten commandments” are imperative to a successful business sale.  Tom West is a founder and past president of the International Business Brokers Association (IBBA) and a frequent lecturer on all aspects of buying, selling, or appraising a business.

 The 10 Commandments

 1. Place a reasonable price on your business. An inflated figure either turns off potential buyers. Rely on your business broker to help you arrive at the best “most probable” selling price.

2. Carry on “business as usual.” It’s important to maintain the company as a “going concern.”

3. Engage experts to ensure confidentiality. A breach of confidentiality surrounding the sale of a business can be detrimental.

4. Prepare for the sale by doing some “housecleaning.” Be sure your records are complete and do a literal sprucing-up of the plant or store.

5. Anticipate information the buyer may request. Bank financing will require the buyer to provide appraisals on assets.

6. Recognize the value of a motivated buyer as someone who will pay the right price for your business. Avoid the greed factor – sellers frequently lose buyer interest if they become greedy.

7. Be flexible. Don’t be the kind of seller who wants all-cash at the closing, or who won’t accept any contingent payments or an asset transaction.

8. Negotiate. Don’t dominate. With your business broker’s help, decide ahead of time when “to hold” and when “to fold.”

9. Keep time from dragging down the deal. Timely communication of counter offers will keep the momentum up.

10. Be willing to stay involved. The buyer may want you to stay within arm’s reach for a while. Consult with intermediaries to determine how you can best effect a smooth transition.

Sunbelt Business Brokers is the largest global business brokerage with 300 licensed offices worldwide. If you are interested in exploring business opportunities or are contemplating the sale of your business, call the Sunbelt Nanaimo office at 1-877-289-0969 or visit http://www.bcbusinessbroker.ca or www.sunbeltnetwork.com/vancouverisland.