Selling or Buying a Business – Know your Lease

Leases can, and do, play a significant role in the buying or selling of businesses. Leases are a common feature of many businesses and simply can’t be ignored. It is important to understand the lease upfront to avoid issues down the road. Leases and Working with Your Attorney Whenever a small business is sold, it is common that leases play a major role.  In general, there are three different types of leasing arrangements.  (If you have any questions about your lease, then you should consult with your attorney.  Please note that the advice contained in this article shouldn’t be used as legal advice.) Three Different Lease Options In the next section, we will examine three of the most common types of leases.  The sub-lease, new lease and assignment of lease all function in different ways.  It is important to note that each of these three types of leases can have differing complicating factors, which again underscores the value and importance of working with an … [Read more...]

What is Really in the Mind of Your Buyer?

It is always important to try and put yourself “in the other person’s shoes.” This fact is of paramount importance when dealing with prospective buyers. Thinking like a prospective buyer could, in fact, be the difference between selling your business and not selling your business. It is easy to think that because everything is going smoothly with the sale of your business that the tough part is behind you. That may be true, but then again there could still be problems ahead. Issues can come up at a moment’s notice when either your prospective buyer or his or her advisor raises a red flag. Additionally, the larger the business, the greater the complexity. The “Little Things” that Could End Up Quite Big Financial statements are of considerable importance. Quite often you’ll see contingencies regarding financial statements and/or business tax returns, so be ready and organized. Lease issues is another common category for contingencies and an area of concern. Sellers … [Read more...]

Does Your Asking Price Truly Matter?

It is no great secret that sellers often aim high. The logic sellers use is simple, “I can always reduce my price.” While that is true, sellers do need to remember that if the asking price is initially too high, buyers won't even take a serious look. In short, your selling price must be bound by reality and what the market will bear. Pricing Does Matter When an asking price is too high buyers will simply move on. But in the meantime, you may have lost a qualified buyer that would have been very interested at a lower price. Pricing isn't a factor that should be played with, instead it should always be treated in as professional of a manner as possible. Instant Millionaire? Maybe and Maybe Not Some sellers want to become instant millionaires and sell their business for top dollar. Sometimes this is warranted and sometimes the numbers don't support lofty valuations. Every situation and every business is different. It pays to be realistic. Studies have shown that there is usually … [Read more...]

Strong Selling Points: Let Your Strengths Work for You

“Independent Business Owner” is a phrase with two meanings. Of course, it means being the owner of an independent business. But another way to look at “Independent Business Owner” is to let this phrase define the very personality of the person at the helm. Independent, Confident, Self-Assured, Strong-Willed. These are vital entrepreneurial attributes, but, ironically, they can sometimes work against the business owner when it comes time to sell. Since business owners are the type who know about selling — either products or services– and about making deals — haven’t they had to cope with suppliers, customers, and competitors throughout their business careers? — it’s not surprising that owners approach selling their businesses with these tried-and-true tactics and ideas. Sellers who have spent years building a business are often unaware of how completely different the process of selling a business can be. Savvy sellers, realizing the importance of a selling approach equal to … [Read more...]

What Are Your Company’s Weaknesses?

Every company has weaknesses; the trick is to fix them. There is a saying that the test of a good company president or CEO is what happens to the company when he or she leaves. Some companies–on paper–may look the same, but one company may be much more valuable due to weaknesses in the other company. Not all problems or weaknesses can be resolved or fixed, but most can be mitigated. Fixing or lessening company weaknesses can not only significantly improve the value, but also increase the chances of finding the right buyer. Here are some common weaknesses that concern some buyers, causing them to look elsewhere for an acquisition. “The One Man Band” Many small companies were founded by the current president, and he has made all of the major decisions. Since he has not developed a succession plan, there is no one in place to take over if he gets hit by the proverbial truck. He is the typical one man band; and, as a result, the company is not an attractive target for … [Read more...]

Be a Winning Seller: Good Negotiation is the Key

You've made the big decision to put your business on the market. Your reasons for selling are valid, carefully-considered, and “good” – the kind that won't make a prospective buyer shy away. Now, you may tell yourself, comes the fun part. You'll come up with a price – maybe a little high, but why not? – and let gut instinct (an attribute common to successful business owners) lead the way. Wait just a minute. Or maybe a quarter of an hour; however long it takes you to bone up on your negotiation skills with the following steps as a guide. Being a smart negotiator is tantamount to effecting the successful sale of your business. Gather Your Forces The first step is to engage the help of a business broker professional. He or she understands the sales negotiation process as well as tactics for marketing the business. Before sitting down with your business broker, however, you should gather the following information: profit and loss statements (for three years), current federal income tax … [Read more...]

Points to Ponder for Sellers

Who best understands my business? When interviewing Intermediaries/Business Brokers to represent the sale of your firm, it is important that you discuss your decision process for selecting one. Without this discussion, an Intermediaries/Business Broker can’t respond to a prospective seller’s concerns. Are there any potential buyers? When dealing with Intermediaries/Business Broker, it always helps to reveal any possible buyer, an individual or a company, that has shown an interest in the business for sale. Regardless of how far in the past the interest was expressed, all possible buyers should be contacted now that your company is available for acquisition. People who have inquired about your company are certainly top prospects. Lack of communication? It is critical that communication between the seller, or his or her designee, and the Intermediaries/Business Broker involved in the sale, be handled promptly. Calls should be taken by both sides. If either side is … [Read more...]

What Should Be in Your Partnership Agreement

Partnership agreements are essential business documents, the importance of which is difficult to overstate. No matter whether your business partner is essentially a stranger or a lifelong friend, it is prudent to have a written partnership agreement. A good partnership agreement clearly outlines all rights and responsibilities and serves as an essential tool for dealing with fights, disagreements and unforeseen problems. With the right documentation, you can identify and eliminate a wide range of potential headaches and problems before your business even starts. Determining the Share of Profits, Regular Draw, Contributing Cash and More Partnership agreements will also outline the share of profits that each partner takes. Other important issues that a partnership agreement should address is determining whether or not each partner gets a regular draw. Invest considerable time to the part of the partnership agreement that outlines how money is to be distributed, as this is an area … [Read more...]

Sell Your Business and Start Your Retirement

When the day comes to sell your business, it is important that prospective buyers understand why you have made this decision. Buyer’s find this important and having a valid reason why it is time for you to sell can make your business more attractive to prospective buyers. After all, it is only natural that you will have to retire at some point even if the business is thriving. In fact, it is safe to state that buying a successful business from an owner that is retiring is just the kind of the situation that most buyers look for but they understand it can be for other reasons. Owning a business and retirement, of course, is far different than retiring from a job. You likely have many friends ranging from vendors and employees to customers, clients and other business owners. It is vital that your departure does not disrupt the operation of your business and that prospective buyers understand that you have taken steps to ensure a smooth transition. In short, you want to create a … [Read more...]

Can I Buy a Business With No Collateral

At first glance the idea of buying a business with no collateral may seem impossible, but in reality it can be done. Let's examine your options. When it comes to achieving this goal, your greatest assets are an open mind and a commitment to hanging in there despite the odds. The Small Business Association's 7 (a) Program is Your Friend One possible avenue for buying a business with zero collateral is to opt for the SBA's 7 (a) program, which works to incentivize the bank to make a loan to a prospective buyer. Under this program, the SBA guarantees 75%. The buyer still has to put in 25%; however, this money doesn't necessarily have to be his or her money. This is where things really get interesting. The cash that the buyer uses can come from investors or even be a gift from parents in the case of young buyers. These possibilities all fall within the SBA's guidelines. Look into Seller Financing, You Might Be Surprised There is a second way to buy a business with no collateral, and … [Read more...]

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Matt Coletta, CBB, CBI, is a Certified Business Broker and a Certified Business Intermediary with over 25 years of experience in successfully representing Business Sellers and Buyers in various industries. Matt is a Los Angeles Business Broker and represents Business Owners throughout Southern California including: Los Angeles County, Orange County, Ventura County, West Los Angeles, City of Industry, Downtown Los Angele, Gardena, Whittier, San Gabriel, Upland, South Bay, Torrance, Newport Beach, Irvine, Brea, Anaheim, Long Beach, San Fernando Valley, Woodland Hills, Chatsworth, Sherman Oaks, North Hollywood, Northridge, Van Nuys, Burbank, Glendale, Pasadena, Sun Valley, Valencia, Santa Clarita, Palmdale, Ventura, Camarillo, Oxnard, Thousand Oaks, Simi Valley and other cities in the greater Southern California area.