Check Out "Buying An Established Business"

Check out this great article by The Wall Street Journal... it aptly summarizes the reasons that purchasing an existing business is sometimes better...

By: Sarah E. Needleman
July 31, 2011
Accidential Entrepreneur, WSJ.com

Last year, Mark Shelstad set to become his own boss after concluding that his portfolio-manager job had become unstable. But instead of trying to build a company from the ground up, the Chicago-area resident began searching for an existing one he could buy.

"I didn't have a creative idea worthy of starting a business from scratch," says Mr. Shelstad, who is in his mid-50s. Also, "I wanted to get up and running quickly due to my age."

After a few months of research and negotiations, Mr. Shelstad earlier this month purchased a 23-year-old lending-fraud investigation firm, which he renamed Armitage Investigative Services. He used a combination of personal savings and a five-year loan form the seller to cover the purchase price of more than $1 million.
If you're interested in entrepreneurship, but lack ideas or time to create a new business, buying an established company may be a wise alternative. You'll inherit a working infrastructure complete with resources you'd otherwise have to secure on your own, such as equipment and employees. You'll also ideally be taking over a known brand built on a positive reputation over many year's time.

To read the full article... click here.

Top 10 Dying Industries

WSJ.com, WSJ Bogs - Real Time Economics
By Phil Izzo
March 28, 2011

The U.S. Economy is recovering from a severe recession, but some industries are unlikely to ever fully bounce back.

A new analysis by research firm IBISWorld looks at 10 industries that appear to be dying. The list isn't exactly shocking, but it represents a mix of sectors that are being left behind by technology or have been hurt by cheaper overseas competition.

The biggest industry profiled by IBISWorld is wired telecom carriers, largely being supplanted by cell phones and the internet. The dominance of the Web and digital media also puts Newspaper publishers, record stores and video-rental companies on the list. Meanwhile photofinishing also takes its place among the top 10 dying industries thanks to the growing influence of digital photography.

to read the full article, and see the rest of the top 10... click here.

Do You Have a Plan?

While it may not be visible itself, a positive plan for the futre of the business is key to actually moving toward a positive future. Business owners should be prepared to spend what it takes to generate new business, and they should take time to explore new possibilities for long-range success.

If the company currently has no mission statement, creating one will be evidence of he owner's enthusiasm for the future and for the ongoing success of the operation. If the company has a mission statement that no longer fits current conditions and needs, it may be time to revisit and revise the statement.

To write/rewrite your mission statement, here is a great article from Entrepreneur.com... "How to write your mission statement."

Now, prospective business sellers, be sure to watch my blog on Mondays and Fridays for the next several weeks, as I will be covering several issues to consider in the everyday running of your business. Issues that will help you prepare for an eventual sale, or at the least help you have a more profitable, well organized and forward thinking business.

Check out: Despite Government Initiatives, BizBuySell.com Survey Suggests Small Business Market Still Faces Hurdles

BizBuySell.com's survey results reveal that small businesses have yet to feel significant benefits from the Small Business Jobs Act, while lack of available financing continues to hinder business-for-sale transactions.

San Francisco, CA - November 16, 2010 -- BizBuySell.com, the Internet's largest marketplace for buying or selling a small business, today released results from a survey of the nation's business brokers on the state of the business-for-sale market.

According to surveyed brokers, most agree that the small business market continues to face major hurdles in today's economy, and the government is doing little to educate owners about the benefits of the Small Business Jobs Act. In fact, three in four brokers report that small business owners do not know how governmental initiatives, namely the Small Business Jobs Act, can and will benefit them.

To read the full article... click here.

SOLD ANOTHER GREAT RESTAURANT!

Congrats Kelsic Group on the purchase of the Danville Pizza King...

How To Get Business SBA Approved - Doing so as a seller can help make your business more attractive to buyers.

By Richard Diomo, Bizquest Business for Sale Blog

Question:How do I get my business SBA approved? It seems like doing so would help to move the sale of my business faster.

Answer:This is a great question and you should be commended for being proactive about the financing portion of selling your business. The process is actually quite simple: if you engage a business broker, this is something they can do on your behalf. If you are selling the business on your own, then you should contact a local Preferred SBA lender. They will provide you with a list of documents required to complete the pre-qualification process. These will generally include:

• The most recent three year's of company tax returns
• Accompanying P & L statements and Balance Sheets
• Your W2
• Recent interim statements
• Asset list

From this they will determine if, under the right deal terms, the buyer will qualify for the SBA program. Plus, there will be some additional conditions relative to the buyer qualifications. They will be able to determine how much they are prepared to lend, what amount the buyer will need as a down payment, what amount (if any) they may ask you, the seller, to finance, and the fees involved to complete a transaction.

Keep in mind that this step is only a pre-qualification and, like all lenders, they will have plenty of disclaimers. However, once you obtain a pre-qualification status, it will provide you with a huge advantage when advertising your business. Make certain that you do not make any claims to prospects about the financing. This is only an initial pre-qualification.

The 50 Riskiest Online Cities

Business Sherpa says… “Not happy we made this list--Indianapolis #25.”

By Jeremy A. Kaplan
FOXNews.com

By comparing cyberattacks, malware infections, and spam zombies with the prevalence of hotspots, online purchases and so on, Symantec has ascertained the 50 riskiest online cities.



To Read More About the 50 riskiest cities … click here.

SOLD!

Six Ways to Speed Up SBA Loan Approval

Six Ways to Speed Up SBA Loan Approval

By DIANA RANSOM

Attention small-business owners: Time is running out on an opportunity to access fee-free business loans that are guaranteed up to 90%.

Earlier this year, the Small Business Administration set aside $375 million to temporarily eliminate loan fees and increase the agency's loan guarantee to 90% for certain loans. The moves were part of the American Recovery and Reinvestment Act (ARRA), which was signed into law by President Obama in mid-February. So far, the SBA has used about 55% of those funds; they have translated to $6 billion in loans under the 7(a) and 504 programs, says John J. Miller, an SBA spokesman.

However, barring another act of Congress, SBA-backed loans will revert to their pre-Recovery Act status by the end of November or December, Miller says. The impact will be palpable. Loans made once the funds run out will only get a 75% to 85% guarantee, down from 90%. The decrease will make it tougher to get approved for a loan because lower guarantees raise a bank's risk, says Eric Grimstead, a business advisor at the Center for Economic Vitality at Western Washington University in Bellingham, Wash. In addition, business owners taking out loans through the SBA loan will have to pay a 2% to 3% loan guarantee fee again, he says.

November is more than two months away, but given that the SBA loan approval process can take as long as 120 days, applicants had better get cracking, says Dave Mulcahy, the director of the Small Business Development Center at Lamar University in Beaumont, Texas.

Here are six ways to speed up the application process for SBA loans:

Update your financials
To accelerate a loan's approval, prepare and provide at least three years of tax returns and up-to-date financial statements, including income and cash-flow statements, balance sheets and sales projections, says Tom Burke, the senior vice president of Wells Fargo SBA lending in Minneapolis. If you don't have a business plan, write one. And if you don't have a marketing plan, write one of those too, he says. "Business owners have to be able to show that they can pay everyone back," Burke says. (Click here for the SBA's loan application checklist.)

Tap a preferred lender
Use a preferred SBA lender such as TD Banknorth or KeyBank, Grimstead says. Conventional wisdom says business owners should consult a bank with which they already work, but if that institution doesn't currently work with SBA loan programs, the process can be take weeks longer than comparable loans at SBA-ready lenders, he says. Not only is there a massive learning curve when working with SBA programs, which are complex and change frequently, but nonpreferred lenders also have to send loans into the SBA for approval, which can take up to four weeks, Burke says. Conversely, preferred lenders are generally able to underwrite their own SBA loans, he says.

Ensure the right fit
When scanning the list of preferred lenders, find ones that cater to businesses like yours, Burke says. For instance, some banks won't authorize SBA loans to start-ups. Others may avoid restaurants or other similarly risky ventures, he says. Also, take into account differences in banks' credit policies. For instance, Wells Fargo will extend a real estate loan for 25 years, but other banks do so for just 20 years.

Hedge your bets
Even if you secure the word of a preferred lender, make sure you've applied to a couple other banks backups, Grimstead says. "Some borrowers get three or six or even 12 weeks into the process only to get a 'no' from someone at the bank," he says. To slash your risk of rejection, apply to a few different banks at the same time. (Note that going through the application process at several banks will not harm your credit, says Mulcahy, from the SBDC in Beaumont, Texas.)

Offer more backup
SBA loan programs often require less of a down payment than typical business loans, says Becky Naugle, the state director for the Kentucky Small Business Development Center at the University of Kentucky in Lexington. For instance, banks providing normal business loans might require owners to put 20% to 40% down, but banks working through an SBA program might require just 10% down. Despite this lower standard, consider putting more down or offering some sort of personal guarantee, she says. "If particularly risky business owners can mediate a [bank's] risk by having a personal guarantee, that could push it through faster," she says.

Get help
An experienced business advisor can also help push your company's loan through quicker, Burke says. Check out a local Small Business Development Center, or tap a volunteer business professional in your area via SCORE, a nonprofit business counseling service, he says. There's also at least one SBA district officer in each state whom business owners can ask questions about SBA loans.

Selling When Business Valuations Are Low

Selling When Business Valuations Are Low

By DIANA RANSOM

Investors weren't the only losers when the stock market crashed last September. Business owners also watched their company valuations plummet.

Timothy Butler, the president and chief executive of Tego, an RFID chip maker in Waltham, Mass., saw his firm's value fall quickly with the market's downturn. Moreover, the recession spooked venture investors. Before the crash, Butler had expected to land investment funds in the range of $1.5 million to $2 million. Instead, he says his firm wound up with just a third of that amount in its coffers.

"It was a very difficult time," Butler says. "We reduced salaries temporarily. We had to cut certain projects and renegotiate the timing and paying of creditors. And we had to rewrite our business plan to recognize current realities."

Many firms turned to equity financing during the downturn to make up for their cash shortage. That solution can help keep a business afloat, but each time this type of funding is raised, a company must be appraised, says Jeffery Sohl, the director of the University of New Hampshire's Center for Venture Research. If owners revaluate their companies when values are lower, they may have to hand over more ownership in the company because the same amount of money buys more when values sink, he says.

In an effort to shore up his firm's valuation, Butler decided to forgo traditional equity financing. Instead, he issued convertible debt, which is seen as less risky than regular equity investments. The strategy has paid off. Since February, Butler has managed to raise $1 million in debt financing.

Butler was able to avoid a lower valuation, but many other business owners — especially those who are older and angling for retirement — haven't been so lucky. In the second quarter, the median sale price for completed business sales dropped 20% to $160,000, from $200,000 the year before, according to BizBuySell.com, a web site that tracks business sales. "There's no question that it's a challenging environment," says Anthony J. Citrolo, a principal at New York Business Brokerage, a business brokerage firm in Melville, N.Y. "If the last three or four quarters haven't been great, some owners [looking to sell now] will have to accept about 12% to 15% less than what they would have gotten a year ago," he says.

Still, low valuations aren't impossible to overcome, says Citrolo. In fact, they might even benefit some business owners, he says. Here are three ways to sell your business when values are low:

Keep it in the family
For business owners who want to keep their companies in the family, now may be an ideal time to hand over the reins, says Matt Painter, a tax partner at LBMC, an accounting firm in Brentwood, Tenn. The total amount any one person is allowed to give away as a gift, tax free, over his or her lifetime is $1 million. So at this point, business owners can effectively give away a larger percentage of their businesses because valuations are lower, Painter says.

Let's say a business that was worth $2 million a year ago was broken down into 10,000 shares worth $200 each. Let's also say that business lost 20% of its value after the downturn, sinking the firm's shares to $160 each. So instead of being restricted to giving away 5,000 shares (to stay within the $1 million exclusion), the owner can now give away a larger percentage of her business (6,250 shares) to her children. The move could also mean a windfall in the recovery. "Depressed values are [likely] going to bounce back," Painter says.

Transition to employees
At a time when buyers are scarce, another option for owners is to sell the firm to its employees. Of course, buying a business on the spot is likely a stretch for cash-strapped workers. In addition, taxes, which are payable by employees, kick in on stock transfers to employees, says Matt Vandenack, an attorney who counsels small-business customers for the Principal Financial Group in Des Moines, Iowa. Still, as valuations are lower, so are taxes, he says. As a result, employees may be more willing to purchase the company via stock transfers today, Vandenack says. "It's an opportunity to get into the business for cheap," he says. "If you sell them a portion of the business today, that percentage of the business will presumably increase. And even if the company's value goes up before [employees] finish buying it, they've at least gotten a discount on a portion of the business."

Sell with earning potential
Getting anyone to pay for a business in full is a tough proposition these days. And although seller financing — transactions in which sellers agree to hand over the business in return for installment payments — has picked up steam, it doesn't encourage business owners with low-valued businesses to sell. Instead, many owners are increasingly turning to transactions known as "earn outs" in which business owners agree to sell their lower valued firms today in exchange for a cut of the company's future profits, Citrolo says. Here's how it works: Sellers and buyers agree on future earnings targets. If buyers meet these targets, sellers receive some agreed upon percentage over and above the target value, Citrolo says. However, if the buyer doesn't meet his target, the seller still receives payment. "In effect, the buyer is hedging his bet," he says.

Book: Selling Your Business for Dummies

Feel free to check out the book: "Selling Your Business for Dummies" by Barbara Findlay Schenck.

Foreword by John Davies, CEO of Sunbelt Business Brokers.

Sunbelt IBR In the News...

Fearful business buyers
April 22, 2009
Posted by Norm


You might think people would be hankering to buy businesses, what with the frail economy tripping trap doors beneath more and more jobs.

Not so, says the managing partner of the state’s largest business brokerage.

Ed Mysogland says the Web site for Sunbelt Indiana Business Resource is getting more hits. But the actual number of serious inquiries is at similar levels to the same period last year and even the year before, when the economy was still roaring.

Why? Mysogland is left to speculate. But his informed opinion is that fear of risk is still a formidable barrier to entry. Younger people shouldering responsibility for children and carrying mortgages and student loans are particularly skeptical about taking on additional risk.

“Most people will think twice about small-business ownership,” he says. “Getting a paycheck every week doesn’t sound so bad.”

It’s not as if good deals aren’t available. Businesses are selling for less largely because their revenues and profits are down. Restaurants are still going for 25 percent to 50 percent of revenue, but the total sale prices have slipped because most restaurants are generating less revenue.

What about you? Are you considering buying a business or starting one? What do you think about conditions?

To view the original article online click HERE

Recently SOLD

Larry Battershell Named Industry Expert!

The 2009 Business Reference Guide "The Essential Guide to Pricing Businesses and Franchises", 19th Edition, has named Larry Battershell an "Industry Expert" in 'Bars' and 'Restaurants, Limited Service'.

The guide is the premier source of business valuation information in the business broker industry.