Apex Blog

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As a business owner, there are good reasons to keep your records clean. Many of our past newsletters/blogs have focused on the success of business owners selling their businesses and how accurate financial statements played a major role.

Since the financial statements and tax returns of those businesses were accurate, the business was usually worth more, the buyers were more anxious and excited, and the banks got more aggressive. And, the sellers didn’t have to finance the entire transaction.

Business owners that hide money to avoid paying taxes damage their business. The price that can be demanded is obviously going to be lower, the potential buyers will doubt other important aspects of the business operation, and bankers will only finance deals based on numbers gathered from tax returns.

Now there is another reason to keep straight records: The IRS can, and does, read emails to find tax cheats! If this makes you anxious and shudder at the thought, then maybe it’s time to make adjustments on your 2013 tax return.

It’s best to plan at least 2 to 3 years ahead of your target sale date to get the most for your business. Any one of our Apex Business Advisors can give you some assistance and guidance in preparing your business for sale.

 

Fairly often, we get approached to assist in a transaction that is already well down the road. Certain agreements have been made, and expectations are set. In many instances a buyer and seller have a relationship by virtue of being an existing customer, family member, friend, or partner. Over time the two sides have come together to discuss a potential deal and decide on price and terms. This might include a partnership’s buy/sell agreement.

Emotions are in play, trust has been developed, but generally there is a winner and loser because the parties don't ask for outside assistance at the proper time. Due to the existing relationships, the tough questions don’t get addressed, the value doesn't get analyzed, and due diligence might get waived. Someone in the deal is either paying too much for the business or getting a steal. In either situation there are going to be hard feelings and maybe future legal challenges.
 
The easiest way to make a deal happen and to improve the odds of a good deal for both sides is to have a third party review the proposed transaction, facilitate discussions, test the value, and bring professionals that are familiar with how to get deals done.
 
A third party could be an M&A professional, mediator, or neutral attorney. Keep in mind that whomever you bring in to help with a deal needs to have years of experience doing transactions and can familiarize both sides with the process of buying and selling businesses.
 
Before you agree to a value on the sale or purchase of a business, contact Apex Business Advisors. Any one of our team members would be happy to discuss your situation and assist you in your review. 

The theory over the past decade has been that baby-boomer business owners were going to be reaching retirement age soon and that there would be more activity coming on the Mergers and Acquisitions front. We are finding that this is becoming a reality as our list of engagements and sales are really growing. A survey recently of Business Brokers and M&A Professionals by the IBBA and Pepperdine University reveals that this is a nationwide trend.

This activity is great, but it also means that business owners/sellers will have competition when it is time to sell. There are plenty of people searching for businesses to buy, but now there are many more options for them. This is not a time to relax and assume the gravy train has arrived! How will you, as a business owner, attract buyers and prove to them that your business is more valuable than the other guy’s business?

We have met with several business owners this week that want to discuss their plans to sell. (The business owners have generally been referred by financial planners or attorneys that have been involved with their estate planning). Retirement is upon them and they haven’t planned for it and don’t have a good idea of their businesses’ value. It only takes 3 to 5 years to fully prepare your business for sale to increase the likelihood of a sale and to get more for your retirement.

We want to meet with any business owner well ahead of retirement (or burn-out) to discuss their options. This is a free service, so please contact an Apex Business Advisor for assistance.

 

Watch the video for tips on increasing the value of your business by delegating responsibilities:

 

 

Under-reporting your business income. It is a strategy employed by many business owners to reduce their tax burden. You’ve probably heard one of our Apex Business Advisors talk about how this strategy will also negatively impact the value of your business.  But, a recently indicted Business Owner took this strategy to an extreme (allegedly). It’s hard to tell how much his business would have been worth had he played it straight. Besides using cash from the business (allegedly) to buy all those goodies, he also claimed he made under $20,000 which qualified him for Earned Income Tax Credits. Your tax dollars at work! Maybe he can beat the charges, but it looks a little suspicious.

An alternative:

Imagine a car wash owner who actually reports all the income on their tax return! This might be a rare event, but when it comes times to sell, the business will be worth substantially more than if the owner had cheated. Apex Business Advisors is in the process of proving this out.  We were able to quickly secure full-price offers on several car washes because the business owners had handled their financial situation in a straight and legal manner. Even better, the buyers of each of the car washes were able to get bank loans for the acquisitions because the complete, historical financial records of the businesses were clean.

Contact your Apex Business Advisor to review your business to determine current market value.

 

"Nearly half of the 799 small-business owners surveyed in August by The Wall Street Journal and Vistage International, an executive-mentoring organization, expect to retire after age 65, with 38% saying that their planned retirement date is later than they had predicted five years ago. In addition, 56% said most of their retirement nest egg is tied to their business."

If you found yourself at retirement age with only one, privately owned, non-public, illiquid stock in your portfolio, how would you feel? Did your stomach just turn into knots? Well, if you are owner of a small business, you may easily find yourself in this scenario. To counter the risks here, you need to make sure you are in a position to sell quickly, at a high price, and on your terms.

How might this be done? Call your Apex Business Advisor to find out how to secure your future.

Many people have a dream of improving on their: status, financial stability, self-worth, career satisfaction, and wealth by owning their own business. Rather than working for others and conceding to the daily grind, they take control of their future. They can make their own decisions.

Others may want to advance their existing business by expanding and possibly diversifying by acquiring an existing business. The value of one business can increase by much more than just the value of the acquired business. One plus One does not always equal two. In the acquisition world, One plus One can easily equal 3 or 4.

The process of buying a business is not easy. Most people have the ability, but only a few can actually make it through the process of, dealing with the banks, lawyers, accountants, (and brokers), and still complete a transaction. But if everyone could do it, we would all be billionaires, and what would be the fun of that?

When buying a business, keep focused on the goal. There will be naysayers, rickety bridges to cross, and red flags flying. If a buyer can successfully manage the challenges, answer the questions, feel comfortable with the remaining risks, he/she is well on the way to success. After all, successful people don’t walk away from challenges and don’t rely on luck.

Rely on your Apex Business Advisor to get you to the goal line!

The Cliff

As was mentioned on the last blog, there has been a bit of uncertainty and nervous energy focused on the fiscal cliff. Well,the cliff was averted for most people, and the wealthy weren't guillotined. The stock market responded favorably. Since the new laws were made permanent we can now focus tax planning...

This article from Entrepreneur magazine is a really good summary of the tax rules that were negotiated last week.

If you are a business owner or plan to be, or plan to sell your business, this will be of particular importance to you. As always, check with your accountant to determine the impact on your personal situation.

Call your Apex Business Advisor to assist with your exit strategy.