Jeff Crooks’ Anniversary

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jeff_crooksApex Business Advisors would like to congratulate Jeff Crooks for having the longest tenure, and being the most successful broker here at Apex.
He has been our lead broker now for over 12 years. That’s quite an accomplishment in the business broker world! Jeff is best at bringing professionals to a deal to help with tax challenges, cleaning up financial statements and getting proper legal advice, etc. He also spends much of his time working with buyers around the country searching for specific business acquisitions.

On the personal side, anyone curious about how to survive in the wilderness for more than a few hours needs to talk to Jeff about the proper equipment needed in your home and car. He will also tell you he is Lt. Colonel of the US Army Reserves, so he might be a little blunt at times. Besides selling businesses, Jeff teaches at the Ft. Leavenworth Army’s Command and General Staff College.

Good Businesses Don’t Come to Market Everyday

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GoodBusinessDontComeToMarketEveryDayIf you wait for the perfect situation before attempting to buy a business, you could miss out on great opportunities. For example, let’s say a service business is cash flowing $250,000 per year and is priced at three times cash flow ($750,000). It comes on the market and we let our network of buyers know that it is available. There is competition for all businesses, especially the ones that are cash flowing well.

The typical process is that a prospective buyer (you) sees that we have the new listing and asks for more information. We email a packet of information about the business for you to consider. It may be a week or two while you think about the opportunity. Then you respond with questions asking for even more information. After four weeks of going through this information collection, there are probably already two or three offers on this business!

What the other guys did quickly was to allow us to set up a meeting with the seller in our office. They asked the seller these questions directly, which saved them time and gave them a better sense of the opportunity. This also showed the seller how serious they were about pursuing their business.

The moral of this story is to act quickly by letting us help you engage sellers directly. This doesn’t mean you are responding recklessly, just that you are moving with a purpose.

Jumping the Gun

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jumpingYou’ve planned to sell your business for some time. You’re tired and ready to retire. You’ve got a buyer knocking at your door. You’ve agreed to a price with the buyer and he seems like a good guy. So, now you’ve got the urge to go to the beach or play golf or anything other than dealing with your business. Big mistake!

Over the years of selling businesses, one of the major goofs we have witnessed is a business owner that changes their normal operations when they think a deal is done. Some of the changes have been; discontinuing marketing and advertising projects, cutting inventory levels, taking a long vacation, and they may even stop paying the bills. Guess what? Those deals died quickly!

It is critical to continue normal operations through the sale process. Buyers will continue their investigation of the business up to the day of closing. If a buyer or a bank realizes that revenues are off, or that there are other changes taking place that may negatively impact the business, they may get nervous and pull out of the deal. That’s not only bad because there’s no deal and no big payoff, but now the seller has a business that may need to be repaired and rejuvenated.

An alternative to keep the deal together is to renegotiate the price or to offer seller financing (if the buyer is still interested). Or worse, if the buyer didn’t catch on that you were making changes during the sale that adversely impacted the business; their attorney may have something to say about it.

To get competent advice when selling your business, talk to your Apex Business Advisor.

Working Capital Needs

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PenniesBuying a business is one of those times in life when you feel true accomplishment. You are going to be able to show all those knuckleheads in the corporate world that you can do it better! The deal is done, now it’s you and the seller working through the transition. Pat yourself on the back because you are ready to really kill it!

However, stress starts to build as you realize you just plunked down most of your available funds for the down payment and what you have left in your personal checking account is to keep the kids fed and your spouse happy.

Right out of the gate you may need to order inventory, employees might need to get paid on Friday, vendors are working with you on service transition and may want deposits, etc. The business has had a good cash flow, but if you have customers on credit you have to wait 30 days for some of your customers to pay. If you have a cash and carry business, is the first week or two of business expected to cover your bills that are going to hit fairly quickly?

An important aspect of buying a business is making sure that you have the ability to fund the business acquisition and the business operations for a period of time. Complete a projected cash flow detail for the first few months with the seller’s assistance. Sometimes the bank who is giving you a loan for the business purchase will also give you a loan for the working capital needed in the short term. It’s important to ask what they might prefer; either keep some of your down payment money to have ready cash, or get a working capital line of credit. Whether you need it or not, in the beginning it is much easier to ask for a line of credit rather that going back in a month and asking for another loan. One thing for sure, if you don’t ask for it, you won’t get it.

Contact Apex Business Advisors to discuss preparing your business for sale or to buy an existing business.