The First Step – Make an Offer

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Take the First StepThe “buyer” seminar that we held this week was very informative – again. (Anyone interested in how deals are done may attend these seminars.) One of our local experts explained the importance of following a process to get to the finish line. Getting a deal completed requires both the buyer and seller to move along with determination and to be able to share information openly.

Although the focus in this seminar was on due diligence, Jennifer Peek, CPA stated that the first step in the process is to make an offer. Without an offer, a seller will be very reluctant to share too much information too soon:

  • for fear confidential information may be used to compete against the business,
  • the information could get into the public domain without being controlled or filtered,
  • and sellers want to make sure they are dealing with a serious and qualified buyer.

Making an offer is fairly simple and carries very little risk for a buyer. At Apex, our offer contracts allow for many contingencies that would relieve the buyer of further obligation. Having an offer on the table allows the buyer to seek financing options and to start researching alternatives for insurance or professional services.

Our Apex Business Advisors can answer your questions about buying and selling a business. Please give us a call.

Doug Hubler
President

Seller Preparation

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money trailOver the years we’ve talked about the need to have some sale pre-planning to improve the position of the company and increase its value. There are numerous variables that need to be addressed and an owner may have to modify how they operate their business in order to reap large rewards.

Another critical aspect of selling a business is preparing for a buyer’s due diligence process. Many deals collapse when problems arise during the review of financial statements. A buyer, and probably their accountant, will spend quite a bit of time analyzing the financial statements and tax returns to validate stated income and cash flow.

Clean and clear financial statements that conform to GAAP standards and tie to tax returns are critical to the success of a deal. Having the ability to run monthly, quarterly, and annual reports give some comfort to a buyer, but they need to hold up to scrutiny too. Explaining the basics of the financial reporting to a buyer or having the company’s accountant available to answer questions is a must.

A seller needs to keep in mind that a buyer may believe the cash flow is there and can follow the trail of money, but if it isn’t reported clearly and correctly, or if there are too many inconsistencies, the buyer’s bank will most likely turn down the buyer’s loan application. Lack of preparation hurts the seller in several ways:

  • extra time and effort in explaining the money trail which leads to time not spent on the business,
  • time wasted with a buyer and waiting for bank decision,
  • perception of other buyers who think that there is something wrong with the business when it becomes available again,
  • downward pressure on price,
  • and, maximum stress on all involved!

Please consult with an Apex Business Advisor about what it takes to sell a business for maximum value in less time.

Doug Hubler
President

Social Media and Business Value

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BlueGurusI had to pass this blog post from Mic Johnson along to our Apex contacts because I think the message from Blue Gurus is important for another reason… increasing business value.

We see quite a few businesses that want to sell, and we can sell, but the value of the business may have been improved if the company had committed to some marketing efforts.  Many business owners struggle with where to put their marketing dollars and miss the freebie opportunities that are available and easy to use.

Having a website, writing blogs consistently, and having a presence on LinkedIn are all solid methods to improve visibility, credibility, and building a nice brand. Although building a website will have some cost, it doesn’t have to break the bank. Ask Jason or Mic at Blue Gurus for some ideas.

Imagine presenting your business to prospective buyers and each one asking about your website, or why you don’t have a website. They probably did a Google search for you and your business prior to the meeting. The worst answer is that you have no internet presence, and no social media presence. The buyer may find that as an opportunity for growth, but you won’t get paid for their great idea and effort!

After reading the Blue Gurus blog, ask an Apex Business Advisor about how to improve your business value.

Doug Hubler
President

Estate Planning Disaster

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Death and TaxThe following is a true-life horror story played out by recently deceased actor, Philip Seymour Hoffman. If you are a business owner, know a business owner, have some money in a bank account, and/or dislike paying taxes, please read on.

Melissa Montgomery-Fitzsimmons recently wrote in the Wall Street Journal about actor Seymour Hoffman’s lack of proper estate planning. The article is a fantastic look at some basic estate planning considerations. One of the main considerations is to decide whether it’s you or the IRS who has control over your estate.

Read through the article and the backup details from an interview with Mr. Hoffman’s accountant – he probably did not clearly understand the impact of his decisions.

You don’t have to have the wealth of a Hollywood star to feel the adverse effects of poor planning. (Well, it is really your heirs that will feel the effects.) We can’t help but apply this to our entrepreneur friends who make the same mistake from time to time.

Many business owners have a huge asset (their business) that needs to be considered in the event of their passing. Without some pre-planning, the business that is part of an estate may have to be sold or liquidated to pay taxes.

Talk to an Apex Business Advisor to connect you with a tax professional to assist in your planning.

Doug Hubler
President