Low Ball Offers

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Low Ball Offers2There are various ways to go about buying a business, but all of them require making a deal with the current owner. As mentioned in prior blogs, before a deal can move forward, a written offer needs to be presented. Keep in mind that offers are based on information supplied from the seller to buyer at this point and more information is probably forthcoming with an accepted offer.

A seller needs to feel comfortable with the person who is interested in taking over their business (their baby), and a relationship needs to develop between buyer and seller during the process. For a strong relationship to be maintained there needs to be fair give and take during negotiation.  Negotiation is expected.

A proper offer needs to be made unless the buyer just wants to play hard-ball and present a low-ball offer. Most sellers of good businesses are not desperate and may have multiple interested parties. A low-ball offer will most likely offend the seller and could compromise any future communication between the parties.

There are times when low-ball offers seem to make sense, e.g., the IRS has shut down the business, bankruptcy is at hand, or there is only one customer and future business is at risk.  Otherwise, be reasonable and success will follow.  If a buyer feels the business is way overpriced, there could be some missing information.  The buyer should discuss pricing concerns with the broker before making an offer.

Please discuss any questions you have about buying or selling a business with your Apex Business Advisor.

Doug Hubler
President

Buying A Business Requires Financial Readiness

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OrderlyRecordsBuying a Business is a process. Much like a business owner preparing a business for sale, buyers also have to plan ahead for an acquisition.

Besides focusing on the right type of business to match background and personality, the business also has to be the right size for the buyer. There needs to be enough income to meet personal and family needs while still having enough cash flow to support debt and working capital requirements of the ongoing business.

If the business is too big for the buyer’s pocketbook, there will probably be too much debt, which in turn will stress the working capital and personal needs part of the equation.

Once the right business is found and the seller has accepted the buyer’s offer (we are optimistic), the banking process starts. Getting an acquisition loan from a bank will require a buyer to be completely open with their financial situation. The bank will also be assessing the buyer’s background and the fit with the business, and evaluating the financial history of both buyer and seller.

Buyers will have to submit a detailed list of investments, liquid assets, and real estate that will be used as a down payment and collateral. Also, the buyer will have to submit proof of income in the form of tax returns, check stubs, bank statements, etc. This piece of the process isn’t difficult if you have good records. So have your financial house in order before hunting for a business.

Apex Business Advisors holds monthly “Buying A Business” seminars, so if you are interested in more information, contact your Apex Business Advisor.

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

Why use an Acquisition Search Program to Buy a Business?

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Watch the video to find out more about our Buyer Search Program and the benefits of having a broker working for you.

Top 5 Reasons to be Your Own Boss

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Top5#1 Build something of Value
If you work for a company for 30 years and have an impact on that business that created value, how much of that value do you receive upon retirement? None!  Put your efforts into your own business to create wealth for you and your trusted employees; then sell it to someone that can carry the legacy forward.

#2 Control your destiny
Many people have felt cheated by spending decades working for a company with the expectation of retiring and getting a pension. Those days are mostly gone. Pensions are disappearing. There is no loyalty to employees by their big company employer. How many people do you know who have been laid off? Way too many. Take control by being your own boss.

#3 Work toward a horizon with no limits
Being a business owner allows you the flexibility to do what you want. The key here is the ability to dream big and not be limited by a boss or company rules. Many bosses are threatened by someone on their team who is a dreamer, someone who has vision and wants more. As your own boss, there are no limits. No one to say you’ve maxed out your commission or bonus for the year (even though it’s only July!) Maybe you want to buy a second company!

#4 Call your own shots
As a business owner you can decide the direction of your business. Day to day decisions are yours – no long, unproductive meetings to plan the next meeting. You can call the shots right now, today, or tomorrow. It’s completely up to you. You may want to put more thought into a given opportunity or you may decide to jump at the opportunity and go by your gut. It’s up to you!

#5 Keep the fruit of your labor
All that cash you were creating for your employer will now be yours! There are many legitimate tax benefits to running your own business. You can use the proceeds to expand, or you can buy that toy that you have always wanted. Heck, give yourself a bonus today!

Call your Apex Business Advisor to talk about how you can be your own boss.