Sellers obviously want to get the most money for their business when selling. However, I have observed that sometimes asking prices that are set too high can impair the selling process and elongate or even prevent the sale. In the first 30 – 60 days that a business is listed will receive the most buyer attention. There are limited number of qualified buyers for any business and you are competing for that buyer’s attention. If you have an overpriced offering, it will turn these buyers away. Buyers that have looked at the business once, but have dismissed it because of the price, typically move onto other opportunities. Once they have moved on, it is very difficult to have them look again. Any extended time on the market will confirm their suspicion.
Sellers who want to obtain the highest price will typically do these following steps:
1) Have the business valued by a professional who is knowledgeable about the marketplace – This will give the owner a realistic idea of what the most probable selling price could be.
2) Hire a business broker – They have the training and experience to position the business in the market but also to successfully lead the buyer through the entire process
3) DON’T OFFER THE BUSINESS TOO HIGH – And be willing to reduce the price (if necessary) in order to increase buyer activity.
Working with a business broker will ensure your company is ideally priced from day one.
Written By:
Dave Gorman
Senior Business Broker
Sunbelt Indiana Business Resource
317-218-8626
Email: dgorman@sunbeltindiana.com
Wednesday, February 25, 2009
Monday, February 23, 2009
SBA Readies Emergency Biz Loans
SBA readies emergency biz loans
Agency has 15 days to create guidelines for $255 million emergency lending initiative approved by Congress.
By Stacy Cowley, small business editor
NEW YORK (CNNMoney.com) -- Small businesses owners struggling to keep up with their bills may see some relief from a new $255 million emergency loan program authorized this week as part of the economic recovery bill.
Congress is pushing for the money to start flowing fast: It gave the Small Business Administration just 15 days to issue guidelines for the brand-new program.
Called the Business Stabilization Program, the initiative will offer loans of up to $35,000 that are essentially interest-free. The loans will only be available to companies that already have bank-issued business loans - Congress wants the new loans to be used to make interest payments and pay down principal on existing debt.
The loans can be used to make payments for up to six months, and no repayment on them will be due for a year. Businesses must fully repay their stabilization loan within five years.
The loans won't be coming directly from the SBA. Instead, the agency will offer a 100% guarantee - something it has never done before - to banks that issue the loans. If the business owner defaults, the SBA will pay off the debt.
The SBA will also fully subsidize the interest on the loans for their entire duration, making them low-cost for business owners and largely risk-free for banks.
Entrepreneurs ready to race out and apply for a loan will need to be patient a bit longer, though. Faced with a tight deadline to create an entirely new program, the SBA is still working out the details.
"We want to get everything in the bill in place as quickly as we can," said SBA spokesman Mike Stamler. "We're doing the best we can."
The SBA hasn't started discussions with banks about how the program will work, but lenders expressed cautious optimism that it will help strapped small businesses.
"We have plenty of customers that would be interested in that type of loan," said Michael Downes, chief lending officer of Unity Bancorp (UNTY) in Clinton, N.J. "We just have to guard against throwing good money after bad."
Rising defaults
Unity issued more than 150 SBA-backed 7(a) loans last year, totaling $73 million. But like many SBA lenders, it curtailed its lending after the economy's sharp deterioration at the end of 2008. Instead of extending loans throughout the East Coast, the bank is now focusing only on its immediate geographic area around New York and New Jersey.
Defaults and delinquencies have increased as borrowers struggle to keep up with their bills, Downes said.
One Georgia Bank in Atlanta became an SBA lender less than a year ago, in April. In its first six months in the program, it issued 14 loans. So far, none of those loans has gone late on payments, but President Chuck Lewis said he sees demand among business customers for options that will free up cash and give them flexibility with their bills.
"Any time there's a facility available for a small business owner to help them meet payroll or help them expand their cash flow, it's going to be a positive for that small business owner," he said.
The SBA is working to create the new program with fairly vague guidance from Congress and without a permanent leader in place. A confirmation hearing for President Obama's nominee as the agency's administrator, Karen Gordon Mills, has not yet been scheduled. In past presidential transitions, the SBA spot has gone unfilled until April or later.
Since Obama's inauguration, 30-year SBA veteran Darryl Hairston has been running the agency as its acting administrator.
The SBA's spokesman said the agency is scrambling to make policy and logistics decisions as soon as possible to begin implementing the array of new initiatives authorized in the stimulus bill signed by the president Tuesday.
The bill allocated millions in additional funding for several existing SBA programs, including the agency's microloan initiative and its flagship loan guarantee programs.
Ramping up those already-running programs to expand their capacity will be easier, Stamler said, than building structures for the two wholly new initiatives Congress created, the stabilization loans program and a new secondary market guarantee authority.
However, those two new programs are the ones Congress wants action on the quickest. It gave the SBA less than three weeks to issue emergency regulations for each.
For the stabilization loans, Congress allocated $255 million to fund the program through September 2010. Since that amount covers only the costs and subsides of the program, it can be used to fund several billion in total loan volume; the SBA is still working out the formulas to calculate how far the cash will stretch.
Only banks already certified to participate in the SBA's loan guarantee programs will be eligible to make stabilization loans. But the agency expects the loans themselves to be available to any small business customer at participating banks, regardless of whether or not the customer's existing loan was actually made through the SBA's guarantee program. (To find out whether your bank is an SBA lender, click here and go to the SBA's resource page for your geographic area.)
As the SBA pulls together its guidelines, lenders and business owners are eager to tap the new line of capital.
"One of the reasons that we were proactive in getting involved in the SBA was because we saw the economy beginning to weaken," said One Georgia Bank's Lewis. "Any time the economy weakens, it's going to be the small businesses that will lead the country out of an economic spiral."
Agency has 15 days to create guidelines for $255 million emergency lending initiative approved by Congress.
By Stacy Cowley, small business editor
NEW YORK (CNNMoney.com) -- Small businesses owners struggling to keep up with their bills may see some relief from a new $255 million emergency loan program authorized this week as part of the economic recovery bill.
Congress is pushing for the money to start flowing fast: It gave the Small Business Administration just 15 days to issue guidelines for the brand-new program.
Called the Business Stabilization Program, the initiative will offer loans of up to $35,000 that are essentially interest-free. The loans will only be available to companies that already have bank-issued business loans - Congress wants the new loans to be used to make interest payments and pay down principal on existing debt.
The loans can be used to make payments for up to six months, and no repayment on them will be due for a year. Businesses must fully repay their stabilization loan within five years.
The loans won't be coming directly from the SBA. Instead, the agency will offer a 100% guarantee - something it has never done before - to banks that issue the loans. If the business owner defaults, the SBA will pay off the debt.
The SBA will also fully subsidize the interest on the loans for their entire duration, making them low-cost for business owners and largely risk-free for banks.
Entrepreneurs ready to race out and apply for a loan will need to be patient a bit longer, though. Faced with a tight deadline to create an entirely new program, the SBA is still working out the details.
"We want to get everything in the bill in place as quickly as we can," said SBA spokesman Mike Stamler. "We're doing the best we can."
The SBA hasn't started discussions with banks about how the program will work, but lenders expressed cautious optimism that it will help strapped small businesses.
"We have plenty of customers that would be interested in that type of loan," said Michael Downes, chief lending officer of Unity Bancorp (UNTY) in Clinton, N.J. "We just have to guard against throwing good money after bad."
Rising defaults
Unity issued more than 150 SBA-backed 7(a) loans last year, totaling $73 million. But like many SBA lenders, it curtailed its lending after the economy's sharp deterioration at the end of 2008. Instead of extending loans throughout the East Coast, the bank is now focusing only on its immediate geographic area around New York and New Jersey.
Defaults and delinquencies have increased as borrowers struggle to keep up with their bills, Downes said.
One Georgia Bank in Atlanta became an SBA lender less than a year ago, in April. In its first six months in the program, it issued 14 loans. So far, none of those loans has gone late on payments, but President Chuck Lewis said he sees demand among business customers for options that will free up cash and give them flexibility with their bills.
"Any time there's a facility available for a small business owner to help them meet payroll or help them expand their cash flow, it's going to be a positive for that small business owner," he said.
The SBA is working to create the new program with fairly vague guidance from Congress and without a permanent leader in place. A confirmation hearing for President Obama's nominee as the agency's administrator, Karen Gordon Mills, has not yet been scheduled. In past presidential transitions, the SBA spot has gone unfilled until April or later.
Since Obama's inauguration, 30-year SBA veteran Darryl Hairston has been running the agency as its acting administrator.
The SBA's spokesman said the agency is scrambling to make policy and logistics decisions as soon as possible to begin implementing the array of new initiatives authorized in the stimulus bill signed by the president Tuesday.
The bill allocated millions in additional funding for several existing SBA programs, including the agency's microloan initiative and its flagship loan guarantee programs.
Ramping up those already-running programs to expand their capacity will be easier, Stamler said, than building structures for the two wholly new initiatives Congress created, the stabilization loans program and a new secondary market guarantee authority.
However, those two new programs are the ones Congress wants action on the quickest. It gave the SBA less than three weeks to issue emergency regulations for each.
For the stabilization loans, Congress allocated $255 million to fund the program through September 2010. Since that amount covers only the costs and subsides of the program, it can be used to fund several billion in total loan volume; the SBA is still working out the formulas to calculate how far the cash will stretch.
Only banks already certified to participate in the SBA's loan guarantee programs will be eligible to make stabilization loans. But the agency expects the loans themselves to be available to any small business customer at participating banks, regardless of whether or not the customer's existing loan was actually made through the SBA's guarantee program. (To find out whether your bank is an SBA lender, click here and go to the SBA's resource page for your geographic area.)
As the SBA pulls together its guidelines, lenders and business owners are eager to tap the new line of capital.
"One of the reasons that we were proactive in getting involved in the SBA was because we saw the economy beginning to weaken," said One Georgia Bank's Lewis. "Any time the economy weakens, it's going to be the small businesses that will lead the country out of an economic spiral."
Tuesday, February 10, 2009
It's a Buyer's Market
A report recently published by the International Business Brokers Association, found that 61 percent of the survey participants (business brokers) believe that more businesses will go up for sale in 2009, while 66 percent indicate say they will sell more businesses this year compared to 2008. Several trade magazines (Inc., Entrepreneur, the Wall Street Journal) indicate seller’s market historically existed, but a as baby boomers retire the buyer’s market would gradually appear over the next decade overtaking the seller’s foothold. The prevailing economic conditions have accelerated the predominance of the buyer’s market…welcome to 2009.
So now what? If you are thinking about selling your business, make it more attractive. Buyers are more selective today because they can. Therefore, improve cash flow as best you can, keep books and records updated, spend more time on the value and pricing of the business. You will be competing for the attention of many buyers. Don’t sell your business short because of not taking care of the basics.
So now what? If you are thinking about selling your business, make it more attractive. Buyers are more selective today because they can. Therefore, improve cash flow as best you can, keep books and records updated, spend more time on the value and pricing of the business. You will be competing for the attention of many buyers. Don’t sell your business short because of not taking care of the basics.
Wednesday, February 4, 2009
Creating Cash in a Cashless Environment
Getting the Value OUT of Your Business during a Liquidity Crisis
It is of no surprise that based on the prevailing economic conditions that in order to create liquidity through the sale of business is a difficult undertaking today. Some of the more prevalent challenges: The buyers’ perception of risk is greater causing valuations to decrease which may result in the seller’s debt exceeding the value of the business; insufficient business value to retire on or pursue another business venture; getting a deal through the bank’s underwriting process…just to name a few of the current challenges.
The good news is that we are selling businesses. It isn’t all “doom and gloom”. When people are displaced from their jobs, entrepreneurs are born. When there are entrepreneurs born, especially with severance checks, new business starts and acquisitions increase.
To create liquidity you have to make your business compete with a buyer’s alternative investments (real estate, stock market, etc…). The primary “attention getters” are: 1) Consider discounting the sale price for cash; 2) Consider financing a portion of the sale price through a promissory note from the buyer with the same security a bank demands; 3) Elongate the transition of ownership demonstrating your willingness to stay and help to ensure a seamless transition (risk reducer). Flexibility is most important.
Edwin Mysogland, AVA, CMEA, SBA
Managing Partner
Have a topic you would like us to blog about? Let us know! Contact: lspringer@sunbeltindiana.com
It is of no surprise that based on the prevailing economic conditions that in order to create liquidity through the sale of business is a difficult undertaking today. Some of the more prevalent challenges: The buyers’ perception of risk is greater causing valuations to decrease which may result in the seller’s debt exceeding the value of the business; insufficient business value to retire on or pursue another business venture; getting a deal through the bank’s underwriting process…just to name a few of the current challenges.
The good news is that we are selling businesses. It isn’t all “doom and gloom”. When people are displaced from their jobs, entrepreneurs are born. When there are entrepreneurs born, especially with severance checks, new business starts and acquisitions increase.
To create liquidity you have to make your business compete with a buyer’s alternative investments (real estate, stock market, etc…). The primary “attention getters” are: 1) Consider discounting the sale price for cash; 2) Consider financing a portion of the sale price through a promissory note from the buyer with the same security a bank demands; 3) Elongate the transition of ownership demonstrating your willingness to stay and help to ensure a seamless transition (risk reducer). Flexibility is most important.
Edwin Mysogland, AVA, CMEA, SBA
Managing Partner
Have a topic you would like us to blog about? Let us know! Contact: lspringer@sunbeltindiana.com
Tuesday, February 3, 2009
Purchase A Business With Your 401k!
Why? Because there are NO penalties, that’s right. This 401k Rollover program lets you use your 401k and other retirement funds to invest in a business – TAX AND PENALTY FREE. This is a safe, proven plan based on long standing provisions of the Internal Revenue Service (IRC § 6501). By using pre-tax retirement dollars to fund your business, you gain equity in your business and improve cash flow from day one. Use the funds to receive a salary during startup, while accelerating profitability by eliminating or reducing interest or debt. Application, creation, and funding is fast; typically (2-3 weeks or less). You can even set aside tax deductible retirement savings up to $200,000/yr.
The benefits of using your 401k:
-Minimize debt
-Enhance cash flow
-Stimulate business growth
-Build equity
-Take full advantage of tax benefits
Authored By:
David Gorman
Senior Business Broker
Direct: 317-218-8626
dgorman@sunbeltindiana.com
The benefits of using your 401k:
-Minimize debt
-Enhance cash flow
-Stimulate business growth
-Build equity
-Take full advantage of tax benefits
Authored By:
David Gorman
Senior Business Broker
Direct: 317-218-8626
dgorman@sunbeltindiana.com
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