Most news for small business owners isn’t so hot. Business owners believe that waiting out the economic storm and their retirement is a prudent fiscal move. While this notion has merit, awaiting better economic times does not necessarily ensure higher value(s) when the business is sold.
The unfortunate reality is that in many instances value deteriorates due to external forces (economy) as well as internal forces (the business owner). There was a study a number of years ago that suggested that an owner actually becomes less effective over time (7+ years) as the original enthusiasm wanes. As business owners approach retirement, it is not unusual to see a decrease in revenue and profits as the business begins “retiring” before the owner does. The result is that the business owner may delay retirement but not increase value equity.
The sale of a profitable company in this environment (or any other) is a viable strategy for business owners who are committed to sell. Value is a very fluid and timing often makes a difference in acquisition prices. Quality sells in any economic environment and profitable, motivated, flexible businesses that are properly positioned are still in demand.
Despite the economic conditions, limitation on credit, and changes to government backed loans, which are forecasted to continue for the near future; we have not experienced a significant slowdown in buyer inquires. However, over the last six months we have noted the following:
• Displaced “blue collar” buyers are seeking to “buy a job”
• Middle management individuals caught in layoffs are utilizing severance or their own 401(k)s to invest in going into business for themselves. Alternative investments such as the bank or the stock market are not nearly as attractive as they once were.
• Strategic (or synergistic) buyers and Private Equity Groups (PEGs) are actively seeking add on or platform acquisitions.
The Business Brokerage Press cited that the business value for most owners equates to approximately 75% of their net worth! This is a considerable statement when evaluating the time to sell and price positioning. Our experience is that planning is key to maximizing value. We have had clients who we started dialog with years ago who heeded (and some not) our advice on the necessary preparations and will fare well as we begin confidentially exposing their business to the marketplace.
For More Information Please Contact:
Ed Mysogland
Managing Partner
317-218-8616
emysogland@sunbeltindiana.com
Wednesday, April 29, 2009
Thursday, April 23, 2009
Sunbelt IBR In the News....
Fearful business buyers
April 22, 2009
Posted by Norm , trackback
You might think people would be hankering to buy businesses, what with the frail economy tripping trap doors beneath more and more jobs.
Not so, says the managing partner of the state’s largest business brokerage.
Ed Mysogland says the Web site for Sunbelt Indiana Business Resource is getting more hits. But the actual number of serious inquiries is at similar levels to the same period last year and even the year before, when the economy was still roaring.
Why? Mysogland is left to speculate. But his informed opinion is that fear of risk is still a formidable barrier to entry. Younger people shouldering responsibility for children and carrying mortgages and student loans are particularly skeptical about taking on additional risk.
“Most people will think twice about small-business ownership,” he says. “Getting a paycheck every week doesn’t sound so bad.”
It’s not as if good deals aren’t available. Businesses are selling for less largely because their revenues and profits are down. Restaurants are still going for 25 percent to 50 percent of revenue, but the total sale prices have slipped because most restaurants are generating less revenue.
What about you? Are you considering buying a business or starting one? What do you think about conditions?
Click HERE to view original article online.
April 22, 2009
Posted by Norm , trackback
You might think people would be hankering to buy businesses, what with the frail economy tripping trap doors beneath more and more jobs.
Not so, says the managing partner of the state’s largest business brokerage.
Ed Mysogland says the Web site for Sunbelt Indiana Business Resource is getting more hits. But the actual number of serious inquiries is at similar levels to the same period last year and even the year before, when the economy was still roaring.
Why? Mysogland is left to speculate. But his informed opinion is that fear of risk is still a formidable barrier to entry. Younger people shouldering responsibility for children and carrying mortgages and student loans are particularly skeptical about taking on additional risk.
“Most people will think twice about small-business ownership,” he says. “Getting a paycheck every week doesn’t sound so bad.”
It’s not as if good deals aren’t available. Businesses are selling for less largely because their revenues and profits are down. Restaurants are still going for 25 percent to 50 percent of revenue, but the total sale prices have slipped because most restaurants are generating less revenue.
What about you? Are you considering buying a business or starting one? What do you think about conditions?
Click HERE to view original article online.
Monday, April 20, 2009
Thursday, April 16, 2009
Optimism Index: Article by Anita Campbell
This is an Article by Anita Campbell from Small Business Trends:
The NFIB’s latest report on small business sentiment is out. The NFIB’s Optimism Index is one of the longest standing indices of small business sentiment, and so I tend to place a lot of weight on it.
It shows that conditions and sentiment are not a pretty sight among small businesses.
Although there have been some tiny signals — albeit weak signals — from other sources suggesting things may be looking up in the economy, you wouldn’t know it from looking at the NFIB report. First of all, there’s this chart:
Pathetic looking, isn’t it? You don’t even have to know what the numbers stand for to know that’s a bad chart — the steep downward line speaks for itself.
Essentially, this chart is saying that the Small Business Optimism Index of the NFIB is near an all-time low – actually the second lowest reading in the 35 year history of the NFIB survey. Only during the 1980-1982 recession was the index lower.
Remember, this is a group of small business owners reporting their sentiment — how they feel — about the economy. The survey was taken during March 2009 of 867 small business owners.
And how do they feel? Not so hot.
Employment among small business firms is down. profits are down, capital spending is down — well just about any number you look at is down.
But there is a silver lining, according to William Dunkelberg, the chief economist of the NFIB. He says that such a sharp downturn as we are in now, is leading to pent-up demand for spending. That means we are likely to have a sharp upturn once the economy starts recovering, as he writes (emphasis added):
“Small business owners are clearly cutting costs at a very rapid pace (as are larger firms as well), which primarily involves reducing employment. Cost cutting is likely being over-done since there is uncertainty about the future, in particular when the recession will end, and earnings are in the tank. What this portends, however, is a rapid improvement in employment and earnings once the economy establishes a forward momentum. Sharp recoveries are possible only after sharp declines. Capital spending and inventory investment are at or near record low levels and, more importantly, have remained their longer than during any recession in the 35 year NFIB survey history. This is feeding an ever enlarging pool of “pent-up demand”. Consumers are accumulating a similar pool of unfilled spending needs as well. Car sales will not continue all year at the 9 million rate recorded at the start of 2009. More will be bought, not a return to 16 million, but a gain. Normally, well over a million new homes, apartments and condos are needed each year, but new construction is a third of that. More houses will be built. This will be the start of the private sector rescue of the economy. Some fiscal stimulus will start to filter in, but it will, as always, be late to the party. The “stimulus package” and the political urgency surrounding it was a smoke screen for other agendas.”
So there you have it from the NFIB Small Business Economic Trends report for April 2009 (PDF): not a pretty picture now, but once things start to recover — things could go up up up.
I agree with the assessment about a sharp recovery. We’ve been affected by the non-stop media coverage about the economy and crises and bailouts — beating into our heads how bad things are — making a bad situation seem much worse. Naturally people stopped spending, out of fear. When you don’t spend in a consumer economy like ours, it becomes a self-fulfilling prophecy as demand drops. Then sales drop, then employment drops, and everything slows or declines like dominoes falling.
It’s time to shake off this climate of fear and get on with the economic recovery.
It shows that conditions and sentiment are not a pretty sight among small businesses.
Although there have been some tiny signals — albeit weak signals — from other sources suggesting things may be looking up in the economy, you wouldn’t know it from looking at the NFIB report. First of all, there’s this chart:
Pathetic looking, isn’t it? You don’t even have to know what the numbers stand for to know that’s a bad chart — the steep downward line speaks for itself.
Essentially, this chart is saying that the Small Business Optimism Index of the NFIB is near an all-time low – actually the second lowest reading in the 35 year history of the NFIB survey. Only during the 1980-1982 recession was the index lower.
Remember, this is a group of small business owners reporting their sentiment — how they feel — about the economy. The survey was taken during March 2009 of 867 small business owners.
And how do they feel? Not so hot.
Employment among small business firms is down. profits are down, capital spending is down — well just about any number you look at is down.
But there is a silver lining, according to William Dunkelberg, the chief economist of the NFIB. He says that such a sharp downturn as we are in now, is leading to pent-up demand for spending. That means we are likely to have a sharp upturn once the economy starts recovering, as he writes (emphasis added):
“Small business owners are clearly cutting costs at a very rapid pace (as are larger firms as well), which primarily involves reducing employment. Cost cutting is likely being over-done since there is uncertainty about the future, in particular when the recession will end, and earnings are in the tank. What this portends, however, is a rapid improvement in employment and earnings once the economy establishes a forward momentum. Sharp recoveries are possible only after sharp declines. Capital spending and inventory investment are at or near record low levels and, more importantly, have remained their longer than during any recession in the 35 year NFIB survey history. This is feeding an ever enlarging pool of “pent-up demand”. Consumers are accumulating a similar pool of unfilled spending needs as well. Car sales will not continue all year at the 9 million rate recorded at the start of 2009. More will be bought, not a return to 16 million, but a gain. Normally, well over a million new homes, apartments and condos are needed each year, but new construction is a third of that. More houses will be built. This will be the start of the private sector rescue of the economy. Some fiscal stimulus will start to filter in, but it will, as always, be late to the party. The “stimulus package” and the political urgency surrounding it was a smoke screen for other agendas.”
So there you have it from the NFIB Small Business Economic Trends report for April 2009 (PDF): not a pretty picture now, but once things start to recover — things could go up up up.
I agree with the assessment about a sharp recovery. We’ve been affected by the non-stop media coverage about the economy and crises and bailouts — beating into our heads how bad things are — making a bad situation seem much worse. Naturally people stopped spending, out of fear. When you don’t spend in a consumer economy like ours, it becomes a self-fulfilling prophecy as demand drops. Then sales drop, then employment drops, and everything slows or declines like dominoes falling.
It’s time to shake off this climate of fear and get on with the economic recovery.
Wednesday, April 15, 2009
SBA Announces Dip in 504 Loan Rates
Click HERE to view original article online.
INDIANAPOLIS (April 15, 2009)—Historic low interest rates announced this week by the U.S. Small Business Administration’s (SBA) 504 loan program, combined with the recent elimination of two real estate financing fees, generate compelling new options for business owners who plan to expand their facilities and operations, according to Premier Capital Corporation Executive Director David Amick.
Amick pointed to the significant opportunity available to small business owners and lenders who choose to utilize the SBA 504 loan program. The current 5.25 percent interest rates follow the temporary suspension of two fees typically required by the 504 loan program. These two developments enhance an already outstanding borrowing program, Amick added.
The 504 loan program accessed through Certified Development Companies (CDCs), the local organizations that work in tandem with lenders and small businesses, currently offers long-term, fixed-rate financing for commercial real estate at the lowest interest rate since the program’s inception. The SBA works with its local lending partners—the CDCs—to provide such loans for small business borrowers who wish to use the financing program to leverage their investment and grow their business.
Following is a brief summary of the changes behind these new financing options:
* On Monday, April 13, the 504 program announced a 5.25 percent 20-year fixed interest rate, the lowest in the program’s history. Business owners who plan to seek financing for facility expansions can lock in 20-year fixed rate financing on a portion of their expansion project creating certainty in cash outlay for occupancy costs.
* A major component of the federal government’s stimulus package unveiled in February eliminates two processing fees associated with 504 loan programs. The elimination of these fees is expected to last through 2009, or as long as funds are available, Amick said. For example, on a $1 million loan, a borrower can save roughly $20,000.
“Businesses of all kinds need long-term, fixed-rate financing options to acquire the real estate or the equipment they need to expand their businesses and create jobs,” Amick said. “That has been a challenge in the current environment. We’re living in an era in which tighter credit markets and the general economic downturn have forced many small businesses to delay their growth plans or cease operations entirely.
“I believe this new combination of rate incentives and stimulus measures will spur significant new activity for businesses everywhere and help advance our nation’s economic recovery,” Amick added. “Business owners who take advantage of these incentives will reduce a portion of their out-of-pocket expenses, lock in long term fixed rates creating positive new opportunities in the marketplace.”
About Premier Capital CorporationSince 1976 Premier Capital Corporation has empowered more than 800 Indiana businesses by serving as one of the state’s leading certified development companies accredited by the U.S. Small Business Administration (SBA). By supporting both business owners and bankers, Premier Capital is truly an engine of the Indiana economy, putting the power of the SBA in the hands of business owners and lenders and providing long-term financing for real estate, machinery and equipment.
Source: Premier Capital Corp.
***
INDIANAPOLIS (April 15, 2009)—Historic low interest rates announced this week by the U.S. Small Business Administration’s (SBA) 504 loan program, combined with the recent elimination of two real estate financing fees, generate compelling new options for business owners who plan to expand their facilities and operations, according to Premier Capital Corporation Executive Director David Amick.
Amick pointed to the significant opportunity available to small business owners and lenders who choose to utilize the SBA 504 loan program. The current 5.25 percent interest rates follow the temporary suspension of two fees typically required by the 504 loan program. These two developments enhance an already outstanding borrowing program, Amick added.
The 504 loan program accessed through Certified Development Companies (CDCs), the local organizations that work in tandem with lenders and small businesses, currently offers long-term, fixed-rate financing for commercial real estate at the lowest interest rate since the program’s inception. The SBA works with its local lending partners—the CDCs—to provide such loans for small business borrowers who wish to use the financing program to leverage their investment and grow their business.
Following is a brief summary of the changes behind these new financing options:
* On Monday, April 13, the 504 program announced a 5.25 percent 20-year fixed interest rate, the lowest in the program’s history. Business owners who plan to seek financing for facility expansions can lock in 20-year fixed rate financing on a portion of their expansion project creating certainty in cash outlay for occupancy costs.
* A major component of the federal government’s stimulus package unveiled in February eliminates two processing fees associated with 504 loan programs. The elimination of these fees is expected to last through 2009, or as long as funds are available, Amick said. For example, on a $1 million loan, a borrower can save roughly $20,000.
“Businesses of all kinds need long-term, fixed-rate financing options to acquire the real estate or the equipment they need to expand their businesses and create jobs,” Amick said. “That has been a challenge in the current environment. We’re living in an era in which tighter credit markets and the general economic downturn have forced many small businesses to delay their growth plans or cease operations entirely.
“I believe this new combination of rate incentives and stimulus measures will spur significant new activity for businesses everywhere and help advance our nation’s economic recovery,” Amick added. “Business owners who take advantage of these incentives will reduce a portion of their out-of-pocket expenses, lock in long term fixed rates creating positive new opportunities in the marketplace.”
About Premier Capital CorporationSince 1976 Premier Capital Corporation has empowered more than 800 Indiana businesses by serving as one of the state’s leading certified development companies accredited by the U.S. Small Business Administration (SBA). By supporting both business owners and bankers, Premier Capital is truly an engine of the Indiana economy, putting the power of the SBA in the hands of business owners and lenders and providing long-term financing for real estate, machinery and equipment.
Source: Premier Capital Corp.
***
Thursday, April 9, 2009
Wednesday, April 8, 2009
Are Family-Owned Businesses Planning for the Future?
The 2007/2008 Family Business Study conducted by PricewaterhouseCoopers found that nearly half of family-owned businesses have no succession plan in place, despite 25% of them expecting to change hands within the next five years.
The majority of family businesses do not make it to the next generation and either are sold or cease operations upon the founder’s death. According to the Cox Family Enterprise Center at Kennesaw State University in Georgia, only one-third of family businesses, worldwide, are passed along to the next generation.
PricewaterhouseCoopers argues that family-owned businesses do not make it from one generation to the next because of a lack of planning.
Businesses are encouraged to create an exit strategy. For succession, outline the details for family members to join management and also encourage the successors to be involved in the business now.
An exit strategy to sell the business also requires careful planning. Business owners should seek guidance from their attorney, accountant and business broker.
~Sunbelt Business Connections Newsletter
The majority of family businesses do not make it to the next generation and either are sold or cease operations upon the founder’s death. According to the Cox Family Enterprise Center at Kennesaw State University in Georgia, only one-third of family businesses, worldwide, are passed along to the next generation.
PricewaterhouseCoopers argues that family-owned businesses do not make it from one generation to the next because of a lack of planning.
Businesses are encouraged to create an exit strategy. For succession, outline the details for family members to join management and also encourage the successors to be involved in the business now.
An exit strategy to sell the business also requires careful planning. Business owners should seek guidance from their attorney, accountant and business broker.
~Sunbelt Business Connections Newsletter
Tuesday, April 7, 2009
Before You Buy That Small Business
Before You Buy That Small Business
Buying an existing business is often safer than starting one on your own. But watch out for these red flags.
By Cliff Ennico June 18, 2008
There's no doubt that buying an existing small business is less risky than starting one from scratch. Why? Because, unlike a startup:
•the business has equipment and inventory;
•the business already has a location, and maybe there's a few more years left on the lease;
•the business has employees, some of whom you may actually want to keep;
•the business has customers, most of whom probably will stick with you (unless this is a professional service business or practice); and
•most importantly, the business has a track record--you can look at the business' books, records and tax returns and get some sense of how much money you will make.
But there's still risk. Whenever you buy an existing business and look at its records, you're looking at the past. There's no guarantee things won't change going forward. If you're negotiating to buy a business and you think the seller is giving you a great deal, be very suspicious--there's probably something heading down the road at 90 miles an hour that will blow this business apart when it hits.
To View the entire article click HERE
Larry Battershell
317-908-9550
inbizsales@aol.com
Buying an existing business is often safer than starting one on your own. But watch out for these red flags.
By Cliff Ennico June 18, 2008
There's no doubt that buying an existing small business is less risky than starting one from scratch. Why? Because, unlike a startup:
•the business has equipment and inventory;
•the business already has a location, and maybe there's a few more years left on the lease;
•the business has employees, some of whom you may actually want to keep;
•the business has customers, most of whom probably will stick with you (unless this is a professional service business or practice); and
•most importantly, the business has a track record--you can look at the business' books, records and tax returns and get some sense of how much money you will make.
But there's still risk. Whenever you buy an existing business and look at its records, you're looking at the past. There's no guarantee things won't change going forward. If you're negotiating to buy a business and you think the seller is giving you a great deal, be very suspicious--there's probably something heading down the road at 90 miles an hour that will blow this business apart when it hits.
To View the entire article click HERE
Larry Battershell
317-908-9550
inbizsales@aol.com
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