Inventory: A Key Component to the Business Sale

Ralana D. Shelley, CBI (bio) Sunbelt Indiana Business Resource March 28, 2011

One of the most overlooked but important issues in the health of any business is inventory. Inventory plays a pivotal role throughout its entire lifecycle, from purchase to storage to sale. It is just as important how inventory is kept and sold as who it is bought from, how much is paid for it, and how much one can charge a customer for it. Below are three key issues to consider abuot inventory and how it affects the health and future sale of your business.

Inventory Accounting... Once a business has purchased its inventory, it becomes important how that business is going to handle it. How quickly or slowly it is turned over can have a direct impact on business value...

To Include in the purchase price or not to include... Most businesses offered through an intermediary will clearly state up front whether inventory is included in the purchase price, or whether it is in addition to the price...

Counting Inventory at Closing... There are basically two ways to count inventory before closing...

Inventory is not so simple when considering its impact on the value of a business both while running it and while trying to sell it. It is certainly something to handle and track carefully, and prepare if you are thinking of selling now or in the future.

To read the full article and learn more about inventory's impact... click here.

How to Hold on to Key Employees (Article 3, Exit planning series)

Courtesy of Business Brokerage Press
During a company merger, the devil is in the details. Identifying key employees and employment issues early on can facilitate a smooth deal. And a communication plan can help prevent, for example, top-producing salespeople from defecting to competitors, decimating the company's customer base, and affecting its value.

It's important to offer employees incentives to stay, but you also need to anticipate potential legal issues. Plan now to put in place protections to prevent employees from disrupting your deal, both before and after its closes.

to read the full article... click here.

Check us out Monday for Article 4 in our Exit Planning Series when we address the subject of Inventory.

Tips for Business Buyers: Selling Yourself - Seller Financing

Courtesy of Business Brokerage Press
Remember that when a seller offers seller financing, he or she is taking a risk. If you are the buyer, the seller is taking a risk on you, that you will be able to run the business successfully. Therefore, other than a seller needing the cash from the sale of the business, the biggest obstacle to seller financing is the seller's concern regarding whether a new owner will be able to pay off the loan from the profits of the business. While the seller already has the best idea about the potential profits of the business, there are some additional things a seller may want to learn about a potential buyer.

You may want to consider what would best demonstrate that you are a "good" risk and have the documentation ready to sell yourself.

• Do you own your own house? If so, how long have you lived in it?
• What is your work history? What experience will help you as a business owner?
• A seller may ask to see a copy of your credit report.
• Be prepared with a list of personal references.

These are just a few ideas that will allow you to "sell yourself" to a business owner so they may feel better about offering seller financing.

Be sure to check us out every Wednesday for more useful buyer articles...

Starting the discussion on employees... independent contractor vs. employee

The Big Question: Independent versus Employee Status
Courtesy of Business Brokerage Press

Are your workers independent contractors or employees? This is a compelling question, especially where the Internal Revenue Service is concerned. Every worker claiming status as a non-employee means payroll taxes and social security contributions that won't fall into the IRS's pocket.

Now many states are taking a closer look at the question, too. They are increasingly on the lookout for new sources of state revenue, including workman's compensation and unemployment insurance, both of which can be bypassed when a business uses independent workers.

To read the full article... click here.

Insurance: A Dull Subject Unless You Need It

Most business owners faithfully renew their business insurance policies every year, but how many actually review the policies on a regular basis? Unfortunately, too many business owners have never read the policies. This means, among other things, that they don't know whether the policies are continuing to adequately cover the changing needs of the business. For example, is the new expensive computer system covered? Are all the weather contingencies covered? Is the employee health coverage up to date with today's medical costs? Does you company have business interruption insurance? If so, when was the last time you reviewed it?

Now might be a good time to review all of your insurance policies...
especially if you are considering the sale of the business now or in the future...

To read the full article... click here.

Why Deals Fall Apart -- Loss of Momentum

Deals fall apart for many reasons -- some reasonable, others unreasonable.

For example:

• The seller doesn't have all his financials up to date
• The seller doesn't have his legal/environmental/administrative affairs up to date
• The buyer can't come up with necessary financing.
• The well known "surprise" surfaces causing the deal to fall apart

The list could go on and on and this subject has been covered many times. However, there are more hidden reasons that threaten to end a deal usually half to three-quarters of the way to closing. These hidden reasons silently lead to a lack of or loss of momentum...

To read the full article... click here.

Do You Have a Plan?

While it may not be visible itself, a positive plan for the future of the business is key to actually moving toward a positive future. Business owners should be prepared to spend what it takes to generate new business, and they should take time to explore new possibilities for long-range success.

If the company currently has no mission statement or business plan, creating one will be evidence of the owner's enthusiasm for the future and for the ongoing success of the operation. If the company has a mission statement or business plan that no longer fits current conditions and needs, it may be time to revisit and revise the statement or plan.

To write / rewrite your mission statement, here is a great article from Entrepreneur.com... "How to write your mission statement"

Watch our blogs for the next several weeks, as we will be covering several issues to consider in the everyday running of your business. Issues that will prepare you for an eventual sale, or at the least a more profitable well organized and forward thinking business.

Exit Planning - Prepare for an out while you're still in

Running a succesful business is time consuming, leaving you little time to plan what may seem like distant succession issues. It's important, however, to outline an exit plan and make succession decisions as early as possible. Evaluating and grooming possible successors or preparing for an outside sale can take years. And it's never too early to make retirement and estate plans.

To read the full article from Sunbeltmergers.com... click here.

Seller Financing -- How a Broker Can Help

Another important factor relating to the asking price is the amount of cash involved in the sale. There is an old saying that the higher the full-price, the lower the down payment - and vice-versa. The sale of almost any business involves some seller financing. The smaller the down payment, the higher likelihood of a quick sale. No seller wants to take back his or her business because the buyer wasn't successful. On the other hand, a buyer wants to make sure that the business will not only pay for itself, but also provides sufficient income for his or her family's needs.

What it all boils down to is that the seller wants the buyer to be successful and the buyer wants to buy a successful business. With the amount of capital required in today's market to buy a business, sellers should feel optimistic that they are dealing with successful buyers.

Read on to find out more about four important ways a Broker can help in this process...

• A Valuable Service
• Maintaining Confidentiality
• The Future of the Business
• What Buyers Think

to read the full article... click here.

Sayonara for Your Small Business?

By Teresa Novelino
Portfolio.com, The Business Blotter
Feb. 28, 2011

Small-business owners who hoped tp sell their companies last year may find it easier to say goodbye this year, as the economic recovery picks up, a new survey finds.

That's the word from BizBuySell.com, a key Internet marketplace for those interested in buying or selling a small business. Its survey found that 76 percent of responding brokers nationwide believe that 2011 will be a "good year to sell."

So does that mean that the amount of small businesses sold are back to what they were before the downturn hit? Not yet. Most of the brokers who responded to the survey say they do not believe transaction volumes will return to prerecession levels for at least another 18 months. That's a grimmer outlook than they had in November, when 62 percent said the same, or in July, when 53 percent were prepared for an 18-month hold on the market's return.

The majority of those who say that the selling season is heating up now though - 69 percent - cite the recovering economy as the reason.

click here to read more.