Article 6: Equipment - The Very Expensive Desk Lamp

Courtesy of Business Brokerage Press
"Moral of the story: Prepare your business before a buyer sees it"

This is a story based on a true incident - only some of the details have been changed. The buyer and seller were ready to close on a business when the buyer asked to look at the list of fixtures and equipment that were to be included in the sale. After a few minutes reviewing the list, the buyer said that the desk lamp on the owner's desk was not listed. The seller explained that the lamp was a gift from his parents many years ago and therefore it was not included. The buyer got very upset, stating that the lamp was just perfect for the desk and he wanted it. The seller tried to explain that the lamp had lots of sentimental value, but that he would replace it with another desk lamp. This did not satisfy the buyer, and in order to stop the sale from falling apart, the seller agreed to subtract $1,000 from the purchase price to keep the lamp. That made the desk lamp a very expensive one.

To find out how this could have been avoided, and how you can avoid this scenario, read the full article... click here.

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.