Mark Cuban: Only Morons Start a Business on a Loan

Entrepreneur Mark Cuban discusses the U.S. Economy and starting a business with Trish Regan at the Clinton Global Initiative in Chicago on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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On Bloomberg Television’s “Street Smart,” hosts Trish Regan and Adam Johnson bring you the most important market news and analysis affecting the S&P 500, Dow Jones Industrial Average, and the Nasdaq for your last trade of today and first trade for tomorrow. Broadcasting daily from Bloomberg TV’s headquarters in New York, this business news show centered around the closing bell on New York exchanges, is targeted to provide the best analysis of the day’s leading market headlines with a mix of original reporting, earnings news and expert sourcing from Wall Street’s sharpest options traders, equity strategists and company analysts.

Trish Regan and Adam Johnson provide actionable insight on the capital markets daily with regular segments such as “Chart Attack,” depicting likely market moves before they happen, and “Insight & Action” which explains original trading ideas that can make you money. In addition, “Street Smart” is filled with breaking news, political analysis, and market-moving interviews with exclusive guests such billionaire investor Carl Icahn, hedge fund titan Bill Ackman, automaker Elon Musk and more.

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Selling a Business – 8 Factors That Influence Selling a Business

Selling a business successfully requires a number of factors, not only related to the quality of the company and the offering terms, but also the external influences working in the marketplace. California business sales statistics help to reveal that one or a combination of the following factors greatly influence how many businesses are sold in California each month.

Selling a business influences include:

1. Holidays or life events: The Christmas celebration, or a milestone birthday of a seller, are examples of occasions that either can speed up or slow down the selling process. Holidays and other diversions that involve family events, often interrupt the marketing effort or delay scheduling the completion of an agreement. But sometimes the reverse is true. An owner who wants to sell by the end of the year, or before his daughter graduates from college, will be motivated to push for quick negotiations, a short due diligence period and a closing date scheduled ASAP.

2. Job market: Corporate downsizing in a community almost certainly will put demand pressures on the local selling a business market. While most people out of work seek employment elsewhere, there are entrepreneurs among the newly unemployed who plan to buy a business for sale.

3. Financing availability: The recent financial meltdown offers a clear case study of how a shortage of funds from lenders can negatively impact the demand for small and mid-sized businesses. The slowdown in volume of businesses changing hands in late 2009 and through much of 2010 was a direct result of the shortage of money needed to complete transactions. Loosening of the purse strings in the past few months has resulted in a more robust business sales environment.

4. Stock market and investments: When faced with alternatives, investors put their money where they expect the best combination of high return and low risk. But these motivations don’t always result in the same behaviors. A booming stock market influences some entrepreneurs to divert excess funds into corporate equities. For others, it’s a chance to profit by selling current investments and–encouraged by the more positive economic outlook–to enter the business for sale marketplace.

5. Real estate equity: The decline in home values and the pressures it put on the economy during the past three years influenced many would-be business buyers to “watch and wait.” When entrepreneurs had substantial home equity they were far more tempted to use their resulting borrowing power to purchase a small business for sale. As equity disappeared however, individuals not only had less financial ability to make a business purchase, they also became less positive about their chances of success owning a company in a troubled economy.

6. Consumer sentiment/confidence: For the most part, someone considering the purchase of a small or mid-market business will delay moving forward on that idea when polls show that most people are worried about the economy. That’s not the time to get into a retail company or even most business-to-business enterprises. For bargain-hunters in the business for sale marketplace however, a decline in consumer confidence signals the possible opportunity to acquire a sound business at a “distressed” price.

7. Businesses for sale supply: Like any demand and supply dynamic, the availability of good businesses for sale strongly influences the market, the prices, and the likelihood of finding a buyer. During a healthy economy when business owners enjoy strong profitability, business buyers find it more difficult to find a desirable company for sale and to get sellers in agreement on prices that can easily be paid off. It’s often the predictions of a sagging business climate that motivates more owners to quickly implement their exist strategies.

8. World events: Much like the stock market that reacts to news about changes to the political landscape and natural disasters, the market of small businesses for sale can be influenced by major events–even those events well outside of the business world. A retail business owner, for example, may delay her plans to sell if she concludes that a natural disaster in a nearby community will hurt the marketability of her enterprise for a while.

While it’s important to look at the profitability and pricing of a business for sale to determine the chances that a buyer will be found in a short period of time, there are key external factors that can determine the likely success of someone selling a business.

The easy part is knowing some of the factors that can influence the marketplace for small and mid-sized businesses. The hard part is understanding which factors have the most influence at any one time, and exactly how each affects the marketplace.

Source: http://eastbayscore.org/wordpress/?p=511

How To Sell A Business In Today’s Market

Rules for how to sell a business are different today than they were just a few years ago before the mortgage meltdown and economic crisis that followed. The difficulty of obtaining purchase money loans and greater buyer uncertainty because of the fragile state of the economy have made it necessary for owners of small and mid-sized businesses, if they want to sell successfully, to employ strategies that address current problems. Four important principals that help achieve a sale are:

1. Prepare the business more completely. Along with the mood of extreme buyer caution in this market, comes a lower threshold of tolerance for companies being sold that are not presented in the best possible way. That means a seller needs to assemble key documents–three years of financial information, copies of premises and equipment leases, and a list of capital assets included in the sale–before the business is offered to prospective buyers. It’s not a good idea to wait until a buyer is found and requests that material. By the time you get your act together, it may be too late.

Preparation also calls for making certain that business premises are clean so that it shows well, getting all equipment working correctly, and settling any unresolved lawsuits or customer complaints that might reflect negatively on the business.

2. Super preparation is also advised. In addition to getting the basics taken care of, entrepreneurs who know how to sell a business in this economic climate are going to the trouble of contacting local business banks, particularly the SBA-backed lending institutions, to get the business “pre-qualified” for a loan. If lenders say they are willing to lend money for purchase of your business by a qualified applicant, it speeds the SBA loan application process and helps to reinforce the value of the company being offered.

Another form of super-preparation involves drafting a marketing plan that, when shown to prospective buyers, provides a blueprint a new owner might follow to increase the revenues. And the company that comes with a marketing plan is more appealing, because it demonstrates the competence of management–reflecting favorably on the viability of the business.

3. Be prepared to help finance the transaction. Several sellers in this market who initially wanted an all-cash deal, have discovered that a business not attracting much attention can quickly become more appealing to buyers if the seller is willing to carry back part of the purchase price. And the owner with few buyer prospects for a company offered with a small seller financing component, say 10%, is likely to find that increasing the size of the note–to 30% of the price for example–is how to sell a business that was not generating much interest. Seller financing can result in a sale to a qualified buyer–one who was not ready or not willing to invest the total purchase price plus the working capital needed to take over the business. Also, a seller’s willingness to help finance the deal can be the factor that persuades other lenders to participate. In most cases, for example, an application for purchase funds through an SBA loan program has little chance of being approved if the seller does not have “skin in the game.”

4. Incorporate an earn out agreement in the sale. This approach often is useful in bridging the gap when a buyer and seller have different estimates of what the business is worth. The basic idea of this strategy is for the initial sales price to be a figure below what is requested by a seller, who feels the business is improving and will soon be worth more. In return for the seller’s agreement with the lower price, the buyer agrees that the business can be re-valued upward, if it does generate higher revenues as predicted by the seller. This provision is founded on a deal with some seller financing, and the contract specifies that the buyer’s payments would be adjusted upward to correspond with the increased value.

These suggestions for how to sell a business in 2011 have been employed by owners who were successful at selling over the past several months, while other entrepreneurs who’ve had their businesses on the market for some time, still are trying to find a qualified buyer and make a deal.

Source: http://eastbayscore.org/wordpress/?p=442

Using a business broker

Selling a business can take a lot of time and effort, so it is a good idea to get professional help. Business brokers are experts in helping their clients to sell and buy businesses. You can find business brokers by searching the internet, Yellow Pages, real estate websites and industry-specific magazines and publications. A business broker will usually charge a percentage of the final sale price as a fee for their work.

You’ll need to weigh the pros and cons of using a business broker, and make the decision that is best for you.

Advantages of business brokers

• They will have experience in marketing and advertising businesses for sale.
• They can save you time by screening buyers and deciding who is and isn’t serious.
• They will usually already have a list of contacts who are looking to buy.
• Business brokers feel confident and comfortable with requesting the disclosure of a buyer’s financials and are well placed to make decisions about them.
• They can remain independent through the process and work efficiently towards selling your business without the emotional attachment that you may have.
• Typically, brokers have strong negotiation skills.

Disadvantages of business brokers

• You have to pay for the services of a business broker.
• You might feel you lack control over the process if you are used to doing everything yourself.
• You might feel some pressure to accept a contract you’re not happy with.
• They may want you to sign a contract at a lower price rather than not selling because their fee is a percentage of the sale price.

Choosing a business broker

If you do use a business broker, assess their experience and expertise before you hire them. Find out:

• how their fees are structured
• if they specialise in a particular type of business
• how many businesses they have bought and sold
• if they have ever owned a business
• if they can provide letters of reference
• how many clients they are currently working with and if they have time to properly represent your business.

Source: http://www.business.qld.gov.au/business/exiting-business/selling-business/using-business-broker

What’s My Business Worth? Easy Steps to Valuing a Business

A short video on a simple way to determine the value of a business.

Hi, I’m here on the bay front in beautiful St. Augustine, Fl. I’m a “business broker” and I work with buyers from all over the world to help them find the business that’s just right for them and I work with business owners to help them find an ideal buyer for their business.

Today I want to talk with you about how we can work together to find the fair market “value of your business” in today’s market.

When I talk with business owners I often ask, have you ever thought about “selling your business” and it’s interesting how often I get same response and that is, “I think about it every day.” Perhaps you’ve thought about selling your business, either to retire, to relocate or to take on an entirely new challenge.

I can’t help you decide when the time is right for you to sell your business, but we work together to determine the approximate “value of your business” in today’s marketplace. And that basically comes down to three very simple factors: the nature of your business, the annual revenues of your business and seller’s discretionary earnings. If I lost you on that last point — seller’s discretionary earnings — don’t despair We’re going to walk through an example to show you exactly how those are determined.

Seller’s discretionary earnings sounds like a complicated term, in fact some brokers use the term adjusted net, some use SDE, I prefer the term owner benefits. It really refers to the net profit of loss of a business with certain add backs, such as amortization, depreciation, compensation to the owner, a health insurance plan, a car payment even a cell phone payment. Any expenses that are a benefit to you as an owner are added back to determine total owner benefits. The easiest way to determine the value of your business is to compare it to other similar businesses that have sold. It’s very similar to what a residential real estate agent might do in preparing comps if you decided to sell your home.

When we talk about comparing your business to other similar businesses that have sold I use information from the database of the Business Brokers of Florida. We have information on thousands of “business sales.” For instance if we look in our database for information on pizza stores that have sold I can do a search and I find 241 pizza stores that have sold in Florida. And I can sort this information by the sold price, the annual revenues or by the owner benefits. And that way I can narrow the results to closely mirror those of your business.

Okay, let’s walk through an example of how we determine an approximate value in today’s market. We work with tax returns, profit and loss statements and other financial records. Tax returns are the highest and best evidence and I know you’ll find this shocking, but not all business owners report all income on their tax returns. But, for an example, let’s say you have a pizza shop with $500,000 in annual revenue.

Let’s say that this pizzeria had a tax return profit of $30,000, but that doesn’t represent the total owner benefits.  …..

How to buy a business

Michael Gray interviews Greg Carpenter of BTI Group Mergers & Acquisitions aobut how to buy a business for Financial Insider Weekly. Part 1 of 2 answers why you might want to buy a business and what skills you need to succeed in your own business.

Buy an Existing Business or Start a New Business from Scratch?

Consider the pros and cons of buying an existing business vs. starting a brand new business. The decision to buy an existing business is much different from starting a new business from the ground up, and while there is no ONE right answer that fits each person, your own clarity about your approach to business will help you make the best choice for you. Discover how your investment of time and money, as well as relationships with customers, vendors, and employees, figure into your decision to start a new business OR buy an existing business.

Steven Schlagel is a CPA and Attorney with offices in both Durango, CO and Farmington, NM. More than the typical CPA, Steve mentors, coaches and consults with small business owners just like you every day to help them solve problems and build value in their business.

The Business Buying Process: Three Methods for Assessing Value

Accurately determining the value of a business is an important part of the business buying process. Explore the three primary ways that Certified Valuation Analysts use to assess the value of a particular business. Whether you are buying a business or selling a business, an accurate valuation takes all three of these methodologies into account, then uses the one most appropriate for your situation Discover how these different approaches can affect the value and subsequently impact the business buying process.

Steven Schlagel is a CPA, Attorney and Certified Valuation Analyst with offices in both Durango, CO and Farmington, NM. More than the typical CPA, Steve mentors, coaches and consults with small business owners just like you every day to help them solve problems and build value in their business.

If you plan to buy an existing business, carefully analyse both the advantages and disadvantages. One advantage is that a good business history can increase the likelihood of a successful operation and ensure that finance is easier to obtain. Potential disadvantages can be overestimating the goodwill figure and a poor public image inherited from the previous owner.

As a prospective business owner you should determine the current worth of the business and its future prospects. Some important considerations are:

• Vendor – reason for sale of business
• Sales – patterns, trends, customer base, current suppliers
• Costs – fixed and variable costs, staff costs
• Profits – analyse financial records, future cash flow and profitability
• Assets – identify and check all assets, including intellectual property and leasing arrangements
• Liabilities – outstanding debts, refunds and warranties
• Purchase agreement – review carefully
• Tax – GST, Capital Gains Tax, stamp duty implications
• Legal issues – leases, business structure.

For advice and protection in buying a business we suggest that you seek the services of a solicitor, accountant or business adviser.

Source: http://www.business.gov.au/Howtoguides/Startingabusiness/Pages/Buyinganestablishedbusiness.aspx

Selling a Franchise

Selling a franchise isn’t quite the same as selling an ordinary business. Your franchisor will have an established procedure for the sale of any business within the franchise.

This procedure is usually outlined in your franchise agreement under “assignment” and will be detailed in your operations manual. Although it will restrict what you can do, the procedure will also make the sale process easier by giving you a clear understanding of what you need to do to make a successful sale.

It’s also a good idea to discuss the sale of your business with the franchisor and other franchisees as they could have useful advice or may even offer to help you sell your business. They might want to buy it themselves or they could know someone who wants to get into the franchise group.

Complying with the franchise code

Under the franchise code the franchisor is required to provide a disclosure document to the person who buys your business.  As a gesture of goodwill, and in order to be transparent in your business dealings, it’s a good idea to provide the buyer with a copy.

Further details on the Franchise code of Conduct can be obtained from the Australian Competition and Consumer Commission

Franchise agreement obligations

The obligations for the sale within the franchise agreement will vary from one franchise to another. Talk to your franchisor to find out about any specific requirements which could include the following:

• First right of refusal for the franchisor to purchase the franchise;
• An assignment fee;
• Interview by the franchisor of the prospective purchaser;
• Approval of the prospective purchaser as a suitable franchisee by the franchisor;
• Payment for the training of the new purchaser by the existing franchisee;
• Payment of all outstanding accounts and fees to the franchisor and suppliers prior to assigning the franchise agreement;
• Trade restraints to ensure you cannot open up as a competitor, or continue to use any of the intellectual property or systems;
• Transfer of business registrations to the new owner or back to the franchisor;
• Return of operations manuals and associated documentation; and
• Surrender of:
  • all client lists and details;
  • the business phone and fax numbers including mobile phones;
  • email or web page addresses.

Source: http://www.smallbusiness.wa.gov.au/selling-a-franchise/