There is no doubt that the COVID-19 situation seems to change with each and every day. The disruption and chaos that the pandemic has injected into both daily life and business is obvious. Just as it is often difficult to keep track of the ebbs and flows of the pandemic, the same can be stated for keeping up to speed on the government’s response and what options exist to assist companies of all sizes.
In this article, we’ll turn our attention to an overlooked area of the government’s pandemic response and how businesses can use a whole new lending platform to navigate the choppy waters.
As the pandemic continues, you will want to be aware of the main street lending program, which is a whole new lending platform. It was designed for businesses that were financially sound prior to the pandemic. Authorized under the CARE Act, the main street lending program is quite attractive for an array of reasons. Let’s take a closer look at what makes this program almost too good to be true.
This lender delivered program is a commercial loan. Unlike the PPP, there is no forgivable component. However, the main street lending program does have one remarkable feature that will certainly grab the attention of all kinds of businesses. It can be used to refinance existing debt at a rate of around 3%. With that stated, it is also important to note that businesses cannot refinance existing debt with the current lender. Instead, a new lender must be found. Generally, loans are a minimum of a quarter million dollars and have a five-year term. In another piece of good news, there is a two-year payment deferment period.
The main street lending program can be used in a variety of ways. In short, the program is not simply for refinancing existing debt. Additionally, there is no penalty for prepayment. The way the program works is that lenders make the loans and then sell 95% of the loan value to the Fed. This of course means that the lender is only required to retain 5% of the loan on their balance sheet. The end result is that lenders can dramatically expand the amount of loans they can make.
Whether it is the PPP or a program like the main street lending program, there are solid options available to help you. Businesses looking to restructure debt or put an infusion of cash to good use may find that the main street lending program offers a very flexible loan with great interest rates.
The post The Main Street Lending Program appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
In today’s business climate, reviews are the differentiator. Years ago, people commonly asked for references when they were vetting a product or service. But these days when people are searching for a local business to work with, they are likely to conduct research on their own and read online reviews.
Google reviews can give businesses a big credibility boost without having to spend a dime. Let’s take a look at some of the key benefits.
Increased Credibility & Trust
According to statistics, approximately 91% of consumers read reviews to determine credibility of a local business. In fact, 84% of consumers say the positive reviews have helped them gain trust. Without the reviews, that level of trust would not have been established.
Needless to say, people trust Google. The fact that these reviews are on a 3rd party website increases transparency. These reviews have much higher value than testimonials posted on the actual business website.
Improved Business Conversions
Once a potential customer gains trust in your company through reading Google reviews, it is more likely the conversation will get converted to an actual business transaction.
Customer Feedback Loop
When your customers write reviews about your business and post them on Google, these reviews often clearly mention details about your product or service. Through this means, future customers become educated. These reviews can also serve as a feedback loop for you if things need improvement.
Increases Online Reputation & Visibility
The power of online marketing methods you might be using to promote your business will be amplified, as users will become more attracted to your business due to 5-star reviews. This factor increases online traffic to your website and an increase in leads and business.
Another fact to be conscious of is that your clients will review your products or services whether you want them to or not. If you fail to set up Google reviews, you’re missing out on the opportunity to gain a level of control and visibility.
How to Set Up Google Reviews
- Create a Google My Business account. – Visit https://business.google.com/ to sign in or create a Google account for a business. Complete the step by step process by filing required information like email, phone number, business details, etc.
- Ask clients to review your services. – Start sharing your Google My Business URL with clients and ask them to post a review about your services. When asking for reviews, you can mention to clients that their review will help everybody else make an informed decision when they are looking for help. It is important to ask about the review within a few days of closing your transaction. If more time goes by, the client may be less motivated to post a review for you.
- Remind clients. – Everybody is busy. Therefore, there is a chance that your client might forget to write a review. In this case, we recommend reminding them to do so. You can also politely inquire if they need any help posting the review that you discussed.
Through the above-mentioned process, you can begin generating reviews for your business. Of course, it goes without saying that you can only guarantee good reviews when you are providing excellent customer service along with a top-notch product or service.
The post Why Does Your Business Need Google Reviews? appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
When contemplating the sale of a business, an important option to consider is seller financing. Many potential buyers don’t have the necessary capital or lender resources to pay cash. Even if they do, they are often reluctant to put such a hefty sum of cash into what, for them, is a new and untried venture.
Why the hesitation? The typical buyer feels that, if the business is really all that it’s “advertised” to be, it should pay for itself. Buyers often interpret the seller’s insistence on all cash as a lack of confidence–in the business, in the buyer’s chances to succeed, or both.
The buyer’s interpretation has some basis in fact. The primary reason sellers shy away from offering terms is their fear that the buyer will be unsuccessful. If the buyer should cease payments–for any reason–the seller would be forced either to take back the business or forfeit the balance of the note.
The seller who operates under the influence of this fear should take a hard look at the upside of seller financing. Statistics show that sellers receive a significantly higher purchase price if they decide to accept terms. On average, a seller who sells for all cash receives approximately 70 percent of the asking price. This adds up to approximately 16 percent difference on a business listed for $150,000, meaning that the seller who is willing to accept terms will receive approximately $24,000 more than the seller who is asking for all cash.
Even with these compelling reasons to accept terms, sellers may still be reluctant. Selling a business can be perceived as a once-in-a-lifetime opportunity to hit the cash jackpot. Therefore, it is important to note that seller financing has advantages that, in many instances, far outweigh the immediate satisfaction of cash-in-hand.
- Seller financing greatly increases the chances that the business will sell.
- The seller offering terms will command a much higher price.
- The interest on a seller-financed deal will add significantly to the actual selling price. (For example, a seller carry-back note at eight percent carried over nine years will double the amount carried. Over a nine-year period, $100,000 at eight percent will result in the seller receiving $200,000.)
- With interest rates currently the lowest in years, sellers can get a much higher rate from a buyer than they can get from any financial institution.
- The tax consequences of accepting terms can be much more advantageous than those of an all-cash sale.
- Financing the sale helps assure the success of both the sale and the business, since the buyer will perceive the offer of terms as a vote of confidence.
Obviously, there are no guarantees that the buyer will be successful in operating the business. However, it is well to note that, in most transactions, buyers are putting a substantial amount of personal cash on the line–in many cases, their entire capital. Although this investment doesn’t insure success, it does mean that the buyer will work hard to support such a commitment.
There are many ways to structure the seller-financed sale that make sense for both buyer and seller. Creative financing is an area where your business broker professional can be of help. He or she can recommend a variety of payment plans that, in many cases, can mean the difference between a successful transaction and one that is not. Serious sellers owe it to themselves to consider financing the sale. By lending a helping hand to buyers, they will, in most cases, be helping themselves as well.
The post Seller Financing: It Makes Dollars and Sense appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
There are many things that you should be doing to deal with the COVID-19 pandemic. At the top of the list is to be proactive. Now is the time to be thinking about how best to position your business after the economy has returned to something near normal. Now is not the time for self-pity. In fact, not preparing for the relaunch of the economy will cost you.
In David Finkel’s recent Inc. article entitled, “10 Things Every Small-Business Owner Needs to Do to Deal with the Impact of COVID-19 on Their Business,” Finkel outlines the 10 key steps business owners should take immediately. Finkel is the author of 12 business books and CEO of Maui Mastermind business coaching company.
There is no way of knowing how long the COVID-19 fueled economic downturn will last, and that means time is of the essence. Business owners, regardless of their particular sector, need to prepare as though the economy could relaunch tomorrow.
Finkel’s 10 Things:
- Take steps to protect your staff and customers from getting sick.
- Tell your customers what safety steps you’re taking.
- Educate your staff on how to stay healthy at work and at home.
- Engage in scenarios planning to deal with how markets could change.
- Enlist vendors and suppliers for help. You should ask them to negotiate payment terms.
- Take steps to plan out your cash flow.
- Open a dialogue with your management team.
- Go on the offensive and look for opportunities.
- Get your team together and brainstorm.
- Be sure your key leaders communicate in a united fashion.
There are definitely some commonalities amongst these 10 important steps. You’ll notice that communication and education are at the heart of most of these points.
There is a lot of fear and uncertainty out there. More than almost any time in modern history now is the time to communicate. All business owners should be advised to communicate with their customers, clients, suppliers, staff, and management team in a clear fashion. Effective communication based around a consistent and logical message can help to reduce fear. The fear sections of the brain are driven by our primordial ancestors’ dread of the unknown lurking in the darkness. Part of being a good leader is to reduce those fears whenever possible.
Another common thread is planning, which includes looking for new opportunities. Whenever there is chaos and fear, there are also opportunities. You should be looking for those opportunities, whether it is improving your own business practices or looking for other companies to buy.
Good communication and planning can help you navigate these choppy waters. Planning for the recovery from COVID-19 pandemic could be the difference between staying in business and going out of business.
Thinking about whether or not you are ready to exit is an important question. It’s something that every business owner will have to address at some point. Importantly, you don’t want to wait until the 11th hour to prepare to sell your business. There are far too many pieces in this particular puzzle to wait until the last minute. You’ll want to begin the process sooner by asking yourself some key questions.
First, you’ll need to determine the actual value of your business. It is a harsh truth, but what you think your business is worth and what the market feels that it is worth may be two very different things.
This point serves to underscore the importance of working with a business broker or M&A advisor early in the process. An experienced broker knows how to go about determining a price that will generate interest and seem fair. Remember that at the end of the day, it will be the marketplace that determines the value of your business, but working with a seasoned professional is an excellent way to match your offering price with what the market will ultimately bear.
Secondly, you’ll want to consider whether or not you truly want to sell. It is not uncommon for business owners to begin the process of selling their business only to realize a few hard facts. Wanting to sell and the time being right to sell are often two different things.
Upon placing your business on the market for sale, you may learn that you’re not emotionally or financially ready. If this happens to you, consider it a learning experience that will serve you well down the line.
Get Your Ducks in a Row
If you have done a financial assessment, a little soul searching and have begun working with a business broker or M&A advisor to determine that now is a good time to sell your business, then there are several steps you’ll need to take. You can be sure that any serious prospective buyer will want a good deal of information regarding your company.
At the top of the list of items potential buyers will want to see are three years of profit and loss statements as well as federal income tax returns for the business. Other important documents ranging from lease and lease related documents, lists of loans against the business and a copy of a franchise agreement, when applicable, are all additional documents that you will need to provide. You should also have a list of fixtures and equipment, copies of equipment leases, lists of fixtures and equipment, and an approximate amount of inventory on hand. A failure to not have this information organized and ready to present at a moment’s notice could be a costly mistake.
Working with professionals, such as accountants, lawyers, and brokers, is a savvy move. Owning and operating a business can be a complex process, and the same holds true for selling a business. Investing the time to seek out experienced and professional advice is the first step in selling your business.
Determining when it’s finally the right time to sell can be a tricky proposition. If you are thinking about selling your business, one of the best steps you can take is to contact a business broker. A good business broker will have years, or even decades, of proven experience under his or her belt. He or she will be able to guide you through the process of determining what you need to do in order to get your business ready to sell.
One major reason you should contact a business broker long before you think you might want to sell is that you never know when the right time to sell may arise. Market forces may change, unexpected events like a large competitor entering your area, or a range of other factors could all lead you to the conclusion that now, and not later, is the time to sell.
In a recent The Tokenist article, “When is the Best Time to Sell a Business?”, author Tim Fries covers a variety of factors in determining when is the best time to sell. At the top of Fries’ list is growth. If your company can demonstrate a consistent history of growth, that is a good thing. Or as Fries phrases it, “What never varies, however, is the fact that growth is a key component, buyers will look for.” Growth will be the shield by which you justify your price when you place your business on the market.
If your business is experiencing significant growth then you have a very strong indicator that now could be the time to sell. Fries points to a quote from Cerius Executives’, CEO, Pamela Wasley who states, “When your business has grown substantially, it might be time to consider selling it. Running a business is risky, and the bigger you get, the bigger the risks you have to face.” Again, growth is at the heart of determining whether or not you should sell.
Knowing the “lay of the land” is certainly a smart move. For example, have there been a variety of businesses similar to your own that have sold or were acquired recently? If the answer is “yes,” then that is another good indicator that there is substantial interest in your type of business.
Reviewing similar businesses to your own that have sold recently can help you determine how much buyers are paying for comparable businesses. This can help you spot potential trends. In short, you should be aware of market factors. As Fries points out, everything from relatively low taxes and low interest rates to strength in the overall economy and an upward trend of sales prices can impact the optimal times for a sale.
Now, as in this exact moment, might not be the right time for you to sell. Getting your business ready to sell takes time and preparation. Fries points out that smart sellers “look for a good time, not the perfect time” to sell a business. Working with a business broker is a great way to determine if now is the right time to sell your business and what steps you have to take in order to be prepared for when the time is right.
It is never too early to start thinking about what tax structure you should use when it comes time to sell your business. A simple, but undeniable, rule of life is that taxes matter and they can’t be overlooked. Author Tim Fries at The Tokenist has written an excellent and quite detailed overview article on what tax issues business owners need to consider before selling their business. His article, “What Tax Structure Should You Use When Selling Your Business?” explores many aspects of a topic that many business owners fail to invest enough time in, namely taxes.
As Fries astutely points out, the taxes involving the sale of a business can be complex and are usually unknown to those selling a business for the first time. Your tax structure can influence how much money you receive at the closing of your deal, so it’s a very good idea to pay attention to all aspects of taxation and your business. It is key to remember, “When you are selling your business – as far as taxes are concerned – you’re ultimately selling a collection of assets.”
Fries points out that taxes and selling a business are no small matter. It is possible that up to 50% of the sale of a business can go to taxes. Don’t worry if you are learning this for the first time and feel more than a little shocked. However, this fact does a good job of illuminating the importance of setting up the right tax structure for your business. While you might not be able to get around taxes altogether by investing the time and effort to set up the right structure for your business, you can keep from paying more taxes than is necessary.
There are a lot of variables that go into how much you will ultimately have to pay in taxes. Let’s take a look at some of the key questions Fries raises in his article.
- Is your sale considered ordinary income or is the sale considered capital gains?
- Are you operating as an LLC, a sole proprietorship, a partnership or are you operating as a corporation?
- What portion of the sale price goes to tangible assets as compared to intangible assets?
- Is there a difference between your tax basis and the proceeds from your sale?
- What does your depreciation look like?
- Don’t expect that the buyer will instantly agree to your terms.
- Realize that the decisions you make during negotiations with a buyer will have tax implications.
- Is an installment sale right for your business?
- With C corporations, sellers usually want a stock sale whereas buyers generally prefer an asset sale.
- Cashing out immediately, where you receive all your funds at once, will increase your tax liability.
- Have you considered switching to an S corporation?
- Have you consulted with experts to decide which tax structure is best for you?
- Have you consulted with a business broker?
Selling a business is obviously complicated. Finding a seasoned business broker can help you demystify many aspects of buying and selling a business. Ultimately, having the best deal structure and finding the right buyer can be a labyrinthian process. Having the very best professional help in your corner is simply a must.
M&A purchasing agreements can have a lot of moving parts. A recent article from Meghan Daniels entitled, “The Makings of the M&A Purchase Agreement” serves to outline a range of facts including that every M&A deal is different. The article, which serves as a general overview, raises a range of good points.
Components of the Deal
It should come as no surprise that M&A purchase agreements have various components. Everything from definitions and executive provisions to representatives, warranties and schedules, indemnifications and interim and post-closing covenants are all covered in these purchase agreements. Other key factors included in M&A purchase agreements are closing conditions and break-up fees.
Advice for Sellers
In her article, Daniels includes a range of tips for sellers. She correctly points out that negotiating a purchase agreement (as well as the different stages involved in finalizing that agreement) can be both time consuming and stressful.
As any good business broker will tell you, business owners have to be careful not to let their businesses suffer while they are going through the complex process of selling. Selling a business is hard work, and this fact underscores the importance of working with a proven broker.
Likewise, Daniels observes that any serious buyer is likely to look quite closely at your business’s financials, which is yet another reason to work with key professionals during the process. Additionally, you don’t want to wait until the last moment to get your “financial house in order.”
You can be completely certain that prospective buyers will want to examine your finances closely before making an offer. The sooner you begin working on getting your finances together, the better off you’ll be.
Use Trusted Pros
Another key point Daniels makes is that there will be tension, as every party is looking to protect their own best interests. Having an experienced negotiator in your corner is a must. Make sure your negotiator has bought and sold businesses in the past, and he or she will understand what pitfalls and potential problems may be lurking on the horizon. Daniel’s view is that the sale price isn’t the only variable of importance. Factors such as the terms of the deal must be taken into consideration.
The bottom line is that there are many reasons to work with a business broker. A business broker understands the diverse complexities of an M&A purchase agreement. They also have experience helping business owners organize their financial information and can prove invaluable during negotiations. For most business owners, selling their business is the single most important business decision they will ever make. Find someone who understands the process and can act as a guide through the process.
The post Understanding M&A Purchasing Agreements appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
The old saying, “an ounce of prevention is worth a pound of cure,” most definitely applies to any business owner that believes he or she will someday want to sell his or her business. The bottom line is that every business owner has to transition out of ownership at some point. In a recent Inc. article, “Four Mistakes That Could Lower Your Business’s Value and Weaken Its Salability,” author Bob House explores 4 mistakes that could spell trouble for business owners looking to sell.
No doubt House explores some excellent points in his article, such as that you should always have what he calls, “a selling mindset.” The reason this mindset is potentially invaluable for a business owner is that when operating in this way, sellers are essentially forced to stay on their toes.
Or as House writes, “a selling mindset encourages continual innovation, growth, and investment, helping your business stay ahead of the competition and at the top of its potential.” Having a “selling mindset” means that business owners have no choice but to perform periodic reality checks and access the strengths and weaknesses of their businesses.
Mistake #1 Poor Record Keeping
For House, poor record-keeping tops the list of big mistakes that business owners need to address. As House points out, both potential buyers and brokers will want to examine your books for the last few years. The odds are excellent that before anyone buys your business, they will look very closely at every aspect of your financials, ranging from your sales history to your operating costs.
Mistake #2 Failure to Innovate
The next potential mistake that business owners need to avoid is a failure to innovate. House notes that a lack of tech-savviness could make your business less attractive to prospective buyers. The simple fact is that virtually every business is now impacted in some way by its online presence, whether it is the quality of that presence or lack of it altogether.
For House, a failure to maintain an active online presence could be associated with a failure to innovate. Even if your company is innovative, if you do not maintain a coherent and robust online presence, this could portray your company in a negative light.
Mistake #3 Unstable Workforce
House also feels that having an unstable workforce could spell trouble for your business’s value and negatively impact its salability. Most prospective buyers will not be very eager to buy a business that they know has a lot of employee turnover. In general, new business owners crave stability. Attracting and keeping great employees could make all the difference when it comes time to sell your business.
Mistake #4 Delayed Investments
The final factor that House notes as a potential issue for those looking to sell their business is delaying investments and improvements. House states that it is important for owners to continue to invest even if they know they are going to sell. Investing in your business can help it expand, grow and showcase its potential future growth.
Another excellent way to prevent making mistakes that could interfere with your ability to sell your business is to begin working with a business broker. A top-notch broker knows what mistakes you should avoid. This experience will not only save you countless headaches but also help you preserve the value of your business.
The post Key Mistakes that Could Impact Your Sale appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Every year countless great deals, deals that would have otherwise gone through, are undone due to a failure to properly utilize and follow confidentiality agreements. A failure to adhere to this essential contract can lead to a myriad of problems. These issues range from employees discovering that a business is going to be sold and quitting to key customers learning of the potential sale and taking their business elsewhere. Needless to say, issues such as these can stand in the way of a sale successfully going through. Maintaining confidentiality throughout the sales process is of paramount importance.
Utilizing a confidentiality agreement, often referred to as a non-disclosure agreement, is a common practice and one that you should fully embrace. There are many and diverse benefits to working with a business broker; one of those benefits is that business brokers know how to properly use confidentiality agreements and what should be contained within them.
By using a confidentiality agreement, the seller gains protection from a prospective buyer disclosing confidential information during the sales process. Originally, confidentiality agreements were utilized to prevent prospective buyers from letting the world at large know that a business was for sale.
Today, these contracts have evolved and now cover an array of potential seller concerns. A good confidentiality agreement will help to ensure that a prospective buyer doesn’t disclose proprietary information, trade secrets or key information learned about the business during the sales process.
Creating a solid confidentiality agreement is serious business and should not be rushed into. They should include, first and foremost, what areas are to be covered by the agreement, or in other words what is, and is not confidential. Additional areas of concern, such as how confidential information will be shared and marked, the remedy for breaches of confidentiality and the terms of the agreement, for example, how long the agreement is to remain enforced, should also be addressed.
A key area that should not be overlooked when creating a confidentiality agreement is that the prospective buyer will not hire any key people away from the selling company. Every business and every situation is different. As a result, confidentiality agreements must be tailored to each business and each situation.
When it comes to selling a business, few factors are as critical as establishing and maintaining confidentiality. The last thing any business wants is for its confidential information to land in the hands of a key competitor. Business brokers understand the value of maintaining confidentiality and know what steps to take to ensure that it is maintained throughout the sales process.