If you are considering buying a business, it is helpful to know the various steps in the business transaction process. Below you will find just a brief summary of the steps involved.
1. Preparation – Be prepared to demonstrate that you are a serious buyer to sellers, business brokers/intermediaries, legal and financial professionals, etc. Make sure your financial resources match up with the target business opportunity. Typically you will need 20-25% cash down payment, access to working capital, and a good credit rating to enable yourself to qualify for acquisition financing from a lender.
2. Finding A Business – When looking for a business to purchase, it is helpful to be clear about your reasons for wanting to buy a business. You will want to evaluate potential opportunities based on how well they meet your financial needs and how well they match up with your reasons for wanting to buy. Also be flexible in your search because historical statistics reveal that Buyers actually purchase a different type of business from what they originally sought in 7 of 10 transactions or 70% of the time.
3. Preliminary Review and Getting All Your Questions Answered – Once you find a business you are interested in make sure the business broker/intermediary or the seller answers all your questions to your satisfaction. Review all information carefully. Buying a business is serious business. There are financial risks involved so do not take any short cuts. Consult appropriate professionals throughout the process.
4. The Offer – Once you get preliminary questions answered, the next step is for you to prepare an Offer to Purchase based on the price and terms you feel are appropriate. Make sure your Offer is based on sound financial and valuation analysis.
The offer is then presented to the Seller who can approve it, reject it, or counter it with another offer. You have the decision of accepting the counter proposal from the Seller or rejecting it and going on to consider other opportunities.
5. Due Diligence – Once the offer price and terms are agreed upon, your next step will be due diligence. This important step is solely the Buyer’s responsibility. Due Diligence encompasses not only the financial records and systems, but also additional areas such as legal, management, operations, production, fixed assets, etc. You may choose to bring in professional advisors or do it on your own.
Closing – The legal closing documents will be prepared and the purchase of the business can be successfully closed. As new owner you should embrace your decision and begin your journey towards personal and financial success.
The small business Buyer of today is a bit different than the one of yesterday. Today’s Buyer has a much lower tolerance for risk, is concerned about financial statements, and often times is not overly focused on the business price but recognizes the more important issue is how much cash is required to buy. Today’s Buyer’s are much more sophisticated than yesterdays and have a better understanding of small business cash flow and the requirements for financing.
Today’s Buyer is finicky, due in part to the fact that they are not risk takers. Some individuals believe they are actually business Buyers searching for the American Dream, but they often times cannot make the leap of faith that is necessary to complete a sale. These “tire kickers” or “dreamers” will never actually purchase a business and in all honesty probably should remain working for someone else.
Real, qualified Buyers have different goals and objectives then you would think. Often times, money or income is not the primary reason for them to buy a small business. Actually Buyers buy because they are tired of working for someone else. They want to control their own lives. In some cases they have lost their job or will in the near future, are very unhappy with their job or are facing a transfer to a city they don’t want to move to. Surveys indicate that about half the people in the country are unhappy with their job and/or career. People buy a business to change their lifestyle.
So how do you know if you have what it takes to buy a business?
Who is a serious Buyer?
A serious Buyer:
· Has the necessary cash funds which are readily available
· Has a good credit history
· Able to make their own decisions
· Is flexible in type and location of business they will consider
· Has a realistic and sincere desire to buy
· Has a reasonably urgent (within three to six months) need to buy a business
· Is a moderate risk taker
· Is cooperative and willing to listen
· Values the importance of good professional advisors.
Sellers should take a second look at those who express interest in their business. If the prospect has very few of the above traits, perhaps the Seller should move on to the next potential Buyer. If you are a Buyer, or think you are, take a second look at the traits of the serious Buyer. If you don’t have most of them, you may not be as serious as you think. You may want to rethink the reasons for owning a business and be sure that this is the right decision for you.
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New Bedford, MA Business Executive, Kevin A. Nery
Attends International Conference for Professional Development
PHOENIX, AZ – Kevin A. Nery, CBB, CBI, M&AMI, President of The Nery Corporation in New Bedford, Massachusetts attended the IBBA/M&A Source National Conference for Professional Development on November 14-19, 2011 at the Pointe Hilton Tapatio Cliffs Resort in Phoenix, Arizona.
The International Business Brokers Association, (IBBA) and the M&A Source are the largest international organizations consisting of Professional Business Brokers, Business Intermediaries and Merger and Acquisitions Advisors with our 1,500 members worldwide
Kevin A. Nery holds professional Designations of CBB – Certified Business Brokers, CBI – Certified Business Intermediary and M&AMI – Merger and Acquisitions Master Intermediary. Mr. Nery attended workshops and classes covering the latest educational, marketing, research, and financing information. Mr. Nery completed recertification requirements for both CBI and M&AMI designations. Kevin also attended the middle market expo, meeting with Private Equity Groups (PEGs) specializing in the lower to middle market arena. The IBBA keynote speaker was Mr. Jack Mackey, CFE, Vice President, SMG Inc., one of the top 50 research firms in the U.S. The M&A Source keynote speaker was Michael O’Malley Jr., President of Family Business Dynamics LLC.
The Nery Corporation divisions are Coastal Business Brokers, Coastal Machinery and Equipment Appraisers, Coastal Commercial Real Estate Sales and Leasing, and Coastal Realty. The firm is located at 700 Pleasant Street, Suite 330 in downtown New Bedford, MA (508) 990-9800, Email: K.Nery@nerycorp.com. Website: www.nerycorp.com.
A Business Sellers Checklist of Do’s and Don’ts
If you are a business owner who is contemplating selling your business, please follow these do’s or don’ts:
- Do have all of your business documentation in order. This includes financial statements, tax returns, tax filings, lease agreements, loan documents, contracts, etc.
- Don’t underestimate the value of your business. Rely on a business valuation professional or an experienced business broker to recast your tax returns to reflect the true cash flow and value.
- Don’t overprice your business. This is crucial in order to attract the right buyer for your business and if not followed could bring irreparable damage to your effort.
- Do offer as favorable terms as you can. Even financially strong buyers want to leverage the sale as much as possible.
- Don’t wait too long to sell. The best time to sell is when business is good.
- Don’t wait until poor health, divorce, or a downturn occurs…sell from a strong position.
- Do allow at least six months or longer to sell your business. The national average is eight months. It is a unique process that could take a year or more to complete.
- Do plan to be patient and flexible during a potentially long process to achieve maximum results.
- Do use a professional business broker or intermediary. You should focus on continuing to operate your business at the highest level. Your broker will assist with determining the asking price, prepare a marketing plan of action to maximize the selling price, maintain confidentiality, handle all buyer activity, negotiations, bring offers and complete the entire transaction to a successful close.
By following this simple list, you can raise your chances of successfully selling your business at the highest value. Good luck.
Planing is key to positive business exit
Forecasters estimate that over the next ten years, at least one third of all business owners will transfer ownership. This translates into an estimated $4.6 trillion of personal wealth. Another statistic shows that generally, 75 percent of a business owner’s wealth is tied directly to their business.
Now the troubling fact is most business owners do not develop an exit plan. Estimates have it at only 15%. Unfortunately 85% of business owners rely on an involuntary event occurring to prompt them to sell or transfer their business – such as one of the Dismal D’s: Death, Disability, Divorce, Declining markets, Debt overload, or Dissenting owner.
So, how do you develop an exit plan? Business intermediaries and other professional consultants are able to assist you and usually a team approach (with a CPA, Estate & Business Attorney, Financial Planner, etc.) is preferred.
What are your goals? The Owner’s Goals should be clearly defined with all factors considered such as family or partner issues, business and personal financial matters, emotional and company specific issues, employees, etc.
Where are you now? The current financial status of the owner is reviewed. A valuation of the company is determined and the company’s history and its’ future is discussed. The state of the industry is reviewed along with the company’s position in the marketplace.
Where do you want to be? There are generally several options of selling or transferring business ownership. (1) Public offering (2) Third party buyer (3) Management (4) Other owners (5) Family (6) Employee stock ownership plan ESOP (7) Voluntary liquidation.
How do you get there? Some examples of ownership transfer strategies:
- To maximize the price paid by a third party buyer
- Sell the business under a controlled auction amongst competing strategic buyers
- In a management buyout, stage the buy-in by selling minority interests over time at affordable prices
- The owners execute a buy/sell agreement with defined pricing and funding mechanics
- Make lifetime gifts of minority ownership interests to family members
- Have the company pre-fund an ESOP over two to five years, borrowing the remaining purchase price from a bank
- Hire a professional auction company to liquidate the assets
Business owners who fail to plan for an exit may succumb to one of the Dismal D’s when it comes time to sell or transfer ownership. With a plan the owner has the freedom to decide how to successfully exit the business. When done with a purpose, the process can be a rewarding experience for all involved.
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Nantucket, MA Retail Business Sold
NANTUCKET, MA – Kevin A. Nery, CBB, CBI M&AMI, President of The Nery Corporation d/b/a Coastal Business Brokers in New Bedford, Massachusetts is pleased to announce the sale of the Nantucket Gourmet retail store on 4 India Street, Nantucket MA on December 31, 2010. The sellers, Nantucket Gourmet Inc., Patty and Jonathan Stone have owned and operated the store since 1998. The buyers, Nantucket Gourmet Guys Inc., Jordana and Michael Fleischut are Nantucket residents. The sale price was undisclosed.
Ridgway J. Crouch, CMEA, SBA, Senior Associate brokered the transaction. Coastal Business Brokers specializes in the sale of businesses in Eastern MA, Cape Cod and the Islands, and Rhode Island
The store was established in 1976 and occupies 1800 sq. ft. with additional storage and office space. Featured products are kitchenware, cookware, knives, small electric appliances, cookbooks, giftware, specialty foods, candy and, mixed nuts. There is also an in store takeout Deli with sandwiches, salads, cheeses etc.
The Nery Corporation divisions are Coastal Business Brokers, Coastal Machinery and Equipment Appraisers, Coastal Commercial Real Estate Sales and Leasing, and Coastal Realty. The firm is located at 700 Pleasant Street, Suite 330 in downtown New Bedford, MA (508) 990-9800, Email: coastalbusinessbrokers@nerycorp.com.
Website: www.nerycorp.com, nery.corp@nerycorp.com.
New Bedford, MA Business Executive, Kevin A. Nery
Attends International Conference for Professional Development
LAS VEGAS, NV – Kevin A. Nery, CBB, CBI M&AMI, President of The Nery Corporation in New Bedford, Massachusetts attended the IBBA/M&A Source National Conference for Professional Development on November 15-18, 2010 at the RIO All Suites Casino and Hotel in Las Vegas, Nevada.
The International Business Brokers Association, (IBBA) and the Merger and Acquisitions, (M&A) Source are the largest international organizations consisting of Professional Business Brokers, Business Intermediaries and Merger and Acquisitions Advisors with our 1,500 members worldwide.
Kevin A. Nery holds professional Designations of CBB Certified Business Broker, CBI Certified Business Intermediary and M&AMI – Merger and Acquisitions Master Intermediary (There are only 91 M&AMI professionals worldwide). Mr. Nery attended workshops and classes covering the latest educational, marketing, research, and financing information. Mr. Nery completed the recertification process for both CBI and M&AMI designations. Kevin also attended the middle market expo, meeting with Private Equity Groups (PEGs) specializing in the lower to middle market arena. The M&A Source keynote speaker was Mr. Todd G. Bucholz, world renown expert in economics, politics, and business. Mr. Bucholz, former Senior Economic Advisor to the White House, is also an accomplished author of best-selling books used in universities worldwide.
The Nery Corporation divisions are Coastal Business Brokers, Coastal Machinery and Equipment Appraisers, Coastal Commercial Real Estate Sales and Leasing, and Coastal Realty. The firm is located at 700 Pleasant Street, Suite 330 in downtown New Bedford, MA (508) 990-9800, Email:
coastalbusinessbrokers@nerycorp.com.