Buying/Selling a Business

The most interaction many of us have with buying and selling a business is simply seeing a “now open” sign in a store-front window. However, there’s a lot more than meets the eye on both the buying and selling side of business transactions. This is why the advice and services of our industry professionals are greatly sought after for these proceedings, both during the process and for the new owner while in transition. In Lincoln, there are many different types of resources available for both buyers and sellers seizing the wealth of opportunities in our diverse commercial landscape.

Often the initial step, once a business opportunity presented by a seller is identified by a potential buyer, a review of the books ensues. Therefore, multiple years of documented financial information should be readily available to get the ball rolling. A matter of importance to both buyers and sellers is the financial status of the business. It can of course be a selling point, but it can also be a cautionary detail that lets a buyer know what to expect if they are willing to take the chance. A buyer needs to make sure that they understand all of the costs associated with taking over and operating the business. As for the seller, it is important to have this information compiled in a way that is easy to read and understand with key documents, such as a profit and loss statement, ready for presentation. Using a software system, such as Quickbooks, and having an experienced accountant conduct a regular audit are highly recommended.

In addition to keeping accurate records, Mary Jo Cassner of Transworld Business Advisors advises, “Pay yourself so that you are able to take out the essentials, such as Social Security and Medicare, and pay your taxes. But, make sure you reduce your expenses and keep all of your cash in your business. That is the key to making your business strong financially. Pay yourself a minimal amount and maximize that bottom net profit. Keeping your money in the business also helps with selling your business because you want to look as profitable as possible to a potential buyer. When it comes time to sell, opting to work with a transactional broker will ensure that everything is valuated properly to yield the best results. It is imperative to work with somebody whose specialty is matching buyers and sellers and controlling the flow through the close of a business purchase.”

Keep in mind that it is wise to keep your credit in check if you are looking to buy or sell a business. Cassner also suggests having at least $15,000 down on a business when buying. You should also have a sufficient amount of start-up capital for unforeseen expenses in the first six months.

Transworld Business Advisors is a great local source for those both buying and selling a business in the area. If buying, give them a call and they are sure to be able to find you one that fits your criteria and standards. They have connections to businesses of all sizes and types. On the selling side, connecting sellers with qualified buyers is their forte.

Whether buying or selling a business, your financial institution is definitely going to be a key resource for that transaction. Particularly for local businesses, it is advised to work with a locally owned and operated bank if at all possible.

The buyer in particular must make sure that they have a full understanding of the business financials; your lender can be of assistance in thoroughly reviewing the financial information with that in mind as well. There are times they may question certain items that may not be identified by someone who does not review financial statements on a regular basis.

Darcie Ross of West Gate Bank® directs those in the market to buy to analyze the economic conditions that may impact the business that they are buying too. She explains, “Depending on the business type, it is of great importance to understand the economic conditions that come in to play. Seasonality of the business, possible rising interest rates, market competition, life cycle of the business, necessary capital expenditures, and government regulations are a few things that may have an impact on the success of the business.”

She adds, “The best advice I have for both a buyer and the seller is to have a good team of experts, such as a broker, accountant, attorney, banker, and insurance agent.”

In truth, similar to buying a home, representing yourself is discouraged because there are so many moving parts and critical details to evaluate. A professional business brokerage is very familiar with the process of buying and selling a business as they do these activities for a living. This expertise will save you a lot of money and issues in the long run, guaranteed.

No Coast Business Advisors offers buyer representation in addition to helping parties who want to sell their business find a qualified buyer and get the deal done. “Before actually pulling the trigger on buying a business, I’d offer anyone three tips towards having a seamless exchange; require proof of any key details that would affect the transaction, at closing before you sign, confirm that all of the equipment works (you have already done your walk-through, but once you sign you are purchasing it as it is represented), and lastly, talk to the bank early and often–especially if you are buying something you are not paying cash for!” advises Jethro Hopkins of No Coast Business Advisors. “Buyers should always do their due diligence. For example, you can pull a previous year’s tax returns on a business to make sure that they match up with the returns that the seller is giving to you. You would be surprised how easy it is to change these with a computer. Or, if they are only giving you profit and loss reports you can pull the tax returns yourself once you have a signed offer. The takeaway here is to make sure that everything is as it should be before you go through with such a major transaction. These are things that are second-nature for a professional to check.

When it comes to selling a business, there are many things that a professional business brokerage will handle. This might include establishing a market value, knowing which business a bank will loan on and what dollar amounts are available for loans, protecting the confidentiality of the seller, conducting background checks to confirm that the buyers are qualified before proceeding so nobody’s time is wasted, utilizing lenders and alternative forms of financing, and more. Additionally, these professionals are the ones who tend to catch the mistakes as they comb through the details with a fine-tooth comb.

As the seller’s representative, everything goes through the broker, which helps to eliminate any number of hassles from fielding incoming phone calls to get all of the necessary items in order and meeting with the other parties who are a part of the transaction. Here’s what it looks like for a business owner who is actively trying to sell his/her business without any outside assistance: you are not only fulfilling your role as owner and performing any other jobs as you would normally, but you are putting yourself in a position where you will also be fielding all of the random inquiries and putting together the promotional items as well as figuring out legal paperwork, accounting, and responsible for addressing anything that comes up in a timely manner…and so on.

Direct representation also ensures the necessary confidentiality is upheld, which is important with financial information being disclosed, as well as the potential impact of the sale on employees and customers. When people find out a business may be for sale, any number of things can definitely go awry. A good broker’s primary duty is to protect you, and then to sell your business.

Regardless of whether you’re on the buying or selling end, it never hurts to have a professional review the deal that you are going to be potentially making. You do not necessarily have to hire one to work for you from start to finish, but at minimum, most competent brokers will sit down, and for a small fee, review and discuss everything.”

Not all business brokerages are created equal: As with any evaluating anyone you are choosing to do business with, it is important to know all costs you may incur in order to avoid the hidden ones. Particularly with respect to sellers, Hopkins further advises, “If we can’t sell it, we do not get paid. Advertising is one area in particular that can be murky as to who is responsible for payment. At No Coast Business Advisors, marketing the business through the appropriate channels is complimentary to those who are utilizing our services as a part of the package.”

Timing is also an important factor. “Small businesses are selling and this is the time of the year when the most buyers come out, but yet there are the least amount of sellers,” Hopkins explains. “If you are looking to sell, June, July, and August are the optimal months to get your businesses listed. If your paperwork is in order and I have what I need—the past three year’s tax returns, current year and previous year profit and loss, inventory, and asset reports/lists– then after a meeting with an owner, I can list the business within 48 hours, so there’s still time to hit that window.”

Franchises in particular present an excellent opportunity for potential buyers because they already come complete with infrastructure that has been proven to be successful for many other business owners as well as offering continued support long after the sale is completed. It remains of the best ways to live out the “American Dream”– operating your own business with the support of a brand or business model that fits your strengths and goals. Investing in a business is exciting, but it can also be a little intimidating. A great way to easy your mind and get all of the answers that you need is to talk to a franchise company, such as Jani-King, that interests you and complete the disclosure process with them. A business broker will be able to set this up for you or you can also do so as an independent party.

Corey Landrie of Jani-King assures that in the disclosure process, you do not have to be 100 percent committed as it is merely just a consultation. “There is no obligation with the disclosure process; this is simply the time when the full program is presented to you so that you can gather the necessary information to make a decision when you are ready. Jani-King always suggests and follows the guidelines that are put in place by the Federal Trade Commission (FTC), which mandates that a Franchise Disclosure Document (FDD) is provided and signed as proof, so that each prospective business owner has a chance to do their due diligence before actually investing in a business. Also, when purchasing or even selling a business, make sure that both parties know of all of the policies and procedures in regards to what business fees and expenses may exist.”

While what happens during the transaction is of great importance, what happens afterwards is significant too as far as the buyer is concerned. When assuming ownership of an existing business, a time of transition is to be expected and with that, changes are almost always inevitable.

One of the most pivotal aspects of a functioning business is its staff. A great team is required for day-to-day business and its success overall. When a business changes hands, while the current employees may choose or be offered the opportunity to stay, they may also opt to leave to pursue other opportunities for any number of reasons or the buyer may choose to let them go in favor of assembling their own team. As the sale of a business marks a time of transition, no matter the conditions of the sale, you will likely be addressing turnover. If your need are few, then many times it is much easier to locate those key people that share your vision through networking, friends, and family. However, sometimes there are instances when more expertise is required to find the right people and that is where a professional employment agency can be of great assistance. Recruiters get to know you and your business and then apply their resources and connections to find those who will be the best fit for the workplace.

On the topic of buying and selling a business, Sue Ellen Stutzman of Nesco Resource contributes, “When looking to buy or sell a business, there are many different factors that we look at, including: knowledge and expertise, market and demand, total project costs, competition, location, laws, rules, regulations, staff and manpower, and technology. It is also of great importance that you do not settle for any less that the ideal fit when it comes to your future employees. Hiring a qualified staff that delivers outstanding customer service and make your customers want to come back and repeat their experience again and again is the ultimate goal.”

As with staffing, promotion is of particular importance to those who have just purchased a business. Many times rebranding is a goal, but most often initially it is just getting the word out that the business will remain open under new ownership and then building upon that. Online presence is another thing that often needs to be assessed, as well as addressing any critical gaps or existing campaigns that are running and may need to be adjusted accordingly.

With the mission of loving what you do, Evol Empire Creative, newly expanded into Lincoln, is an end-to-end digital agency and covers the whole spectrum of digital media once hired on by a business. Altogether, Evol Empire Creative handles brand development, brand content, all front-end web development (the visual side), search engine optimization (SEO), search engine marketing, targeting specific demographics, social media marketing, among many other relevant services.

Andrew Tuzson of Evol Empire Creative provides a more detailed explanation of media applications for a new business owner. “Once you have actually purchased a business, it is very important at the beginning to approach that new marketing task head on and make a face for this new business. Addressing critical items like your website and an online presence along with promoting that the business is still open is very significant. In addition, it can also prove to be a positive move to consider rebranding the business as a whole. Since it is under new ownership, it is only appropriate that the brand reflects the new owner, the business, and the culture behind it.”

Tuzson reminds anyone who is acquiring a business that the key to successful branding is consistency. A big disconnect in digital marketing is that business owners are commonly seeking multiple companies to fill different but related roles, which can result in branding and messaging confusion. As such, when evaluating the key players you will need to bring on, it is best to look at the bigger picture and then find a company to partner with that is experienced and can meet most if not all of your requirements. As a result, you will also gain a better understanding of your objectives for the future, including which outlets and approaches are advisable, all the while ensuring that the same consistent strategy and message is applied across all domains.

Another big part of establishing your new brand, as well as effectively communicating your message, is the creative advertising production side of promotion. Utilizing the services of a local agency such as Red Thread will allow you to tap into the expertise of the professionals when crafting your unique message, which is what will set your business apart along with getting your name out there.

Generally speaking, Adam Kroft of Red Thread Creative explains that having an understanding of the business and your goals is a great place to start. “If your messaging is in place and your team is in place and ready to rock as a cohesive unit, no matter what you’ll be taking on in the beginning stages of assuming ownership, that backbone you’ve created will be there to support you throughout the whole process. Just make sure that everything aligns with your vision. Lincoln is an awesome place, especially lately, for up-and-coming businesses, so now is your time to get involved!”

With new branding comes the need for updated signage and promotional materials too. While it’s pretty hard to forget the prominent signs outside of your business, there are many other things to take into consideration here such as business cards, rate cards, pamphlets, banners and displays, vehicle wraps, company swag with a prominent logo, and more.

Along with staff and branding, location is yet another signature component of a business that could be subject to change under new ownership.

A new business owner is going to make the decision to either keep the business in its current location and eventually expand, or alternatively, move or down size depending on the company’s needs and direction for the future. Whether a business is downsizing or expanding, HIP OffiCenters is there to help. HIP OffiCenters Executive Office Suite is centrally located and provides office space for rent with multiple services available to help business owners grow and prosper. Their services, including a receptionist and personalized phone answering, all can be customized and tailored to meet any company’s wants or needs.

“HIP OffiCenters is full-service office environment,” says Michael Holroyd of HIP OffiCenters. “We’ve designed the space and offerings based on what would be ideal for a business owner. While renting from us, there are no upfront costs that one finds with build outs and adding infrastructure. High-speed fiber optic internet, an executive conference room, copy center, kitchen facilities, janitorial services, all utilities paid and free parking are all available on-site and included in your rent. HIP OffiCenters also offers virtual offices allowing companies to expand their business into new areas without taking on more space. The purpose of our business is to make work life easier, so companies can focus on growing and managing their business.”

If you’re staying in the existing location, the furnishings will either stay with the business as a part of the sale or will leave with the previous owner. For the latter, you’ll need to move quickly on getting everything in place so that the environment is functional and inviting. While you might have the budget to buy new items, keep in mind that finding quality items at auction is a great way to save money that you could be investing in other parts of the business. As for sellers, liquidating assets at auction is often a necessary part of the exit process.

Tom Rine of Rine Auctioneers explains, “Depending on the situation of course, we are able to assist with liquidation and turning assets into cash. Most of our experience has been with liquidating items commonly found in commercial settings, industrial equipment, and office equipment. If you just bought a business and still need to furnish it, or even advice as to what would look nice in the space or best fit your business’s needs, feel free to contact us for a consultation and we will help you find high-end furniture at a good price.”

Once your location has been established and you’re all set up, you’ll also want to focus on promoting where you are at now so that people know that you are still open for business and where they can find you when they need you.

Returning back to staffing considerations, there are certain instances when it may be favorable to partner with a company who can handle specific tasks, outsourcing them as opposed to adding to your team. For example, utilizing an answering service is a helpful way for a new business owner to ensure that excellent customer service is maintained during transition and that no balls are dropped or critical calls are missed. Executive Answering Service offers friendly telephone receptionists who can answer your phones whenever you cannot – whether you are on the other line, out of the office, with a client or spending treasured time with your family/friends.  Many callers will hang up and call someone else when they receive a voice mail or busy signal, resulting in what could be hundreds of dollars of lost business!

“Hiring, training and then the overhead cost for a friendly and customer service oriented telephone receptionist – including salary, benefits, etc. – is expensive!” says Megan Lipert-Murphy of Executive Answering Service. “Our operators can obtain messages and/or seamlessly transfer calls to you or your staff, just as if they are working directly in your office.  They are trained to be the best virtual receptionists in the industry. We don’t want to be just your answering service, our goal is to be a part of your team and your customers are our number one priority. Executive Answering Service is able to offer the quality of service that is aligned with your reputation and the communication technology that your business requires.”

Bookkeeping and payroll for employees is another area where you could choose to add to your staff, or alternatively, hire a company to handle it for you. The same is true for accounts receivable and collections.

When it comes to first, managing, and then growing your new business, one of the pivotal factors of making sure your recently purchased business thrives is ensuring that it is both viable and sustainable, and most importantly profitable. The business world is ever-changing and something that is profitable today is not guaranteed to be in 20 years.

For all of the decisions you’ll make down the line that will have an impact on your business, Aaron Newell of AR Solutions advises towards using the SWOT (strengths, weaknesses, opportunities, and threats) analysis to help you arrive at a solution that best addresses the issue at hand. “Using the SWOT analysis can help you weigh where you are at business-wise and decision-wise. This, for many, ends up being an eye-opener because in business it is often easy to overlook potential threats, in addition to weighing all of these factors. When making these decisions, whether they are towards buying or selling a business, having a partner in place always helps to speed up a process that can often become arduous. When a plan is in place, your chances of failing or making a bad decision are more slim than not having one.”

As you can see, there are so many things to be considered and that would be of value to those buying or selling a business, just as much during the process as after the transaction has concluded. Bottom line: When the opportunity comes about to either buy or sell, don’t go it alone. There are many experienced professionals in Lincoln that can offer help on either side, and who want to see you succeed in your efforts!