Buying & Selling A Business in Lincoln, NE – 2018

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Buying & Selling A Business in Lincoln, NE – 2018

When a business changes hands, it’s a big deal for both the buyer and the seller. With the substantial nature of this type of transaction, no matter which side you fall on, you’ll want to have a team of experts to guide you through it. The typical professionals to have actively involved and working on your behalf would include a business broker, an accountant, a banker, and a lawyer.

Jethro Hopkins No Coast Business Advisors Headshot

Jethro Hopkins
No Coast Business Advisors

“I can’t emphasize enough the importance of working with someone who specializes in the sale of businesses, with that education and experience to offer,” says Jethro Hopkins with No Coast Business Advisors. “A professional selling commercial real estate property and a professional selling the actual business, although obviously related in most cases, will have different training and working knowledge as well as different tools and resources at their disposal. You’ve probably all heard the advice that you don’t need to be good at many things, you just need to be great at one, and this is an excellent example of expert vs. generalist. If there’s ever real estate involved, I call my real estate contact and vice versa. Similarly, it’s to your advantage to work with a professional who has a solid network of professional contacts in the related specialty areas that encompass every aspect of the transaction. You can get solid referrals this way, too.”

When looking to hire a business broker to buy or sell, in the initial meeting Hopkins advises to get the answers to the following questions in order to make the best decision: *When do they get paid and what do they get paid? (For obvious reasons.) *Who handles closing and is responsible for preparing the closing documents? (This could be a lawyer, broker or title company – there are different ways it’s handled.) *How are they going to market/advertise the business? (A proactive approach and one that has a reach bigger than just Lincoln and Omaha is advised. Just putting up a listing on a website and waiting for someone to bite isn’t enough.) *How long have they been doing it? (Speaks to experience.) *Is your broker an owner, employee, or subcontractor? (An owner will almost always be the most invested in the outcome and how business is conducted throughout because it’s his/her reputation on the line. That’s not to say the others won’t do an excellent job, but it’s something to consider. Also, point of contact is important, such as if you’ll be regularly communicating with the owner or his/her secretary or assistant.) *How will they protect confidentiality? (Example: Any broker who takes pictures of your business for the listing, regardless if any signage is present, is not doing everything possible to protect the confidentiality of the sale. Particularly with the worldwide web, it’s very easy to connect the dots when you have the type of business and city in the listing.) *What references can you provide? (Be sure to ask for references from the specific broker, not just the brokerage. Individual performance is important. If they can’t provide you with references for any reason, whatever the case may be, it’s a big red flag and you can surely do better. Also, don’t just be satisfied with the fact that they provided references, follow up on them.)

Kelsey Appleby
SP Group, P.C.

In agreement to the importance of a team approach, Kelsey Appleby with SP Group, P.C. further advises, “It is important to have a team of advisors. In addition to your accountant, these include attorneys, bankers, brokers, and consultants. Having an expert involved in the purchase or sale transaction from start to finish can reap numerous benefits as these experts know the right questions to ask and documents to request for a successful transaction. Furthermore, buying or selling a business is often an emotional decision. With all of the emotions involved, it is important to have an accountant or tax advisor provide an objective, yet expert opinion to the purchaser or seller of a business. Doing so will ease the process, provide more accurate information, and ultimately result in a better decision. Purchasing or selling a business is a complex process, and an accountant can provide advice regarding the business’s worth, the best structure for a given transaction, and the tax consequences of the sale.”

Aside from the professionals involved, Appleby also notes the importance of timing and a few other key aspects. “It is best to plan the process of a purchase or sale over the span of a couple of years. Doing so can reduce the likelihood of rushing into or making uninformed decisions. Planning can also help the buyer or seller clean up the bookkeeping, take action to get the most out of the transaction, or even take advantage of certain conditions in the market. Knowing whether it is a sellers’ or buyers’ market or what tax legislation will be in place for the upcoming year can affect the decisions that go into a purchase or sale of a business. We have many clients come to us years in advance. They know they want to sell their business(es) in the near future and want advice regarding steps to take to make sure they are ready to sell when the right time and buyer comes along. Also with respect to timing, many clients forget about the tax consequences of selling a business and can be surprised by their income tax liability in the year of sale. Planning with a tax advisor can help to minimize the taxes owed or at least be prepared to pay them once April comes around. Oftentimes, an installment sale can be used to spread the proceeds of the sale over several years. This spreads the capital gain taxes from the sale over several years rather than a huge lump sum in one single tax year.”

In conclusion, she states, “Buying or selling a business is an exciting time for both parties. However, the complexity of these transactions can leave business owners feeling overwhelmed. Finding a trustworthy accountant with expertise in buying/selling a business can make all the difference when making these life-changing decisions.”

Finally, the legal advice from your lawyer will be invaluable for a number of different reasons. “Having handled the legal aspects of hundreds of business transitions, I’ve learned that the smoothest sales involve an attorney from the beginning to the end,” says Susan Napolitano with Berry Law Firm. “Ideally, a seller should visit with his or her attorney (and accountant) at least one tax year before listing the business for sale to prepare for a succession. It can be helpful when the seller’s attorney understands the seller’s day-to-day business, but it is imperative that the seller’s attorney understands the unique legal aspects of the seller’s business transition. I don’t need to know how to perform a root canal to sell a dental practice, but I better know the federal and state laws that govern the transfer of medical records.

Preparing your business for sale by visiting your lawyer and your accountant well in advance of listing the business will help a seller get the best valuation and clean up any legal loose ends. It also puts your trusted advisors on notice that you are going to need them to protect your best interest and be your advocate throughout the sale transaction.

As for advice, as was previously mentioned, beware of unqualified ‘consultants’ who want to broker the sale of your business. They feed on your fear of lawyer fees; they play up their knowledge of your industry to gain your trust, then they take 8-10% of your purchase price for themselves. I have seen very sophisticated professionals be taken by shady consultants and ultimately end up with final documents that were negotiated and drafted by a non-lawyer at a price much higher than a lawyer would have charged. A good business lawyer prepares you for the journey, informs your choices along the way, and fights for your best interest throughout the entire process. One unfortunate mistake that seems to arise from this misconception is mistrust, hostility, and blurred boundaries between advocates who should be working together for the client’s best interest. I’ve seen this occur most often between accountants and lawyers. Instead of respecting each other’s’ areas of expertise, they try to be a one-stop shop for the client. It should be a red flag if one of your advocates, without good reason, refuses to coordinate with another of your advocates. Also, do not ever hire a business broker who represents both sides of a transaction. Your advocate should be YOUR advocate—no one else’s.”

Similarly, she also cautions, “Baby Boomers are retiring. For sellers, this means selling before peak inventory saturation. For buyers, this means a lot more due diligence in sorting good business investments from bad ones. Cultural shifts often create a temporary bath of market chaos that will be bliss for some and disastrous for others. When either buyers or sellers get overwhelmed or desperate, predators of all kinds come in and offer to lift the burden. Whether your sale or purchase outcome yields bliss or disaster is often determined by who you trust. Choose wisely. Finally, do things right the first time. Never rush through something, especially if you don’t understand it. Don’t allow anyone to rush you. Trust your gut.”

The bottom line is that if you’re considering buying or selling a business, the team of seasoned experts you entrust with every aspect will determine the outcome. Choose wisely, indeed.


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