Buying & Selling a Business
Call in the Professionals to Get the Job Done Right
Maybe you’ve contemplated buying a business because you have a dream to run your own company or a talent you want to showcase. Or maybe you’ve been running your own business and are ready to get out or retire and you’re looking to sell. Either way, buying or selling a business is no small feat. If you think you can handle it on your own, you might want to think again. It’s a life-changing transaction, and you need some experts on your side to help determine true value and potential for the business. The last thing you want to do is end up buying a business based on numbers from the seller that were plumped up or deficiencies that were not disclosed. It’s not a handshake kind of deal. If your business isn’t doing well and you’re thinking of closing your doors, don’t just take the loss, either. Work with someone to sell it. After all, something is better than walking away and getting nothing.
“Don’t do it alone,” said No Coast Business Advisors Owner Jethro Hopkins. “Everybody thinks they’re smart enough to figure it out, but there’s a lot more involved than most people realize. You’ll need to have business advice, including a CPA (Certified Public Accountant), and a lawyer. There are a whole lot of legal and transition documents, and you need someone to figure out the true value of a business. When you buy your first business, you don’t know what you’re getting into. It’s a team sport, and you need a team or you’re going to leave money on the table and get blindsided.”
Jethro further warns against rushing a purchase or sale of a business.
“The average time it takes to sell a business that’s worth under a million bucks is 8.4 months right now,” he said. “If the economic conditions are weird or you have a unique business, it could take up to two years. It takes a lot of pre-planning, and it takes time.”
No Coast Business Advisors is a full-service business brokerage. Every broker at the business owns at least one business, and everyone has bought and sold their own businesses. They are also members of the International Business Brokers Association (IBBA). Jethro also is certified as a specialist in mainstream business and is the only Certified Business Intermediary in Nebraska, which means he has to be good enough to do the job and train others to do the same.
“We understand what both sides of the transaction are going through because we’ve been there,” Jethro said. We understand every angle. We understand business. We help people buy businesses, sell businesses, and grow businesses because we are experienced business owners and we have a proven record of getting it done right!”
When you hire No Coast, they handle market valuation that will give you a realistic market value for a business, and they know how to recast financials to show the true potential of that business. They’ll do a valuation for you, take it to market, and advertise it confidentially, because if everyone knows your business is for sale, it can damage your business in the meantime.
“Your business is either worth what your assets are worth or what your market value of your revenue stream is,” Jethro said. “That’s where people who are not business brokers go wrong. We’re a point of contact for all the business. We field questions, keep your marketing updated, and get nondisclosures signed to protect your financial information and your business. We can assist with walk-throughs, structure a deal, point clients to contacts for financial support, handle paperwork via our in-house lawyers. When I say we’re full-service, I mean we handle it all, from start to finish.”
Jethro said the market for business transactions in Lincoln is fairly active right now, but he worries about a lot of people shutting down due to economic stress from COVID and not calling a professional to get the most possible out of all of their hard work. The last shutdown was the final straw for a lot of businesses, and Jethro believes that a lot of business owners in Lincoln are, unfortunately, going to be closing and walking away.
“When the economy falls on its face, the selling of businesses goes up,” he said. “The market right now is fairly active, but the problem is there are a lot of people who should call someone like No Coast Business Advisors because if you’re in a position where something might possibly lead to closing your doors, you should take a shot at selling it and walking away with something instead of nothing. I’ve been fighting the battle for a long time, and my job is to help pass businesses on to the next generation of owners. Give me a chance to do that.”
Time of Great Prospects
It’s unfortunate, but sometimes what’s negative for one person or business means an opportunity for another. That seems to be the case, at least to some extent, with the pressure that COVID has applied, especially on small businesses, according to T. Troy Stentz, an enrolled agent and team accountant at SP Group, P.C. in Lincoln. SP Group is a public accounting firm that is built on serving entrepreneurs and their businesses.
“Despite the COVID-19 pandemic, a great deal of business activity continues to march on, including the buying and selling of businesses,” Troy said. “The pandemic has created significant challenges for some businesses, but many entrepreneurs consider it a time of great prospects, too. Times of economic upheaval can create transition opportunities that bring buyers and sellers together.”
Troy said buying or selling a business can be a very emotional time. For a buyer, he said, it is a decision that can determine their livelihood for many years to come and, for a seller, the sale of a business may be the culmination of decades of building and nurturing a company that represents a substantial part of their personal wealth. SP Group can provide the objective advice necessary to do thorough due diligence and help business owners make thoughtful decisions that can have tremendous financial and tax consequences. Maintenance of proper financial documentation is crucial to the process.
“Business sellers should make sure they have accurate and up-to-date financial statements,” Troy said. “Both buyers and sellers will use these numbers as part of the equation for determining the value of a business. Having an accountant review your books and financial statements will help identify issues before the business is put on the market, and an experienced accountant also can help with valuing the business.”
For those looking to buy a business, Troy points up the importance of hiring trusted advisors for legal matters, tax and accounting, and for commercial lending, if financing is involved. SP Group can provide guidance on the tax treatments of the various legal entities, including partnership, corporations, and limited liability companies. A new business owner likely will need to select and create a legal entity as part of the process of purchasing a business, too.
“Being a first-time business owner can bring to light government regulations and various tax matters that may be unforeseen before the purchase,” Troy said. “It’s easy for new entrepreneurs to fall into the trap of thinking they must find their own way to address these issues. SP Group wants to bring our experience with many types of ventures to bear and help minimize the regulatory headaches of business ownership.”
Finding Your True North
Stay-at-home orders sparked by COVID created a growing population of people sitting on their couches and shopping from their phones and tablets. In fact, research indicates that retail platforms enjoyed a 6% increase in global traffic increase in March 2020, registering 14.34 billion visits—up from 12.81 billion global visits in January 2020. One of the most important things you can do to increase the value of your business is to maximize your online presence. Oh, and don’t try to do it yourself. Free drag-and-drop website development tools aren’t going to you far. They use templates that are generic and not specifically designed to meet your business needs.
“It’s a must that you invest in a revenue-generating website,” said Renee Sobotka, founder and CEO of True North Technologies. “It’s more critical than ever for your business to be able to found online. Whatever service you are offering—local, national, or international—people will go to Google to find you. If you’re looking to sell your business, the purchaser will require a high Google ranking and a large number of social-media followers. If you can be found easily, you’ll increase the value of your company.”
The main way to accomplish that is to increase your Search Engine Optimization, or SEO, which includes having the right keywords and meta-descriptions for every page.
“Google will verify that your heading matches your keywords, which gives you credibility,” Renee said. “With every page that earns credibility, you increase your ranking with Google. Every page counts. If you do it right, your website ranking can prove to buyers that you’ll have continued growth in sales.”
True North Technologies has been experiencing a growing number of calls for website redesign and SEO. Business owners are figuring out how crucial it is to not just have a website, but to have a website converts traffic to customers. To help you grow your business in Lincoln, True North Technologies will augment your local and global SEO. Their attention to detail will be a tremendous benefit for your business.
“A lot of people don’t know that you need to claim your business to create a pin on Apple and Google maps. It’s completely free, and an accurate business listing will help you get phone calls and walk-ins from potential customers.”
In addition, True North Technologies will increase your backlinks and third-party references on other websites, or citations, which creates even more credibility for your business with Google. They can also create mobile apps with a Google review campaign to obtain those highly coveted five-star reviews.
In short, True North Technologies is focused on helping people grow their businesses.
“We want you to succeed as much as you want to succeed. To increase salability, an excellent web presence lends stability to revenue and profit margins,” Renee said. “Our proven strategy will demonstrate that you have replicable revenue. By sharing online traffic statistics, you can demonstrate growth and increased engagement. We are our clients’ biggest fans, and we want to see them knock it out of the park!”
Banking on a Transfer
First National Bank of Omaha (FNBO) also frequently supports clients who are buying or selling a business. On the buying side, the bank customizes loan structures to support acquisitions with strong prospects for the incremental growth of the target business in mind.
“Cash-flow recapture provisions and other features may be used when financing is primarily reliant on the acquired business and/or when the loan is under-secured,” said FNBO Senior Director, Commercial Banking Group Nathan McKown. “FNBO also provides accommodating Treasury services to assist in managing and consolidating cash collection and remittances during the transition and assimilation of the acquired business. The bank’s Global Banking Group is able to offer a full range of products when the acquired business is domiciled outside of the country or transacts extensively with foreign customers.”
On the selling side, FNBO turns to its Wealth Management division, which includes a Trust department that can provide advice when a completed sale results in a substantial liquidity event for its owner. In addition, FNBO has a Capital Markets division that can transact short-term investments and manage sizable amounts of liquidity for the seller.
FNBO saw a slowing, or pausing, of some business buying and selling early in the pandemic but the “new normal,” combined with low borrowing costs and plentiful levels of capital, deals are once again flowing through the processes. Still, Nathan has some advice for anyone considering a business transaction.
“For those considering the purchase or sale of a business, always consider hiring a great advisor,” he said. “In many cases, the biggest risk factor or the largest contributor of enterprise value may be intangible or qualitative. An advisor will understand those industry-specific nuances and steer the negotiation with your best interest in mind. Business sales are complex and should truly involve a team with a mindful, trained eye on the operational risk associated with ownership transfer or integration in the case of a strategic acquisition.”
Nathan reminds that anyone selling a business must be certain to maintain comprehensive accounting records and controls in place because any counterparty will seek to quickly identify what normalized operations represent. Things like good customer records, internal controls, management strength, and customer and vendor diversity also will enhance the perceived sustainability of a business. People contemplating first-time ownership have some other initial tests to run through their minds.
“If you’re thinking about buying your first business, be sure you have a passion for the work you do,” Nathan said. “Understand the value of the good or service you provide and build on that proposition. Use the resources you’ve developed and created—both internally and externally. Whether an external advisor or a great marketing firm, those resources will support and accelerate your success. Also, be sure you are realistic about what success looks like at various intervals, and celebrate the wins.”
Finally, Nathan said, if you are starting a new business or new project for an existing business you purchase, be sure to capitalize the venture properly.
“Sometimes, great ideas and strong ambitions are derailed when management is distracted by the lack of adequate funding,” he said.
Value of Receivables
If you have found a business you’re considering buying, it’s crucial that you do a thorough evaluation of the company’s receivables before jumping in. AR Solutions in Lincoln has the tools to do just that.
“If you’re buying assets and liabilities, you need to know what those liabilities are and how likely it will be that you can collect them,” said AR Solutions President and CEO Aaron Newell. “We can analyze those receivables and check the age of them, whether there are any disputes, and what contractual obligations are tied to them. We can figure out the difficulty level of collecting those receivables and work to get disputes resolved. The value of the business is significantly less if it’s burdened with receivables where the collectability is low.”
As a collection agency, AR Solutions just might have more to offer than an accountant as you evaluate a business. They’ll work closely with you to know what the reason is for any nonpayment of receivables and find out how you’ve communicated with your customers to collect to help determine what you might expect to bring in from them.
“I’d argue that we would have a better handle on the true value of receivables than an accounting firm,” Aaron said, “because we do this every day and we could provide a better projection of collectability.”
Aaron said the bottom line for someone looking to purchase their first business is this: Know that not all 100% of the billings a business sends out will be paid. It’s crucial that you know that up-front and develop a policy for handling those cases of nonpayment. If you’ve owned a business before, AR Solutions can track and collect on receivables for you, so you can focus on what your business does to make money—and you don’t pay AR Solutions unless they collect the debt.
“If we don’t collect, we don’t eat,” Aaron said.
Preparing for the Journey
Before you get to the point of actually jumping in to buy or sell a business, Kris Peterson of Leadership Harbor recommends some planning in the form of mapping out your reasoning and expectations
“You need to ask yourself, ‘Am I ready to sell this?’ Or ‘What am I going to do when I sell it?’” Kris said. “We have a lot of options for helping people figure out what’s next in their journey and find purpose in the next adventure. That includes one-to-one coaching, group think-tank calls twice a month, and transition workshops completely focused on purpose, strengths, values, and helping you set the next couple of steps in place so you know where you’re headed.”
Leadership Harbor has experienced an increase in business participation with workshops and think tanks since COVID reduced the personal edge that active business owners crave.
“COVID actually helped me see that more people want that ability to think things through with someone—either on an individual basis or think tanks of 10–12 people,” Kris said. “These think tanks are like a Mastermind on steroids. We do them online twice a month, including a business owner and entrepreneur think tank for buying and marketing discussions and networking.”
The other thing that an entrepreneur or business owner needs to do before jumping into or out of a business venture is to really set solid goals about personal growth and balance. Business owners should be careful that they don’t let one thing consume them and that they aren’t about to do something that’s going to throw off that balance of life, family, and other endeavors.
“You need to figure out who you are, what you want, and what your goals, purpose, and place are,” Kris said. “We’re also doing some complimentary work making sure that people are feeling empowered and finding balance during the COVID uncertainty. Having a thinking partner is key to helping a person unlock the fears and questions that are holding us back from taking the next step. Don’t be afraid of the unknown in this timeframe. It’s a perfect time to change, and you don’t know what you’re capable of until you jump and begin to grow your wings on the way down.”
Partnering for Growth
Once you make a decision to purchase a business, you want to be certain that your plan for growth comes to fruition. CFO Systems can help in more ways than you can imagine. CFO Systems is a nationwide firm that was founded in 2005 to provide practical and experienced leadership. Their vision is to be a collaborative partner who helps clients’ companies grow to their full potential.
CFO Systems’ client services include fractional, interim, project, and timeshare Chief Financial Officers (CFOs), accounting, bank-loan review, capital, controller, human resources, project management, strategic planning, SEC filings, and transitions, including reorganization of a business, improved reporting and budgeting, and structured mergers and acquisitions.
The team comprises CFOs, controllers, senior accountants, and human resource experts. Their team has more than 1,400 years of experience in numerous multiple industries in a variety of roles. This depth of knowledge, education, and experience provides their clients with access to reliable experts who provide objective leadership, strategy, and creativity without the expense of a full-time executive. CFO Systems was named on the Inc. 5000 list of fastest-growing companies for four consecutive years. They operate nationwide, with a heavy presence in the Midwest, with teams in Lincoln, Omaha, Denver, Des Moines, and Kansas City.
Buying or selling a business is a serious venture, for sure. After talking to these experts in the field, there’s one thing that’s absolutely unanimously clear: Hire professionals to help you maximize your prospects, regardless of whether you’re buying or selling. You have some great options with these local businesses, and we always recommend hiring local!