Choppy Waters

Navigating the Choppy Waters of a Sale to a Third Party by Paul Willingham

So what if you’ve never sold a business before? Who better to lead the sale process than the guy who knows far more about the business than anyone else? Who better to steer the ship than the gal who knows exactly what she wants from the sale of a business?

Before you answer, pause for a moment to consider the possibility that you might just be the worst possible person to sell your company.

Why? As the one most emotionally attached to your business, you will likely find it difficult (if not impossible) to negotiate with a prospective buyer in a detached, dispassionate and effective manner.

In the mid-market range, most buyers are experienced and skilled in buying companies just like yours. They understand that all deals travel rough and shark-infested waters because they are the sharks! Their favorite meal is the owner sailing the sale waters alone.

Further, at some point, all sales negotiations become intense. Experienced transaction professionals anticipate and manage the inevitable lulls and storms that few owners have the stomach to endure.

But let’s assume (as you might) that you will have no problem navigating the rough waters of the typical sale process. Can you do so while simultaneously doing everything necessary to keep your business running at full steam? Rare indeed are the owners who can keep their companies running at peak performance while negotiating the intricacies of a sale.

If there was ever a time to stay focused on your company, the period during which you negotiate the sale of your business (often six months or more) is it. Any drop in company productivity, sales, or income is like blood in the water and will be subject to the buyer’s scrutiny and has the potential to scuttle even the best deal.

If you need another reason to decline the lead role in sales negotiations, keep in mind that once the deal closes, you are the only member of the cast who may have to work with the buyer as an employee. The more crucial you are to the success of your company, the more likely it is that a buyer will require your continued services after the sale. For that reason, many sellers understand that it may be in their long-term interest to assume a less visible (and thus less adversarial) role during the sale process.

Consider that if you allow your deal attorney, business broker, or investment banker to take the lead in the negotiations, you are better positioned to remain detached from, yet in control of, the process. For example, if your lead advisor reaches an impasse with the buyer’s representatives, you can insert yourself, at the appropriate time, to break a deadlock. This is precious capital that you cannot afford to squander by being in the thick of the fray day in and day out.

As transaction intermediaries (business brokers) are quick to point out, the right transaction intermediary should bring value to the sale process. They argue that you should receive more money on better terms when they organize and conduct negotiations.

You may find the assistance of a good transaction intermediary to be valuable in:

Assessing the marketability of your company. Accurately pricing and valuing your company. Locating qualified buyers. Conducting a competitive auction. Negotiating and closing the deal

For all of these reasons, put your energy into selecting the best possible crew: an Advisor Team (including a transaction intermediary) that has navigated these waters—many times.

While you may depend on your crew to navigate your voyage to a safe harbor, you remain the captain of the ship. If you have questions about the sale process, your role in it, or the role of your advisors, we can help. Please contact us.

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The Time Value of Money ≠ Money Value of Time

By. Russ Allred MBA  www.russallred.com

A tenant applied to live in a newly constructed apartment.  The landlord denied the application because the tenant was habitually late paying rent in their current apartment.  The tenant was irritated because they had always paid a $25 late fee, and thought that was ample compensation for a few days wait. The landlord explained that it costs $200 in time every time he has to make an additional deposit. The conflict here is between the Time Value of Money and the Money Value of Time.
Time Value of Money is the term for the opportunity cost of not having cash when you should or the discount charged for the use of money over time.  For example, it is often better to have $100 today than to have $105 in a year.  The discount rate or interest earned for waiting a year is 5%.  All loans and most investments can be evaluated by the Time Value of Money.

The Money Value of Time is seldom considered among entrepreneurs, but grows in importance as the business becomes more successful.  A start up entrepreneur’s time is less valuable than that of a successful business person.  It has been said that Bill Gate’s time is so valuable, it isn’t worth the time for him to stoop down and scoop up a $100 bill. In the case of Gates, that is probably true for $500.

Entrepreneurs must learn to capitalize on both of these principles.  Step 1 is to practice delegating.  If you are running your register, then you are paying your cashier too much.  Delegate each activity to the lowest paid employee possible. Step 2  Make policies to protect you from their incompetence or potential dishonesty.   Step 3  Determine the value of your time so you can compare what you are doing against what you should be doing.  For example, should you be taking the deposit to the bank or negotiating a new loan?  What is a better use of your valuable time?  Step 4 Invest your excess capital where it will earn the highest yield.  Often that is back into your own business, but you should know if an alternate investment will yield more.  You should also be making more money from your business than if you got a job and invested your initial capital into something else, like an apartment building.

You may have heard Robert Kiyosaki, author of Rich Dad, Poor Dad, say on the radio, “There is no job security.  You can’t afford not to be an entrepreneur.”  If you understand these two principles, you will know why.

Now Serving Santa Clarita Valley

 e6d2b5b9-dee8-be41-5088-4fc65607dca9ScottLiebergJPGBy Scott Lieberg, CBB

scottlieberg@sunbeltsantaclarita.com

I have been here at Sunbelt Business Brokers in Bakersfield for four plus years. I just checked my calendar the other day and my wife, Linda, is retiring in less than 10 months.

Having sold my first business in 1992, I love the business brokerage business and plan to continue.

Linda and I have bought a home in Pine Mountain Club, CA and so as a normal transition, I have decided to focus on the mid-sized business owners in the Santa Clarita Valley Area. .

My friend and colleague, Phil Haney has been serving the Santa Clarita Valley for years and will continue to do so.

I have always served a large geographic area, that won’t change. For me it is all about people. I look forward to working with all of you.

Agency Disclosure in Business Sales

By: Phil Haney     Senior Executive Broker & Sales Associate

Agency Disclosure for the Bureau of Real Estate and for Business Brokering in California with the California Association of Business Brokers is mandatory and critical when representing a Seller in Selling a Business and a Buyer in the Purchase Process. This is the Law under California and the California Civil Code. This Disclosure insures that any Seller and Buyer understand fully their rights when it comes to representation and transactions under the Law. So you are aware a Business Broker can be the agent of a Seller or Buyer or both the Seller and Buyer or what is called a Dual Agency. The Agency Disclosure explains concepts and definitions concerning the relationship between a principal and an agent in the sale of businesses and is required. You should read it very carefully and acknowledge that you have been advised of the contents. 

Here are a few of the main points in the Agency Disclosure: 

1. As a Seller Agent the Agent under a listing agreement with the Seller acts as the agent for the Seller only.

2. As a Buyer’s Agent a selling agent can, with a Buyer’s consent, agree to act as agent for the Buyer only. In situations like this the Agent is not the Seller’s agent.

3. An Agent representing both the Seller and Buyer can legally be the agent of both the Seller and Buyer or what is called a Dual Agency situation.

 In all cases the Agent must operate and give fiduciary duty of utmost care, integrity, honesty and loyalty in dealing with various parties and other affirmative obligations with fairness.

 Under California Law for Full Disclosure the buyer and seller of a business are each required to fully and fairly disclose to the other any and all information which is known or should be reasonably known which could impact the other party’s decision to enter into a transaction.  

 With Agency Disclosure each party is advised to consult with independent attorneys, accountants, and other competent professionals on entering into a transaction. Business Brokers and Agents are not licensed, qualified or entitled to provide legal, accounting, or tax advice under Agency Disclosures and Transactions under the California Civil Code for Agency Disclosure. 

  A Business Broker Professional & Consulting Service Executive such as our Sunbelt Business Broker & Advisors organization can provide the necessary professional knowledge, skills, and business advice and Representation to either sell your business, provide consulting and an improved thought process for you, and for prospective buyers to purchase what they desire. To also represent the sale of the Business for you when ready or to assist you as a Buyer.  Give me a call or email me to coordinate a confidential meeting on your business and representation or buyer requirements. I can be reached at my email address at phil.haney@sunbeltnetwork.com or calling our main office or my personal cell phone at 661-644-5313.    

Consider A Career in Business Brokerage

By John W. Willingham, CCIM, CBI, CBB

Sunbelt Business Brokers and Advisors is always looking for, “Top Quality”, individuals to join with us in the rewarding and challenging opportunity of Business Brokerage. The reason I am writing this Article for our monthly Newsletter is; many of the best Business Brokers in the business are former business owners. I suppose it could be because these individuals understand business operations better than others who have never owned a business. Our Newsletter is pointed at Business Owners and Buyers, many of which fit the profile of a good Business Broker.

Being a Business Broker is similar in many ways to owning your own business, but with the backing of a multinational corporation that will provide you with complete training and cover most of your expenses. You will need a Real Estate License to get started and we will help you with that. Unlike buying a business your startup cost will only be around $2,000.00 and many business brokers make mid six figure incomes. Check out this Video https://www.youtube.com/watch?v=bMU7ol8wC_I&feature=youtu.be

If you like people, enjoy challenging activities and high earning potential. You owe it to yourself to give me a call. John W. Willingham (661) 332-9401 or email me at john.willingham@sunbeltnetwork.com.