Posted by Jeffrey Abbott on Thu, Mar 11, 2010 @ 12:05 AM
Have you considered that in today's economy buying a business is essentially buying a job that you can never be laid off or fired from?
If you have the requisite skills and access to capital and / or financing, there could not be a more favorable time to buy a business. Most buyers today have less than $100,000 to invest, and much of this may be pulled from a 401k or home equity. A buyer's motivation is generally to gain more control over their own life and achieve pride of ownership.
What would your dream job look like? How many hours a day would you work? How long would your commute to work be? Where would you live? What would the weather be like? What would your average day be like, what kind of activities would you be performing?
It is important to ask yourself these questions, because buying a business is really the same thing as buying a lifestyle. In addition to the choice of what kind of business to buy, whether that be a manufacturing business, service business, restaurant, franchise or any other kind, there is the choice of where to buy that business.
Buying a business in Arizona offers many different lifestyle options, for example:
- Buying a business in Phoenix offers access to the nation's 5th largest city and year round warm temperatures. Proximity to Sedona, Flagstaff and the White Mountains offer weekend escapes.
- Buying a business in the White Mountains area, including Pinetop and Show-Low, affords buyers with 4 seasons and mountain and lake sports.
- Businesses for sale in Tucson or Southern Arizona offer buyers less extreme weather than Phoenix, access to Mexico, and plenty of great hiking and outdoor activities.
There are many different lifestyles available to investors considering in buying a business in Arizona. We would be happy to answer any questions or point out of state buyers in the right direction to discover more facts about life and business ownership in in Arizona.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted by Jeffrey Abbott on Sat, Mar 06, 2010 @ 09:32 PM
In the previous post, we began a conversation about how even experienced buyers who have great familiarity with the process of buying a business need to perform rigorous analysis in support of every transaction. Regardless of how much experience they have with buying a business, there are areas where a business broker can assist a buyer in performing due diligence in order to uncover the areas where intentionally or unintentionally, a seller may have obscured the reality of the value of their business.
CASH FLOW STATEMENTS are another such area that must be carefully scrutinized, because for a buyer they are more important than either balance sheet or income statement. The buyer needs to certify that the cash flow will continue to remain positive even after having taken into account the debt service that will be necessary after the acquisition and once the non-recurring or extraordinary items have been removed.
The ability to continue producing positive cash flow is dependent upon the condition and reasonable future lifespan of the machinery and equipment of the business. Should CAPITAL EXPENDITURES become necessary to replace equipment that is dilipidated or will become obsolete in the near term, a buyer needs to know that in order to assess its impact on the acquistion price and the ongoing operation. Rapidly growing companies may also continue to need capital investments in productive capacity that exceed the normal rate of depreciation, which would have an impact on both future projections and acquisition price.
We invite you to visit the experienced buyer page in the resources section of our Web site for more information on all aspects of buying and selling a business in Tucson or Southern Arizona.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted by Jeffrey Abbott on Fri, Mar 05, 2010 @ 04:25 PM
As Tucson business brokers dealing with Arizona businesses for sale, we frequently deal with experienced buyers, or even professional acquirers, whose level of experience and familiarity with the acquisition process may give them an advantage over an owner who plans to sell a business for the first time. That said, regardless of a buyer's level of experience, the facts about a transaction need to be uncovered by thorough and rigorous analysis in each and every case. For there are many areas where a seller, whether intentionally or unintentionally, may have obscured the reality of the value of the business for sale in question. We plan to comment on these over the course of this and several subsequent posts to this blog.
The first of these areas is INVENTORY. It is paramount for a buyer, or representing business broker, to ask the right questions about inventory, such as:
- how often and how it is counted?
- how it is valued, by cost or fair market value?
- what percent of it is obsolete
- how many years of worth of obsolete inventory there is?
- what kind of reserve policy is in place to cover for the inevitable need to write down a portion of inventory?
Another area that business buyers ought to delve into carefully is DISCRETIONARY COSTS. Often, when preparing to sell a busines, the owner will scale back on discretionary spending in order to maximize profit in support of an inflated asking price. Areas that frequently get the axe are:
- marketing: advertising, promotion, public relations, etc
- maintenance: equipment and facility
- research and development
- technology upgrades
A buyer and his or her representing business broker must ask probing and persistent questions in order to understand the correlation of each these categories of expenditure to the company's long-term competitiveness.
While we are Tucson business brokers working with Arizona businesses for sale, we want to serve as a resource for business buyers and sellers anywhere, regardless of location. Check out the resources section on our Web site for more information. And leave us a comment below if you want to discuss this post.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted by Jeffrey Abbott on Mon, Dec 07, 2009 @ 10:16 AM
Last week we talked about the emotional aspects to the business buying process. You learned when emotion must impact your thought process and conversely when to avoid making emotional decisions. Today, we will review the other side of the equation when common issues arise in the business buying process and you must let logic prevail
Numbers Don’t Lie – People Do
Whether you are looking at industry data, company financials, or any other reports on the business where numbers are involved, the only approach is to allow logic to dictate your conclusions. No matter what “twist” any seller wants to put on their numbers; the fact is that the numbers never lie; only people do. There is never any reason to attach emotion to numbers unless there is an attempt to manipulate them. So when we are talking numbers, it is all black and white, good old logic.
Now of course, there may be instances where you must take certain things into consideration when analyzing financial statements for example, or there can be some instances where further discussions are appropriate, but in all, the numbers are the numbers and so you must review them logically.
The same holds true for any data you may uncover such as customer concentration issues, declining margins, company sales data, or industry trends that could impact the future of the business. You certainly want to allow the seller to make their point, but they will need a very compelling case to override the factual data.
Are You Going To Be Successful As The Boss?
No matter how wonderful or poor a business may be today, you must logically determine whether or not you have the skills to replace the seller and operate the business successfully in the future. There is no such thing as an “easy business to run”. Every business has its challenges. Certainly, there are plenty of businesses that are operated by the wrong owner, and these present opportunities. However, this is only the case if you have the skill set to give the business what it needs to grow.
Conversely, solid businesses run by the wrong people will turn sour quickly. This is one area where business buyers make terrible mistakes. You must logically determine if YOU have what it takes to be the boss of the particular business. You cannot afford to grow into the job. Sure, there will always be some on the job training during a normal transition period, but if you lack the core strengths to run the business, then have the common sense and logic to make that determination and then find another opportunity.
Do not allow yourself to start dreaming about running the business, or trying to convince yourself you are something you are not. Take out the “logic mirror” and give yourself a good, hard look.
Are The “Fixes” Really Fixable?
Everybody is a critic. It is very easy to sit on the sidelines and point out all the things that a business owner is doing wrong. I am still amazed whenever I get an email from a prospective buyer outlining all the wonderful things they think they will do once they take over, and how they are going to repair all the ills that are now in place. Well guess what? Unless you have a wealth of experience in that specific type of business, you truly have no clue to draw up any meaningful strategies yet, nor do you know whether or not your ideas make any sense at all.
This comes back to what you have probably read many times over the years in my column; you first have to understand the business intimately before you can logically undertake any new aggressive initiatives. Translation: “Don’t try to fix anything until you know what the heck you are doing!”
Pulling Off The Deal
Right now, the financial markets are in complete disarray. Getting financing requires very specific skills, and even with those, banks are not lending. The stimulus package the government is touting provides nothing more than stimulating debate right now. Time will tell if this gets the banks to start putting money on the street for the small business buyer. If you want to leverage a deal, seller financing is a must. But along with that strategy, you have to be in a position to “sell” the seller on your ability to get the deal done, and convince them you will be successful in the future. You cannot do this by making an emotional plea. It takes a logical plan to demonstrate and convince them they should bet on you.
The vast majority of our clients (91% in fact) get seller financing, but not every seller is going to be open-minded about it (those are the ones whose businesses won’t be selling today) and so you have to be able to logically approach this type of offer. Of equal importance, you have to know where these opportunities exist.
Similarly, you cannot have delusional expectations about the size business you want to acquire. Logic must prevail in your thinking. There is no doubt that the market is poised for incredibly creative deals today that can be very attractive to a seller if, and only if, you have the know-how (a.k.a. logic) to properly structure them.
Originally posted by Richard Parker on February 15, 2009 at 07:44 PM to blog/bizquest.com
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted by Jeffrey Abbott on Wed, Dec 02, 2009 @ 06:10 AM
Whether you are selling or buying a business, allowing a business broker to assist you with the due diligence process is a good idea. Most business brokers would use a simple definition of “due diligence” to mean the process through which a potential buyer evaluates a target company or business for the purpose of acquisition.
According to the U.S. Securities Act of 1933, business brokers must conduct a due diligence investigation for the businesses they are selling and disclose their discoveries in order to not be held liable for non-disclosure.
In Arizona, business brokers are governed by the Arizona Department of Real Estate, which requires them to disclose material information that could affect a buyer’s interpretation of the sale price as well.
The due diligence process is similar to a forensic analysis. According to many business brokers, relevant areas of concern can include financial reports, the business’s place in the market, real and personal property, insurance and liability coverage, review of debt, employee benefits, immigration, and international transactions.
Business brokers say that due diligence should be performed before a company goes to market. This helps to uncover any hidden or unexpected costs that may be associated with the sale of the business, ensuring that the seller is receiving a fair sum from the buyer. The best advice is to employ the help of a qualified business broker.
Protecting the seller is a business broker’s job, and properly performing due diligence is one of the most important steps to take when selling your company. Broker’s may also be retained to protect the interests of buyers.
Portions of this post originally appeared on Web site of the International Business Brokers Association, Inc.
http://www.ibba.org”>http://www.ibba.org
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted by Jeffrey Abbott on Tue, Dec 01, 2009 @ 06:12 AM
How long have you been looking at businesses for sale for the the right opportunity to buy a business in Tucson, or make a Tucson Business Investment.
Several months ago, Bizquest.com (a national business for sale listings site) conducted a survey and learned that nearly 70% of the would-be business buyers who responded had been looking for a business for over 7 months. The same group of buyers also reported that they had also met with fewer than 3 sellers during that period of time.:
If you are looking at Tucson businesses for sale, with an eye to making a Tucson business investment, then what this means for you is that if your strategy has been similar to those prospective buyers in this survey, it is time to make a major change to your approach. Otherwise, you might still be sitting in front of your computer in a year, no closer to buying a business in Tucson than you are now.
You can look at businesses, at a superficial level, from your computer. But you can’t buy one that way.
And you won’t ever buy a business if you’re just a “looker,” someone who never gets beyond the executive summary
to really dig in and get to know a business, meet the seller, understand the numbers, etc.
If you want to buy a business, you have to get off the porch and play with the Big Dogs, as they say. You need to get out and meet with people who have businesses for sale if you plan to make a Tucson Business Investment. You should meet them, ask them questions, and arrange to visit their businesses. And you should do this with quite a lot of businesses, because there is no other, and therefore no better, way to to expand your understanding of what different businesses have to offer you in terms of lifestyle, operating model, and return on investment. We believe that your decision to purchase in the end will be based on these factors, and that the lifestyle a business offers you will turn out to be perhaps the most important consideration. If you don’t go meet sellers, and get a feel for what their life is actually like while running the business they intend to sell, how else are you going to get a reality check on what your life would be like if you were running their business? You need to answer the question “what are the fundamentals that I am looking for in a business?”
The more sellers you meet with, the better you will get at rapidly and accurately analyzing a business, getting your questions answered, and working with your broker to determine what you think it is worth. If you don’t go through these steps, you will never actually get to the point of being ready to make an offer. And it goes with saying that you miss 100% of the shots you don’t take. If you don’t go through these precursor steps, you will never be in the position to buy a business. Preparation and practice are essential to buying a business. If you are not working with your broker to better prepare yourself, and you are not practicing by researching and interviewing, then quite frankly you are spinning your wheels and wasting your time.
Businesses for sale come and go on the market continuously. Will you be ready to seize upon the right opportunity when it presents itself? Buying a business can be intimidating, and time consuming, until you take the time to get into the process and understand all the steps involved and develop your own judgment at each stage. Once you’ve made that investment of time, you’ll take the mystery, and any hesitation, out of the process. But unless you take off your gloves and roll up your sleeves and get in there and meet real live sellers and get your hands dirty by digging into the numbers, you will never buy a business, and instead will remain part of the 90% of lookers who never become buyers.
So, unless you’re willing to get out in the market, don’t tell people that you are trying to buy a business. Because the only thing you’re really doing is wasting time.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted by Jeffrey Abbott on Sun, Nov 22, 2009 @ 06:14 AM
Thinking about listing your business for sale in Tucson, Arizona? Or making a Tucson Business Investment?
At Allen & Young, we believe that you will judge your satisfaction with the process of selling your business by the amount of cash that you end up with in your pocket after the sale of your business.
Before you go forward with the process of listing your Tucson business for sale, and eventually selling it, please keep in mind that there is usually a rather large difference between the sales price and the amount of money that actually ends up in your pocket. This difference could be 50%, or even more.
That is why Allen & Young always recommends that anyone considering selling a business in Tucson, Arizona, that they obtain solid advice from a good estate planning attorney and CPA prior to listing the business for sale in Tucson. This is essential. There are many things to be aware of, and some decisions you will need to make.
Some areas where you will want to investigate prior to listing a business for sale in Tucson include:
– the type of entity structure
– early transfer of stock and assets to trusts
– partnership and /or family members need to be considered.
Selling a business is fairly straightforward, and we would love to help you prepare to put your business for sale in Tucson. Just keep in mind that there are a lot of considerations, and make sure that you have access to high quality advice. We maintain a rolodex of skilled and trusted advisors in every relevant field, and are always happy to answer questions.
It all starts with a handshake.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted by Jeffrey Abbott on Wed, Nov 04, 2009 @ 06:15 AM
Protecting the confidentiality of our sellers is absolutely essential. It is a responsibility that Allen and Young and the Arizona Business Broker Association takes seriously. This is necessary when you consider the potential decrease in value a business could experience if its key employees, vendors, customers or competitors discovered it was for sale.
When you begin to investigate a business that is for sale, a simple rule applies: Keep it to yourself and tell as few people as absolutely necessary. Do this at the very least out of respect for the seller, and it will serve your best interests as well if you end up buying the business. We’re really serious about this. For that reason, Allen & Young requires every prospective buyer to provide the following items before receiving our Confidential Business Profile on a business that we represent:
Confidentiality Agreement:
The confidentiality agreement makes very clear your responsibilities as a prospective business buyer regarding the confidential information that we provide to you.
We may also require a financial disclosure statement from you at this time, to determine the kinds of business opportunities that you are eligible for based upon your financial situation. There is no reason to waste your time, ours or the sellers in pursuing a business that you will not have the wherewithal to eventually purchase. Sellers understandably want to make sure they are dealing with financially qualified buyers, and since they are providing sensitive financial details of their business to you it is entirely reasonable for them to request the same in return from you.
If you are looking for businesses for sale in Tucson or Southern Arizona, and trying to decide if buying a business is the best move for you, give us a call.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted by Jeffrey Abbott on Tue, Nov 03, 2009 @ 06:17 AM
Do you plan on selling a business in Tucson or Southern Arizona? Think for a moment about what someone who wants to buy a business in Tucson would love to see. Wouldn’t they be simply delighted to find all of your accounting and customer records completely accurate, computerized, and ready to be used without the need for any confusion or translation
If you’re already running Quickbooks or a similar small business accounting package, you can increase the value of your business by taking the next step and organizing your customer records using one of the many affordable small business Customer Relationship Management (CRM) systems that are available today. These systems will allow you track all manner of customer information, take notes, make appointments, broadcast email campaigns, etc. They build on the customer record in your accounting package, and let you do much more.
CRM systems are available as both “on-premise” solutions (meaning that you buy and install the software on your computers) or as Software As A Service (SaaS), or internet hosted solutions that you pay for monthly on an a per-user basis. The latter have the advantage of continual upgrades to the software itself, and do not require any expenditure on hardware.
By exporting your customer records from your accounting software into a CRM system, you will gain the ability to cost-effectively communicate with your customers and to track their activity in a more detailed fashion than the accounting software generally allows.
Why will this increase the value of your business? Well let this business broker tell you!
In terms of marketing expenditures, it is nearly always more cost effective and profitable to gain additional share of business from current customers than it is to prospect for new customers. Existing customers are also typically less price sensitive and therefore higher margin, whereas you will generally need to offer new customers some form of an incentive to switch to your product or service, which lowers your margin.
Using a CRM systems can also transform the way sales and marketing work within your organization when combined with analysis of past sales, and the visibility they offer for managing the pipeline of future sales. If you fully understand the products, services, channels or customers that make the largest contribution to your bottom line, a CRM system will allow you to redirect your marketing resources and sales efforts in a highly targeted fashion to focus on the areas of your business that matter most.
From the perspective of a prospective buyer of your business, imagine how much more confidence they would have in their investment if you could clearly demonstrate who your customers are, what their sales patterns have been, what orders or repeat business is in the pipeline, and by deduction, what the future value of those customers are.
A buyer will generally not pay for future value, preferring instead to base their evaluation of your business’ value on its historical financial performance. However, if you can show them this level of detail about your business, and give them the greatest possible level of confidence that they could hit the ground running after buying it and expect the same or better results, then they are likely to be willing to pay you a higher price.
Don’t wait until you want or need to sell your business in Tucson to take advantage of the power and insight that your customer records can provide when you use a CRM system to manage them.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted by Jeffrey Abbott on Tue, Nov 03, 2009 @ 04:18 AM
A good broker will create a marketing or purchasing plan for your business.
If you’re selling, the marketing plan will involve an advertising plan and information relevant to the sale of your business. But developing this plan is not the first or only task of a thorough business broker. A broker must understand you, and your objectives, and most importantly the financial results your business has generated in recent years. Pricing your business correctly, and knowing how you are willing to participate in making a transaction possible are the most important element in a solid marketing plan. Once the message and the facts are well understood, your broker should put together an attractive marketing document or package which should include recast financials and answers to questions it is anticipated that a prospective buyer will ask.
If you’re buying, expect the purchasing plan to include information about comparable listings, recent sales data, and benchmark data about the industry category the business(es) you are considering belongs to.
As the business owner or buyer, it isn’t unreasonable for you to be involved in the development of the plan. But remember: You hired a business broker for a reason. It’s okay to offer input, but you should also be willing to take your business broker’s advice.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com