Buying & Selling a Business In Tucson Blog

How A Business Broker Can Help You Sell An Internet Business

If you're hoping to sell an online business, then the best advice we can give you is the exact same advice we give any seller of any kind of business: make sure your financial records are accurate and complete. 

Given the relative ease and lower cost of launching online businesses, many are launched by innovators with great tech and design skills, and a tremendous idea, but who may lack business experience. Is that you? Then keep in mind that while not keeping accurate financial records, including accurate general ledger, statement of profit and loss, and balance sheet may not get in the way of you running your business on a day to day basis, it will become an obstacle for you when you seek to sell the business.  Whether buying a bricks and mortar or online business, any buyer is going to insist on seeing accurate and complete financial records.  That's the bare minimum.

We like to tell business owners not to wait to prepare for selling their business until they have to sell the business.  In other words, get a head start today by running your internet business by employing the same best practices that any other business owner would.  In that way, you will make a buyer's due diligence easier, and remove preventable obstacels that stand between you and sale.

If you'd like more information on this subject, please Contact Us.

Selling a Tucson Business: Decisions, Commitments & Emotions

Business owners sell for a variety of reasons. There are those that have grown beyond their desire to run a bigger business. Sometimes it’s simply a matter of insufficient operating or growth capital. Occasionally, the business would be profitable except that servicing the debt eats up all those profits that could be realized by someone with more operating capital and less debt. Other times, the sales and profits have reached a plateau or hit a wall because the company doesn’t have the working capital to grow the business to the next level. At times the business owner just wants to cash out and take their hard earned “sweat equity” and use the money for something else now.

Selling a business is different than selling a car or a piece of furniture for many business owners, because a business is more than just another asset worth so much money. It’s your “baby” and a lifestyle that many often equate with “who we are” as well. In other words there is a lot of emotion connected with selling a business.

Unless you are committed to making this sale happen, there is a danger of emotions getting in the way of the objective. Remember, buyers are different than you are, with different agenda and different needs or issues. Both selling and buying are emotional exercises. Letting our emotions overrule our good judgment gets a lot of us in trouble in life. It is “balance” that helps sell a business; the balance between personal financial or emotional needs or wants on the one hand, and economic opportunities on the other.

Buyers assume that you have made a reasoned carefully derived decision to sell your business, as well as an emotional one, and that, in the interest of successfully selling your business, all reasonable questions, queries or offers can be reviewed in the light of rational, calm consideration.

It took time, effort, and investment to start or build your business. It is prudent and often essential to take the time and effort, and make the necessary investment to exit your business successfully.



The best time to sell a business is when you want, not when you have to. It is perfectly acceptable to have no other reason than you are ready for a change. Here are a few examples of the most common reasons: (1) Health, (2) Personal Reasons, (3) Burn out, (4) Age, ready to retire, (5) Tax situations, both present and future (6) Investments, (7) Other business interests.

Larry Orenstein
Business Broker
2500 N. Tucson Blvd., Suite 109
Tucson, Arizona 85716
Cell:    520-820-1706
Fax:    520-579-2613

If you'd like more information on this subject, please Contact Us.

Could You Sell Your Business If You Wanted To?

Could you sell your company if you wanted to? (Cover via Amazon)

 

This is an excellent article by Dorie Clark, which originally appeared on March 10th on Forbes.com. The original post can be found here.

Because we thought our customers would value it, we are republishing it in its exact original form.   Most company owners probably don’t want to sell their business right now – but they want to know they could. That’s the theory behind The Sellability Score, an online tool developed by author and serial entrepreneur John Warrillow. The Sellability Score – created based on market research with business owners and mergers & acquisitions professionals – is a free, 30-question self-assessment that helps business owners determine how saleable their company actually is. “Knowing you could sell allows you to sleep well at night,” says Warrillow, the author of Built to Sell: Creating a Business That Can Thrive Without You. “You know you’re building an asset that has value and could fund your retirement, let you travel, or whatever you’re passionate about.”

So what makes for a business that other companies would want to acquire? Warrillow gives a sneak preview of four top criteria.

1. Management Team. “Any buyer will say, ‘What happens after you leave?’” says Warrillow. You want to answer that question definitively by having a strong second-in-command who knows the business and is committed to carrying on over the long term.

2. The Switzerland Factor. Much as Switzerland has thrived by being studiously neutral, Warrillow suggests your business should do the same. Specifically, “you have to be neutral toward any one supplier, customer or employee – that is, you can’t be overly dependent on them.” You want to demonstrate that you’ve hedged your bets with a diversified client base and “no one employee has the secret sauce.”

3. The Five Times Factor. Your business looks a lot more attractive if you’re able to scale it – specifically, says Warrillow, “Can your business scale five-fold without adding five times the costs?” A hotel running at only 20% occupancy is the perfect example of an underutilized asset that has room to grow; software companies also typically scale easily without adding lots of employees. But even in industries that usually don’t scale well – like law firms – there is room for innovation with new offerings like Legal Zoom, an online service that helps people create their own legal documents.

4. Revenue Stream. In your personal life, you don’t want to live paycheck-to-paycheck – and to create a saleable business, you don’t want to live project-to-project, unable to predict future cash flow. Instead, your goal is to create a steady and consistent revenue stream with a subscription or membership model. That’s common for fitness centers or magazines, but even unlikely suspects can make it work (Warrillow cites a Canadian snowboard instructor who got tired of giving individual lessons and now has a thriving business selling subscriptions to his YouTube channel with exclusive snowboarding videos).

Let’s say your Sellability Score is top-notch and you’re ready to move – what next? Warrillow advises most business owners to work with an advisor or broker to help sell their company, because “their job is to create competitive tension, get multiple bidders, and run the process for you.” The fees can be steep – for a business with less than $1 million in sales per year, Warrillow estimates that brokers may charge 10-12%, and a mergers & acquisitions professional may charge 4-5% for a deal in the $5-$50 million range. But they help you avoid “the classic mistakes that business owners make in selling their company,” such as focusing so much on the sale that revenue actually slips and the value of the company diminishes. Says Warrillow, “Let them run the process so you can run your business.”

Want to learn more? Warrillow offers workshops and more information on his website.

Have you sold your company – or do you want to? What pointers do you have to share?

Dorie Clark is CEO of Clark Strategic Communications and the author of the forthcoming What’s Next?: The Art of Reinventing Your Personal Brand (Harvard Business Review Press, 2012). She is a strategy consultant who has worked with clients including Google, Yale University, and the Ford Foundation. Listen to her podcasts or follow her on Twitter.

To view the original article on forbes.com, follow the link below:

http://www.forbes.com/sites/dorieclark/2012/03/10/could-you-sell-your-business-if-you-wanted-to/

If you'd like more information on this subject, please Contact Us.

Buying A Distressed Tucson Business Out Of Bankruptcy

As we discussed in the previous post, investors looking to buy a business in Tucson will likely come across the opportunity to purchase a "distressed" business, including businesses that have already been taken through bankruptcy. For those buyers who have done their due diligence, and find synergy with the business, such a Tucson business investment can be a promising opportunity.

In such cases, purchasing the assets of a debtor who has been through Chapter 11 can be accomplished in two ways: (a) a "Section 363 Sale" under Section 363 of the Bankruptcy Code or (b) by participating in the debtor's restructuring plan.  The more common method is the Section 363 Sale, because it's generally a faster and less expensive process. That is so because it avoids the process whereby the court and creditors need to confirm the restructuring plan, which can get complicated given all the procedural and disclosure related requirements, etc.  As such, taking this approach can help protect against a decline in the overall value of the business and a decline in working capital.

From the perspective of an investor considering buying a distressed business in Tucson, the Section 363 Sale can often be even more attractive than a non-bankruptcy acquisition for several important reasons, including: 

• In the majority of cases, the sale of a distressed business' assets will be approved free and clear of liens and liabilities by the bankruptcy court (excluding those liabilities that the buyer explicitly agrees to assume and potential  "successor" liabilities such as environmental and product liabilities claims.)

• By virtue of receiving the bankruptcy court's approval, potential fraudulent conveyance challenges may be avoided. (As discussed in the previous post, fraudulent conveyance challenges result when creditors believe that an asset sale prior to bankruptcy has defrauded them of the opportunity to recover value from the bankrupt business.)

• A buyer purchasing assets out of bankruptcy will essentially get carte blanche to cherry-pick the assets and contracts of the bankrupt business in a way that would simply not be possible outside of the bankruptcy context. That's because bankruptcy confers upon the buyer assumption/rejection rights.  For example, contracts acquired out of bankruptcy can be "cleansed" of most non-assignability or change-of-control provisions (exceptions include personal services contracts and some intellectual property licenses).

• Additionally, Section 363 Sales are exempt from State shareholder-approval and bulk-transfer laws. Such sales are subject to approval by the bankruptcy court after notice and a hearing has been given to interested parties.  Often, an auction will be held under the supervision of bankruptcy court in order to ensure that debtors have received the "highest and best" price for their assets.  

When considering the purchase of a distressed business' assets out of bankruptcy, there are two basic strategies that you as potential buyer should consider.  The first is to be the "Stalking Horse" bidder, or the first party to strike an agreement to purchase assets from the debtor.  The second approach would be to wait and see final sale terms that are approved by the bankruptcy court and evaluate the opportunity to make a higher offer, assuming such an opportunity exists. 

It appears that there can be advantages to pursuing the stalking horse strategy, including:

• You would have more time to pursue thorough due-diligence investigation

• As the first bidder, you will have the opportunity to set the price and terms of the sale. If they are accepted, you will likely have achieved an advantage.  If not, you can still follo on afterwards to see what the court decides.

• You will have the ability to negotiate a number of protections and bid procedures, as discussed below. 

• There is a downside risk, of course, is that no matter how thorough your due diligence process may be, you are not all-knowing and do not have a crystal ball.  As a Stalking Horse bidder, you run the potential risk of bidding too high and only becoming aware of that as the subsequent auction unfolds. 

Outside of bankruptcy, an investor seeking to buy a distressed business will usually only need to negotiate the terms of the deal with company's management.  There will be be little to need to deal with the seller's creditors, except in possible cases where the buyer seeks to amend terms of debt, ect.  In contrast, when pursuing a Section 363 sale the buyer will have to deal with a variety of stakeholder groups whose interests often diverge.  These may include:  secured creditors (e.g., first-lien and second-lien holders), unsecured creditors, equity holders (e.g., preferred and common stockholders), bondholders, landlords, indenture trustees, etc.  As a result, it is absolutely critical that the buyer of a distressed business have a complete and accurate understanding of the seller / debtor's capital structure, and be able to manage and balance the competing interests and priorities and other stakeholder dynamics of these multiple pieces in order to keep all parties on board during the negotiation process.

The support of secured creditors will be essential to most if not all Section 363 Sales, unless the proceeds of the asset sale are sufficient to pay their claims in full.  In cases where there are first-lien holders and second-lien holders, and the first-lien holders will be paid in full, but the second-lien holders will not, the second-lien holders may be able to block the sale. Finally,  unsecured creditors and / or equity holders will often oppose a Section 363 Sale if they feel that their interests are not being fairly taken into account.  This could occur in cases, for example,  where it appears that only secured creditors are going to be paid and such creditors might conclude that a court supervised reorganization plan would better protect their interests.  Despite their objections, Section 363 Sales in such circumstances are approved more often than not.

Summing up, buying a distressed business in Tucson can be a great Tucson business investment, and different considerations and strategies apply depending on whether the acquisition is prior to, or after, a bankruptcy proceeding.  A qualified business broker can help you navigate the complexities of buying a distressed business, representing your interests, assisting as a core member of your due diligence team, and advising you on effective negotation strategies.  That's what we do? 

Interested in buying a distressed business in Tucson?  Check our listings, or contact us if you didn't find the distressed business opportunity you are looking for.  We have access to many confidential listings within the Tucson business for sale community.

If you'd like more information on this subject, please Contact Us.

Buying A Distressed Tucson Business (Before It Goes Bankrupt)

In the Distressed Businesses page within our Listings on this website, we discuss some of the characteristics of distressed businesses, and lay out a number of reasons why buying a distressed business in Tucson could prove to be a sound investment strategy for you to consider. Businesses can become distressed for many reasons, and if some relief and resolution is not found for the underlying problem, once possible outcome is that they could end up in bankruptcy.  In this article, we are going to talk about taking advantage of buying a distressed business before it gets to bankruptcy.

1. Perform Extra Thorough Due Diligence. Whether a business is distressed or not, performing a thorough due diligence is a central component of any aquisition from the buyer's perspective.  In the case of a distressed business, it takes on heightened importance because it is less likely you as the buyer will have any recourse against the seller should things not go as planned after the closing.  That makes it essential for you to dig in deep to understand the reasons why the business in questino is distressed in the first place.  Is it overloaded with debt?  Did it lose several key players who took large pieces of business with them?  Has it failed to execute on its targets due to incompetence, or because they were unrealistic?  Without knowing the causes of the business' failure, it will be nearly impossible to develop a comprehensive post acquisition game plan. If the business is totally hopeless, you may conclude that you'd only be interested in a post bankruptcy scenario.  A qualifed business broker can assist you in this assessment.

2. Buy The Business Assets Only, But Not Stock (Equity). Whenever your'e considering buying a distressed business, it's going to be important to have access to competent advisors, including those who can advise you on the tax implications of the different ways you might approach the transaction.  In most instances, when you're buying a distressed Tucson business, you will first want to look at the possibilty of doing a deal that only involves the purchase of the business' assets.  There are several reasons why for this: (a) you could obtain an accelerated tax basis for the acquired assets; and (b) it may minimize your need to acquire unwanted liabilities of the distressed business for sale.

That said, if the business for sale is very distressed, there may not be any tax benefits to an asset deal.  Nevertheless, it is prudent to pursue this angle of inquiry as far as you can until the seller pushes back.  Of course, it is to be expected that the seller will push back strenuously and try to get you to acquire the entire company, problems and all.  If you are able to do an assets only purchase, it is your surest safeguard in terms of risk and liabliity that you willl be able to avoid unknown or undisclosed liabilities of the business that derive from the stressed circumstances it finds itself in, including unpaid taxes, pending lawsuits, and ongoing fraud or negligence in the operation.

3. Do Your Best To Avoid A Fraudulent Transfer Challenge.

If you try to buy the assets from a distressed business prior to it eventually filing for Chapter 11, you need to be aware that you may face the risk of a fraudulent transfer challenge.  There are several classes of fraudulent transfer challenges covered by federal law, state law and/or the Bankruptcy Code.  The first is called "actual fraud," and can be claimed when dissatisfied creditors or a bankruptcy trustee can show that the sale of assets (to you) was conducted in order to hinder, delay or defraud the seller's creditors. The second, which can be easier to claim, is known as "constructive fraud," in which case the creditors will try to show that you acquired the assets for less than fair market value or reasonably equivalent value and that the seller was either insolvent at the time of the sale, or made insolvent by the sale. or   sale was made for less than fair consideration or reasonably equivalent value and the target was insolvent at the time of, or rendered insolvent by, the sale.  Indeed, Section 544 of the Bankruptcy Code empowers bankruptcy trustees to utilize applicable state law to void such asset transfers for "reach-back" periods of six years or more.

So, how can you protect yourself from a transfer fraud challenge if you're the one buying a distressed Tucson business?   First, do everything possible to get a third party validation (from a bank or business valuation expert) to show that you paid "fair consideration" or "reasonably equivalent value for the distressed business' assets.  Second, structure your purchase so that the terms of the deal specify that the proceeds of the sale stay within the Seller's company as opposed to being distributed to shareholders or partners and insist that arrangements be in place that ensure the Seller's creditors will be paid off.

4. Don't Allow For Time Between Signing And Closing.

If you're considering buying a distressed Tucson business, and go so far as to sign a contract to buy one, then you need to close on it immediately.  Do not allow for months or even weeks to transpire before closing, because the Seller could conceivably file for Chapter 11 during this interim period.  If that were to occur, the Seller could reject the purchase agreement leaving you, the Buyer, with little more than an unsecured pre-petition for claim for damages that would likely be worth pennies on the dollar, if that.

The Seller, on the other hand, would still retain the right to "assume"  the purchase agreement, thereby locking you into a deal that might suddenly not look so good if weeks or months have passed and the business may not look so good after weeks/months of the deterioration of the target's business.  Eliminate the risk of any of this happening by insisting that signing and closing occur simultaneously.

5. "Hold-back" or Escrow a Significant Portion of the Purchase Price.

In the event that the Seller of a distressed Tucson business files for bankruptcy after you have closed on the purchase of their assets, if you seek an adjustment to the purchase price, or indemnification of the entire sale itself, your claim will again be treated as an unsecured, pre-petition claim.  In some cases, claims for indemnification can be completely disallowed if they are contingent at the end of a Chapter 11 process.  Unless you have a guarantee from a creditworthy affiliate or stockholder of the Seller to make good on the deal, then the best way you as a buyer can protect yourself from this risk is to hold-back or escrow a significant portion of the purchase price.  Escrow/ holdbacks are frequently used as part of deals, including deals involving healthy companies.  By putting in place an escrow/holdback as part of your deal you are protecting yourself.  In normal circumstances, 10-15% is the usual amount held back. But, if the company is distressed, the buyer should consider a greater amount, up to perhaps 25% or more.

We hope this information about buying a distressed business will be helpful to your efforts to buy a Tucson business. Give us a call at 502-909-8242 or contact us if you're interested in further exploring the possibility of buying a distressed business.  And, of course, keep an eye out for updates to our Listings page, which includes a link to distressed business listings that we may have from time to time. 

If you'd like more information on this subject, please Contact Us.

Preparing Your Tucson Business For Sale

If you're like most small business owners in Tucson and Southern Arizona,  you started your company because you had a passion for what the business does, or you were seeking a certain balance between a desired lifestyle, your skills, and your desired return on investment.

No matter how much you have loved owning and operating your business, and no matter how much you have prospered from doing so, the reality is that the day will come when you need to to sell it.  The need to sell could arise for a variety of reasons.  You may simply be at a place in your life where you want to retire.  Or, another incredible opportunity may arise that arouses your passions anew, but requires you to divest of your current business in order to pursue it. You may also need to exit the business for personal reasons, including health or divorce.  You can never be certain about any of this, except the fact that one day you or your heirs will need to sell the business.

And when you do sell the business, your objective of course will be to get as much for it as you can.  Here are a few very important things for you to consider well in advance of the time you need to sell your business in Tucson.

Organize and Run The Business So That It Can Run Without You

While this may sound easy, it is actually very challenging because it requires a great deal of discipline on your part.  Start out by asking yourself: "If I needed to be away from my business for a month, could it run smoothly in my absence?  If you can't answer "yes" to this question confidently, then it’s definitely time for you to focus on your processes and systems.  By processes and systems, we mean "the way you do things."  Do have clear and thorough written documentation of how to perform all the major tasks that must be completed within your business? 

Such documentation could be as basic as writing down the steps to perform a task like cleaning a machine, or producing a report on a piece of paper or in a Word document.  For other more complex processes, it could involve highly detailed and specific instructions on how to operate a machine, or use a software tool to perform certain critical functions.  Are there critical processes in the business that only you know how to perform?   A good way to answer this question would be to see what a member of your staff would do if asked to perform a given task or procedure when you are not around to answer any questions they may have.  What happened?  Did they do it the way they were supposed to?  Did the make the same decision, arrive at the same conclusion, or produce the same result as you would have?   If they did not, then you have uncovered an area where documentation would have been useful.  If there are too many sucg areas across your business, where nobody but you could achieve a required outcome, then your business could fall off the tracks in your absence.  That means that a buyer acquiring your business is at risk, because you're not always going to be there and nobody knows what you know.  Having standard, written processes makes your business more robust, more stable, and therefore more valuable. With your critical processes documented important projects and daily operations can continue even when you or another staff member are absent or call in sick, and it will be easier to train new hires as well.  A business that can run without you is one that by definition has more efficient operations,  and to a buyer that translates into more predictable cash flow. That is a key component in the valuation of your business.

Make It Easy For The Buyer To See What The Future Holds For Your Business

A buyer is not likely to run your business the same way you have.  They are buying it because they have a plan, see an opportunity, and want to make it into something more in order to generate value for themselves.  As the seller, one of the most important things you can do to ensure that your business sells is to show them how confident you are that they will be able to achieve their plans once the deals closes. In general, these opportunities that a buyer may have in mind fall into the categories of cost reduction or revenue enhancement.

In the case of cost reduction, a buyer is naturally going to be looking for ways to reduce overhead by looking for tasks that they themselves, a family member, or a lower cost employee could perform.  They will also be looking for cost savings in the areas of procurement and operations.  To assist them, make sure that your books are prepared with sufficient detail to ensure that your salary and operational costs can be fully broken out and understood by the buyer. The buyer is not the only one who will benefit from your efforts to break out these details, because in doing so you're likely to uncover opportunities to wring savings from the business long before you sell.

In the area of revenue enhancement, the buyer will likely have his or her own new, creative ideas and see new opportunities in certain areas of your product and service offerings, or within a segment of your customer base,  that you may not have considered.  In order to permit the buyer to estimate the potential upside of the new initiatives they may be envisioning,  you will need to have an accurate customer database and detailed historical transaction data about customer's purchases.  In other words what they bought,  how much they paid, and how much the customer has been worth to you during their lifecycle with your business.  A business that knows who its customers are, and can market to them effectively, affordably and electronically, is worth more than a business the same size that lacks an understanding of its customers.   If you can let the buyer see that you're giving them the keys to a control panel of tools and predicatable ability to keep selling to known customers, you've just increased the future visibility of the business, and with it the buyer's confidence in its value and willingness to pay you more for it.

Be Prepared To Answer Questions During Due Diligence

Every buyer will conduct due diligence in a slightly different way.  Nevertheless, there are certain questions that will predictably asked.  Working with a qualified business broker can help ensure that you're adequately prepared to anticipate and respond successfully to these know areas of questioning. 

Buyers will often begin the due diligence process by auditing your business' contracts. A contract review will allow them to quickly determine what intellectual property your business may own, what obligations you may have to banks, creditors, landlords, vendors and employees.  A buyer may wish to hire different people, or transact with different vendors and service providers, and a review of contracts will assist them in determining how much latitude they actually have in each of these areas, and when.   A buyer will also want to review the terms in the agreements themselves, and what the drivers were that caused you to agree to those terms and not others.  By having all of this information readily avialable right from the start, you will demonstrate to the buyer that you are detail oriented and have placed important on contractual matter.  From the buyer’s perspective, that should indicate that you've run a "tight ship," and there are no hidden surprises.

While each of the areas we have discussed here will add value to your business, as well as make it more desirable to potential buyers, keep in mind that these are not easy recommendations to implement, and that doing so well requires years of advance preparation.   In other words, don't wait until you need to sell your business to begin preparing yourself for the inevitable day when you will sell it.  By preparing in advance, the process should go more smoothly and have a higher likelihood of your being satisfied with the outcome.

Ready to start planning now to sell your business?   Schedule a free consultation with one of our experienced business brokers to discuss these and many other ways to begin preparing in advance to sell your business.

If you'd like more information on this subject, please Contact Us.

Are You Ready To Speak Directly With A Tucson Business Broker?

If you have visited the Buyer's Section of this website, then you should have a clear idea about whether or not you're really ready to buy a business in Tucson or Southern Arizona.

It may not be as clear to you, however, why you should want to speak to a business broker face to face and consider working with one throughout the process of seeking and acquiring the right business for you.  The fact is that whether you are actively seeking to buy a business now, or just getting started with your initial research now for a possible purchase a few years down the road, speaking with a business broker is one of the first steps you should take.  It may sounds self-serving of us to tell you that, since we are business brokers, but hear us out because we're confident that an in person conversation will benefit you whether or not you decide to use a business broker when you proceed to buy a business, or not. There are times when a brief perusal of a website, or short telephone conversation, just doesn't provide a complete enough picture of the advantages a service can offer, and this is one of them.

To begin with, start out by putting yourself in the shoes of the seller.  Most business owners planning to sell a business in Tucson are doing so because really want to, or really need to.  In that respect, once they've made the decision to sell they would obviously prefer for their business to sell as soon as possible.  And since it's a numbers game, they realize that they will need their listing to be put in front of as many qualified buyers as possible.  The more buyers they reach, the faster their business is likely to sell.  Business brokers serve sellers by marketing their business for sale listings professionally, and confidentially.

What that means to you as a buyer is that a licensed business broker is going to provide you access to a large number of Tucson business for sale listings that you would never have been able to find on your own.  Brokers commit to their sellers that they will closely guard the confidentiality of the listing, and obtain signed non-disclosure agreements (NDA's) from potential buyers before making known any details about their business for sale. If you have not met with the broker in person, they will not be able to make you fully aware of the opportunities to buy a business in Tucson that are actually out there on the market.  

If you're seriously interested in buying a business in Tucson, then you probably have a good idea what type of business you're looking for.  If that is still kind of hazy for you, then let us suggest again that you go through the Buyer's Section on this website, which is designed to help you refine your focus.  The helpful videos and questionnaires listed there will assist you narrowing in on the business that best fits your investment parameters, lifestyle priorities, and professional skills.  Once you've clarified these things for a business broker, most brokers will try to keep you up to date on their own new listings that match your criteria, as well as other listings that come on the market that only a short list of brokers are actually aware of (remember, the seller wants this to be confidential until a deal is completed). In our case, we post our listings on our blog, so subscribing to our RSS feed will ensure that you're notified of new listings. 

Finally, if you conclude that there are sufficient good reasons to work with a business broker, it's important to find one who you "click" with and will enjoy working with. Beyond that, you'll also want to be on the lookout for "red flags" and filter your choices of broker.  An experienced broker will have solid references and a track record, and will increase your confidence by sharing their knowledge about the kind of business you're looking for and the industry it's in, as well as the purchase process itself. Your broker is also the person that will be representing you in a transaction with the Seller, so you will want to be comfortable with their style and approach, as well as completely certain of their competence, integrity, and clarity about your goals. 

How can you properly evaluate these qualities in trusted advisor unless you've met with them in person?  The good news is that most business brokers will gladly meet with you with no obligation to understand your objectives and share their expertise.  We certainly will, at least. 

Ready to Schedule a Consultation?  Just click here.

If you'd like more information on this subject, please Contact Us.

Selling Your Tucson Small Business in 2012

If you're like most small business owners in Tucson and Southern Arizona, you've been waiting and watching for signs of economic recovery for several years now.  The news seems to be a mixed basket of goods, as various indicators of recovery continue to rise and fall, and often paint contradictory pictures.  Housing market analysts suggest that the recovery in home values and sales may be as far off as 2014 or beyond, and we all know the disproportionate role they play in the fortunes of the housing-driven Arizona economy. For you, the small business owner, the numbers that really matter are growth in your business' top line revenues, improved profitability, increased productivity and improve cost position.  In short, the numbers that would cause the market to place an increased value on your business were you to consider selling it in 2012.

The reality is, that in recent years most small business owners have concluded that this has not been the right time to sell because they have believed the valuation of their business has been adversely impacted by the overall state of the economy.  Will anything change in 2012? To begin with, the right time to sell is the right time for you.  Regardless of what the market may be doing, there will always be a buyer for a strong business that is appropriately priced. 

There have been some signs of increased interest in the market for selling a business in Tucson and Southern Arizona as 2011 draws to a close. This increase in business owners exploring the possibility of selling has not, however, translated into a large increase in the number of Tucson businesses actually for sale, for the reasons mentioned above.  Tucson small business owners appear to still be waiting.  Will 2012 be the year they decide to sell?  It's hard to say.   

We regularly consult local and national databases to review statistics about business sale trends, and maintain an open dialog with other professionals in our field both locally and nationally.  All sources confirm that the number of new Tucson business for sale listings and closed transactions are down between 30 and 40 percent from their peak period of 2007. Our conversations with Tucson banks, lenders, and title agencies suggest that lending options may be improving slightly, and that the constriction in lending in recent years has resulted in both buyers and sellers becoming more knowledgeable and proactive about finding financing solutions to help them close the deals they want to do.

Now that 2012 is just around the corner, and evidencing some signs that enthusiasm is building around buying and selling Tucson businesses, lets turn to what those looking to sell a Tucson business should be doing to prepare themselves. The short answer is: start planning now because your potential buyers are out there researching options right now.  Here a few things to consider:

1) Understand The Value of your Business:  

• Get Your Financial House In OrderStep one is getting your financial records in order. You'll need to have at least three years  of tax returns, company financials like P&Ls, balance sheets and statements of cash flows, as well as records of business expenses and other valuable data such customer lists and lease agreements, etc.  Each of these documents plays a critical role in establishing the market value of your business, and when presented in an accurate and orderly fashion, provide a qualified with the confidence that they are looking at a well-managed business.

• Resolve Major Outstanding Issues: Before you list your business for sale, you should also endeavor to resolve any outstanding issues that could serve to undermine buyer confidence.  Examples include: short-term leases without an option to renew, overdependence on a short list of key customers you could not afford to lose without impairing the business' prospects, and any pending legal issues that could threaten a sale

• Appearance matters.  Prior to listing your business for sale, make sure to conduct a thorought review of the physical condition your building, plant and equipment, as neat and tidy and well-maintained assets also create a favorable impression with buyers. Keep in mind that any core business assets that visibly need updating will quite likley be seized upon by a buyer as material reasons to lower the offer.  Put yourself in the buyer's shoes; the less work they will have to put in, the more you can likely expect from your final selling price.  In other words, make the effort to do a deep cleaning and upgrade inside and out, and we advise you to invest in any building or equipment improvements youmay have considered but postponed.

• Understand the market for your business.  A licensed business broker can help you to develop a more complete understanding of the market and how your business is positioned against comparable businesses. This is critical to your ability to set an effective asking price. Every business seller justifiably seeks to avoid undervaluing their business and ending up with less money than it is really worth.  However, the flipside of overvaluing the business vs the value of comparable businesses will almost certainly lead to a longer sales process, and one that may end in disappointment.

• Complete a Business Valuation. There are some signs that the economy is improving. Buyers may be more inclined to reenter the market buoyed by these modest improvements, and even in challenging times qualified buyers won't resist paying the price required to acquire a solid business.  But during these times they will be even less inclined to pay attention to an overvalued listing. So how can you determine the right price to list your business for?  The most straightforward way is to compare it to other similar businesses.  A business broker can assist you be researching similar businesses for sale. Some online business-for-sale websites allow you to search for businesses by industry, size and location. By learning the prices that comparable business are listed at or have sold for recently, you will have a sound foundation for determining a price for your own business. You could also purchase a Business Valuation report from Allen & Young, in which we will work with the financial and other information mentioned above for your business and perform this research on comparables for you (selling price and multiples of cash flow and revenue that the businesses sold for) of recently sold businesses in your industry.  We have access to many sources of data, and a great familiarity with the local market.  A Business Valuation will give you great insight into the estimated value of your small business.  However you choose to proceed, it is necessary that you be honest with yourself.  Look at your business as a buyer would.  If your revenue and/ or profits have been in decline, you must take that into consideration. When it comes to pricing your business, your goal should be to attract as many buyers as possible, create maximum demand, and an atmosphere where they are competing for your business.  If you overprice your business, there is no chance of this happening.

• Get the Word Out:  Hiring an experienced business broker is the best way to get the word out, confidentially, that your business is for sale.  When selecting a business broker, you will want to check their references and make sure that you choose a broker who is accomplished and respected, and ideally has experience selling businesses in your industry. A broker should prepare a marketing package for your business, and advertise it through numerous on and offline marketing channels.  Even if you elect not to work with a broker, you should still plan to be aggressive with your marketing plans. Use websites to post your listing, work through trade associations and their publications, and spread the word through family and friends.  However, if you need to maintain confidentiality about listing your business for sale, then a business broker is your best option. They can list it and deal with buyers, while you continue to run the business.

• Plan to Offer Seller Financing:  Even in good times, banks will almost always require a seller to finance part of any transasction they may choose to fund.  In other words, at the time your business sells you are not just going to be handed a check and be able to ride off into the sunset.  Rather, you will receive some portion of the sales price at the time of closing, and receive the rest over time, plus interest. From the buyer's perspective, this is valuable because it commits you to ensuring a smooth transition.  From the lenders perspective, it commits you to the success of the deal as well and ensures an experienced hand will remain at the wheel to increase the odds of the new owner's success.  The upshot is that you will remain connected to your business after sale helping to ensure a smooth transition. Offering seller financing broadens your access to a larger pool of buyers, who are in turn more likely to qualify for lending, and more likely to make you an offer.  By helping ensure a buyer's success, you ensure their ability to keep paying you over time.

In conclusion, if you're thinking about a possible sale of your Tucson business in 2012, don't wait until the last minute. Instead, get started putting your house in order now, allowing you to  take your time and do it right.  By working with a licensed business broker and planning ahead and accurately researching your market, you will prepare your business to stand out from the competition. Understanding and effectively managing the sales process is more than half the battle, and that's a business broker's specialty. If you're thoroughly prepared, and understand the process, you're more likely to achieve a faster and more financially rewarding exit from your business.

If 2012 is the year you decide to explore the possible sale of your Tucson business, we look forward to speaking to you then.  In the meantime, Merry Christmas and Happy Holidays from all of us at Allen & Young Business Brokerage.

If you'd like more information on this subject, please Contact Us.

Making the Decision to Sell Your Business

By Larry Orenstein

When is the right time to sell your business?  Actually, there is no definitive answer to that question.  The reality is that most small business owners wait too long and have unrealistic expectations of how easy it will be to sell or how long it should take. If you are considering the sale of your business, our advice and that of most experts is don’t wait to the last minute. Why do we say that?

Because you don’t want to wait until you have to sell for economic, health, age, or emotional reasons. Anxiety will almost always force you into accepting a deal that is not good for you, causing emotional reactions that will prevent a sale from happening at all. Developing an “EXIT STRATEGY” involves much more than simply the decision to sell. It requires preparation, engaging the right recourses to advertise, finding qualified buyers, negotiating terms of sale, preparing contracts of sale, structuring and securing financing and executing documents to protect your interests after closing, getting yourself, your business, and assets all properly prepared to expedite a sale.

Even if you already set an initial price for your business it is an important subject to review. Determining a selling price range for a business is part of the buy-sell process, but it is often the part most likely to create vast differences of opinion. Buyers and sellers usually do not share the same perspective. Each has their own motives, rationale, and their own way of seeing the facts and figures, colored by their emotional attachment to the business or to their money.

Typically, the buyer probably wants to pay less, the seller want to get more. That is usual and understandable. For a sale to happen both buyer and seller must be satisfied with the price and be able too understand how it was determined.

At Allen & Young Business Brokerage our business pricing analysis will simplify the rather complex process of establishing an asking price for a business. Suffice it to say, there are many factors, variables, and assumptions that are involved in that process.  By working with Allen & Young for your business pricing analysis, we can help identify all these variables as they applly to your business, and demystify the process of determining what the market is likely to be willing to pay for it. 

Ready to get started developing your exit strategy, or to move forward with a pricing analysis?

Contact Larry Orenstein at Allen & Young Business Brokerage, at 520-820-1706.

If you'd like more information on this subject, please Contact Us.

Support Your Community: Buy From Tucson Arizona Businesses

 

If you were considering making a Tucson Business Investment, or buying a business in Tucson, Arizona, just imagine how much more confidence you would have in your decision
if there were a strong commitment in the community to buy from locally owned businesses.

ABC News has been running a special during the past 6 months about products that are "Made in America" that has garnered quite a following, as Americans search for and find opportunities to support American jobs and workers with their hard earned dollars.  As you prepare for the holiday season here in Southern Arizona, consider the impact of your holiday purchases as well as your ongoing regular purchases on the American economy if you buy products "Made in America," and then take it one step further by challenging yourself to keep as many of your purchases here in our local economy as possible. No matter your walk of life or station in it, research has shown that a dollar spent buying from a local business will have a much greater impact right in your community than buying from a business that is not based locally. 

The graphic above, an except from a 2008 study performed by Civic Economics in Grand Rapids, Michigan, determined that for every $100 spent locally, $25 dollars more stayed in the local economy when the purchase took place at a locally owned business as opposed to a chain or branch of a larger out of state company.  Here is what they found could be achieved by shifting just 10% of retail sales in favor of independent local businesses:

Pretty convincing, isn't it? 

So, here's some advice to you whether you are thinking about selling a business in Tucson, and want to get the highest price the market will offer, or if you want to buy a Tucson business:  think about how you can share this message with your customers, benchmark your out of town competitors and see how you stack up, then stimulate local pride, reward loyal customers, encourage referral through viral marketing and social media, and make sure everyone understands that we all win when people shop locally. 

Whether you're the buyer or the seller, a local business with a strong and loyal LOCAL following, is a better bet.

If you'd like more information on this subject, please Contact Us.