Posted on Tue, Aug 17, 2010
According to Tom West, in the Complete Guide To Business Brokerage, "a recent figure was that the time from listing to sale was (on average) 7.9 months or about 230 days." In 1978, the average was 56 days. If that is the average, then it can obviously take much, much longer.
So what will that mean for your business? The answer is, of course, it depends. It depends on a number of things that we have discussed from time to time across this site and in this blog. Many of the factors that influence how long it may take your business to sell are, fortunately, within your control before you even decide to list it for sale. Let's review a few of them again here:
- The Market: by the market we do not mean the macroeconomic environment, which is what you may have been thinking. Regardless of the general state of the economy, it is always a good time to sell a business and there are always interested and qualified buyers. The question is whether you as the seller are willing to accept how the market prices your business. If you are, then you will have created the principal prerequisite for having a productive conversation with a potential buyer. All you need now is the resources of a professional business broker to help you identify and market to a pool of such buyers. Be very clear about one thing: if your expectations about the value of your business substantially exceed the value the market would place on it, for whatever reason, you can expect a longer than average time to sale, or no sale at all.
- Accounting: if your books and records, going back at least 3 years, are clean and organized in accordance with widely accepted accounting practices, then this should not contribute to any delays in the sale of your business in Tucson. That does not mean it will speed it up either, because from a buyer's perspective accurate accounting records is a basic expectation. Wouldn't it be for you as well, if you were the buyer?
- Layered Management: Are you the only one that makes the wheels of your Tucson business go 'round? Or do you have a team of trained and reliable people who would transition to new ownership and provide a degree of certainty to new owners that future growth projections were in fact attainable?
- Equipment & Facilities: are your equipment and facilities clean and up to date, and in a good state of repair? Or are they dilapidated and obsolete? Can a new owner walk in and just get down to business, or will s/he be required to make additional investment of time, energy and resources to clean up and fix up the operation?
These are not all of the factors that influence the salability of your business, but they can affect how long it takes to sell. Over the years, the time from listing to sale of all businesses has increased. Some of the reasons cited for this change include higher priced businesses, better educated buyers, greater regulations, the increasing involvement of lawyers, the paucity of escrow companies and attorneys with expertise in business transactions in many parts of the country, and perhaps even the changing practices of the business brokerage profession itself.
Whatever the explanation may be, it behooves you to control the controllable when considering the sale of your business. There are many factors that are beyond your control; being prepared and realistic are not among 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 on Tue, Jun 15, 2010
So you're considering buying a business in Arizona? Or listing your Tucson or Arizona business for sale? Where should you look?
Here are few options to consider, ranging from large national business for sale listing services, to local Arizona options:
Of course one of the best places to learn about Tucson businesses for sale is to contact a Tucson business broker. Oftentimes a business may be listed for sale, but only the owner and their broker may be aware of this. Brokers often prefer to look for buyers confidentially on behalf of their seller clients, or network privately among one another to match buyers and sellers. This is done primarily to protect the privacy of their clients. As a result, perhaps the most effective way to learn about business for listings that may meet your criteria as a buyer is to begin a relationship with a business broker.
If you are considering buying a business, beginning a conversation with a Tucson business broker implies no obligation on your part, except that you treat with utmost confidentiality any information that is disclosed to you about the businesses for sale in Tucson that your broker may share with you. For example, in working with Allen & Young, you will be asked to sign a non-disclosure agreement. This protects the seller, and you as well if you are seriously considering the purchase of a business for sale. It is to noone's benefit that the fact a business is for sale become widely known, especially to competitors or employees, since this erodes current and future business value.
Working with a business broker in Tucson will also give you the opportunity to set forth your criteria as a buyer. What type of business are you looking for? In what industry? What can you afford to buy? To help think through those questions and others, we've developed a special section for Buyers on this site. Check it out here.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted on Wed, Jun 09, 2010
When you are preparing to place your business for sale in Tucson ( or anywhere else for that matter), it is extremely important to ensure that you are current on all of your federal, state and local taxes. While that may seem pretty obvious, in the heat of the battle it's possible that something may have slipped through the cracks so it is best to double check.
Additionally, those qualified investors considering buying a business in Tucson will be impressed by you as a seller if you are knowledgeable about the taxes that your business is subject to, and open and transparent about sharing your knowledge. Taxes of course can be complicated, and they are continually changing. Taxes in the City of Tucson are no exception.
The purpose of this article is to continue to explore the resources that are available online at the City of Tucson to help understand Tucson business taxes. If you are considering a Tucson business investment, or buying or selling a business in Tucson, here are some important areas where further investigation will be beneficial to you
- If real estate is involved in the business transaction, make sure you understand the tax implications if you will have rental income. For example, if you lease property to an S Corp that you also have an interest in, the transaction is taxable. You will also need a business privilege license.
- If some of the Tucson business' sales are conducted with out of state customers, investigate the proper handling sales tax to customers out of state. The State of Arizona allows taxes to waived for out of state residents making purchases while in Arizona, but the City of Tucson only waives the taxes if the customer is physically outside of Arizona at the time of purchase.
- Similarly,if your business takes orders from a location within the limits of the City of Tucson, you must pay the 2% sales tax even if the customer is out of state.
If your business is for sale in Tucson, don't let confusion about how local taxation works create a misstep in the process as you prepare to sell a Tucson business.
Click here to download the City of Tucson's "City Tax FAQs" document now.
If you have any additional questions about this, visit the City of Tucson's Web site at:
http://www.tucsonaz.gov/finance/BusInfo.html
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted on Thu, Jun 03, 2010
A respected colleague in the business brokerage industry in Prescott, Arizona, Brian Harron, is the original author of this helpful article about selling a restaurant or bar. Much of what Brian writes is applicable to the sale of any business. We hope you find this valuable.
When is the best time to sell a restaurant or bar? Another question that I get asked is when is the best time to list a restaurant or bar for sale? So here are ten answers to the questions.
#1 Before you absolutely have to. The best time to sell is when there is no sense of desperation due to economic circumstances, divorce, health or whatever. Whenever desperation is present, it seems to infect the process everywhere and creates an unbelievable buyer advantage or a situation where buyers just stay away.
#2 After you have sought professional advice. Smart Sellers confer with their attorney, their tax adviser and a professional business broker and perhaps a business appraiser before putting their business on the market. Tie up loose ends first, not last, get your legal and tax house in order and know the consequences of the sale first so that when the sale is done there are no unpleasant surprises and you get a deal that you can live with.
#3 Before a deadline. You do not want to be trying to sell when the lease is running out or when you thought you were going to retire. When you want to sell, you need to know that the average time length for a business sale can be six months or longer. Allow for it and let the process unfold normally.
#4 After you spruce the business up. This is all about fixing up your business both physically and fiscally. Paint, clean, replace. This is no different than selling a house. Then get to work on the money side of your business. Clean up your financial reports, report all sales. remove unnecessary expenses and maximize your Seller's Discretionary Earnings, the thing that most likely will have the greatest impact on the price that you can get for your business.
#5 When cash flow is strong. Don't know what Seller's Discretionary Cash Flow is? SDE has a formula but in short it is the amount of cash taht an owner has access to directly or indirectly. Profit counts but not as much as SDE because most small business owners do not like paying taxes. SDE gets at the ways owners can have cash and it is generally the number that gets capitalized to create the estimate of listing price. Better read the Blog on SDE to be sure that you realize it importance to brokers, bankers and appraisers and yes, seller's too.
#6 When general economic trends are rising. Right now, April of 2010, is an excellent time to list a business. The economy is improving as is the general level of optimism. When the economy is hot is also a great time to have a business on the market as buyers are willing to pay higher prices and there are more buyers to deal with.
#7 When it is a Seller's market. A wonderful time to sell is when there are more buyers than sellers and buyers get anxious to buy, sometimes becoming a little less demanding than what they might ordinarily be. Supply and demand is always in the favor of the seller when there is a small supply and a great demand.
#8 When you have ample time left on your lease. The length of time on your lease can be critical to your ability to sell your business. Your buyer needs time to get his investment back and then time to get a return on the investment. Anything less than three or four years will cause a very deep discount in your price. With an average life span for restaurant ownership of approximately five years, a five year lease with one or more renewal options can be very important to your sale strategy.
#9 When sales are steady or increasing. Strong sales are a very good indicator of a healthy business. Generally only bottom feeders are going to be interested in a business with significant reductions in sales. Start your sales plan two to three years ahead of the time that you list your business for sale and make increasing sales one of your biggest goals.
#10 When the business is no longer fun. Most entrepreneurs get into the restaurant business because it is fun and they love it. it is for many, a physically and emotionally demanding business. When it is no longer fun or when you can feel the burnout arriving, it is most likely time to sell - before your performance,. your attitude and the business deteriorates, making it harder to get the best price at the time you want it.
To read Brian Harron's original article on his blog, click here.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted on Thu, Jun 03, 2010
Whether your considering buying a business in Tucson, or placing a business for sale in Tucson, at some point as you move forward towards a transaction the issue of licenses and permits will come up in the conversation. The questions will be: does the business you're buying or selling require a Business License in The City of Tucson, and, if so, is that Tucson Business License current?
It's better to be safe than sorry, it could be costly & inconvenient to say the least if the failure to maintain a necessary business license up to date caused a business transaction to fall through. So how do you know if the business in question needs a business license?
Here are the first two questions you need to ask yourself?
- Will your business be located within the city limits of Tucson? Or, Will you conduct business within the city limits?
If you answered yes to either of those questions, then the business does need a Tucson business license. But it's not that simple, I'm afraid. We are dealing with the government here, after all!
The next question is:
- Do you know if your business is zoned to conduct your type of business in your part of town? Or, Do you know if the property /space you are about to rent will pass building and fire code requirements? Or, Do you have a Certificate of Occupancy for your business name?
If you answered yes to all the above questions, then you are in good shape. But guess what? There are 15 more questions that cover the gamut of things like the type of signage you will use, whether your business serves food, liquor, is a manufacturer, operates out of the home, etc.
If you are considering buying or selling a business in Tucson, this could be the right time to familiarize yourself with these requirement. Click here to Download the City of Tucson Business License Process.
To view the entire set of tax and licensing related regulations in Tucson, visit the City of Tucson's Web page devoted to these questions by clicking here.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted on Sun, May 09, 2010
Have you listed a business for sale in the past? Do you have a business listed for sale now? Or are you considering listing a business for sale in Tucson sometime in the near future? Have you worked with a business broker during this process?
If so, ask yourself this important question: did your business broker take the time to educate you about the process of buying and selling a business in Tucson? Or did they just ask you the price you wanted to put on your business, give you a copy of the listing, and disappear without setting expectations and ground rules for managing the process of selling to your best advantage?
Do you know what kind of listing you have? What are the price, and terms? The commission structure? Even if you think you have experience in all this, the fact is that most sellers can make simple mistakes that end up being costly during the sale process. And when they do, it's actually their broker's fault for not spending enough time with them to fully prepare them for every contingency.
Here are a couple of examples of situations that can cause you problems if you're the seller:
1. Handling Buyers:
- Do you know what your listing agreement says about how to handle buyers that walk in the door unexpectedly? Most sellers assume that these buyer prospects are theirs without having read the agreement. But they could well belong to the broker.
- Many buyers will return to the business and try to find the seller after being shown the business. They may ask the seller to quote a price, or to show them books and records.
- This could put you in a difficult spot in front of others, and severely compromise your negotiating position.
- Did your broker coach you on how to handle such situations?
2. Keeping Your Business For Sale Listing Quiet:
- If you really want to keep secret from your employees, customers, suppliers and competitors the fact that your business is for sale, have you considered how hard that is going to be if you're the one dealing with buyers?
- One of the most important roles of a broker is to shield you from these conversations, and handle them for you.
- Is your broker playing this role for you?
If you're considering selling your Tucson business, make sure that you know as much as possible about every step in the process of selling a business before you start. That way, you can avoid being caught off guard by events and surprises along the way. Click here to take a moment to walk through the steps of selling a business.
And remember, if there is something, anything, about the process of selling your business that you are not completely clear about, and you're already working with a business broker, then you have the right and should ask that person for a detailed explanation.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted on Sun, Nov 22, 2009
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 on Tue, Nov 03, 2009
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 on Tue, Nov 03, 2009
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
Posted on Sat, Oct 10, 2009
Manage the Income Statement
As a small business owner, when you hear “manage the income statement” your thoughts most likely jump immediately to thinking about strategies to minimize tax impact.
However if you are considering selling a business in Tucson or Southern Arizona, tax deferral is no longer your objective. It is time now to shift gears and begin to examine the income statement from the perspective of someone who may be preparing to buy a business in Tucson or Southern Arizona.
Buyers like to see consistent revenue growth and consistent operational expenses. Revenues, or expense categories, that visibly fluctuate up and down on your income statement from year to year will immediately invite questions. When the option exists, these fluctuations on the income statement may be balanced out by increasing or decreasing revenues, giving or postponing bonuses or capitalizing or expensing certain. Just remember that any such changes made to smooth out the income statement still need to be according to Generally Accepted Accounting Principals.
Taking personal discretionary expenses results in a lower net profit and less taxes. But just remember that for every $1.00 spent, the sales price may be reduced from $3 to $5 or more. Keep receipts for all discretionary expenses in separate folders so that you have proof of these expenses to show to a buyer.
A business broker can explain the process of “recasting” your Income Statement to better determine the profitability of your business and thus the likely pricing range it will fall into in the market. How you have managed your income statement will have an impact on what a buyer is willing to pay for your business.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com