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Small Businesses and the Law

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 25 Apr 2012 12:13:53 GMT

Did you know that your small business is subject to the same regulations as a giant commercial entity? If you find this startling news, you’re not alone; most entrepreneurs in the United States assume that laws apply only to much larger corporations.

All companies – small, medium, large and mammoth – must adhere to the applicable local, regional and national laws and regulations.

Hopefully, you’ve been aware of these since the day you opened for business, but if not, we encourage you to take the time now to become compliant. You may wish to engage legal counsel to explore these areas more thoroughly and ensure you have adequately covered yourself and your company.

Let’s begin with your great idea: have you protected your intellectual property? You may wish to investigate filing for a trademark, patent or copyright. A related issue is having non-disclosure contracts in place to prohibit employees or others closely involved with your company sharing your proprietary information.

Spreading the message about your great products or services? Your clients and customers are protected by numerous advertising and marketing laws. The Federal Trade Commission is the agency mainly responsible for enforcement of these laws and regulations. At a minimum, advertising must be truthful and not deceptive, and advertisers must have evidence they can produce that reinforces any and all claims.

Other laws abound in specific industries and for certain products, so investigate all regulations pertaining to your particular industry and products or services.

In addition to the Federal Trade Commission, state and local regulatory agencies also govern advertising. Many resources and publications are easily available on the Internet to help navigate through the complex rules for advertising. The Consumer Action Handbook (http://www.usa.gov/directory/stateconsumer/index.shtml) is a great place to start.

Protection is provided for investors and others related to areas of finance through securities, bankruptcy and antitrust laws.
Privacy laws ensure your customers know how their personal information will be used, shared and protected.

Your business may also be impacted by environmental regulations or by the Uniform Commercial Code, should you transact business outside your state.
Last – but certainly not least – are the numerous federal and state labor and employment laws. It is wise to be aware of the many regulations in place that protect employees. This extensive area includes child labor, wages, employee eligibility, workplace safety and health and workers’ compensation.

We will go into more depth on labor and employment laws and some of the others mentioned above in future blogs.

The Value of Organization and Time Management

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 14 Mar 2012 17:31:08 GMT

How often do you find yourself looking for that important – yet somehow misplaced – piece of paper? Do you promise yourself that you’re going to become better organized, but find the days, weeks and months slipping by with too much work to do and not enough time to start that new filing system or categorize your overflowing email messages?

Everyone can benefit from good time management skills, but these practices are particularly valuable for entrepreneurs, who typically wear many hats on any given day and don’t ever seem to have a second to spare.

Here are some tips that successful small business owners and time management experts have shared with us:

The best and the worst of times -To better assess what changes might be most helpful for you, it is crucial to understand how you spend your time each day. Where are you not making the best use of your time? Another way to approach this is to note what you are doing differently on the days you find yourself most productive.

Are you diligent at daybreak or mentally best at midnight? Do you need solitude and a deadline to focus, or do your best ideas seem to be found after social interaction or when you’ve taken the time to simply let your mind wander?

But it’s Leap Year, so I got an extra day - Every day has 24 hours, and there’s nothing you or I can do to modify that. It is up to each of us to manage our behavior: it’s the only way to better cope with the finiteness of time.

Eliminate those distractions that are not helping you become productive. Find a system that works to help get – and keep - you on track (there are many available, so choose something you feel comfortable with and will use). Set realistic goals toward better time management. Streamline your inbox and organize physical and electronic files of information.

Routine tasks need handling, but perhaps they need time limits. A perfect example of this is reading and responding to email. If you keep an eye on incoming email messages all day long and then stop to respond immediately, there might be room for improvement by simply limiting the times you read and reply. Many small business owners put email at the top of their list as an area that truly needs better organization and time management.

What’s really important – Make that decision and prioritize each day accordingly. Many small business owners feel they accomplish more if they begin with the most difficult challenge. Usually this is the very task one wants to avoid but by facing it first, with fresh energy and a clear mind, you might find it wasn’t so bad after all. When using this approach, deadlines are often met ahead of schedule.

Let someone else do it – Determine which jobs could or should be outsourced, and then allow someone else to do the work. Tedious or simple tasks could be contracted out to free up your time for something more precious, and those areas that fall outside your comfort level and areas of expertise should definitely be left to the professionals.

Just say “no” – Only you can decide where your time should be spent. In addition to running your company, you want to ensure you enjoy quality time with family and friends. Most entrepreneurs are also involved in their communities, which is a wonderful way to serve others while networking to help grow their companies.

But, how much time do you really have? Many self-motivated business owners find it difficult to turn down requests to serve on boards or volunteer in other capacities. By thinking about your time restraints in advance, and realizing how much energy will be required for various community activities, you might find yourself making different choices going forward.

This pie is always being cut in different proportions: one year may be a great one for volunteering, as your youngest child heads off to college; another year might be too busy with helping your parents move, hiring new employees and wanting to spend more time with your spouse.
Be true to yourself as you give of your time and talents.

What I need most – Don’t neglect spending time just on you. Understand your physical and mental limitations and respect those times you need to take a break. When you find your schedule slowing, embrace it (that might be a great time to review your progress and switch priorities).

One final note is that some flexibility must be considered with anyone’s schedule, but by spending a few moments each day organizing and staying on track, you are creating habits and routines that will enable you to stay calm and focused as you manage your small business (and your life!) now and in the future.

Business Plan Basics

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Thu, 23 Feb 2012 21:31:39 GMT

Ho-hum, you may be thinking. Or, boring. Maybe even, when can I possibly fit this into my hectic week?

As an entrepreneur, you are an extremely busy individual who probably shoots from the hip more often than not. So, do you really need to take the time and effort to put a business plan in writing?

Almost every CEO and business consultant in the country would answer with a resounding, “Yes!” The importance of a business plan cannot be overemphasized; however, the plan should be carefully considered and comprehensive and objective in nature.

Many entrepreneurs are quick to write a plan if they are seeking external financing, but the reality is every company needs a plan.
Having a good business plan in place will help you stay focused and achieve the goals you have set.

The U.S. Small Business Administration notes that “a business plan should be a work in progress.” Conditions change every day. Our national economic climate is not what it was ten years ago, and your local business environment has more than likely changed in the last few years. Factor progress or decline in your specific industry into this mix as well.

Focus on what makes your company special: what niche does it serve? Think about where you want your business to be in one year, five years, ten years.
What should be included? An executive summary that states the intent and purpose of the company; a thorough description of the business (including information on marketing, human resources, policies, procedures and competition); financial data (P&L statements, balance sheet, list of equipment); and any supporting exhibits (including resumes of principals, lease agreements and other legal documents).

Time spent today creating a business plan is definitely a solid investment in your company’s future.

The Many Benefits of Buying an Existing Business

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 18 Jan 2012 13:39:51 GMT

You may be dreaming of starting your own business from scratch. Or are you really dreaming of being your own boss and seizing control of your financial destiny?

Most entrepreneurs would be wise to take a look at purchasing an existing business, provided they have the financial power to do so. Most business owners and industry experts would agree with the logic behind this decision. After all, the potential for failure is huge when starting something brand new, whereas stepping into the shoes of a successful entrepreneur provides the new owner a tremendous head start.

According to the U.S. Small Business Administration, over half of all small businesses fail in the first five years. Start-ups are tricky, and that first year of operating a company can be like walking through a field of land mines. What equipment should you buy? Who is the best vendor for supplies? Will you need to hire employees? Where should the business be located? What are going to name it? Do you need to create a logo? What about establishing policies and procedures? How will you attract customers? Have you thought through an emergency plan? Those are only a few items that will need addressing in the initial stages of establishing your entity.

By purchasing an existing company, you dramatically reduce problems that generally arise within the first few months of operating a business. The company is established, and you inherit a name, location, equipment, vendors and suppliers. Perhaps most important are the customers that are in place, familiar with the business and its products or services.

When an entrepreneur buys an existing company, a training period with the former owner is generally included. The amount of training time is often negotiated when an offer is made to purchase the business. Savvy entrepreneurs use this time wisely to learn about the day-to-day operations, as well as demand, seasonal fluctuations, competitors and marketing. Ask questions and perhaps suggest that the previous owner be available via phone for a period after the training (be reasonable with this request: a question here or there is expected, not lengthy conversations on basic issues that should have been covered during initial training).

Not only are customers in place, but buying an existing business usually means there are employees in place who want to remain with the company. Having a built-in customer base, earning a profit from Day One and retaining knowledgeable employees are a great way to begin your new venture.

Small Business Buyer’s Wish List

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Mon, 09 Jan 2012 17:08:15 GMT

We recently presented a wish list for a typical seller of a small business. Now, it’s the buyer’s turn.

Entrepreneurs – whether they are buyers or sellers – generally agree on several factors that make the business transfer process more seamless overall.
A buyer wants:
•    A solid business – Although that phrase may be somewhat subjective, buyers are searching for stable companies with a track record of success. The savvy buyer approaches the situation just as a lender would: requiring a history of financial data that is able to be verified. Filed tax returns are the preferred record for conducting due diligence. It is also important that a business be established. Most lenders require a minimum of three consecutive years of financial history and prefer that the company was under the same ownership (the current seller) for these three years.

•    Reasonable seller expectations – This comes into play at the first moment a buyer begins looking at a business for sale. Does the seller receive an adequate income from his company? Are his revenues increasing or, in this economy, at least staying consistent from year to year? Is his business priced appropriately? Will the seller consider offering some financing?

•    Disclosure during the due diligence phase – Buyers hope sellers will share the items requested in a timely fashion and be able and available to answer questions or present further information where necessary. Courtesy and common sense should prevail during this delicate phase of the business transfer process.

•    A smooth closing – Just as the seller wishes, the buyer also wants the closing to be a positive experience for both parties involved. It is a time of celebration, not a venue for uncertainty, debate or hesitation. Closing attorneys experienced in the business transfer process assist immensely with a seamless closing. By the time everyone is seated at the closing table, all questions should have been answered, all pre-closing paperwork completed and the buyer and seller should be confident this is a win-win situation for everyone involved.

•    A seller who stays involved (for a while) – While a typical buyer probably has some new ideas for the business, almost all buyers want training and initial support from the seller. Buyers want to be successful and retain employees and customers wherever possible and practical. Buyers look for sellers who will spend a week or two showing them the ropes, and buyers are especially appreciative if a seller remains available at a later date should an unexpected question arise. Buyers generally do not want sellers to be involved for a long period of time, unless they have previously presented the seller with an offer of employment. A buyer wants to feel comfortable and prepared as he assumes control of his new enterprise.

As I mentioned in Murphy’s previous blog, my experiences working with buyers and sellers who are forthright, reasonable and agreeable have been the most enjoyable and produced the most successful closings. When buyers and sellers have realistic expectations -- initially and throughout the business transfer process -- and maintain a professional and positive attitude, they typically find the transactions to be pleasant and seamless.

Small Business Seller’s Wish List

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Mon, 19 Dec 2011 16:45:50 GMT

In the spirit of the season, we offer a wish list for a typical buyer and seller of a small business. Entrepreneurs who are selling their companies, as well as those looking to purchase, generally agree on what would make the process more seamless overall.

Today’s blog focuses on what the seller wants:

•    A qualified buyer – This not only means someone with the financial resources to meet a down payment and secure financing, it also describes someone with experience owning or managing a business -- perhaps with some knowledge of the industry itself. A qualified buyer more than likely has established ties to the geographical area and if married or in a domestic relationship, has the support of his partner.

•    An appropriate offer – A seller appreciates an offer that is solid, reasonable and timely. Sellers expect contingencies to be a part of the offer, but also anticipate these to be realistic. One of the most common contingencies is a lease transfer with equitable terms for the buyer.

•    A practical due diligence phase – Sellers are pleased to answer questions and share pertinent data during the due diligence phase; however, buyers should take care not to pose queries or make statements that may be perceived as an insult to the seller. Common sense should dictate how the buyer should best introduce discussions on past decisions the seller made or how the business is run on a daily basis. Buyers should prepare their due diligence requests in writing and as soon as possible after the offer has been accepted.

•    A smooth closing – The closing should be a time of celebration for both parties, not a time for second-guessing, bickering or hesitation. Hiring a closing attorney experienced in the business transfer process helps immensely. By the time everyone is seated at the closing table, all questions should have been answered, all pre-closing paperwork completed and the buyer and seller should be confident this is a win-win situation for everyone involved.

•    An efficient transition – Most sellers, particularly those who created the business from the ground up, truly want to see the business continue to grow and prosper. Sellers want their buyers to be successful, and most will work hard to ensure the buyer is completely comfortable with all facets of the business during the training period that begins after the closing. This transition phase often involves introducing the new owner to suppliers and customers and showing the buyer everything related to running the business, from how to operate office equipment to the best way to manage employees’ schedules.

As a business broker, I have most enjoyed working with buyers and sellers who are forthright, reasonable and agreeable. Having realistic expectations on both sides and keeping a professional and positive attitude throughout the business transfer process goes a long way toward reaching a successful closing.

Beware of this Buyer

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 30 Nov 2011 19:34:32 GMT

One of the most difficult challenges facing the seller of a small business is finding a qualified buyer.

The key word in the preceding statement is “qualified.”

Potential buyers are easy to find, but they don’t become buyers unless a closing takes place. There are a lot of lookers around, and they are adept at draining a great deal of unrecoverable time and emotional energy from a seller.

One of the biggest advantages to working with a knowledgeable business broker is that a professional is experienced in winnowing out these tire kickers to find those few, qualified prospects. This is one of the most valuable services a broker may provide to a seller.

If you’re attempting to sell your company without a broker’s assistance, here are some warning signs to keep in mind.
    • The buyer is taking his time in order to find the “perfect” business.

        o A prospect who is gainfully employed (notably for a larger corporation in a managerial role) has time on his side. He may be in love with the idea of being his own boss, but may never leave the security and familiarity of the paycheck and career he currently enjoys.

        o The buyer may be taking his time because he’s incapable of making such a large, possibly life-altering, decision. Many more individuals than one might imagine fall into this category. A potential buyer may think he is ready for such a challenge, but once faced with actually choosing, finds himself paralyzed.

        o If a buyer has been searching for six months or longer, he may have expectations that are impossible to fulfill.

    • The buyer has no financing. Although this seems obvious, a buyer might be quick to assure the seller he has the means to obtain cash, and sometimes a seller wants to believe he has indeed found a qualified buyer. Be cautious if the buyer:

        o will need financing (unless it’s based on the equity in his home), especially if the buyer has not even approached an outside lender

        o has no available cash to pay for closing costs or a down payment

        o claims to have a wealthy relative or friend who will be financing the deal, particularly if you have yet to meet this affluent individual

    • The buyer’s spouse is not present during meetings or is completely unsupportive of the venture.

    • The buyer is immersed in detail too early in the process. He may be asking too many questions, especially relating to insignificant details; he may act as though he knows far more than you as the seller; or he may take a copious amount of notes at every meeting.

A savvy business broker will also cite buyer red flags of a more personal nature, such as being very young (late teens or early 20s) or too close to the typical retirement age. Brokers often mention if an individual has lived in the geographical area for quite some time, but is still a renter instead of a homeowner, it might give a seller reason to take notice.

Obviously, this is not a comprehensive list, and some buyers who exhibit these tendencies may turn out to be very well-qualified. However, these characteristics do represent consistent trends in our industry. If your prospect starts to fit the profile of a tire kicker, you may find it prudent to evaluate the time and energy you are expending, as well as the information you are sharing, with this individual.

Do You Hear What I Hear? (More on First Impressions)

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Thu, 03 Nov 2011 19:12:36 GMT

When a potential customer contacts your company via telephone, what is the first impression received? Is the caller warmly welcomed by a live operator or receptionist, or does he get dumped into a frustrating, endless cycle of automated voice commands?

Sometimes the obvious is the most easily overlooked. A business owner has only one chance to make a first impression. Today, it’s common for a potential customer’s first visit to your company to be made by telephone, so make that initial contact a positive experience for your caller.

The first time a potential customer visits your company (whether in person, via telephone or through the Internet), he should immediately feel comfortable and confident about doing business with you.

Think about the image presented to someone who phones your organization for the first (or 50th) time. Will the caller feel welcomed and important? Is he likely to remain on the line to finish the transaction or call again for products and services in the future?

Telephone Doctor recently commissioned a survey that discovered the following:
•    85% of consumers indicated that telephone courtesy makes a difference when choosing which business they will patronize
•    65% prefer doing business with companies who have real people answering calls versus those that use an automated attendant
•    65% stated they are frustrated when placed on hold immediately after calling a company
•    48% refuse to conduct business with a company if they receive poor customer service over the phone
•    The most frequently noted complaint: being placed on hold

The nonprofit and nonpartisan research organization Public Agenda discovered that a whopping 94% of its survey sample indicated it was “very frustrating” to phone a business and be greeted with a recorded voice rather than one of a live person.
According to the Bureau of Labor Statistics, telephone operators are one of the top ten positions expected to decline within the next twelve months. Today’s voice recognition systems continue to improve dramatically, and the increase of electronic communication has considerably reduced reliance on the telephone.

Although many companies have made the transition from live operators to automated attendants for a variety of reasons (most notably to reduce overhead), the survey findings discussed in this blog should be carefully considered. Business owners may wish to ensure callers have a way to reach a live operator, and all employees interacting with customers on the telephone should be professional and courteous. Operators should be able to listen and really comprehend what the caller is requesting, so they can answer the question and fulfill the order or get the customer to someone who can.

Here's hoping you hear what your customers do!

First Impressions: A Customer at Your Door

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 19 Oct 2011 15:25:58 GMT

This is the first in a series of several articles on how to better position your company to potential and existing customers.

We've all heard the phrase, "First impressions count." This is a true statement that is sometimes easily overlooked by a small business owner. It seems obvious, but if you have a physical location, you should always be thinking about maximizing your curb appeal.

The first time a customer -- an existing or potential one -- visits your company, the customer should immediately feel comfortable and confident about doing business with you.

Residential real estate agents often request that homeowners looking to sell first spruce up their homes as much as possible in order to generate interest from potential buyers. The same is also requested from business brokers prior to listing a company for sale.

The time to think about curb appeal is not just when selling, however. Having a professional and inviting entrance is sure to help retain existing customers and attract new ones.

Stand outside the front door of your business and look at the impression you may (or may not) be making through the eyes of your customer. If a first-time visitor walks past your building, is he likely to enter your door? Here are some helpful tips:

Is your company name and street address clearly visible?
Speaking of signage, do you have enough -- but not so much that it appears cluttered? And, is everything spelled correctly? You'd be surprised how often we notice poor spelling and grammar: not the best first impression.
Is the exterior clean and pleasing to the eye? Perhaps a coat of fresh paint or some planters at the entrance might be a good investment.
Does the front of the company convey the message you want to send to customers?
Is the entryway tidy, and is it easy for customers to reach the door and access the business?

Of course, first impressions don't stop there. Once the customer is inside, what does he see?

Does your reception area include friendly, knowledgeable staff members to greet visitors?
Is the lobby clean and uncluttered? (Keep an eye out for messy papers and disorganized working surfaces.)
If signage is present, it is helpful or distracting? Is your company's name (and/or logo) prominently displayed?
Does the lobby become an extension of the entryway and reflect the message you want to share with visitors?

Many small businesses employ the use of a welcoming sign in their reception area. If an entrepreneur knows of a visit in advance, most guests appreciate seeing their name as they enter the front door.

Comfortable seating areas, flowers and plants and the offer of a beverage are other welcoming touches that visitors notice.

Here's hoping your visitors become long-term customers!

Buying and Selling a Business or Franchise

info@bbpinc.com (Ron West) — Mon, 20 Jun 2011 19:45:36 GMT

A recent national survey confirmed what business brokers have noted for years: making money is not the primary reason buyers are interested in owning their own business.

When asked to rank 12 factors in order of importance, the majority of buyers did not place potential earnings in the first half of the list. Freedom, flexibility and control of one's destiny are the main reasons buyers are attracted to independent businesses. Interaction with customers and clients also was consistently ranked higher in importance than personal income.

Keeping these motivating factors in mind during the business transfer process helps buyers and sellers. Qualified buyers generally possess the entrepreneurial spirit necessary to take risks and make decisions. As business brokers, we facilitate this process by interviewing prospective buyers to learn more about their educational and occupational backgrounds and why they are looking to acquire a company. Understanding a buyer's motivation helps a good business broker suggest listings that may be of interest to the buyer and provide a good fit with the buyer's needs.

Internet Searches are Key for Business Buyers

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Tue, 10 May 2011 16:01:33 GMT

Recently, I've noticed several articles in various publications regarding changes in residential real estate marketing strategies. It seems that open houses (except those hosted for other real estate agents) are no longer a preferred way to reach potential home buyers. Today's tech-savvy buyers prefer to research listings on the Internet, taking virtual tours when and where it is most convenient to them. Most buyers, these articles note, make a decision whether or not to contact the listing agent based on these virtual home tours.

This got me thinking about buyers looking for a business to purchase and the similarities of utilizing the Internet for research. The majority of advertising and marketing for business brokers is handled through web sites that feature businesses for sale. While a few of these sites are available to entrepreneurs looking to sell their companies themselves, the majority are available only to business brokers through professional subscriptions.
As we've discussed, maintaining confidentiality of the business is a key factor for a successful business transfer. After all, a small business owner does not want to announce to his customers or competitors that he is thinking of retiring or leaving the industry.

The larger sites available to business brokers offer more space for describing key points about the companies for sale, while still maintaining complete confidentiality. Business brokers are experienced in wording listing descriptions that grab attention and highlight the factors most buyers will find attractive.

You only get one chance to market your business. Most buyers will find your company's listing by searching online. Make sure to maximize your marketing strategy when the time is right for you to sell.

Top Tips for Selling Your Business

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Thu, 21 Apr 2011 12:56:14 GMT

Most entrepreneurs readily embrace new tasks and roles and are used to being in charge of everything relating to their companies.
However, before rushing in to market and sell their small businesses, business owners will want to keep the following tips in mind. The dance between buyer and seller is a delicate one, and it is very easy for one small misstep to ruin the entire deal.

Prepare in advance - General housekeeping should be scheduled well in advance of marketing the business. This includes a physical clean-up of the premises, making needed repairs on equipment and perhaps enhancing the curb appeal of the company with a new coat of paint or adding plants and shrubs to welcome guests through the front door. Housekeeping also includes getting files -- particularly those relating to accounting -- in order. Buyers will expect to review financials dating back at least a few years during due diligence.
Plan for due diligence - In addition to reviewing recent financials, buyers typically will want to see the lease agreement, customer lists, an accounting of inventory, information on FF&E and other similar items. Anticipating what the buyer may request and planning ahead saves time and helps make the seller appear organized.
Be realistic in pricing - You may wish to engage the services of a business broker to determine a reasonable selling price for your company. Businesses that are not priced correctly (particularly those priced too high) will not interest most buyers initially and generally do not sell at all.
Ensure confidentiality is maintained - Business owners must avoid a breach of confidentiality at all costs. Buyers should be qualified in advance and be willing to sign a non-disclosure agreement. A business broker is experienced in how to handle this situation while keeping the process moving along.
Don't neglect the daily routines - The business transfer process rarely happens overnight, so it is important that the seller continue to focus on his business, keeping it running smoothly and successfully.

Stay flexible - Negotiation involves give-and-take. Realize the buyer is probably also an entrepreneur and may be used to being in charge of situations as well. The willingness for both parties to compromise on some issues will keep the process moving to the closing table.

These suggestions are the top recommendations from experienced business brokers around the country.

How to Sell Your Business, but Keep it a Secret

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Fri, 11 Mar 2011 13:03:28 GMT

“Loose lips sink ships.” It’s a familiar phrase to Americans, originally written by the War Advertising Council during World War II as “Loose lips might sink ships.” The British also used variations of the phrase that encouraged citizens and military personnel to avoid careless talk that might serve the enemy.
The phrase is still used today to caution against thoughtless chatter in general.

When selling a company, it is vitally important that confidentiality be maintained throughout the business transfer process. A breach of confidentiality may not only kill the deal, it can cause further repercussions to the seller as employees and customers may leave, creditors may begin to scrutinize more intently and competitors may capitalize on the perceived opportunity.

If a business owner is unable to disclose information, how is he supposed to sell his company?

Business brokers are professionals in this arena and have the experience and tools in place to manage the business transfer process discreetly, helping sellers maintain the utmost confidentiality until the transaction has been completed. This is accomplished by:
•    Marketing effectively
•    Qualifying buyers
•    Using documents that require confidentiality
•    Managing the information flow

A business broker should prepare a customized marketing approach for each company he lists for sale. This includes describing the business in a generic fashion -- one that will appeal to prospective buyers without jeopardizing the seller’s identity.

Approximately 90% of prospects who initially reply to advertisements are usually not a fit at all, generally because they lack the necessary experience or cash investment for the transaction. There are also a lot of “lookers” or “tire kickers” who can easily drain a seller’s time and tax his emotional energy. Business brokers have the skills to help qualify buyers immediately, before the seller is ever involved.

Business brokers use confidentiality agreements, with wording prospective buyers must agree to, in writing, before additional information is released.
Business brokers also manage the flow of information, holding the most sensitive records secure until a formal offer to purchase (with escrow deposit) has been accepted by the seller.

The business transfer process is somewhat unique in that the details of the entity being sold are not shared initially, but rather peeled away as the buyer becomes more interested and continues to offer proof of his sincerity and qualifications.

Entrepreneurs: Trim the Fat and Boost your Profits!

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Thu, 03 Feb 2011 13:38:57 GMT

Now more than ever, individuals are looking for ways to cut costs -- personally and professionally. This is especially true for entrepreneurs preparing to sell their businesses. Higher profit margins naturally make a company much more attractive to potential buyers, and increased seller’s discretionary earnings generally equate to reaching the closing table faster and with a better selling price.

Most business owners today are using tried-and-true cost-cutting methods, as well as employing more creative techniques in order to reach their goals sooner.

Here are some suggestions you may wish to consider in the continuing quest to lower expenses:

Enjoy the electronic age
Try a voice mail system for your office and use email whenever possible. This may help reduce the hours needed for a receptionist or secretarial staff and could allow these employees to contribute in other areas. There is a variety of affordable software for businesses, which can help increase productivity within the office. Don’t forget to take advantage of the sales and marketing opportunities the Internet provides at little or no cost.

Deal directly with the source
Establish relationships with the manufacturer of products you frequently use. This may help avoid surplus charges added by third parties.

Makes vendors competitive
Sometimes business relationships can become too complacent. Check out current pricing by requesting multiple bids – especially on larger projects. Remember that sometimes the lowest-price offer may actually cost more in the long run, so be sure to examine the fine print and associated details.

Be rewarded for loyalty
For those vendors you patronize, ask about any loyalty programs they may offer. Even if none are publicly promoted, you may find a vendor will express thanks with special savings.

Outsource when appropriate
Both in terms of employees and leasing space, this is an attractive option for business owners. Outsourcing continues to grow in popularity on many levels. Temporary employees or contract workers make sense for seasonal jobs and short-term projects. Try renting or subletting space when it is needed only occasionally (such as a conference room or large space for presentations).

These are only a few of the many ways savvy business owners are making a direct, and positive, impact on their bottom lines. We’d love to hear what suggestions you might have for other entrepreneurs!

Why Business Deals Fall Apart

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 19 Jan 2011 20:43:43 GMT

It is an all-too-common event for buyers and sellers of a business: the deal falls apart. After both parties have reached a tentative agreement on the sale of a business, it is emotionally and financially frustrating to watch a deal disintegrate before everyone reaches the closing table.

Why does this occur, and what can be done in advance to help prevent such a scenario? Business brokers across the country generally agree the following are the three top reasons businesses don’t sell.

Issues with pricing
Business brokers consistently encourage sellers to be realistic about the asking price of their company. A business is fairly priced when its financial records support the value perceived. During due diligence, the buyer has the opportunity to review the company’s financial data prior to closing. It is best not to give a buyer any reason to feel the original asking price was inflated.

A troublesome issue is not disclosed
Sometimes sellers feel a challenge with their business is best not disclosed initially. This represents the potential for a deal falling apart quickly down the line. Most problems will eventually surface; we all know they don’t simply disappear overnight. Once a potential buyer (either before or after an offer is made) learns about the problematic situation, what could have been handled easily becomes an off-putting surprise. The buyer feels misled – and who can blame him?

Time can easily kill a deal
This is a common observation among business brokers. Part of the value of using a business broker comes from his experience in managing the business transfer process and keeping all parties focused on the same goal. This is an emotional time for both buyer and seller, and it’s understandable that one or both can become irritated, defensive or critical when time drags on with no resolution. The closing process does take time – and certainly some deals are more complex than others. Using knowledgeable and experienced professionals will help ensure the process moves forward seamlessly and to everyone’s satisfaction.

Selling Your Business? Guidance from a Commercial Lender

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Mon, 20 Dec 2010 15:45:18 GMT

In our third installment of “tips from the experts,” we discuss a topic of great importance to both buyer and seller: how will this transaction be financed?

When a buyer or seller contacts me to inquire about the business brokerage process, it has been my experience that financing is not always at the top of everyone’s mind – but it should be! Many companies listed for sale never reach the closing table, and lack of financing is almost always the reason these businesses do not sell.

While it would be a much easier process if all buyers brought 100% of the contract price and associated costs in cash to the closing table, this rarely happens.

Typically, seller financing and/or SBA loans are used for financing a sale. SBA loans are guaranteed by the Small Business Administration and are provided to small companies.

Christopher J. Kneer is vice president of commercial lending for Community Bank and specializes in both conventional and SBA loans. He explains, “Banks view business acquisitions as risky transactions for two primary reasons: change of ownership and financing of goodwill. For that reason, we utilize the SBA.”

Kneer provides these tips for potential sellers:

The time to begin preparing for the sale of your business is three years out. To get the highest price for your business, you need to have multiple and consistent years of earnings. Banks and many buyers are suspicious of one great year and dramatically different results in previous years.
Accounting quality is very important. An arm’s length CPA should be working with your company. Accounting issues and statements that do not match up from year to year are a major red flag. If there are significant line items or particular issues on your financials, be upfront and point them out. Spend the money on good accounting and it will come back twofold.
Show earnings. The time to strategically limit profits for income tax purposes is not while you are preparing to sell your business. No bank wants to see a company that loses money every year and bases its sales price on “add-backs.”
Have buyers pre-qualified. Banks want to see buyers with industry experience, proper equity injections and liquidity. It does no good to show your businesses to those that cannot qualify for financing unless they are cash buyers.
Plan to have a seller note involved in the transaction. Due to changes in SBA financing, it is often necessary, and it also shows good faith in that you are willing to stand behind the business for sale.
Plan to stay on for a period of time. This also shows good faith that you are willing to help the new owner be successful.

Solid and sound advice.

Time to Maximize Your Marketing Efforts!

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 08 Dec 2010 15:55:31 GMT

Part Two in our series of “tips from the experts” focuses on marketing, an often overlooked and misunderstood component that is vital to the success of a business.

As a business broker, I have noticed one of the first questions generally asked by potential buyers (especially when they meet the seller for the first time) involves marketing – is there a plan in place; what works; what doesn’t work; who is the target customer?

Laura Woodard, president of GrassRoots Marketing Group, Inc., emphasizes the importance of having a marketing plan in place. Woodard notes, “An integrated, well-designed and efficient plan for growth is essential for any size business in any type of industry. Although it may sound simple, most companies struggle with this process.”

Woodard shares the following tips to help entrepreneurs begin creating or updating their marketing plans:

Know your customer
Put the plan in writing
Prepare a budget for marketing
Don't just monitor the plan; measure it

If you are planning to sell your business soon – or if your exit strategy is several years down the road – there is no time like the present to create or review your marketing plan. Use these guidelines to take the first step!

Timely Tips from a PR Expert

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 01 Dec 2010 15:57:38 GMT

If you're thinking of selling your business in the future, you should be planning right now.

You've heard of homeowners preparing and then "setting the stage" to present their investments in the best possible light; business owners should also be preparing as far as possible in advance of selling their companies.

We spoke with Suzie Boland, president of RFB Communications Group, Inc., who offered these public relations tips for entrepreneurs:

1. If you haven't done so already, be able to define your unique positioning and unique value proposition -- succinctly (and that means in less than one minute). Include what you do, for whom, and how what you do benefits your customers. This is similar to what you may have heard described as an "elevator pitch" -- what would you say to interest someone in your business in the time you rode down the elevator together.

2. Make sure your web site is current and expresses your positioning and value proposition. That's the first thing prospective buyers will look at.

3. Think about which of your clients would give you good recommendations and prepare a list with contact information.

4. If you have any favorable and recent news articles, clip them and put them in a binder.

Great advice: a business owner should never underestimate the value of established, positive public relations!

Help! How do I create a strategic business plan?

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Mon, 22 Nov 2010 15:59:29 GMT

Twenty-something years ago, I received my Bachelor of Arts degree in Business Administration from a recognized state university. But how much practical or "real world" knowledge did I gain with this diploma?

Recently, The Wall Street Journal printed a reader's question concerning business plan strategy -- something that was not covered in his academic studies.

The reader began by stating he had a college degree in business, but his formal education did not include learning the specific components that make a business plan successful. He asked if there was someone who could review his business plan and give the necessary feedback to ensure its success before the plan was formally submitted to lenders and other outside parties.

Barbara Haislip responded by suggesting a free and knowledgeable resource: the Small Business Development Center (SBDC). The Office of Small Business Development Centers provides man agement assistance, information and guidance to new and established small business owners through a cooperative effort of the private sector, educational community and federal, state and local governments. The best news? This assistance is available in all 50 states and U.S. territories at no cost to the small business owner.

Haislip suggested that prior to approaching the SBDC, an entrepreneur should include the following items in his business plan:
•    discussion of customers
•    review of present and potential competition
•    presentation of marketing strategy
•    list of all resources necessary to the business

Haislip further explained most entrepreneurs will also need a financial plan (generally showing two or three years of projected income and cash-flow statements and balance sheets).

Check out www.sba.gov for more information and to find the SBDC branch closest to your business.

Maximizing Value for Your Company

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 13 Oct 2010 16:16:31 GMT

by Gokul Padmanabhan - Orlando, Florida Franchisee

Sooner or later many companies end up with more than they need for a successful operation. Being a business owner myself, I confess we love to dream big and perhaps overestimate when preparing for the future. We might obtain more office space than we presently need or buy more equipment “just in case.” We often mistakenly rationalize these decisions by declaring that if business increases significantly, we will need that extra room or additional piece of equipment.

The truth is, if and when you need the added space or that new printer (which does everything but make your morning coffee), you can always purchase it at the time you most need it for practically the same price you are going to pay for it today. So, why spend the money ahead of time?

As professionals in valuing businesses, we know that a profitable organization is valued based on its earnings -- not its assets. It makes sense, then, that having a smaller office or passing on the latest technological gadget does not diminish the value of your business at all. Indeed, running your business frugally and showing a healthy bottom line is a surefire way to increase the value of your business.

Business Valuation - What Is a Business Worth?

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 29 Sep 2010 16:18:09 GMT

Determining the value of a business is the first step in the process of buying or selling a business. The value of a business is related to the risk involved, the ability to generate an income stream, and the value of the tangible assets.

An expert business valuation report will be based on standard valuation methodology combined with the experience and knowledge of the valuation expert. The specific purpose of the business valuation and the size of the company will determine the depth of analysis and research required.

Basic factors that influence value are:
• Value of hard assets
• Recast cash flow analysis: normalize earnings
• Review factors that can impact future earnings
• Calculate and apply external factor discounts
• Analyze intangible values

The final step of a business valuation report is to make sure that the suggested price for the business passes the sanity test:
• Will the income cover the debt service?
• Will the cash flow provide the owner or manager with a reasonable salary?
• Can the cash flow provide for future capital equipment requirements?
• Will the cash flow provide a cushion to allow for fluctuations in the business cycle?

What Do Business Brokers Sell?

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Tue, 21 Sep 2010 14:09:32 GMT

The great majority of business brokers are what we call general business brokers. They sell businesses mostly priced under $500,000. That figure does not include the inventory of the business or the actual real estate, if it is owned by the business. Almost all surveys of average selling prices of businesses sold by business brokers show that the average selling price is less than $300,000.

Industry Breakdown:
General Business Brokerage - Businesses priced under $500,000, annual revenues of less than $750,000, and with fewer than 10 employees. This category represents almost 80 percent of all businesses.

The Larger Business - Business priced between $500,000 and $3 million, annual revenues between $750,000 and $2 million, and fewer than 100 employees. This category represents about 11 percent of all businesses.

The Mid-Size Company - Businesses priced between $3 million and $20 million, annual revenues between $2 million and $30 million, and between 20 to 100 employees. This category represents approximately 9 percent of all businesses.

The Larger Company - Businesses priced over $20 million, annual revenues over $30 million, with over 100 employees. This category represents slightly over one percent of all businesses.

How Many Businesses Are There?
Business Size:
• 1-4 employees: 6,600,000 = 62%
• 5-9 employees: 1,900,000 = 18%
• 10-19 employees: 987,000 = 09%
• 20-49 employees: 680,000 = 06%
• 50-99 employees: 250,000 = 02%
• 100-249 employees: 132,000 =01%
• 250-499 employees: 32,000 = <1%
• 500+employees: 34,000 = <1%

Business Buyers: Who Are They?

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Wed, 15 Sep 2010 14:14:24 GMT

Buyers of small business are most likely replacing lost jobs or searching for a happier alternative to corporate life. Buyers of mid-sized and large operations are, typically, private investment companies seeking businesses to build and eventually sell for a profit. This is the broadest possible look at the types of buyers out there.

1. Individual Buyer: This is typically an individual who will purchase a business and be directly involved with the day-to-day management of the company. Many of them have come out of corporate America and are first-time buyers. Others are buyers who have owned a business in the past and are looking to once again become their 'own boss'. They generally will attempt to match the type of background or experience that they have with a given business opportunity. The individual buyer usually seeks a business that is financially healthy that will pay them a reasonable salary and any debt service required to purchase the business. Their financing sources are generally SBA loans, owner financing or loans from family members. They very rarely will pay all cash for a business. These buyers will usually limit themselves to transactions involving less than $1 million, cash.

2. Strategic Buyer: This buyer is almost always a company, having its goal entering new market share, gaining new technology, or eliminating some element of competition. In essence, it is part of this buyer's strategy (hence the name) to acquire other businesses as part of a long-term plan. Strategic buyers can be either in the same business as the company under consideration, or a competitor. Strategic buyers will be looking chiefly at businesses with sales over $20 million, with a proprietary product and/or unique market share, and effective management in place and willing to remain.

3. Synergistic Buyer: The synergistic category of buyer is usually a company looking to grow by acquiring products or services of a complementary nature. The joining of the two companies will produce more, or be worth more than just the sum of their parts. They now have the opportunity to sell the existing customer base additional products or services.

4. Industry Buyer: This type is often a competitor or a highly similar operation. This buyer already knows the industry well and, therefore, does not generally pay for the expertise and knowledge of the seller. The industry buyer is interested mainly in combining manufacturing facilities, consolidating overhead, and utilizing the combined sales forces, expanding their operation geographically. These buyers will pay for assets but in most cases they will not pay for goodwill, covenants not to compete, or seller consulting agreements.

5. Financial Buyer: Financial buyers are influenced by a demonstrated return on investment, coupled with their ability to get financing on as large a portion of the purchase price as possible. Working on the theory that debt is the lowest cost of capital, these buyers purchase businesses with the sole purpose of making the maximum amount of money with the least amount of their capital invested.

Buy A Franchise - Convenient Hair Care for the Entire Family

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Fri, 10 Sep 2010 14:16:01 GMT

As a walk-in, no-appointment hair cut salon, we are the largest salon franchise in the world. We have perfected a system for delivering value-priced hair cuts to the entire family in a convenient environment. Being positioned in the $55 billion dollar market for the past 28 years, we currently have over 2,800 franchisees.

This opportunity allows you to keep your job and hire a manager to run your salons. Our segment of the hair cutting industry is very recession resistant, very predictable, a simple business plan, technology resistant and a cash business with no sales required!

An ideal candidate for ownership has strong management skills, business management experience, is profit-oriented and needs no hair care experience! The desire to own multiple units is ideal. To give you an idea of our current franchisee ownership, 70% have a white collar executive background, 15% as a diversified business owner and 15% are semi-retired. Our average franchisee owns 5-6 salons after 5 years of operation. It is important for our owners to be skilled at recruiting and motivating staff, somewhat analytical, can follow a system and understand the basics of business.

We can provide you with a very strong Item 19 from our FDD, which outlines average salon revenues, operating cash flow and top 20% of salons earnings. All of our units are 100% franchisee owned with a very high success rate.

Again, this is an opportunity that you can keep your job and build a simple, very profitable #1 branded business. Selecting a franchise is a big step. If you are someone who is transitioning out of Corporate America and has an exit strategy for the future, but wants to keep your professional career, we feel confident of our management opportunity and encourage you to go here to find out if this Beauty/Personal Care, Hair Salon franchise could be a good fit for you!

Buy A Franchise - Residential Cleaning Service

e.perdomo@murphybusiness.com (Evelyn Perdomo) — Fri, 03 Sep 2010 14:19:24 GMT

As a maid service franchise owner, you don't lift a broom - you hire people to do the cleaning for your customers. You'll have the satisfaction of growing, managing and motivating a team of employees, but best of all you'll be in a great business for yourself.

Here are some top features of our opportunity:
•    Lifestyle business: M-F, 8-5
•    Cash business, no receivables or bad debt
•    Recurring and predictable revenue (97% retention rate of customers year after year)
•    No inventory
•    By the end of year 2, a manager can be promoted or hired and run 90% of the business
•    Strong Item 19 earning claim!

Our initial investment is very affordable as we believe it's important that our new owners get off to the best start possible, saving hard-earned capital to launch the business, retaining more profits to grow their new business. We believe in selling the right size territory to each new franchise owner, using sophisticated demographic data and mapping so a territory can satisfy growth projections.

Our system provides its owners incredible freedom, with weekends off and the opportunity to build an extremely profitable business, all with the credibility of the most recognizable name in residential house cleaning. We have over 25 years of brand equity and millions of satisfied customers. Over the last decade, residential housecleaning has become one of the fastest growing industries in the country. Over 12 million households use paid domestic services.

Our business generates repeat, cash paying customers. There is low inventory with a quick start-up timeframe and our customers find our franchisees. No strong selling required! With multiple revenue streams, it's easy to get excited out the advantages of our business model.

If you have a can-do problem solving attitude, good management and leadership background and are ambitious to succeed, lead and belong to a winning team...go here to find our more about ownership of a Cleaning; Maid Service business.