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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.

 

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.
 

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!

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.

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!