WHY HIRE A BUSINESS BROKER INSTEAD OF A REAL ESTATE BROKER TO SELL YOUR BUSINESS?

By:  Art Cormier

                Do you own commercial real estate that you want to sell together with a business operating out of that real estate?  If so, you may want to consider engaging a business broker rather than a commercial real estate broker to sell both the real estate and the business.Many business brokers have real estate licenses and expertise in selling real estate because businesses are often marketed together with the real estate out of which they operate.  Significantly, business brokers also have expertise in marketing and valuing businesses that real estate brokers often lack.  Maximizing the value of the combined real estate and business is what a business broker does.

As compared to stand-alone real estate, a business with real estate should be marketed very differently and to a different group of people.  Business brokers know how and who to target.  Unlike the case of stand-alone real estate, when a business is involved one cannot simply put up a “for sale” sign.  The business owner wants to keep the fact that the business is for sale from employees, vendors, customers and competitors.  Business brokers are experienced at marketing businesses while maintaining confidentiality.  Moreover, unlike real estate brokers, business brokers know how to connect with people who are interested in buying businesses, rather than in buying justreal estate.

Understanding the value of the asset to be sold is a critical competence of any good broker.  Valuing a business with real estate, however, requires a completely different approach than valuingstand-alone real estate.  A business broker has expertise in reviewing financial statements, industry data and other materials necessary to understand the relative cash flows of a business and its likely value.  The value of the business and the real estate can sometimes be dependent on each other.  Real estate brokers are not trained in this area.

In summary, a business broker may be better positioned to sell real estate coupled with a business than a real estate broker.  At ROI Corporation, all of our business brokers are also licensed real estate professionals.  Please consider contacting ROI if you want to sell a business with (or without) real estate.

Art Cormier is a business broker with ROI Corporation.  He also is a licensed attorney and real estate broker.  For over a decade prior to joining ROI, he helped financially distressed companies restructure their operations and balance sheets, often through Chapter 11 proceedings, asset sales, and/or renegotiating critical contractual relationships.  Art is a magna cum laude graduate of Brandeis University, where he majored in both Economics and Political Science.  He received his law degree from the University of Virginia.

Art Cormier

acormier@roibusinessbrokers.com

2012 Is Here – Thinking of Exiting Your Business?  Exit planning requires a team approach.

New and higher tax rates will likely go into effect in 2013, making 2012 a watershed year for succession planning. Included in the 2013 rates is a new 3.8% health care surtax.

 So, this is the time of the year to sit down with your 2009 and 2010 results and compare 2011.  Yes, that’s the only reliable way to look forward to 2012 and plan for it.

 These are unusual times with high unpredictability, but we know some businesses are doing just fine though they may be running harder just to stay in place.   

 Your salespeople have goals; you have sales and service goals; and you may have a goal to exit the business, maybe in 2012, maybe 2013, or beyond. 

 If you’re working with a Wealth Management advisor or Estate Planner, they should assemble a team, including your lawyer and accountant, and they need a business broker and business valuation expert on that team. Most CPAs are not trained in business valuation. Whether the succession plan is to sell to an outsider or gift it to a family member, valuation is key, just like planning for the tax consequences and writing the buy-sell agreement(s).

 Call us.  We’ll work with you to determine the current value of your company.  We might recommend that you obtain an independent, third-party valuation so you really know where you are.  Then we’ll define your most important goal: maximizing the value of your business.  We may verify that your various expense categories are in line with industry norms.  If not, we’ll help you plan a way to get them in line.  We may find that your rent is too high or your inventory is excessive.  You need to do this periodically, just the way you need a personal physical exam occasionally.

 We do this confidentially.  We have certified valuation professionals in our office and access to outside experts who themselves have access to comparables, the valuations and sale prices of privately-held companies similar to yours around the country.  Comparables are the mother’s milk of valuation.

 What determines the bottom line?  An acquiring company buys the ability of your company to produce cash flow.  For a successful exit, you need positive cash flow over a period of years.  Just like selling a house, you need to clean up, so the business shows a clean balance sheet and optimum cash flow.

 Call us.  Whether you are transferring the business within the family, to a key employee or competitor or anticipate a third party sale, we’ll help you develop and implement a plan for a successful exit in the years ahead.

 Have a great Holiday Season!  

 Peter Quandt

PQuandt@ROIBusinessbrokers.com

Mobile: 617.212.5115

A former business owner provides insight on the steps to buy a business.

So you have decided to leave your 9-5 job working for someone else and buy a business.  In 2001 I did just that.  After a 30 year career in banking I decided to buy a commercial printing company.   Although I had never owned my own business and did not know anything about commercial printing, this seemed like a great idea and, as it turned out, it was.  I spent the next 11 years growing a successful business and sold it in June of this year.  

Having walked the walk of owning my own business here is what I would tell anyone contemplating buying a business.  Go for it!  Is it scary? Yes.  Is it worth it? Yes.  Owning my own business was one of the best things that I could have done in my life.  The satisfaction of being my own boss and growing my business was well worth the effort.  That being said, here is a short list of items to consider when planning your business purchase.  

1. What type of business do you want to buy?  It makes sense to buy a business that builds on your prior experience and your interests.  You are going to put some very long hours into your business so it better be something you enjoy.  It will be easier to obtain financing if you have some prior knowledge of the industry.  However, if the seller is willing to provide training you may want to consider a business that allows you to learn something new.   Also, you will want to consider the size and location of the business.  Don’t overlook the hours of operation and commute time.  If you don’t want to work weekends then a 7 day a week business, i.e. retail, probably won’t work for you. 
2. What do you need to get out of the business financially?  You need to be able to live on the salary that you can earn from the business after debt service. Look very carefully at the financials.  Success in business actually has at least as much to do with cash flow as profit.  Know the difference.  If you don’t have a strong background in small business financials, get help.If you can’t pay your personal bills you won’t be able to concentrate on running and growing your business. 
3. How will you pay for the business?  Is the business you’re considering financeable? Does the seller have a business valuation in hand?The SBA has tight requirements for underwriting small business acquisition loans but the banks are definitely lending money again. You’ll probably need a minimum of 20% of the purchase price for a down payment.  Where will the down payment money come from?  Do you have the liquid assets?Can you get a “gift” for the down payment? It makes sense to talk to a business broker and the list of lenders he or she recommends to discuss what options may be available for financing.  Seller financing may be an option.
4. Why is the business being sold?  There are many reasons why business owners want to sell ranging from wanting to retire to plain old burnout.  However, it may be useful to dig a little to make sure that there are no hidden reasons for selling the business.  How you buy the business, i.e. An asset sale versus a stock sale can protect you from liabilities incurred by the business before your purchase. Be sure to ask for a period of “due diligence” to inspect the books, records and operations of the business.
5. What professional help will I need?    You may want to consider contacting a business broker to represent you as a buyer.  A business broker can prove to be valuable resources in helping you negotiate with the seller, arrange financing, understand the inspections you may want to complete and coordinating the services of your CPA and lawyer to keep the process moving along to a successful conclusion.

 Asking these questions will be just a starting point in the decision making process.  The more you know about yourself and the business you are buying the more likely you are to make the right choice and the more successful you will be.  

Please don’t hesitate to contact me if I can answer any questions or help you in any way at all.  Ask me about our “PASS Program” (Proactive Acquisition Search Service) to help represent you as a buyer in your efforts to find the right business or visit our website at www.roibusinessbrokers.com for more information.

Be your own General Contractor

No…I don’t mean building houses but buying and selling a business.

When the process of buying or selling a business begins, both parties soon engage outside professionals to assist in the objective, specifically a lawyer and a CPA, and this usually where the train goes off  the tracks.

The cause?

Usually because the buyer/seller is vague on just what they want that professional to do, so they begin with the question…”What do you think?”, and always a lawyer or CPA will tell you what they think, and most commonly at $100 to $300 per hour, however “what they think” may not be what you need them to do.

This is where being your own “General Contractor” comes into play. Each party has already discussed, negotiated and agreed to the financial pieces of the agreement… discussed and agreed verbally to possible employment contract or promissory note… sales definition “done the deal”. Both parties need their professionals to do specific tasks.. for the CPA, the buyer needs verification of the numbers…tax returns, P&L, bank records, Accounts payable and receivable. In the case, the buyer must specifically instruct the CPA to do just that, instead, many CPAs given vague instruction usually begin to pontificate on the worth of the business, an amount the buyer and seller have already agreed to. I recently experienced a CPA performing due diligence and he commented to his client, the buyer, that the business was worth less. I called him and asked him what matrix he was using to determine value… his answer? “I think (blank) should buy a smaller business… in other words, no facts, just an unfounded and unsolicited opinion. Fortunately the buyer in this case was acting like a General Contractor, and told the CPA to finish the bank statement tie in with the general ledger, secure in his knowledge that he was getting good value for his purchase price.

I’m not a lawyer, but I play one in the office.

Lawyers kill more deals than any single factor by drafting agreements, so one-sided no sane person would sign. Again, terms, price and mutual understandings have been agreed to and a lawyer is needed to articulate those agreements and understanding in a binding legal contract. Unfortunately like me playing  lawyer in the office, many lawyers start to play business negotiator, after buyer and seller are in agreement. This really gets out of hand and becomes as contentious as a divorce proceeding. Recently a prospective client had his lawyer review our standard (Industry) listing agreement. He deleted and added so much that it took us days to get a handle on it. Again, a lawyer attempting to craft a document so one sided that his client had zero exposure. The fact that the lawyer had no ability to market the business himself was secondary. The net result after weeks of moving commas around was essentially the same document inspirit that we had originally.

By:   Bill Hogan

Press Release Weymouth, MA.

Attorney Arthur “Art” Cormier has joined ROI Corporation in their M&A Division as a Mergers and Acquisitions Intermediary.  Prior to joining ROI, Cormier spent over a decade representing financially distressed companies restructure their operations and balance sheets, often through Chapter 11 proceedings, asset sales, and/or renegotiating critical contractual relationships.  He also has substantial experience representing lenders in connection with new and troubled loans.  He has practiced at major law firms, including the New York firm of Weil, Gotshal & Manges and the Boston firm of Choate, Hall & Stewart.  Cormier is a magna cum laude graduate of Brandeis University and received his law degree from the University of Virginia.

ROI President Gary Rayberg stated, “We are very excited to have Art join our M&A team.  His legal background makes him a perfect fit as an M&A Intermediary.  He brings his knowledge of deal making to the lower middle market companies our M&A division serves.”

Cormier will be assisting clients in selling, buying and valuing companies with annual revenues in the range of five to fifty million dollars throughout the Northeast.

Cormier observed, “. ROI has developed a strong M&A division and is recognized by clients and peers alike as being a leader in New England.   The ROI team provides a great platform from which together we can build upon our collective experience helping companies and business owners make deals.  I look forward to assisting in that growth and to serving our clients as they sell and acquire companies.”

ROI Corporation is a business brokerage and business valuation services company headquartered in Weymouth MA and serving MA, NH, RI, ME, CT,VT and NY. Soon the company will be opening offices in St Petersburg FL.   ROI has a Main Street business brokerage division serving small business and an M&A division serving lower middle market companies. In addition to valuation and business brokerage to third parties, ROI assists in transitioning business ownership to family members, key employees and other known parties on a consulting basis.  More information about ROI can be found on the web at www.roibusinessbrokers.com

Many business owners have an emotional and financial interest in maximizing the value of their business.  Yet, owners don’t often know its market value nor how to safely and profitably exit it.  Not many are able to sell their business for top dollar nor transition out on their own terms.  Unfortunately, many end up being sold in an emergency, or “fire sale”, situation which nets only a fraction of the company’s worth, often due to poor planning or timing.

In the best of economic environments, it is still often necessary for a seller to aid in financing the sale of his business.  By taking a note, the seller helps complete the funding and realize a higher price for the business.  In times of economic uncertainty and credit tightening, seller financing becomes an even more necessary part of the funding source equation. However, there are a number of issues that need to be managed prior to and during the transition process in order to protect the buyer, the seller, and, of course, the business itself.

With seller financing, the seller assumes more risk as he is dependent on the buyer to fulfill his obligations to pay the note.  Sellers must therefore do their due diligence to find buyers whose business acumen is as important as their credit worthiness.  The buyer must be able to successfully run the business in order for the note to get paid without complication.  Assuming the buyer is a good choice to take the reins, then what other issues would put the payments from the buyer or the business at risk?  If the buyer was unable to run the company due to a change in health or premature death, might the seller have to again assume control of the business or litigate to get the balance of the payments?

The buyer has an obligation to pay whether he lives, dies, or becomes disabled.  Should the buyer die, then life insurance could provide the capital to protect both the buyer and seller.  The seller is guaranteed the payments due him and the estate of the deceased buyer is relieved of the debt.  It can also provide additional funds for a planned and more profitable transition of the business.  Term insurance is an inexpensive means to cover this situation for the term of the note.

A more common scenario than a premature death is the inability of the buyer to work for an extended period of time due to illness or injury.  Yet, this situation is often overlooked in most buy/sell and transition agreements.  Should the buyer be unable to work to his full capacity, the company and the note payments would be at risk.  There are ways to mitigate this situation for the benefit of the both the seller and the buyer.

Each company and each sale is unique and requires more than a cookie cutter approach to properly establish and fund transition agreements as mentioned above.  A team, which includes an estate and tax planning attorney, can collectively work through these issues.  They need to understand how to utilize business valuations to properly establish strategies to protect the parties involved.  Should you want to learn more about protecting your business and establishing a transition plan, we’d be happy to walk you through our unique process.

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