IN THIS ISSUE: Letter From the 2020 Chair A Pandemic Recession? How Virtual Data Rooms Enhance Communication Between Deal Participants The Impact of a PPP Loan on Recasting Differences Between Business Ownership and A Job New CBIs in 2020! LETTER FROM THE CHAIR: We Found a Way Barry J. Berkowitz, PhD, CBI, M&AMI Year […]
Main Street News March 2012
Hope your 2012 is off to a good start. It is hard to believe that we are nearing Q2 of 2012. The first couple of months have kept us busy tying up 2011 loose ends:
The Auditors are now at working to complete the 2011 Audit. Upon completion we will, for the first time, provide our members with an annual report.
Now that the IBBA bylaw Section 8:12 has been dealt with, Chet Walden M&A Source Chair and I are working in a collaborative relationship that will benefit both brands. We are cross pollinating task forces and committees in order to benefit from synergies between IBBA and M&AS.
The most recent announcement of bylaw changes may have brought confusion to some of you. Those changes were recommendations made to the board by the Bylaws Committee in June 2011 and were supported by the board. We failed to send an announcement to you as required by our bylaws. In the spirit of total transparency, the board elected to re-vote on them in January 2012. This will enable us to provide membership, as required by our by-laws, the opportunity to ratify such changes or reject them. We anticipate the changes will be accepted. The results will be forthcoming.
Keith McLeod, CBI, CBB, SAC and Fellow of the IBBA
During February we gave you a sample of our new Mainstreet News format. You are invited to comment on this format on IBBA Linkedin’s discussion page. We also featured George Lanza as our incoming chair next year. This month Marcie Woolworth is featured. She, along with George Lanza and Cress V. Diglio are Pino’s Executive Committee members. We plan to feature Cress next month. Thereafter we will introduce you to another board member each month. Our Member Spotlight features two IBBA veterans: Brian Knight has achieved many accomplishments; however, paramount for our association is his ability to establish our distinguished CBI designation. The other is Clyth MacLeod. With a similar last name we call each other “Cousin.” Clyth is from New Zealand, the total population is similar to the City of Phoenix. Yet he and his firm have sold 7,000 businesses – truly a remarkable achievement.
New this month is a message from our Technology Chair, Steve Wain. Technology is a tool we should all be familiar with and use Steve says, “Let’s make it pay for all of us.”
Turn to our Marketing Chair Scott Bushkie and quickly follow-up registering for his committee’s video benefit. Only the first 40 will be included, better make that the first 39 because I told him I wanted to be included!
My tip this month is to establish a competitive advantage for yourself and your firm. It should be a part of your message when talking to prospects and featured in your marketing materials. Here are some exercises to further establish your presence in your market:
- List three ways you are different from your competitors…
- List three we are the only…
- List three benefits for Clients working with you…
- It is important to understand, it is not about you, it is your value in your Client’s mind!
- Promote and reinforce your competitive advantage in the market. Develop support activities, packaging, and start executing and delivering Client benefits to reinforce your advantage.
- You will be creating your Brand in the market place.
As you participate in IBBA activities there should be a constant progression in your thinking, and your operation, to move from a Standard Practice, to a Distinct Practice and finally to a Breakthrough Practice where Prospects are calling you.
Clyth MacLeod, CBI, Fellow of the IBBA / Brian Knight, CBI, Fellow of the IBBA
Clyth MacLeod, CBI, Fellow of the IBBA
What is the one thing you are most proud of you’ve accomplished inside and outside the industry?
I’m happy to contribute, not one, but two: That I helped raise the profile of business brokerage in New Zealand as a separate and professional discipline, and at the IBBA level I contributed to a wider recognition that we are truly an international organization.
Why a business broker and how long have you been one?
I’ve been selling businesses for 50 years. I’ve never seen a business that I would rather own than sell. All that stock on our shelves is obtained for free and it is something new and different all the time. We change people’s lives.
What do you see doing differently in the coming year?
Hopefully not too much different; I’m battling increased technology (a valuable tool but it is not the answer), and trying to keep it simple (it is a simple business, but not an easy one), and focusing on our team doing the basics persistently and constantly.
What recommendations do you have for brokers in our industry?
Learn more, listen more, hard work won’t prevent success, and build relationships.
Do you have any final comments?
It really is a rewarding industry, not just financially but even more so in the people you meet and the friends you make. I am blessed. I owe so much to so many friends who have been ready and willing to share with me. I’m happy to contribute, Kia Ora, Clyth
Brian Knight, CBI, Fellow of the IBBA
What is the one thing you are most proud of you’ve accomplished inside and outside the industry, and how long have you been a business broker?
I made a decision to become a business broker in 1984 and have enjoyed this profession ever since. Country Business Inc. (CBI) now operates in 6 New England States plus 3 provinces in Atlantic Canada. The last few years have been challenging but currently we are enjoying a steady return to the revenue levels previously achieved. Becoming a business broker in 1984 was a correct decision and it remains so today. It has been rewarding to me, my family, and the brokers who have been part of our organization.
Being involved with the CBI program since its inception and watching its growth and acceptance provides continuing satisfaction. We still have a long way to go in order to bring the program to its full potential but I am convinced that we will achieve the goals originally outlined. The CBI education program provides IBBA members, be they main street or M&A, an opportunity to improve their business skills. You obtain an ability to differentiate from others in our industry both by joining the IBBA, obtaining the CBI designation, and attending educational conferences. It becomes an important marketing tool if used properly.
What do you see yourself doing differently this year, and what other recommendations do you have for other brokers in our industry?
The 2012 business year is challenging, but it is a time for us to keep focused on the basics. Our business survives on obtaining and selling quality listings. The measure of quality is not size but rather the overall deal structure and your ability to meet the objectives of the buyer, seller, and the financing institutions. The most valuable asset of a broker is time, and it should not be wasted on projects that will not close. Focus on listings that will close, and then promote your success. Take advantage of the tools that are available, promote your membership in the IBBA, attend conferences, and publicize your CBI designation. Differentiate yourself; look, act, and perform like the professional you are.
Marcie Woolworth, CBI, Fellow of the IBBA
Meet Your Board Member
What is the one thing you are most proud of you’ve accomplished inside and outside the industry?
Inside: I have had the privilege of managing a large, successful business brokerage office, retiring, and then coming out of retirement, to again enjoy the success of our industry. I have also received my CBI designation and Fellow of the IBBA.
Outside: Having the privilege of working for the State of Colorado Judicial Department for over 20 years (being Clerk of the Water Court and Clerk of the District Court) and able to retire from there and work with my husband, Ron, in our brokerage business.
Why a business broker?
After serving 20 years with the Colorado Judicial Department, I was definitely ready for a change! Ron had begun working with a national franchise for business brokerage which was very beneficial to us in the beginning because of the great training and support. I was coming in evenings inputting our listings on their website and had attended training with Ron. When Ron asked me to join him, other than my fear of not having a guaranteed paycheck at the end of each month, I was ready to jump. It’s one of the best decisions I have ever made. I joined our firm in early 1995 and have loved it every minute (well, almost every minute…). I was introduced to IBBA by one of our former associates, and am very grateful for that. My first IBBA Conference was in Minneapolis and I haven’t missed very many since then. It’s been a blessing for me of being able to work and live with my husband – I joke we’re together 24/7/365 when people ask if we’re together all the time.
What do you see yourself doing differently in the coming year?
With the economy hitting our industry and others as it has, we will see a natural attrition of those leaving the industry. Our firm has stayed with the basics learned so many years ago and will continue to do so because they have brought us success. My plan is to continue that process.
What recommendations do you have for brokers in the industry?
The best recommendation I can make is to work hard and keep a personal relationship with your customers. Education is crucial to our industry and being involved in the IBBA and taking advantage of all it offers is the key. For new brokers it is important to work towards the Certified Business Intermediary (CBI) designation and continue to work on their education.
It is also important to give back to your local community. I am currently an advisor with the Loveland Small Business Development. I have also had the privilege of serving on the Patient and Family Advisory Council at our new local hospital for the past three years and am also a member of Zonta International, a women’s service organization which advances the status of women worldwide through service and advocacy, and especially enjoy my working with young adults (20 to 30 year olds) in my church.
Webinar: March 28th – Working With a Financial Planner
Gain an understanding of the type of financial advice your sell-side clients will need in advance of a contemplated transaction. This better understanding will allow you to work more effectively with the financial planner. This coordination should benefit the client and their M&A team in more reliably navigating to a successful conclusion.
Scott Bushkie, CBI, M&AMI
Marketing Committee Update – Quarterly Survey and Video Testimonials
A new quarterly survey will soon be launched. Its benefit will be used to help IBBA members become the “voice” of Lower Middle Market and Mainstreet business sales. It will highlight trends of our industry. We are currently talking with a few partners to give us instant credibility in the media. Our quarterly surveys should be completed in 5 minutes. A more in depth survey will be done each January to capture trends from the previous year. These surveys will provide key data to our members on trends, valuation metrics and other helpful information to make your practice more successful. Look for our first survey in April.
Another way we are enhancing the image of IBBA is to create a video of the conference in San Antonio. It will feature a highlight reel of all the great things that take place at our conference. This should encourage more members to attend future conferences, and others to join IBBA.
We are also doing video testimonials of some of our attendees. It will most likely be a maximum of 40 members. We will provide each member 3 or 4 questions ahead of time to discuss the value of IBBA membership, becoming a CBI and attending the IBBA Conferences.
For those who agree to sign up, IBBA will pay for you to have a 30 second commercial done by the same professional videographer AT NO COST TO YOU! You will be able to feature it on your website or email to potential sellers or buyers. It will showcase you and your practice, and become your competitive advantage in your market. See Editor Keith McLeod’s tip on how to create a competitive advantage in this newsletter.
The M&A Source will be taking videos of members for their “Done Deal” section on their website. It will feature the M&A Source advisor/Broker doing the deal in a 30 second story about the transaction. Visitors to the site will see it when they click on the tombstone. It will run on a continuing loop on the website. In summary:
- The video testimonials will run on a continual loop in your website.
- We will also establishing a YouTube Channel for others interested in IBBA or to easily find a broker or M&A advisor.
- Be aware! This program is on a first come, first serve basis. If you are interested in doing a Video Testimonial or a Done Deal testimonial and become eligible for a free 30 second commercial to be done at the same time CLICK HERE and fill out the form. Contact headquarters staff with any questions: 888-686-4222. Remember only the first 40 are available! If we get more requests we will try our best to accommodate you, but there is no guarantees.
We will be setting up a schedule in 15 minute increments, and will help you prepare ahead of time so it will go smoothly to look and to sound great.
Steve Wain, CBI, M&AMI, CBB
Technology, the IBBA and YOU!
My Life has been centered around technology. If you know me – you know what I mean. If I have not had a chance to meet you yet, after spending over 3 decades knee deep in software and hardware, and owning a few computer software companies along the way, believe me when people tell you the Steve Wain has ‘tech on the brain’ syndrome.
Lucky for me though, early on, as much as I was in awe of what technology could do, I recognized just as much what it CANNOT do. DLL’s, C++, object-orientation, integrated circuits, and OLED’s are great terms to know, but they bring no value unless PEOPLE bring value to them through use and content. As we try to enhance our operating efficiency in each of our practices, we inevitably turn to tech products to assist us in being more efficient, and ensure we remain competitive in an ever increasingly difficult environment.
It seems like each day a ‘new’ initiative becomes the rage, and we are forced to evaluate its long term viability, effect on our business if we do/don’t integrate it into our daily operations, and the ultimate cost to us in time and dollars. Think about it, a few years ago, if someone had said to you, “what you don’t have the ability tweet, friend, or join a discussion group on your LinkedIn ID?”, you would have thought they were either out of their mind, or more likely spewing words last heard from your teenage daughter.
We no longer have the luxury of turning our back on those facilities. As practitioners, we HAVE to deal with what life throws at us. Technology IS a fact of our lives. It impacts both you, and the people around you. It also impacts the IBBA as your professional association.
More Owners Help Finance Sales of Their Firms
Wall Street Journal (03/08/12) P. B8 Maltby, Emily
Increasingly, selling a business has become more complex with buyers asking sellers to help finance sales, with sellers being paid in installments over time. In some cases, buyers want or require sellers to continue working at the firms once the sale is completed so that buyers can more easily take over the managerial role without disrupting employee or customer relationships. A recent survey by the American College found that more than 50 percent of more than 1,200 business owners are concerned about obtaining the highest possible value for their businesses to help fund retirement. The concerns are valid given the increase in seller financing as buyers still find it difficult to secure third-party funding — which generally needs between 50 percent and 80 percent of the sale price financed — and concerns of buyers about business debt or declining or flat business returns. Business brokerage Generational Equity LLC says 90 percent of 2011 transactions had a seller-financing arrangement, up from 25 percent of transactions before the recession. Worldwide Business Brokers LLC says that banks are more willing to lend to buyers that have collateral, such as real estate, but even with access to financing, sellers may still have to finance 20 percent or more of the deal for buyers. BizBuySell.com reports that the median sale price for small businesses totaled $155,000, about 18 percent less than in 2008 but 3 percent higher than in 2010.
Growing Your Business Through Acquisition
Miami Herald (03/18/12) Cassel, James
James Cassel, co-founder and chairman of the Miami-based investment banking firm Cassel Salpeter & Co., says that now is a good time to buy a business, as Baby Boomers are retiring and their children do not always want to inherit the business. Some companies seek to acquire a business as part of a growth strategy, and there are several things they should do to ensure a successful purchase. They can expand their business by buying a direct competitor, a similar firm in a different geographical area, or a company that offers cross-selling opportunities. They should make sure they have the finances to make the acquisition, being realistic about the estimated costs, ensuring their existing business has enough capital, and avoiding too much debt. They should forge relationships with companies they might want to acquire in the future to give them a competitive edge when those companies decide to sell. Additionally, they need to plan the integration of the new business and the transition of its employees in advance, and they should not be afraid to walk away from a deal that is not going to achieve their goal of expansion.
How to Value Inventory When Buying a Business
Business valuation is an important part of a business purchase or sale to ensure that buyers are not paying too much and sellers are not selling for too little. To properly evaluate a business’ inventory, buyers and sellers must agree on the method used for valuation, such as the original purchase price or the current value of the items. Given that inventory levels will fluctuate during the transaction process, final count and valuation should be done at the close of the sale, and anticipated value for inventory must be provided by the buyer and seller and adjusted if necessary. Should a valuation disagreement arise, both parties should consult with an accountant, and the buyer must account for errors in inventory control software and perform a physical count of inventory when necessary. The condition and quality of items in the inventory should be assessed, with salable items included in the valuation. When buyers and sellers have a good relationship, inventory counts should be done together and buyers can use the opportunity to ask the seller about aspects of the business. An outside inventory service firm should be considered to count and assess items as well.
Can Your Business Be Sold?
Inc.com (03/14/12) Handelsman, Mike
Exiting a business can be a tough decision, but owners and their advisors must first determine if the business is a good sale prospect that someone would want to buy whole or in pieces. Buyers are looking to purchase not only assets but also the reputation, clients, and marketplace advantages of a particular business. Experts agree that the business’ condition must be assessed in terms of sales and profits over the last three years, costs and operational expenses, current financial condition, liabilities, superiority of products and services, and its reach beyond local and regional clientele or prospects for client growth, among other intangible assets. Once the firm has been assessed, areas for improvement should be strengthened before a sale offering is completed, which will require an action plan for each and a timeline for completion. Once finished, business owners and advisors will determine if the business can be sold immediately or later or eventually be liquidated.
Senate Seeks to Toughen a Bill Aimed at Start-Ups
New York Times (03/19/12) Wyatt, Edward
A bipartisan version of the JOBS Act was passed by the U.S. House in recent weeks, and the Senate is now preparing to vote on a version containing an amendment that greatly differs from the House version. However, it is uncertain whether the 60 votes needed to revise the House bill will be secured. The bill aims to help emerging companies raise funds and court investors, but U.S. Securities and Exchange Commission Chair Mary Schapiro opposes the measure due to concerns that it will erode existing investor protections. The bill defines emerging businesses as those with annual revenue of no more than $1 billion and $700 million or less in publicly held stock. Businesses with no more than $350 million in annual revenue would qualify for exemptions from many securities regulations, under an amendment sponsored by Sen. Jack Reed (D-R.I.). The White House voiced support for the House bill, with President Barack Obama urging cuts in “the red tape that prevent many rapidly growing start-up companies from raising needed capital” and at the same time calling for “appropriate investor protections.” Another statement from the White House indicated support for Senate amendments to the House bill on investor protection.
Fewer Sellers, Plenty of Buyers for Business
Colorado Springs Gazette (02/23/12) Heilman, Wayne
Colorado Springs, Colo.-based business broker Ron Brasch says that now is the time to sell a business, given that values are up 20 percent to 25 percent since 2009. Brasch, a merger and acquisitions specialist at First Business Brokers Ltd., says, “It is really a sellers’ market for quality businesses with accurate financial statements because there are fewer sellers and plenty of buyers.” Rather than finding another job, Brasch says that more people are looking to buy a business, and an increase in loans guaranteed by the U.S. Small Business Administration is making this possible. He adds that some business owners from the Baby Boomer generation are hanging onto their businesses as they wait for income to return to pre-recession levels. The cash flow generated by the business plus the owner’s salary, demand from prospective buyers, and the fair market value of inventory and equipment, among other things, will determine its value, according to Brasch.
California Legislates Fair Franchising
NU Wire Investor (03/16/12)
In California’s Assembly, the Level Playing Field for Small Businesses Act (AB 2305) is gaining ground and would protect franchisees from unfair business practices committed by franchisors. The law would require both parties to deal in good faith, protect against a franchisor developing geographically competitive franchises, and include a 55-day extension over the current five days allotted to franchisees to settle overdue fees. Additionally, franchisee agreements would automatically renew under the original terms unless franchisees have significantly breached those agreements, franchisors would owe a duty of competence to franchisees, and any provisions in the agreement requiring the application of law in another state would be void. Attorney Peter Lagarias says, “Franchisees should not be subject to unfair terminations and non-renewals following their investment and hard work. The result of unfair franchise practices is not only the loss of the business but often financial ruin. This legislation will level the playing field and provide for fair relationships with franchisors including protections from deceptive and unfair practices.” Other states, such as Vermont and Massachusetts, are considering similar legislation this year, and Rhode Island already has such laws in place.
U.S. Banks to Pursue Small-Business Lending in 2012, Survey Says
American Banker (03/06/12) Stewart, Jackie
A February survey of 409 banks across the globe by Arlington, Va.-based Omega Performance indicates that U.S. banks, flush with deposits, will turn to small business lending in 2012 as they seek to boost revenue. Of U.S. bank respondents, 78 percent plan to “actively” pursue small business lending this year, with 76 percent of banks globally planning to do so as well. About 64 percent of U.S. banks anticipate slow growth in small business lending, while nearly 13 percent predict dramatic increases. Another 66 percent of U.S. banks will actively pursue medium- to large-business lending, and 59 percent will focus on consumer lending.
Five Things Small Businesses Do to Undermine Online Marketing Efforts
Miami Herald (03/04/12) Cunningham, Tasha
Although small businesses spend much time and effort on online marketing, they may be making several mistakes that undermine their efforts. They may not create an online marketing plan, but it is important for them to list their goals and develop a plan to achieve them. It also is crucial that they have mobile-friendly Web sites that are accessible via smartphones, tablets, and other mobile devices, and Google’s Mobile Optimizer could help them create a mobile version of their current Web site at no cost. Small firms often make the mistake of not geo-targeting campaigns, but if they sell locally, they should use Facebook and Google Adwords’ geo-location features and include their city, state, and zip code in the header and the footer on all pages of their Web site. Finally, they must regularly update Facebook pages and Twitter feeds to engage with customers, and they should optimize their Web sites to increase their search engine rankings in order to generate sales and customers.
Merger and Acquisition Deals Expected to Increase in 2012
Los Angeles Times (03/01/12) Hsu, Tiffany
A new report from KPMG and the University of Pennsylvania’s Wharton School finds that companies are likely to pick up their merger and acquisition (M&A) activity this year while interest rates are low and they have more cash on hand to spend. Of the 825 executives polled for the study, 34 percent said they are feeling more hopeful about making deals this year, 40 percent feel as hopeful as they did last year, and only 2 percent say they are much less hopeful. Some factors affecting respondents’ feelings about the current M&A environment are the sluggish job market, Europe’s uncertain fiscal outlook, and the upcoming U.S. presidential election. Nevertheless, companies have been eagerly seeking deals for months, even though agreements now are not as lucrative as they were several years ago. Private equity buyouts reached a three-year high last year of $277.7 billion in deals as emerging markets became more active in dealmaking. Close to 70 percent of the executives queried said they expect their companies to complete one or more acquisitions this year, compared to the 57 percent who said the same last year.
BVR Announces New Functionality to Pratt’s Stats Deal Database with the Innovative Excel-Based Tool, Pratt’s Stats Analyzer
Virtual Strategy (03/15/2012)
Business Valuation Resources (BVR) recently unveiled a new Excel-based tool as part of a subscription with Pratt’s Stats, a large private company merger and acquisition deal database. The new Pratt’s Stats Analyzer will help those in need of business valuation information to examine the private financial deals for more than 18,000 acquired firms. The multi-tabbed workbook allows users to quickly view and remove outliers in scatter plots, remove transactions, search all comps within the workbook, calculate key statistics and valuation ratios, calculate regression formulas and valuation multiples to a subject company, and export the analyzer into custom templates. The tool draws from Pratt’s Stats financial information on M&A deals, which are verified by the BVR team and include up to 89 data points, such as financial ratios and income statements. BVR President Lucretia Lyons says, “Financial professionals want every insight possible into their comps. The Pratt’s Stats Analyzer takes this type of financial analysis to the next level – and also saves hours, even days of research time.”
Murphy’s Business Model Evolves With Key Personnel
Tampa Bay Business Journal (02/24/12) Spring, Kathy
Murphy Business & Financial Corp. started small as a business brokerage firm matching buyers and sellers of businesses. Founder Roger Murphy says the best approach is to find a business owner willing to sell, market their business in a package on the Web and other places, and wait for the calls from buyers. He says that once buyers call, they may find that particular business is not a good fit, but it gives business brokers an opportunity to work on another deal. Listing businesses for sale is the most difficult part of the business and requires a great deal of research, but it is essential to do it right, he says. When Murphy sought out training materials and how-tos for business brokering, he realized he had to create his own, and once he did, he shared them with other business brokers. Eventually, he took on two minority partners and started to franchise, and franchisees pay a 10 percent royalty in exchange for access to Murphy’s marketing, business valuation, technology, and other resources, enabling the business brokers to meet with clients. Murphy says net profit for his business reached $5 million in 2011, and he expects even more earnings in 2012 as the market floods with pent up demand. Murphy’s business sells standalone and franchise businesses, but franchises often take longer to earn a profit while standalone companies can cost more up front. He says one of the hardest aspects for buyers is securing financing as many banks are still reluctant to underwrite loans. Previously, some deals were backed by home equity loans, but he says that’s a trend of the past. “If you have a good company and it’s priced right, it will sell,” he says.
National Report: Advisors Divided on When Business Sales Will Return to “Normal” – NOW or 2021 or 2022 November 9, 2020 – LOS ANGELES – The latest data from the Market Pulse survey of business brokers and M&A advisors suggests that pandemic-resistant businesses are in demand. Responding advisors report they completed 301 transactions in the […]
Independence, OH – October 2, 2020 – The International Business Brokers Association (IBBA), the world’s largest not for profit association for the business brokerage industry, is pleased to announce the formation of its first domestic Chapter, IBBA Mid-America, with a primary service region of Missouri, Arkansas, Kansas, Kentucky, Oklahoma and Iowa. Going forward, IBBA members […]