On WMUR on Sunday morning June 21st State Director Wit Jones of the SBA reflected the same opinion that we have been trying to get across. In NH if you have a good business to fund the local banks have the ability to finance you. He was on with Fred Kocher doing a business interview.

After outlining that there has been a big drop in SBA Guarantees this year he summarized at the end of his presentation that in New Hampshire the problem is not a real Credit Crunch but the “perception” of one that has folks not asking for loans.

Check out his comments at: http://www.wmur.com/video/16668751/index.html

Every once in awhile we have a real disconnect with a would be seller. We work for sellers,and they become our clients when we accept an assignment to sell their businesses. But we are not mind readers,or magicians.

If you want us to help you exit your business, and realize a fair return on your investment, you have to give us the information we need to do the job. You also have to have your business ready to sell. Additionally you have to trust and communicate with us as changes occur in your situation.

That means that you have to have financial records that we can understand, you have to know and tell us what you have for assets, like equipment and fixtures as well as accounts, customer lists, and any other things of value, both tangible and intangible. Most importantly you also have to own up to problems, so we can figure out how to deal with them. I have to read the auction notices in the paper every Thursday, because every once in awhile I run into an ad for a foreclosure auction on a property where a client has told me they are up to date with mortgage payments.

Problems are going to come out during a buyers due diligence. If they have been hidden then the buyer is not going to trust us or the seller and 9 times out of 10 the sale will crash. If problems are disclosed, explained and dealt with up front, they often become non-issues, or can be dealt with effectively, and we can still have a sale.

We expect sellers to put the best possible spin on their business when they tell us about it. That is good, because it helps us figure out how to best present it in the marketplace. But it also has to be honest and realistic.

I recently sat in a store talking to the owner and asked him for the value of his inventory. He claimed he had $150,000 worth in a store where it was obvious that there was no more than $25,000 or $30,000 worth. There are no tax returns, or QuickBooks, or any other financial records to verify the level of the booming business he claims. How can we ever convince a buyer to even look at that business? For that matter, how can I trust what he tells me and repeat it to customers without risking my own reputation?

If you are planning to sell, ask yourself “what would I want to see for information about this business if I was looking to buy it?” We need at least that much information and will probably ask for a lot more.

Also, just to repeat a frequent offer we make, if you are like most small business owners and don’t really know how to prepare a business for sale, call us to help. Plan ahead, you are not going to want to, or be able to, run the business forever. Let us help you figure out what you need to do well in advance of your need to exit the business so that we can put it on the market in the best possible light when the time comes.

It appears if you read the business news carefully that there are a few writers now starting to recognize that the economy is strong enough so that the Media and politicians trying to convince us that we are in a recession or even a depression, are wrong!

We have been saying right along now that it is a great time to buy a business. Loans are available at some of the best rates ever. Local banks have money and are eager to do business. Sellers are recognizing that the negative atmosphere means they have to price businesses realistically.

Get busy now, while the timid and meek are sitting on the sidelines. It is a great time to buy a business, and be in a great position when after the election the winning party, (either one) puts a positive spin on things and people shift back into a positive mode.

In my last post I talked about the need for trust between all parties in a business deal for it to be successful.

I also mentioned that Business Brokerage is a lot more complex than straight real estate brokerage. There is a considerable difference in the methodology and practices of the two types of activity.

The general public is being educated by consumer advocates and by real estate firms that they need to be represented by brokers working for them if they are buying real estate. I have no complaint about that. As a matter of fact I support it. Also in real estate brokerage many companies and agents represent buyers all the time and make a living doing it. Partly that is possible because a very high percentage of customers actually make a purchase.

In Business brokerage only about one percent of our customers ever buy anything. There are a lot of reasons for that, and one of them is the level of complexity of the deals we do. Probably the main reason for that low percentage is that so many customers are not prepared to, or can not afford to, buy a business, but they have to go through the process of looking at several potential purchases to get educated to that fact. We understand and accept that as part of what we do. We work hard at educating customers about the process and trying to help them be successful and part of the 1%.

When qualified customers do decide to make an offer on a business they are more frequently now demanding to be represented by a buyers broker. The parties involved in a business transaction usually include, in addition to the buyers and sellers, lawyers for each party, and accountants for each party, and a sellers broker (our role). It is really important that if an additional party representing the buyer is going to be involved that they be competent and understand the roles of everyone on the team. It is also important that they understand how Business Brokerage works, as well as being able to counsel the buyers on finding deal making lawyers who will properly support the process.

Real Estate brokers with no business brokerage experience have on several occasions recently demonstrated that they do not have the proper training and skill to do that.

Customers really need to find representation that understands the process they are involved in and is qualified to help them. That is true of course for their lawyer and accountant, and especially true if they decide to inject a buyers broker into the situation. There are commercial real estate agents who also have experience in business brokerage, and who can handle the job. But it is not appropriate for a buyer to hire an inexperienced real estate agent to help them and provide that agent with an on the job training opportunity.

Also the commission sharing process is considerably different in our business than it is in real estate transactions. We expect buyers to pay their representation if they inject buyers brokers into the process after they have started working with us, just like they have to pay their lawyers and accountants. Also we do not routinely offer to share our commissions on a 50/50 basis, particularly with real estate agents who have not earned our trust.

The bottom line - if you are trying to buy a business and want a buyers broker to help you, make sure you find one that has successful experience as a BUSINESS BROKER.

We have had a couple of situations lately that have been really bothersome, because we couldn’t work with folks who wouldn’t level with us about their financial strength.

We understand that some of our customers are going to be sensitive about sharing financial information with us. We also understand that some customers think that if they tell us what they have for resources that we will try to push them to make more of a down payment than they are comfortable making. We all have to get over those fears if we are going to work together.

For our point of view we are representing, and protecting, our clients. We represent people bringing their businesses to market, and in order to price them properly and market them we have to have access to tax returns and other sensitive financial and operational information. In order to help customers make intelligent choices we also have to share our clients information with them. We have to assume that if you won’t tell us how you are going to come up with the down payment that you are not going to be able to, and we can’t work with you.

It is not appropriate for us to share the financials for a company priced at $1,000,000 with a customer who is looking for 100% seller financing and has no money to put down on the deal.

We use the information requested in our online confidentiality agreement as part of our process of finding out what customers have to work with. If the forms are not made out properly we have to get on the phone and ask customers what they have for liquid assets to work with. If the customers can’t trust us enough to share that information we are not going to be able to work with them.

We very frequently get messages from customers that they don’t know what they have for a down payment. Or even worse they tell us that they have less than $50,000 to work with but want to have an income of $150,000. We can’t really work with either situation.

There is a large education component to our work. For example we help people who have resources figure out how to use home equity for a down payment, or how to use a 401K to set up an investment in a company they want to purchase. We also have to explain to folks who don’t have sufficient funds for a down payment that the are not going to be able to support a very high income level without a whole lot more to put down.

My plea is that you have to trust us, just like we have to trust you, to get a deal done. One of the reasons that the Code of Ethics of the International Business Brokers Association is such a big part of our orientation of new Associates is that we don’t tolerate anyone on our team who is not going to earn that trust.

Business Brokerage is different than real estate brokerage. We are dealing with a lot more sensitive information, a lot more complex factors, and their has to be a whole lot more trust on the part of all parties to make a deal work.

This is another in a fine series of articles provided by the International Business Brokers Association. This is written well enough so that I have chosen to just include it in total.

Consider the options – work as an independent contractor…start your own business…buy an existing company.

Certainly there are pros and cons to each option. If you do a careful analysis, you’ll learn what many seasoned entrepreneurs have discovered…the risk-to-reward ratio is tipped in your favor when you purchase an existing business.

Admittedly, as an independent contractor, your risk is minimal. The up front investment and overhead costs are limited. However, without the ability to leverage the work of an employee base, the returns are limited by your own personal capacity.

Starting a business of your own can pay great dividends, but it’s important to understand that the risks are significant. Most start-up businesses will falter and eventually die. According to Michael Gerber, author of The E-Myth Revisited, 40 percent of new businesses fail in the first year and 80 percent fail within five years.

On the other hand, purchasing an existing business reduces an entrepreneur’s risk while creating opportunities for tremendous profit.

There are a number of reasons to consider the purchase of an existing business rather that starting one:

· Proven Concept. Buying an established business is less risky – as a buyer you already know the process or concept works. Financing a purchase is often easier than securing funding for a start-up business for that very reason—the business has a track record. A bank will be able to look at the historical results for the business, not just rely on projections.

· Brand. You’re buying a brand name. The on-going benefits of any marketing or networking the prior owner has done will transfer to you. When you have an established name in the business community, it’s easier to place cold calls and attract new business than with an unproven start up. That’s an intangible benefit that’s difficult to put a price on.

· Relationships. With the purchase of an existing business, you will also be buying an existing customer base and vendor base that took years to build. It’s very common for the seller to stay on and transition with the business for a short time to transfer those relationships to the buyer.

· Focus. When you buy a business, you can start working immediately and focus on improving and growing the business immediately. The seller has already laid the foundation and taken care of the time-consuming, tedious start up work. Starting a new business means spending a lot of time and money on basic items like computers, telephones, furniture and policies that don’t directly generate cash flow.

· People. In an acquisition, one of the most valuable and important assets you’re buying is the people. It took the seller time to find those employees, develop them and assimilate them into the company culture. With the right team in place, just about anything is possible and you will have an easier time implementing growth strategies. Plus, with trained people in place you will have more liberty to take vacation, spend time with family, or work on other business ventures. When start-up owners and independent contractors go on vacation, the business goes too.

· Cash flow. Typically, a sale is structured so you can cover the debt service, take a reasonable salary, and have some left over to take the business to the next level. Start up owners, on the other hand, often “starve” at first. Some experts say start-ups aren’t expected to make money for the first three years.

· Risk. Even with all these advantages, some entrepreneurs believe it is cheaper, and therefore less risky, to start a business than to buy one. But risk is relative. A buyer may pay $1 million, for example, for an established business with strong cash flows of approximately $200,000 to $300,000. A lending institution funds the transaction because historical revenues show the cash flow can support the purchase price. For many people, however, that is far less risky than taking out a $300,000 loan with an unproven concept and projections that may or may not be realized.

Becoming your own boss always involves a risk. When you buy a business, you take a calculated risk that eliminates a lot of the pitfalls and potential for failure that come with a start up.

One of the items we have to negotiate in almost all purchase and sale agreements is the seller assistance terms. In many very small business cases this will be a two week period, and often the buyer wants the seller to leave before the two weeks are up. However in any substantial business transition the seller involvement is a very serious concern.

The following article from the International Business Brokers Association covers the subject very well, so I have just included it in total.

Selling a business and walking away can be very difficult. But in many cases, there’s a transition (“training” and/or “consulting”) period dependent on the size of the company and the role of the owner. Transitions may be as short as a month or two or as long as a year. In most situations, the buyer wants the seller to remain on board to shorten the learning curve and help with the smooth transfer of key relationships.

In the typical business sale, a transition period of four to eight weeks is included, and sometimes a “telephone consulting period” is added (e.g., 6 months of telephone consulting not to exceed 5 hours per month). Also, the seller may additionally be retained as a consultant at a negotiated rate. In some instances, a long-term employment contract is negotiated and the seller maintains daily involvement for a much longer period of time.

For the owner who wants to sell the company and leave quickly, the focus should be on the development of a strong management team. Be sure to introduce key employees/managers to your major customers and vendors and look at ways to delegate responsibilities. The more the customers think they are interacting with “the company” versus the “owner” the easier the transition.

If you’ve established a good management team, less time will be required for the transition to the new owner. In addition, a well developed team usually adds value to the sale.

Occasionally there are owners who want to sell but just aren’t ready to quit working. They may be looking to sell early to get a premium price while the market is in their favor or to get away from unwanted or overwhelming administrative and management duties.

Either way, long-term employment contracts can be included in the sale agreement. The seller can stay on board and work with the business a few more years while still drawing an income and benefits.

If you’re selling your business, in most cases you won’t be able to walk away the day after the sale and in most cases you probably don’t want to. Talk to your business intermediary about the true timeline of the sale and transition. If you want to sell while the price is right, but you’re not quite ready to leave immediately, consider the options available to sell now and maintain a role with the company.

The International Business Brokers Association® is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

©2007 International Business Brokers Association® (IBBA®) all rights reserved

Permission to reuse any or all of this material should be directed to the IBBA at 888-686-4442 and is restricted to IBBA members.

One of the unique services we provide, as Business Brokers, is an intermediary negotiating “service”.

I choose the term “service” because what we do is usually not done for our own interest, but for our clients and customers.

Most people are familiar with some of the aspects of negotiation. We have all been subjected to the exhortations to always try to establish win-win situations. If you think of those instructions you have seen or heard in the past they are usually written from the point of view of a principle beneficiary of the negotiation.

A Business Brokers role is to analyze the situation from a third party viewpoint, and suggest to both parties ways to attain the “win-win” outcome everybody wants, (Keeping our own clients interests clearly in mind!). That is why we are called “Business Intermediaries”.

We make sure all parties to a negotiation understand the issues. We have to be sensitive to the communication process and understand the facts, laws and regulations, and desires and objectives of each party to a negotiation.

We have to explain to each party what is possible, and help each party establish reasonable objectives.

And in some cases we have to understand when there is no further possibility of coming to any successful conclusion of the issues being negotiated, and gracefully tell the parties that they are too far apart to make a deal, and help terminate the expenditure of time and effort on something that is not going to work.

When things go the way we always try to have them go we end up with satisfied parties on both sides.

There is a great deal of satisfaction in being able to walk out of a closing with both the buyers and sellers satisfied with the outcome.

Following is a copy of a piece generated by the International Business Brokers Association. See their copyright notice at the bottom. It does a very good job of explaining how a buyer should prepare to deal with us. The owners and some of the Associates of New Hampshire Business Sales are members of the IBBA, we follow their Code of Conduct, and three of us hold the IBBA Certified Business Intermediary (CBI) designation.

The Process of Buying a Business

Buying a business is a process that takes time. It can sometimes take years to find the right opportunity.

Unfortunately, many buyers want to look at all available options, thinking they’ll recognize what they’re looking for when they see it. That approach is actually a waste valuable time and energy and can lead to frustration and an end to the search. Or the potential buyer may miss out on great opportunities because they weren’t found early enough or they weren’t ready to move forward with a purchase.

There are some key steps to follow in the business search process:

Start with a self assessment - Ask yourself why you want to buy a business. What types of work activities do you like and what kind of lifestyle do you want to pursue? It’s important to understand that there may be more work and longer hours for an owner in some industries. Be sure to include your family in the assessment.

Establish financial expectations - Determine how much money you need and want to earn. Make sure your expectations are in line with the types of businesses you are targeting and the return they can produce.

Put together a personal financial statement - Outline your assets and liabilities. Identify what you can use for your initial investment. The personal financial statement serves as proof of your financial wherewithal, so be prepared to share this document with a seller’s intermediary.

Update your résumé - Sellers want to be sure that their business will continue to be a success. They’re looking for someone with the experience necessary to continue their legacy and take care of the staff. Ultimately, you’re selling yourself to the current owner(s), the lender and the professionals representing them.

Outline your acquisition criteria - Define the parameters of your search. Ideally it should include your targeted industries, geographic area and transaction size. Your acquisition criteria will help you demonstrate your commitment to finding the right business for you.

Search multiple sources and enlist help - Let your professional advisors (e.g. attorney, accountant, financial planner) know you are looking for a business. Most importantly, contact business intermediaries who represent businesses within your targeted market. They will notify you of available companies that meet your criteria and qualifications.

Most business brokers or intermediaries work for the seller and are paid by the seller. That means you can enjoy the luxury of their services at no cost. The intermediary is looking out for the seller’s best interests, so you should have experienced council to represent you in any transaction.

When interested in a business, you want the business intermediary to be selling you to the seller. Prove to them that you are a qualified, motivated buyer by preparing for your search.

Your motivation, lifestyle, expectations, financial statement and résumé will help you develop your acquisition criteria. Identifying and communicating your acquisition criteria, qualifications and experience will save time and frustration and will place you far ahead of less focused buyers.

The International Business Brokers Association® is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

©2008 International Business Brokers Association® (IBBA®) all rights reserved Permission to reuse any or all of this material should be directed to the IBBA at 888- 686-4442 and is restricted to IBBA members

2007 WAS A BANNER YEAR FOR NEW HAMPSHIRE BUSINESS SALES, WITH CLOSE COMPETITION FOR ASSOCIATE OF THE YEAR

For 2007 the Associate of the year award for New Hampshire Business Sales goes to Stan Evans of Wolfeboro for the second year in a row.

Stan had his best year ever out of the 6 he has been with us, and came in with a 17% edge on runner up Ed Settino, who also had his best year since joining us 6 years ago, and who was our Associate of the year in 2004.

Stan has continued to capitalize on his extensive business background in commercial lending, sales, business development, ownership, and brokerage to achieve this status.

Stan had a wide variety of sales this past year, including convenience stores, an oil distribution company, a printing company, a wholesale garden center, a medical services company, and some commercial real estate. In addition to the sales he managed he has an impressive list of properties he is currently representing.

Stan represents us throughout the state, from his home office base in Wolfeboro. Interestingly our two top producers this year both live in Wolfeboro since Ed Settino moved back there this year.

Our company had the second best year in it’s recent history, and our commissions collected was only second to the high we hit in 2004.

We expect that 2008 will be a year “confused” by Presidential elections and all the fears of recession, but consider it a good time to buy a business, so we are looking forward to increased competition among our Associates for the Associate of the Year honors for 2008.