We have seen a lot of promotional news items and discussions lately telling us it is a great time to buy a business.

For instance, Interest rates are as low as they are ever going to be, banks are starting to lend money, business values are lower and good deals area available.   Sellers are being told they should market their businesses now because of the pent up demand of people out of work looking to “buy a job”.  Also, Capital Gains taxes may go up next year.  These are all valid observations.

However, while these things are all good reasons to buy, buyers right now should have the same concerns they always should have.  The right time to buy is when it makes sense in terms of your current situation.  For sellers the same advice is appropriate.

If a buyer has an appropriate down payment, and finds a business they feel comfortable they can take over and run, and they can see themselves making good money and a return on their investment, then “it is the right time to buy”, whatever other factors are involved.

Likewise, is a seller has reached the point where they have to sell, either for reasons of health, or because it is time to retire, or other circumstances making it appropriate to leave, then the challenge is to arrange a sale, under current conditions, that gets them the best deal they can arrange.

In other words, any time can be the right time to buy or sell, totally depending on the individuals circumstances and whether a deal can be structured for a win-win purchase or sale.

If you think you want to buy a business it is important that you figure out how to go about it.

A  good source of information is the International Business Brokers Association (IBBA) web site, particularly the article at:

http://www.ibba.org/Buyers/BuyingProcess/tabid/265/Default.aspx

We are members of the IBBA and several of us are Certified Business Intermediaries.  The CBI designation means we have studied our trade and passed a rigorous examination to meet the standards for the professional certification of the Association.   There is more information about the CBI program and designation on the Association site.

Invest in Your Future, Become a Small Business Owner! OR, as an owner, perhaps you’re thinking of selling. We can assist you in developing an exit strategy.

Attend our seminar and learn how businesses are analyzed, valued, marketed, and how sales are negotiated and financed. These seminars are being held at various venues around the state. We’ve already have several which have been well received. The next one is scheduled for October 8th at the EF Lane Hotel in Keene from 6-8PM. The last seminar of 2009 will be on October 29 at Franklin Savings Bank in Franklin from 6-8PM. Seminar is at no cost, but advance reservations are requested. To register, or for more information, contact us at 603-279-5561 or by e-mail at nhbs@nhbizsales.com .

After my note to my Associates yesterday about it being the time to act now one of them, John Howe, wrote the following:

 

“Are you open to opportunity?

 

This is a great time to get going on your business dreams, particularly if they involve living in New Hampshire.

 

Our company president Leon Parker issued a memo with several excellent reasons why buyers should act now.

 

Opportunities come and go. Some see them and act on them. Others, ignore or miss them. Visible to you or not, the chance to be successful is there.

 

A few years ago a business man drove along a barren stretch of highway in Tilton, N.H. Off on the side was a little For Sale sign. Across the road was a large line of paving equipment vehicles. Ahead was a simple highway interchange.

 

Long story shortened, the end result was the first of what would become one of many developments that has turned the Exit 20 area of Interstate 93 into one of the busiest retail and business centers in New Hampshire. I have been told that a gasoline station operated by a large chain in that area consistently reports some of the biggest daily sales in the state from that location.

 

Someone saw an opportunity, not just open land.

 

Several recent news developments add fuel to the notion that now is a good time for business, and that New Hampshire is a great place to be. One is the fact New Hampshire remains among the top ten for business tax climates in the nation. The other is the fact housing costs in New Hampshire remain affordable compared to other New England states.

 

Keep your eyes open. Check out our listings and think what you could do if you were in charge.”

 

 

 

Our Associates are located all over the state (and Maine and Vermont).  Here is a copy of a message I just Emailed to them:

“I was visiting a local banker this week.  He asked me, “When are you going to bring me some good deals to finance?”   I realized this was third banker in as many weeks who asked me the same question.    With the banks saying “bring ‘em on” and the economy on the upswing, could there be a better time to buy a business?  Consider:

ü  Interest rates are as low as you are apt to see them for a long time.

ü  The SBA guarantee fees, which can be substantial, are being waived until the end of the year.

üBusinesses that survived the downturn are the ones you want.

ü  Prices are low but will be rising as the economy improves.

Give this message to all your customers - Want a business with good cash flow?  Here is a partial list of our businesses for sale that have Seller Discretionary Earnings (SDE) of more than $100,000: Ø  North Country feed store, $475,000:  SDE $107,000

Ø  Southern NH auto repair/lube shop, $300,000:  SDE $140,000 Ø  7-11 store, $458,000:  SDE $131,000

Ø  Seacoast c-store, $850,000 including real estate:  SDE $106,000

Ø  Lakes Region inn, $575,000 including real estate:  SDE $116,000

Ø  Southern NH c-store, $949,000 including real estate:  SDE $187,000

Ø  Mass border c-store, $1,375,000 including real estate:  SDE $284,000   My message: “It’s time to act!”  Tell customers to look at all the businesses we have for sale at www.nhbizsales.com. Sincerely,Leon Parker, CBIPrincipal Broker”

§  Happiness is owning a business
A new Gallup-Healthways Well-Being Index rates business owners as the happiest workers in America, followed by professionals and executives. Well-being is measured by how respondents answered questions about how they feel about such things as their work environment, physical health, emotional satisfaction, and access to food, shelter and health care. Google/The Associated Press (9/22)

As we go thru the second half of the summer, when things are usually pretty slow in our business because it is vacation season, we are pleased with the level of activity we are experiencing.

Customer traffic has picked up.  Sellers are calling to consider listing their businesses for sale, and bankers are courting us again to bring them deals.

If you have been thinking of buying a business, and have some cash to use for a down payment, take a look at the listings on our web site.  Be aware that a lot of the prices on businesses for sale have come down because of the slow last year in most of them.  Also be aware that bankers are going to take a hard look at the deal and will be conservative in what they will finance.

In a lot of cases seller financing assistance is required and sellers are understanding that.

There has been a lot of publicity lately about Small Business Administration loan guarantee programs.  The best news is that they are covering their own financing fees right now, leading to very significant savings in closing fees for loans they guarantee.

In previous Blogs I have mentioned, and sometimes copied, Richard Parker of Diomo Corporation.  This time he hit such a home run in his piece giving advice to customers who want to be buyers that I could not resist copying it for anyone who reads us but who has not been following him.   The following was published in the latest BizQuest newsletter, which you can get by subscribing at BizQuest.com.

“Common Mistakes When Buying A Business

Sometimes I have to just shake my head when it comes to how people approach buying a business. Here are some of the common issues that buyers table and I want to use today’s forum to get a few things straight for you: Don’t expect the seller to hand over a binder of confidential documents - Of course any buyers want to have access to as much financial documentation as possible so they can effectively value the business. However, sellers will often disseminate this information in stages, as the buyer demonstrates their qualifications and level of interest in the business. It makes no sense whatsoever to barge into the first meeting with the seller expecting a portfolio of documentation or request detailed financials at first contact with the broker.  

Sign the non-disclosures right away - When you contact the seller the first time, do not request any information. In fact, it is just the opposite; it is the buyer who should be offering to provide information to the selling party, and specifically a non-disclosure form. As such, in your first contact, simply express interest, and request the appropriate documents for you to execute in order to get additional information. You know the old adage about first impressions….if you come across as an amateur, you probably will never hear back from the seller.  The first meeting is like a first date - While you absolutely need to be prepared with all of your questions for the first meeting with the seller, it is best to keep the meeting conversational. You want to engage in a dialogue with the seller, and to learn more about their business. If you sense they are apprehensive in answering any questions, just move on to the next one. Your goal in the first meeting is to get a good sense about the business, can you see yourself running it, do you like/trust the seller. You want to leave with enough data to conduct your research, and don’t worry; you will have ample time to get all your questions answered, regardless of whether or not the seller/broker pushes for an offer. 

Impress the seller but don’t boast - It is amazing how a buyer can negotiate better deal terms when they impress the seller. After all, there is no way any seller will provide financing if they believe you are incapable of running the business. Do not try to show the seller how smart you are; show them how capable you are. Outline your past accomplishments and be honest about your strengths and weaknesses. As you learn more about the business you can provide feedback and questions about certain initiatives you would like to consider and ask more pointed questions about the past a strategies the seller has implemented. Don’t lie - I know this sounds obvious but you cannot even imagine how many buyers go through with contacting brokers, meeting sellers and completely embellish their story. This mostly happens when they’re asked how they are going to finance the deal. If you do not have financing lined up, and you are expecting the seller to finance the deal, and especially if you have limited resources for a down payment, then be upfront about it. Don’t waste anyone’s time, and certainly your own. Yes indeed there are some incredible deals in the market now, but you have to be realistic as well about what you can afford. 

You cannot buy a business from an ad - The listings you see online are teasers. They will provide you with some basic information about the business. These advertisements strictly provide the buyer with a general overview of the business and when you find one of interest, send in an inquiry. You can spend endless hours searching endless listings. That is not how you buy a business; that is how you “look” for a business. If you want to be a buyer, you have to start the buying process and that means contacting sellers, meeting with them, and conducting your research. If you sit in front of your computer and click from one ad to the next hoping that your ideal business is a click away, you are going to spend a ton of time and get no results. Get into the hunt and get out there and meet sellers…lots of them….it is undoubtedly the best strategy to become a buyer and not a looker.  And the single most frequent comment I get from buyers is - ”Should I buy a business in this economy?” And my answer is always the same: ”I have no idea.” But, I will tell you that it is a tremendous time to do so because you can put together a better deal today than at any other time in the twenty years I have been involved in the business of buying businesses. We have written an excellent report on this subject which you need to read because there are specific deal terms you must follow given today’s uncertain times. You can access the report at: http://www.diomo.com/tips.html  Have a great week.”The author of this piece, Richard Parker, has been helping small business buyers for nearly twenty years. To learn more about Richard and to read some other great articles on the subject buying a business, visit www.diomo.com.

On March 26th we put on the first performance of our new seminar about buying and selling businesses.  We developed this one based on several we did last year aimed just at buyers, and we think it is a significant improvement.

We are trying to schedule sessions in concert with lending institutions, hoping some of them will sponsor sessions, but more importantly getting them to participate so that buyers and sellers can get the latest information on the critical subject of financing right from the lenders, not second hand from us.

Our goal is to keep the presentations to an hour so we can have plenty of time for Questions and Answers afterward.

We always hand out critique forms and the ones for the session on the 26th gave us high marks for content, length of session, and our handling of the questions and answer period.

Watch our web site for an announcement of the schedule for the next one.

We frequently have customers call for information about businesses and in the course of finding out what they are looking for, and what they have for money, we are told that they have “backers”.  Sometimes it is a relative, sometimes it is a close friend, and other times it is a casual acquaintance.    They very often become upset with me when I tell them that in our experience “Backers always back out”.

I usually suggest that we will work with them when we have specifics about who the backers are and what they specifically will do.  Then we ask them to bring their backers to meetings and showings so they can be involved right up front and throughout the process.

There are lots of horror stories shared between brokers about this phenomenon.  One broker told me a story about having one customers eight business associate backers sign letters committing them to support, and then having them all pull out after he had worked a long time on the deal.

While such experiences are time wasting for us, the impact on the customers who are often embarrassed, disappointed, and have wasted a lot of time, can be really depressing.

That is not to say it is impossible to get family and friends backing.  I had a deal not too long ago where family and friends put up 100% financing, almost $200,000, for a couple to buy a business.   Just be prepared if you are a customer trying to be a buyer to have brokers be skeptical when you say you have backers.

The following is an excerpt on the subject from a blog by Richard Parker of the Diomo Corporation on the subject.  Richard (no relation) writes extensively and publishes guides for use in buying and selling businesses based on many years of buying, operating, selling and brokering sales of small businesses.

“Getting the Money from Family and Friends When Buying a Business

Getting the money to buy a business is, oddly enough, one of the things that many buyers leave for the last minute. Perhaps it ties into the incorrect perception that traditional lenders have their vaults open ready to hand over money to you to buy a business.

Unfortunately, it is not the case. Not even close!

Today, I received an email from a website visitor explaining he has found a business, negotiated the deal and now is absolutely stunned and stuck to learn that his “investor”, his Uncle Max, doesn’t want to lend him the money.

This financial backer initially told him “I will lend you the money – don’t worry” (I really wish they had read my course because here’s what they would have learned):

If you are planning on having friends or family members finance your purchase, you need to understand it is a business deal. More importantly, you must be sure that they will be there to write the check when you need it. It is very easy for somone to off-handedly promise you the money, but it is a whole different ballgame when the time comes for them to fork over the cash.

If you are considering getting financing from your “Uncle Max”, keep a few things in mind:

• Make sure Uncle Max’s criteria for agreeing to finance you is completely aligned with the type of business you are looking to buy.
• Nail down the deal details with your financier before you begin negotiations with any seller.
• Lay out very specifically what Uncle Max expects in return for his investment. Is it equity, debt, and what are the note terms, etc.?
• Involve him in the process. Keep him updated. Analyze companies together. If a particular business is not of interest to Uncle Max, you want to know it early on.
• Be completely upfront with any sellers or their brokers about the source of your financing. Simply telling them “My Uncle Max has plenty of money and will finance the deal” is not good enough.
• Get Uncle Max to provide you with a letter acknowledging they will assist in the financing, and have him provide you with a Personal Financial Statement that you can offer sellers as proof to back up your claim.

While family and friends who offer to lend you the money are well-intentioned, and may even come through with the financing, do yourself a favor and don’t put your entire future in Uncle Max’s hands. There are many options available to finance a business. Learn what these are beforehand. When the right opportunity arises, you want to be in a position to pounce on it and get it done!”

You can find other interesting commentary by Richard Parker on: http://blog.bizquest.com