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.

The following article is copied directly from the BizQuest newsletter, edited by Richard Parker (not a relative) and covers a very important topic. The original article can be viewed on www.BizQuest.com, a very valuable source of information about buying and selling businesses. Aside from the newsletter they are a major source of businesses for sale listings. See the link to their site on the left under “Business Resources”

Today’s Topic: Buying a Business with a Partner - A Marriage Made in Heaven (or Hell)

I receive a surprising number of emails from prospective business buyers who are thinking about going into a venture with a partner. Usually, it’s a family member, friend or business acquaintance. What I find astonishing is that most inquiries relate to whether or not there needs to be a formalized agreement between the parties. After all most note, the partners have known each other for many years, they get along great, and trust one another. That’s all wonderful but the answer is an overwhelming, unconditional and categorical “yes” – you absolutely must have a formalized agreement.

To give you a personal example, my brother and I owned a large company together. I would trust my brother with my life in addition to him being a tremendous business confidante. Our partnership was perfect but, if heaven forbid something happened to him or me, the last thing either of us wanted was to suddenly have the other’s spouse as our partner (even though we love our sisters-in-law). For this, and numerous other reasons, it just makes sense to have everytIt does not have to be a 50-page shareholder/partnership agreement but it must clearly spell out the necessary fundamentals. Everyone goes into a partnership all glassy-eyed and hopeful. Dreams are shared. You are convinced you’ll conquer the world together. Unfortunately, situations change. Like my first boss and late uncle once told me: “you never know a woman until you marry her, and you never know a man until you work with him”.

While you will want to have an attorney compile any agreement, a few of the issues to consider include:

• Definition of ownership
• Dealing with disputes
• Mechanisms to dissolve the partnership
• Procedures to follow and a pre-determined formula to value the business in the event of a buyout by one party
• Voting rights should one partner own the majority of shares (some issues such as dilution, binding the company, selling additional shares may need unanimous consent)
• Procedure to follow in the event one partner dies, becomes incapacitated and unable to contribute to the business for an extensive period of time

Above all, the agreement must be fair to both parties.

I have had many partners in the numerous companies I have owned over the years. Most were great, and only a few were disastrous. Personally, I am a huge believer in having a partner. If the combination is right you can really divide and conquer!

If you are going to buy a business with a partner here are a few things to consider:

• Partnerships work best when each party brings a distinct set of skills to the equation. In other words, you should each have your own area of expertise and not simply a duplication of skills.
• Just because you get along with the other party is not enough reason to go into business together.
• You need to formulate a list of fundamentals in advance that you both agree any business you consider purchasing must have in place. If not, each partner will find a reason not to buy every business you review.
• Understand that your personal relationship with the partner will never be the same once you’re in business together. It may get better. It may get worse. Just remember what my uncle said. In my opinion, it is never worth it to jeopardize a friendship over a business but that’s not always possible. Be mindful of it and try as best as you can to keep business and personal issues separate.
• You need to share the philosophy that the business comes first before individual personal gain. If you do right by the business, the personal rewards will always follow.

Business partnerships are a lot more difficult than marriage because there’s money at stake from day one and it can really influence people. Just like a marriage, a business partnership takes work; you must have full faith in the other party, and initiatives you undertake should be for mutual benefit. Most importantly like a marriage, if there are “issues”, you need to communicate no matter how difficult it may be. You cannot sweep problems under the rug hoping they’ll go away. Just like in a marriage, problems left unresolved or ones that are too big, will cause the business to breakdown and will likely not be salvageable.

It never ceases to amaze me how our customers use the gloom and doom media news stories as an excuse to either not make decisions, or make the wrong ones.

For an individual looking for a small business to buy, for whatever reason, their decisions about what to do of course need to be made against a backdrop of what is going on in the world. However, they also need to pay attention to the details of their situation and the businesses they are considering rather than assuming that if, for example, the stock market is tanking that the business they are looking at is also. For that matter when times are good in general they also have to pay attention to details, because a business that they are considering may be “sinking during a rising tide”.

We live with business cycles. After more than 20 years as a Business broker I expect that it will be hard to sell businesses during a presidential election campaign because of all the bad things the candidates say are or will be happening.

An entrepreneur who is going to be able to successfully run a small business will be able to understand the context within which the business they are looking at functions, and figure out whether it makes sense to buy it, regardless of what the media claims is going on on a national or global basis.

While there are few “recession proof” businesses it always appears that the downswing is not as bad as the doom sayers predict, just like the upswings are usually not as high as the euphoria speaders claim or predict.

So why is this a good time to buy a business?

• - Because the timid would be buyers are setting on the sidelines, so there is less competition,
• - The sellers are more willing to consider reasonable valuations for their businesses, particularly if business is down a bit,
• - The sellers may be more motivated if they ahve saved up during the good times and are not looking forward to a period of lower profits.

It is always a good time to buy a business, as long as you approach the marketplace intelligently. During a time of a business cycle going down is the best time to catch some bargains! Figure out how the current cycle is impacting the business you are interested in, and how the inevitable business cycles will impact it and buy into an operation that is going to be well placed as the cycle goes back up. For that matter a lot of businesses are not even bothered by some cycles.

There are risks involved in buying any business, at any time. How you evaluate them is what makes a difference. There will always be business cycles, and how you react to them and position your business will determine how they impact you.

And let’s not forget that while there are all kinds of stories about the credit crunch we still have local banks looking for deals to finance for some of the best interest rates in history.

So if you want to own a business it is a great time to shop for one, regardless of the efforts of the media and the politicians to convince you that the sky is falling! In fact their chatter may be establishing the right conditions for you to find a really good deal.

Once in awhile we get to put together two businesses for a resulting much stronger operation.

We recently brokered the sale of the Independent Color Press, on Moultonville Road, Center Ossipee, NH, by Ernie and Marge Carter to Jim Graves and Marlene Crowder of Rochester Printing, LLC, in Rochester, NH. Ernie and Marge have been providing quality commercial printing to customers from the Mt. Washington Valley to the Lakes Region and southern NH for many years.

Jim and Marlene, who also own TKO Printing in Rochester, are looking forward to providing the same great service to the customers of ICP that the Carter’s did. Now with two locations, they can build upon their customer bases and expand their coverage. They are expecting to benefit greatly from the synergy resulting from the combination.

The sellers were represented by our Associates Stan Evans and Richard Corbyn. CIT Small Business Lending, represented by Beth Cleary, provided the financing and Attorney Stephen Hyde of Portsmouth handled the closing.

During a combination like this our Associates have to be very careful about managing confidential information. However this kind of transaction frequently represents the best opportunity sellers have to make a deal, and often results in higher sales prices, because of the increased value of a business to a strategic buyer.

Our conventional wisdom is that a buyer for a business has to have at least 20% of the price in cash to put down, plus cover hefty closing costs.

In recent press reports we are all lead to believe that there is a “credit crunch” making it hard to get any credit for anything.

In spite of this, we recently (November 2007) completed a deal where the buyer got over $30,000 at closing from the bank. He was able to put that toward the cost of inventory, which cost a lot less. In other words, the buyer came out with money left over from the financing! A true “no down payment” deal!

It takes two things (at least) to do that. A lot of home equity and a business plan for the purchase that shows enough cash flow to cover the debt and still leave enough to live on. It also helps that the buyers spouse has a job with a good income.

But the point still is made very strongly that if you have a decent deal, a good credit rating, and the desire to buy a business, there is money available! Our local banks in New Hampshire didn’t pig out on the wave of sub prime and other risky mortgages. Most of the senior bank leadership lived through the crashes of the early 1990’s and learned from the experience. Call us for the name of the friendly banker for this deal. If you are looking in his part of the state, he is a great resource.

We still ask customers what they have for resources to put down, and we need to know your financial situation before we disclose lots of information about a business. But it is not always necessary to have lots of cash if you have other resources.

Even if you don’t have home equity you can now buy a business with the funds in a 401K if you do it properly.

Interest rates are still low by historical standards, and it is a great time to buy a business!

       KEENE:  Park Avenue Deli & Market, long a fixture on Keene’s west side, has been sold .  The new owners are Brian and Karen Cagney of Mont Vernon, NH, who plan to build upon the popularity of the business.  “We are very excited to take over ownership of a business that has served generations of

     The Park Avenue Deli & Market  has been in business at 30 Park Avenue in Keene for many years, formerly as Pare’s Market, and then for many years as McLay’s Market.  The Cagneys used to buy sandwiches at the market years ago when they lived in the area.  They will be continuing the business with the same departments and staff, and look forward to renewing their connections with the area and providing excellent service and value to the residents and businesses in the area.  In addition to the normal range of convenience store items, the market does a robust meat and deli business, and provides catered lunch items for businesses and parties in the area.