Only negotiate when selling or buying a business.  This may seem an unusual heading to an article but it now keeps happening too many times and I feel compelled to write about it.

There is no question that selling a business is difficult as there are so many items to consider.  Equally, buying a business is extremely difficult not the least because the buyer may not know the seller but more importantly to the buyer, because they are yet to fully understand how the business works and what has made it successful.

When you put these basic unknowns together and add the imprecise art of valuing a business, both the seller and the buyer understand there will be a negotiation on the final purchase price of the business.  What is intriguing from my perspective is that sellers and buyers can spend a lot of time and negotiating energy to purely focus on the purchase price, which is important as the seller does not want to take less than they think the business is worth and the buyer does not want to pay any more.
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Hopefully you will make a New Year’s resolution which includes building a business plan and in it, your personal and business goals.  You will also do a budget to make sure you can afford to execute what is in your plans.  Hopefully you are rested and as they say, “all dressed up and ready to go.”  You are also saying “Bring it on.”  My question is therefore, you know WHAT you want to do but HOW are you going to do it?

Chances are you have a list of projects and tasks you want and need to do.  It probably does not include answering phones, sending and receiving emails, reading articles and newsletters, attending conferences, staying on top of compliance items that affect your industry but numerous day to day activities that lead most entrepreneurs at the end of the day to say “Where did the day go?”  That’s the point of a Productivity plan.

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Everyone is familiar with the Christmas song, The 12 Days of Christmas.  Without going into every verse of the song, the carol works forward with the first day of Christmas being a partridge in a pear tree, the second day of Christmas two turtle doves and so on.  The song is full of optimism and hope that the giver and receivers of the gifts will be thankful for life, the opportunity to share and hope for the future.

From researching the origins of the song, I came across something interesting.   One of the articles I read suggests the 12 days of Christmas is not about the 12 days prior to Christmas but in fact, the 12 days from Christmas until the beginning of Epiphany which begins on January 06.  When I thought further about this, it naturally combined with another favorite thing we do during the Holiday Season and that is to make New Year’s Resolutions.
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There is a US Court of Appeals judge by the name of Judge Learned Hand and he lived from 1872 to 1961 or until he was almost 90 years old. Originally from upstate New York, Hand graduated from Harvard Law School and became a lawyer. At 37 years of age he became a judge appointed to the Federal District of Manhattan and he became well known and respected for the quality of his judgments.

What caught my attention was one of the best quotes I’ve read regarding the paying of taxes. His quote is “…over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do it right, for nobody owes any public duty to pay more than the law demands.”
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Successfully selling a business requires a lot of preparation, attention to detail and organization. Most sellers badly underestimate both what they need to do and what to do if a qualified buyer comes along. A good rule of thumb is that it takes about ten buyer inquiries to reach a potential buyer who has the qualification to buy the business. There is not a shortage of buyers; there is a shortage of buyers who have the right industry and management, a downpayment and good credit score and the most important ingredient of all, the motivation to move through the process to buy a business. So if you find the right buyer, you need to have you’re “A” game ready.

Here are 5 tips to help you prepare and be ready.

1. Assuming you know what the buyer wants.

Buying a business is a unique experience; every transaction is unique. If you meet a buyer with the right qualifications and assume you understand their needs, wants and motivations it is a bad practice as a smart buyer will not reveal their true motivations.
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Obtaining finance to buy a business is particularly challenging. One of the advantages of buying a business in the United States that very few other countries have to assist with this process is the Small Business Administration or the SBA as it is commonly called. If you have retirement money in a 401(k) plan, this money can be used to move into a corporation and fund the purchase or down payment to buy a business. This option can be combined with an SBA loan. Both of these processes are very formal and deliberate and therefore take time, but if applying for an SBA loan is part of your business acquisition plan, consider the following 5 tips.
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A business that is available for sale is often handled like selling a residential property or house – except they are totally different. In some states in the United States, for a professional third party or a broker to represent the seller of the house they are required to have a real estate license. That real estate license allows that person to sell a house, a commercial property, and in some cases, provide mortgage loans and assist in the transaction of selling a business.

As I mentioned above, however, all have similarities but there are major differences. When selling a house both seller and their broker want everyone to know the house is for sale whereas with a business, the sale is kept confidential to protect the business, the employees and other parties.
Here are 5 tips to help an owner thinking of selling their business.
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On Monday, September 27, 2010 the President will sign into law HR 5297, the small business bill.  This bill has huge ramifications on commercial lending AND the economy.  Most people don’t realize how big this bill is and the ramifications of it on small business lending.

The key SBA provisions of HR 5297 are noted below:

7A SBA loans

• Increase to maximum SBA 7a loan amount to $5,000,000 (permanently)
• 90% guarantee through December 31, 2010
• Fee waiver for the rest of 2010 (subject to available funding)
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Per the Coleman Report – Today the Senate voted 61 to 37 to pass a motion to invoke cloture on Boucus Substitute Amendment to H.R. 5297, the Small Business Lending Bill.

After the vote, Majority Leader Harry Reid (D, NV) said that passing this motion was the most significant thing the Senate has done since the Stimulus Bill was passed to create jobs.
The bill is expected to create between 500,000 and 700,000 new jobs.
“We have community banks now with the ability to compete with big banks, and the ability to loan money to small business,” Reid stated.
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The Small Business Administration’s 7(A) Loan Guarantee Program has recently gone through some modifications and changes. These changes include an increase in credit availability for owners of companies with purchase prices between $400,000 and $4,000,000.

The SBA 7(A) program helps small entrepreneurs start or expand their businesses with loans through bank and non-bank lending institutions. Previously the loans only allowed a maximum of $250,000 in intangibles (including goodwill) to be financed. However, under the revised rules, it is now possible to finance any amount of goodwill (even up to this program’s lending limit of $2,000,000), as long as at least 25 percent equity exists in borrower down payment and/or seller stand-by financing.

There is more good news, in that the SBA has temporarily increased its guarantee from 75 percent to 90 percent of the total loan amount, and currently waives the guarantee fee (2.6 percent of the loan amount) charged to borrowers.
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There are many items you need to do when planning to sell your business. There are also things to avoid.  Here are 5 mistakes to avoid so you successfully sell your business.

1. Talking when you shouldn’t.
This may sound obvious but when you sell a business it’s more important to listen and ask questions than continually talk to try and “sell” the business. Often there is more information in hearing the type of questions being or not being asked and the follow up comments. If you are the only one talking that means there is little interest or other negative perceptions that need to be removed so the buyer is comfortable moving forward.

2. Failing to use common sense.
Selling a business rarely happens to the first buyer that comes along. There is a need to reveal information but only after the buyer provides enough information to show they are suitable buyers. This is one of the main reasons to use a broker to sell your business. They are trained and have the emotional detachment to ask appropriate questions to know not only if the buyer is truly serious but more important, qualified to be able to buy, finance, manage and run the business.
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The following article is reprinted with the permission of Monty Walker at Walker Business Advisory Services, Wichita Falls, TX. Phone: 940-322-5086.

The Patient Protection and Affordable Care Act (the Patient Protection Act) was signed into law by President Obama on March 23, 2010. The Reconciliation Act has now passed the Senate and the House and will be signed into law by President Obama sometime during the week of March 28, 2010. Not withstanding the fact that amendments to the Act will likely occur, some minor and some significant, it is important for small business owners to understand the tax components of the Act which apply to them as it currently stands. All small businesses will be impacted with the following information hopefully of assistance to those businesses in the local Sacramento area.

For owners of small businesses and their workers, the recently enacted health reform legislation has some key provisions to pay attention to. The major ones include: tax credits; excise taxes; and penalties. But whether a business will be affected by them depends on a variety of factors, such as the number of employees the business has. This article provides an overview of the key tax provisions in the new law with the biggest impact on small business.
Tax credits to certain small employers that provide insurance. The new law provides small employers with a tax credit (i.e., a dollar-for-dollar reduction in tax) for nonelective contributions to purchase health insurance for their employees. The credit can offset an employer’s regular tax or its alternative minimum tax (AMT) liability.
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The following article is re-printed from an email sent by Mike McGrane, an SBA lender with Wells Fargo based in Roseville, CA.

The Senate and the House have both passed various versions of the following improvements to the Small Business Admin 7a and 504 loan programs. This is a very good thing for Small Business, Entrepreneurs, Banks and Business Brokers and Developers. There is something for everyone in this Senate Bill outlines below. It still needs to be signed into law and the SBA needs to make their official guidelines public, but this should be what is coming.
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When most business owners decide to sell and they wish to be the one to start the process, the first and obvious place to start is with a business valuation. A business valuation gives the owner a reference point as to whether the price they hope to get for the business will be reasonable and/or achievable.

Some business owners choose the selling price for the business based on what they want in order to sell. They may have a certain amount of debt they wish to retire, money they need for retirement plus an ache that makes them think there business is worth a certain amount of money. Not a good basis for trying to convince a buyer about the asking price for the business.

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The following is an article by Chrystal Jarvis of the Birmingham Business Journal about good news for Small Businesses looking for positive news about finance for their business.

The U.S. Small Business Administration is looking to offer more government-backed loans to commercial businesses.

The government agency has proposed increasing the size standards for 71 different types of businesses, two-thirds of them in retail trade sectors. The rest are in accommodations and food services and other services.

If adopted, more small businesses will become eligible for government loans and will have access to the SBA’s financial assistance, contracting and other programs.
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