Bottom Line Management, Inc. has teamed up with the Edge Connection, a nationally recognized leader in microenterprise and small business development, to provide seminar training on buying and selling a business entitled, "What You Need to Know When You Are Ready to Sell or Buy a Business or Franchise" that offers specifics on how to successfully prepare yourself and pitfalls to avoid.

The Edge Connection offers an award-winning, nationally recognized, multi-faceted program that delivers best-practices business training, financial literacy, entrepreneurially focused technology training, and essential support services to aid micro and small business owners to launch, sustain, or grow a business. 

It was developed through community collaboration and remains a campus and community partner with Coles College of Business, Kennesaw State University.

Bottom Line Management, Inc. looks forward to partnering with the Edge Connection program to create growing entrepreneurial businesses and positively impact the community. "My passion for helping business owners understand and maximize their bottom line was the motivation for starting a free seminar. I want to share my successful experiences to help others navigate through the details of preparing, listing and selling." – Loren Marc Schmerler, CPC, APC, President

Buying or selling a business can be a complicated and daunting endeavor. Bottom Line Management, Inc.'s President, Loren Marc Schmerler, CPC, APC will unravel the mystery of the process and answer all your questions such as:

• How do I get started? – How long should the process take?
• What role does financing play in the process?
• What do I need to know about buying a franchise, license, distributorship or business opportunity?
• How can a business intermediary help you buy or sell a business or franchise?

And much more! If you have ever thought about buying or selling a business this free seminar is a MUST!

Seminar Dates:
The seminars will be offered monthly on the second Wednesday of each month from 1pm – 4pm at Kennesaw State University Center 3333 Busbee Drive, Room 464, Kennesaw, GA 30144. The first seminar is scheduled for July 13, 2011 from 1pm-4pm.

For more details contact Bottom Line Management, Inc. email: info@botline.com or call: (770) 977-7334.

About The Edge Connection
The Edge Connection is a fully independent, non-profit 501 (c) (3) organization. It is housed on the campus of Kennesaw State University's Coles College of Business and enjoys many benefits from its KSU partnership, including in-kind support and teaching assistance. In the fall of 2004, The Edge Connection became an SBA Women's Business Center that targets low-to moderate-income women, minorities, veterans, and persons with disabilities.

The Edge Connection received the U.S. Models of Excellence, Visions 2000 award from the U.S. Small Business Administration, the "Simply the Best" award from the U.S. Department of Housing and Urban Development, and the Federal Home Loan Bank Community Partnership Excellence Award. The Edge Connection is a founding member of the Georgia Micro Enterprise Network and is a member of the national microenterprise trade association, the Association for Enterprise Opportunity (AEO).

Contact:

For details or to sign up contact: Edge Connection at 770-499-3228 or email lsperry1@kennesaw.edu Leslie Sperry, Program Manager. Visit www.theedgeconnection.com

This Seminar is for:

• Individuals who are interested in either buying or selling a business.
• CPA/accountants interested in providing information to clients interested in buying or selling a business.
• Attorneys interested in providing information to clients interested in buying or selling a business.
• Business Professionals.

Visit: www.botline.com/free-seminars for seminar details.

Home based business in Coastal Georgia – work 6 months and get paid for 12 months.

This well respected annual publication with decades of profitability and a loyal customer base in Coastal Georgia allows you to work only part of the year to earn a full year's pay. You work your own hours and customers routinely contact you to renew their ads. Many improvements have been well-received by the business customers with future improvements planned.

There are many print and recorded testimonials by prominent business owners.

Financial Information

• Asking: $225,000
• Gross: $128,923
• Cash Flow: $71,318
• Furniture, Fixtures & Equipment: $5,000
• Inventory: $1,000 (included in price)
• Financing: $150,000 down with $75,000 @ 6% over 36 months
• Seller financing is available

General Information

• Facilities (Home Based): The business is home based and can be run by anyone who lives in the surrounding area. ***Included: phone number; website; all CDs to beginning of time; all phone books; all working files; all software; Adobe Indesign Creative Suite included
• Competition: 1,000 brochures are distributed to new places in the surrounding area. The business is a member of the Chamber of Commerce and another group.The company buys a monthly list of everyone who has bought a new business license and distributes a directory to each new business owner
• Growth and Expansion: Hire more commission salespersons to market to outreaching areas.
• Support/Training: The current owner will introduce the new owner as the co-publisher during the first month and be available by phone assistance for 6 months afterwards
• Reason Selling: Owners retiring
• Employees: 1PT + 2 owners

Contact Information
Contact: Loren Marc Schmerler
Phone: 404-550-1417
Email: LMS@BOTLINE.COM

Profit margins are healthy and customers are very loyal!

Looking for a successful business to purchase? Here is your opportunity!

Once every 5 years, a business like this becomes available. It's a really fine tuned machine. The staff is well trained and extremely friendly to customers and fellow employees alike. There is a branch office in Indiana manned by a key employee who is home-based. This employee knows everything there is to know about the business.

The business mails catalogs to 13 states to derive most of its business. It only carries the finest products. Profit margins are healthy and customers are VERY LOYAL.

Financial Information

• Asking: $1,000,000
• Gross: $2,018,446
• Cash Flow: $224,932
• Furniture, Fixtures & Equipment: $30,000
• Inventory: $180,000 (included in price)
• Financing: SBA pre-qualified

General Information

• Location: Metro Atlanta, Georgia 30041
• Facilities: 5,500 sq. ft. of warehouse and office space in commercial industrial park. Rent is $2,500/month.
• Competition: This business prides itself on offering the finest customer service available.
• Growth and Expansion: Since the business is just mailing to 13 states, by expanding the mailings to the other 37 states and Canada, the business can easily be doubled.
• Support/Training: Owners will assist a new owner for 4 weeks.
• Reason Selling: Retirement.
• Year Established: 1996
• Employees: 6ft & 3pt

Contact Information
Contact: Loren Marc Schmerler
Phone: 404-550-1417
Email: LMS@BOTLINE.COM

2011 is a great time to buy or sell an existing business. Read why 2011 is a good time to become your own boss or sell your business to move onto a new project.

Reasons to Buy a Business

1. Many baby boomers are reaching the retirement age of late fifties or early sixties. From my experience, the most common age when business owners call me is 62. They are tired of working 40+ years since high school, the last 15 to 20 years as owners of their own businesses. The available supply of good and well established businesses has never been greater.

2. When you find a business you want to buy, the owner will be more receptive to both traditional and creative financing. Traditional financing would be where an owner holds a note for part of the purchase price. Interest rates are roughly 6% for owner notes at the current time. Creative financing would be assumption of liabilities or earn outs. Earn outs are based on a percentage of sales above certain thresholds.

3. SBA preferred lenders are more willing to make loans due to relaxed federal guidelines and the elimination of certain costs and fees. While you will not be able to obtain an 80% loan like the good old days, you should be able to easily obtain a 65% loan with you making a 25% down payment and the owner holding a 10% note.

4. Vendors are highly motivated to make sales. Their businesses have suffered financially during the last 2 years. As a result, you should be able to purchase inventory, supplies and other materials at substantial cost savings.

5. Due to the millions of unemployed workers, the labor pool is loaded with qualified and motivated prospective employees. Additionally, existing employees at the company you purchase will be highly motivated to stay with the company, since finding another job will be quite difficult.

6. You are now able to use 401k funds, IRA funds, Sep-Ira funds, etc. to purchase a business. There are many tax advantages to doing so, and you can control how much you may yourself for salary and how much you keep within the C Corporation tax free.

Reasons to Sell a Business

7. With millions of unemployed workers living off of their savings and retirement plans, there is a high demand for good businesses. And due to the unprecedented demand, multiples of Owner’s Discretionary Cash Flow are exceeding 3 where in the past the multiples ranged between 2 and 3. Thus there will never be a better time to put your business up for sale.

8. Since unemployed people have had their 401k plans and savings devastated, and they are tired of only earning .25%, they need an alternative plan. The tax code allows them to purchase a business using retirement funds and creating a C Corporation. Once the Corporation is created, all profits can grow tax free, and the new owners are not obligated to disburse profits, dividends or salaries.

9. If you are in your late 50’s or early 60’s, there is no way to know what the future may hold. Regardless of your current health, it can change unexpectedly. Or you may have issues with aging parents. By selling now, you can remove some of the uncertainty.

10. If you are willing to provide owner financing for some or all of the purchase price, you can earn interest in the range of 6% which is more than 20 times what a bank will pay you.

11. SBA financing is loosening up which will allow more prospective buyers to have an opportunity to buy your business.

12. There comes a time when quality of life becomes more important than money. Only you can decide if obtaining freedom trumps obtaining money and to what extent.

13. There are investment vehicles that will allow you to defer most or all of the seller’s proceeds. Thus there will be little or no tax liability due in the year of sale. You can work with a financial professional to set up a residual income stream that will meet your needs and spread the capital gain over many years.

If you are unsure of what type of business opportunity to purchase or looking to sell your business but are unfamiliar with what steps to take, Bottom Line Management, Inc. provides a FREE Consultation with no obligation.

Bottom Line Management will work with you to determine how your strengths and interests will align successfully with businesses that are available in the marketplace and explain the entire selling process. Call (770) 977-7334 or click here to contact Bottom Line Management, Inc. to schedule a FREE business broker consultation.

Author’s note. After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.

Use your superior customer service skills and clean up with this business.

A successful cleaning service has been strategically cultivated where the owners of this cleaning service never get their hands dirty. They take leads and convert them into satisfied customers. This business grows heavily through referrals and repeat business.

The growth potential for this company is great, as the employees are loyal and dependable and the repeat customer business is high. Expansion includes targeting apartment complexes and assisted living homes as customers and additional window cleaning services.

Work hours are Monday – Friday from 7:30am to 5:30pm. Fifty percent of the customers are bi-weekly, 25% are specials and 20% are four-weekly. Each employee is responsible and gets the job done. Bids can be given over the phone or in person.

General Information

• Location: NW Atlanta, Cobb County, Georgia 30101
• Facilities: 1,100 sq. ft.: $995/mo.: cam $113/mo.: utilities run $200/mo.; telephone /Internet runs $220/mo. Lease expires 5/31/11.
• Competition: There are many home cleaning services, but this service has very little turnover.
• Growth and Expansion: More targeted marketing. Additional services like window cleaning. Pick up apartment complexes and assisted living homes as customers.
• Support/Training: Owner will work with new owner for 2 weeks. New owner must have 1 week of training with Franchisor.
• Reason Selling: Early retirement
• Year Established: 2004
• Employees: 6 Full-time

Financial Information

• Asking: $225,000
• Gross: $251,510
• Cash Flow: $79,359
• Financing: $100,000 Down And $125,000 @ 6% Over 10 Years With 5 Year Balloon.

Contact Information

Contact: Loren Marc Schmerler, President, CPC, APC
Phone: 404-550-1417
Email: lms@botline.com

Article from the International Business Broker Association Inc.

The typical business owner will only sell a business once. Understanding the complex process involved will help produce the best results. But don’t fall prey to the myths that can derail or seriously affect a potential sale.

Myth #1 – I Can Sell It Myself

Many owners believe they’re qualified to sell their business without professional assistance. Many owners are entrepreneurs and the key salesperson for the company. But selling a business is not like selling a product or service.

If you’re looking to sell on your own, confidentiality is lost. If word of a potential sale gets out, there are definite risks of losing clients, employees and favorable credit terms.

Do you really have the time to run your business and compile marketing materials, advertise, screen buyers, give tours and facilitate due diligence

When you’re looking to sell you want to put even greater emphasis on running your business, boosting your sales and not taking on new challenges.

Myth #2 – I’ll Sell When I’m Ready

Certainly, an owner wants to be sure he or she is mentally and emotionally prepared to sell. But personal readiness is just one factor. Economic factors can have a significant impact on the sale of a business.

Sale prices can be affected by industry consolidation, interest rates, unemployment and many other economic measures. Talk with a professional and aim to sell when your personal goals and market conditions align.

Myth #3 – I Know What it is Worth

Some owners will base the company value on what they need for retirement. Others will tell you they want $100,000/year for “sweat equity.” Still others utilize industry multiples.

A third party valuation is a good idea for anyone seriously considering the sale of their business. An outside valuation will include a thorough analysis of the business and the market it operates in. This will provide a solid understanding of the company’s growth potential, not some vague industry average.

Myth #4 – It’s Like Selling a House

Preparing to sell your house may take a few weeks, then you want to get the word out to everyone that the house is on the market. Once you get a satisfactory offer, you sign on the dotted line, turn over the keys and move on.

Selling a company is much more complex. A successful business sale usually requires a great deal of pre-planning, at least a year and maybe as long as three years to drive sales, develop key staff, document the operations and control expenses.

The average house will sell in less than four months, while the average business sale is nine months to a year.

Even after the business is sold, the seller can be expected to put in at least a few months, and possibly years of transition time, helping to make the new owner a success.

Sound sale strategies will bring you the optimum price the market will bear. Go to market with realistic expectations by getting a professional valuation and using a professional business broker or intermediary.

If you are a seller, it’s lonely at the top. Normally, you have your spouse, your partner and possibly your CPA and attorney to assist you in making major decisions. But in reality, it falls upon your shoulders to determine whether you should or should not sell. Many times, a CPA or attorney will encourage you to stay in business because they want to retain you as a client. They do not understand the importance of freedom to an entrepreneur who has invested blood, sweat and tears over many years and now wants to take a break or a breather. Your attorney and CPA are very important in the completion of the sales process after you have made the decision to sell.

A business broker who has been helping sellers and buyers on a daily basis fully understands the trade-off between personal freedom and financial freedom. They are not oriented towards bodily retention. They are oriented towards retention of goodwill. There is tremendous personal satisfaction in having been the causal agent for matching the needs and wants of a seller and buyer who each have differing objectives.

When working with a seller, they have to maintain communication and keep telling the seller to keep their powder dry. When working with a buyer, they have to control excessive enthusiasm. There is a delicate balance that must be maintained in order to have a successful conclusion.

A business broker knows experts in various professions that can be brought to the table when necessary. It might be a CPA, an attorney, a financial planner, an investment advisor, an insurance agent, an EPA expert, a real estate appraiser, or an equipment specialist, etc.

The business broker is the quarterback for the team. They need to know when to pass the ball to another expert and let them run with it. They need to know when a conference call with the seller and buyer is adequate. They need to know when a face-to-face meeting is necessary. And most importantly, they need to know when to let the seller and buyer bond with one another. Excessive interference based on insecurity will kill the deal as quickly as inadequate personal involvement.

The business broker constantly serves as the “reality check” for the seller or the buyer. When the seller says “I want x dollars and it must be all cash” as the asking price, the business broker knows that emotion is driving this statement, and that over time, personal freedom will allow the seller to become more negotiable.

When the buyer says “find me a company for $150,000 where I can earn $100,000″, the business broker will present the buyer with a list of companies where they can earn $100,000. But the buyer will quickly find out that their expectations may differ greatly from what the market has to offer.

The most important reason to use a business broker is to have someone who routinely must “think outside the box.” Someone who has worked in this industry for over 20 years has probably seen almost anything imaginable. They have been called upon to mediate transactions in order to help sellers and buyers put their egos aside for the benefit of the deal. Creativity can save a transaction that has been stopped dead in its tracks. The business broker brings this creativity to the equation to help solve the problem and make everyone a winner.

Author’s note, Loren Marc Schmerler, Bottom Line Management, Inc., President & Founder. After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.

Tip #1: Give yourself a reality check.

Do you have the courage to take the entrepreneurial leap? Forget about the cozy comfort of the corporate environment where you can have someone else take out the trash, clean the bathroom, get your coffee, pick up your dry cleaning, etc. The buck stops with you, and you will be taking 100% responsibility for everything.

Do you have adequate working capital for one or more years? If you are a start-up, you may not see a return on investment for a few years. If you are buying an existing business, the best laid plans of mice and men can sometimes become undone. Most, if not all, undercapitalized businesses will fail eventually. I have seen some fail in months while others have a painful death of years.

Have I gotten your attention with my cautionary tales? Remember that buying a business can be the most fulfilling, yet the most challenging, experience of your life. It’s best to be prepared about what you may experience because that preparation will likely be the key to your success.

Tip #2: Learn the upside of hiring independent contractors.

In your new business, do you want to manage employees or just yourself? Using independent contractors is a great way to operate a business if you are sure they will perform to your expectations and standards. Managing employees often forces you to worry about issues dealing with health insurance, retirement benefits, employment tax, workers’ compensation, overtime, etc.

As stated by the IRS, three characteristics are used to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.

• Behavioral Control: Covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
• Financial Control: Covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.
• Type of Relationship: Relates to how the workers and the business owner perceive their relationship.

Tip #3: Step back and observe.

Do you know what your strengths and weaknesses are? Are you strong at selling, strong in finance, strong in operations, strong in marketing, strong in supervision, strong in organization, strong in customer service, strong in planning, etc.? It is highly unlikely that you can do all the preceding well. When you purchase a business, it’s important to understand exactly how you will fill in the blanks with other resources.

My best advice is the old adage: If it’s not broken, don’t fix it! Would you be able to leave a business alone that is not broken for at least 3 months after the purchase? It’s important for you to take the time to observe from the inside how the business operates and examine where there’s room for improvement. If you don’t do this, you risk the possibility of self-destructing, scaring off your loyal customers and running off your employees.

During your 3-month observation period, I encourage you to have regular meetings with your staff and keep the communication open. Solicit their advice, counsel and suggestions for improvement and positive change as they see it. Then, as you make changes, be sure to explain why you are “trying them out” to see if things improve. If they don’t, put your ego aside, admit your mistake and return to the basics. A little humility goes a very long way.

Tip #4: Create strategic alliances.

Are you willing to create strategic alliances to protect the health of your business? I encourage you to regularly share your financial statements with your banker, CPA and attorney. Your banker can give you a line of credit, your CPA can give you excellent tax advice and help you understand the numbers, and your attorney can help you avoid litigation or any other worst-case legal scenarios.

As a business owner, would you be able to admit when you have made a mistake? Are you willing to take full responsibility for it and do whatever is necessary to correct it? If you stay in denial until the bitter end, there may be no way to recover from your error. This is probably the most important thing to remember: You will not have a boss leaning over you to correct you. If you do not work with your strategic partners to keep your business running smoothly from the inside out, it may prevent you from achieving the highest level of success.

Author’s note. After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.

Tip #1: Make sure you really want to sell your business.

First, ask yourself the tough questions: Are you bored, burned out, ill, have a new child, have aging parents that need your assistance? Or, are you simply unhappy with how much money you are making? If you’ve answered yes to any of these questions, you may not need to sell your business. Quite possibly, what you may need is some guidance to get it back on the right track.

An experienced business consultant can help you refocus to see the forest for the trees. You might find out that once you start making enough money, you do not want to sell after all. But, if you conclude that selling is what you want to do regardless of any of the above-mentioned variables, then you should proceed to the next step.

Tip #2: Rate the “curb appeal” of your business.

After you are 100% sure that you want to sell your business, I suggest that you drive up to your business to determine if the following applies to you: Are there any potholes in your parking lot? If so, fix them before a buyer shows up. Is the landscaping out of control or unappealing? If so, replace it with attractive shrubbery that is well-maintained.

Are the windows clean? If not, get them washed. Is the building exterior clean? If not, schedule a professional pressure washing. Does the roof look old or damaged? If yes, then make the necessary repairs. Does the building need to be painted? If so, get it done.

In brief, be objective to ensure the “curb appeal” of your business has no obvious and easily correctible issues. This may seem like overly simplified advice, but remember that a buyer will be paying a considerable sum of money for your business. You don’t want to turn a prospect off with a bad aesthetic first impression.

Tip #3: Look around the inside of your workplace.

Once you have fixed any exterior issues with your business, it is now time to examine the interior from top to bottom. Start with the ceilings. Are there any water stains from roof leaks? If so, fix the leaks and replace the tiles. Are there any light bulbs that need to be replaced? If so, get on a ladder and put in new and shiny bulbs. Does any of the furniture look ratty? If it does, either repair it or replace it.

Are there scrape marks on the walls? If yes, then have them repainted. How about your employees’ desks? Do they look organized or out of control? Insist that your employees maintain neat and orderly working areas. How about the rest rooms? Are they an embarrassment? If so, clean them up and keep them tidy. Are they handicap accessible? If not, make arrangements to bring them up to code.

Most importantly, look at your office with a keen eye. Remember that when a buyer tours your business, you want them to visualize becoming the owner and being proud to do so.

Tip #4: Evaluate your infrastructure.

After you have fixed any interior “physical” issues with your business, it is now time to look at job descriptions, policies and procedures. First and foremost, you need to draft your own job description that covers what you do daily, weekly, monthly, quarterly, semi-annually and annually. It should be very detailed, and make certain you have someone proofread the final product and correct any errors.

After you are satisfied with your job description, ask all of your employees to complete theirs. This process has several benefits: First, your employees will see how much they actually do. Second, it will give you a chance to see if they are doing what you think they are doing. Third, it will tell you whether they are doing what they should be doing. When all the job descriptions are complete, place them in an organized binder labeled “Job Descriptions.” Then, you will move on to policies and procedures.

Tip #5: Assess your policies and procedures.

Now that you know what you do and what all your employees do, it’s time for policies, procedures and controls. With regard to employees, you need to cover hiring, evaluations, probations, vacation, sick days, holidays, etc. If your company has positions where employees must have background checks, drug tests, reference checks, etc., you need to speak with a labor attorney to dot all your i’s and cross all your t’s.

When asking a prospective employee to complete an application, it is best to stay away from questions that deal with pregnancy, military status, race, national origin, etc. If you decide to hire an employee, make sure they complete a W-4 form, an I-9 form and the appropriate state form. Should your labor pool have a large number of Hispanics, you will need to consult with a labor attorney to insure you do not hire illegal immigrants. Severe penalties can result. With regard to vacations and sick pay, it is best to let them accrue a day or less for each month worked. More policies and procedures will be discussed in Tip Number 6.

Tip #6: Stay current with all your employee evaluations.

It is very important to stay current with all employee evaluations. Employee morale can be devastated if reviews are delayed or not given at all. Plus, it is grossly unfair to ask a new owner to review employees with whom he or she has never interacted. A prospective owner will most certainly ask about employee turnover and employee tenure. But one question that is rarely or ever asked is whether you have any “problem” employees.

That brings up the issue of probation. Probation can be a way to successfully rehabilitate a wayward employee, or it can be the final process to document a termination in such a manner that a legal challenge to the termination will not prevail. When an employee is put on probation, the leash should be very short. The employee must know exactly what behavior will be tolerated and what behavior will lead to immediate termination. Interestingly enough, putting a person on probation sometimes leads to an outstanding employee.

Tip #7: Keep your financial statements current.

Nothing frustrates a prospective purchaser more than asking for current financial statements and tax returns and being told that they are not available. Worse yet is being told that a date cannot be given for when they will become available. Talk about red flags. How can you run a business without current and accurate financial statements?

The short answer is that you cannot do so. As a business owner, you must anticipate the purchaser’s questions regarding all financial matters and have current statements to defend your answers.

When I say financial statements, most people think of a profit and loss statement (also called the income statement.) But the balance sheet is equally important. The combination of these statements tells you whether a business is losing money and gives you a picture of the company’s financial health. There are certain subtleties to keep in mind. For instance, a high level of inventory can indicate several different things. Maybe much of it is obsolete or slow moving. It can be a purchasing mistake that will hurt a business or a brilliant purchase at a great cost. Only with thorough investigation will you determine the true answer.

Tip #8: Ensure your tax returns are in tip-top shape.

Have you filed all your tax returns? Specifically, I mean monthly sales tax, monthly state withholding, quarterly payroll taxes, quarterly state unemployment insurance, annual unemployment insurance, annual ad valorem, annual corporate tax, annual state tax and any local, county, city or other special taxes.

It is absolutely critical that you are current with all these returns to instill confidence in your business’ prospective purchaser. But when it comes to sales tax, if you have not filed and paid all returns, there are very negative consequences. The penalties and interest are exorbitant, but in addition, unpaid sales taxes become the responsibility of the new owner. I was once at the closing table waiting for the checks to be written when the Georgia Department of Revenue called and told the closing attorney that the seller had not paid sales tax for the last 3 years. Upon hearing this, the buyer stood up and left the closing. Needless to say, the company was not sold and eventually shut its doors.

While we are on the subject of taxes, you need to have a heart to heart talk with your CPA regarding taxes when you sell your business. Should the sale be an asset sale? Should the sale be a stock sale? There are bona fide reasons for each type sale. An asset sale limits your exposure for past liabilities, errors and omissions. An example would be a product liability claim for a structure or machine that becomes faulty. A stock sale allows for ease of transferring contracts presently in force. A stock sale is also critical in the medical industry when a Medicare number might be involved. But there is another angle. The stock sale allows for the company to be sold for less money while still letting the owner realize the same or greater after tax position.

Tip #9: Understand the meaning of due diligence.

What is due diligence and how do you prepare for it? Due diligence is the process where the buyer tries to validate everything you have represented both verbally and in writing. The buyer will scrutinize your financial records, your legal records, your employment records, etc.

With financial records, the process starts with the tax returns, goes backwards to the financial statements, goes backwards to the general ledger, goes backwards to all source documents that include bank statements, deposit slips, check stubs, cancelled checks, vendor invoices, client/customer statements, etc.

To prepare for the financial side of due diligence you should assemble tax returns, financial statements, general ledgers, bank statements, deposit slips, check stubs, cancelled checks, vendor invoices, client/customer statements, etc. for the last 3 years. Tax returns, financial statements and related items should be in date order from the most current to the oldest. Vendor invoices and client/customer statements should be in alphabetical order first and then in date order for each vendor or client/customer. Employment records should be filed alphabetically, but you better make sure you have a W-4 form, an I-9 form and a state form (G-4 for Georgia) for every employee.

Tip #10: Tie up your legal loose ends.

There is a legal side to the due diligence process as well. Are you a valid legal entity such as a partnership, corporation or LLC? Is your annual filing of officers and registered agent current? Have you maintained your Corporate Minutes and held annual Board of Directors and Shareholders meetings?

Do you have outstanding liens for debts that have been paid off? If so, you need to contact the creditor and ask them to remove them. If this is not done, the closing attorney will have to withhold funds in escrow until the actual status can be determined.

Have you paid all of your payroll taxes? If not, you may have undermined a possible sale. Have you paid all sales tax that is due? If not, I can tell you from personal experience that this can demolish a probable sale. Is there any outstanding litigation that affects you as either a plaintiff or a defendant? Are all your employees legal, and do you have proof? Are there any patents, trademarks or service marks that need to be protected? If real estate is involved, do you have a deed to prove ownership? Do you have a plat that clearly shows boundaries of the property? Do you have any contracts with vendors or clients/customers? Is your company minority owned, and if so, how would a change in ownership affect your business?

Author’s note. After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.

Listen to the following podcast…

Self-Destructive Sellers and Buyers [ 6:34 ] Play Now | Play in Popup | Download

Or read the transcript here:

As Jack Webb used to say, “there are eight million stories in this naked city.” He was of course referring to Los Angeles. But there are thousands of horror stories of business owners all across the country who self-destructed for a variety of reasons. This article will deal with some real life examples.

Sellers and buyers can each undo themselves. Let’s start with the owner of a 15 year old dress shop located in a high demographic suburb of Atlanta. When I took her listing, she gave me her drop dead figure. For those of you who do not know the meaning of this expression, it means the owner would rather drop dead before he or she will accept less than a certain amount for their business.

They also use the expression “before I will let them steal my business for that amount, I will shut it down.” With regard to the case of the dress shop owner, she started with an asking price of $300,000 which was clearly excessive based on her history of declining sales. During the course of the listing, she received offers in the mid to low $100,000 range, but she could not see herself letting someone “steal her 15 year old business for such a meager amount.”

So after months of limited interest at her asking price, she made the executive decision to close her business forever and received nothing for her 15 years of blood, sweat and tears. That was one of my earliest experiences where I learned that selling a business is so personal and so emotional that some business owners would rather close their doors and receive nothing than have to live with accepting an amount that bruises their ego.

Another example of an owner who was not on the planet Earth with regard to his expectations of what his business was worth was the owner of a family owned fence company. When he and I first sat down for lunch, and I asked him what he wanted for his business, he said without hesitation that he wanted $1.2 million. As I continued to prod him for more information, it became obvious that his expectations were totally without merit. But I took the listing at his required price and started marketing the business.

In short order, it became obvious that all buyers felt the business was so over-priced that they refused to even agree to have face-to-face appointments. Then out of the blue, after working the listing for months, the business owner presented me with two previously unknown facts. First, there were significant amounts of unpaid payroll taxes that needed to be settled. And second, the owner wanted to require that any buyer agree to keep a family member on the payroll who had been receiving an above market salary and was doing little to nothing to earn it.

Long story short, I was fortunate to find a group of buyers who wanted to diversify out of the telephone industry. When they looked at the books and tax returns, they concluded that the business was worth no more than $100,000. That’s right. I said $100,000 which was 1/12 of what the owner expected and was $1.1 million less than the listing price. The owner was happy to accept this amount and was able to settle his tax liability. By the way, the family member was immediately terminated on the day of closing.

Now let’s look at a buyer who self-destructed. For purposes of confidentiality, I cannot identify the industry. But I can tell you that it was a service company with great employees and great clients. After closing, the sellers started teaching the buyer the methods that had made them extremely successful. But the buyer resisted listening and learning and started to tamper with things he should never have touched.

When they attempted to introduce him to the important clients, he resisted the introductions and behaved in an introverted manner. When they tried to explain the importance of all the employees and independent contractors, he felt the company was over-staffed.

Because the buyer had obtained a very sizable SBA loan to acquire the business, he started feeling the pressure of debt service. This pressure got worse because clients were typically billed, and he had to wait for the accounts receivables to be collected. He was undercapitalized as many businesses find themselves to be.

So he started to terminate employees or reduce their hours. He put the terminated employee’s workloads on those that remained. The happy and harmonious environment that had existed under the former owners turned sour and oppressive. Employees started looking for new employment. When they left, the owner did not replace them. The nightmare finally ended when the buyer defaulted on the SBA loan and filed personal bankruptcy. The moral of this story is “don’t try to fix what’s not broken” or “leave well enough alone” or “a fool and his money are soon parted.”

Author’s note. After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.