Andrew Rogerson's Blog, page 45

Secure Your Business With Affordable Technology

Securing your business may seem like a daunting task, but with some cost-effective technology, it does not have to be a struggle. Protection can be a huge source of stress for business owners, so prevent what you can. From break ins, to hacks, to employee theft, there are simple ways to make sure that your company is safe. Feel confident in your business with these low-cost methods of protection.

Video Surveillance

Always keep your eyes open for intruders and theft with security cameras. With no subscription required, a surveillance camera from a company like Lorex can be a more cost-effective buy. Cameras can be motorized, have night vision and be waterproof. If there is any trouble near your property, these easy-to-operate video cameras can offer a crystal-clear look at the source. They can also be installed inside your business to keep an eye on employees and customers during normal business hours. If you have any suspicions, cameras give proof. Having a system of security cameras is basically like being your own security guard. You can check on your business when you want, and there is nothing that can replace having a set of eyes on property.

Reinforced Door Jambs & Deadbolts

Locking up your business at night means it’s secure, right? Deadbolts are only as secure as their strike plates. If your deadbolt doesn’t already have a strike plate, check out the ones available at your local hardware store. They’re inexpensive and could save you from a messy intrusion. You might also consider reinforcing the door frame as well, to prevent forced entry. Family Handyman offers a great tutorial on these projects.

Strong Passwords

We continue to place more and more faith in our technology, and so it becomes increasingly more important to make sure that our cyber information is protected, as much, if not more than, our physical information. One of the most obvious ways to protect information is by using strong and different passwords for all your accounts. Use a free password generator, and all the passwords can be stored in a password manager. While it may be tempting to just use “password123,” for everything, don’t do it! Make sure they are random and change them often, especially when an employee parts ways from the company. Password protect as much as possible to minimize the chance of hacking.

Antivirus Software

From Norton to McAfee and more, there are many options when it comes to protecting your computers against malware. Pricing and level of protection vary greatly, so you are sure to find one that fits your budget. Some are specifically made for small business budgets, such as Symantec. Be sure to enable automatic alerts and updates! There is no point in having a security system that is not kept up to date and working properly.

Don’t let the security of your business be a source of stress. Make small investments in helpful technology that can keep you protected. Physical and cyber security are both important, and there are cost-effective ways to manage both.

Making your business more secure only increases its value. When you are ready to sell, you can explain in detail to a potential buyer what you have done, why you have done it and most important, how it has been of benefit to the business and you as the owner. If you have questions about valuing or selling your business, you are welcome to schedule a time to talk with me.

The article Secure Your Business With Affordable Technology first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Your business cannot sell if you are the business

At the moment I am keeping a list of reasons why a business does not sell and more importantly, what the seller can do to increase the chances of selling. It’s not pretty but it is what it is.

As entrepreneurs we get so excited about getting into business, rarely do we think about getting out as we often don’t know that nor have the time and energy to work that out; that is, we will deal with that later.

The seller is the business

Over the last 2 months or so I have jumped in and upgraded my website. What do you think?

Websites change and evolve not only with new technologies but also new trends with how a website looks and feels.

As I am not a website designer or developer I reached out for professional help and amongst my many choices, found James Chartrand of Men with Pens fame. James is an interesting lady as she lives in Canada and her principal skill is writing which she complements with her website design skills.

If you research what makes a good website you will probably read that it’s mainly about content. That is, a good website needs to look good but the best looking website won’t go anywhere if the information or material is poor. Hence my reason for choosing James; as she knows how to write. In fact she teaches a course over 10 weeks called Damn Fine Words.

James is a critical cog in her business. In fact, a lot of small business owners are the cog, the spark, the energy and well, they are the business. This makes it tough to sell when it is time to go and do something different.

Read More: To see a sample business valuation.

How the seller can fix being the business

This is a critical problem and must be solved if the business owner wants to sell and pass the business to a new owner or more importantly, be paid for the ability and cash flow they currently generate from their business.

Here are three solutions.

The first solution is to outsource. Find complementary skills from other professionals and add them to the business to make it bigger and stronger. If they are like minded business people it will make both businesses stronger.

The second solution is to hire, train and motivate the right employees. This can be tough on a lot of small businesses due to the cost and time it takes to find the right employees and allow them to grow and reach the right level so it provides a Return On Investment to the owner.

This is where the third solution comes in. There is an Australian company called Way We Do and they have a web based solution that works in the cloud to allow a business owner to systemize the business by documenting all processes and procedures so there is a consistent written set of standards. If you have ever read the E-Myth series of books by Michael Gerber, Way We Do will make perfect sense to you.

The Way We Do offers the business owner a tool to document written policies and procedures and as a result, a minimum set of standards. This is in contrast to the business performing to the employee’s moods and attitudes.

The best news in this scenario is what happens when the owner sells the business. Because all processes and procedures are in place and employees know how they are measured and compensated, a buyer will see how simple it is for them to replace the seller and continue the business. It doesn’t get any better than that.

As Michael Gerber said “The only reason to start a business is to sell it.”

If you want to sell your business it has to survive and thrive without you being the engine on a daily basis to run the business.

The best news is that there are great solutions out there.

Are you thinking about selling your business and move to your next challenge? Would you like to know the value of your business? If you would like more information please visit this page of my website Business valuation.

For more immediate help you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.

The article Your business cannot sell if you are the business first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Tax and owning a business

Donna Sauter is my guest on 105.5FM and Money 2.0 and our topic covers tax and owning a business.

Donna is a CPA and works at Ueltzen and Co where she prepares tax returns for different business legal entities. That is, Donna’s focus is not primarily on an individual’s tax return, but if they own and operate a business what must be done to correctly report and claim business tax expenses and more.

Donna agrees with me that the tax laws are at best confusing and contradictory and so we spent about 25 minutes together talking about some of the tax strategies a business owner can understand as well as tax planning and tax minimization strategies.

Starting a business tax tips

The first topic Donna and I talked in detail about was what a new entrepreneur should consider when starting a business. We spoke about choosing the right legal entity; from a tax perspective as well as the three biggest mistakes she sees new business owners making in regards to tax issues.

Existing business owner tax tips

Our next topic was tax tips and strategies for a business owner who has been up and running for about 5 years and if there are any tax strategies they should consider. Donna gave a great suggestion for all business owners to start looking at the tax situation of their business about 3 months before the end of their financial year so they can minimize the amount of taxes they would have to pay.

Tax tips if you plan to sell your business

The final topic we spoke about was tax tips if you plan to sell your business and Donna gave me her three top tax tips. This topic gave me the opportunity to remind business owners that if they are getting close to deciding to sell their business, at least 12 months before they sell they should make sure they report all their income.

If you would like to hear my conversation with Donna Sauter, please click this link. Donna is the second guest and my conversation with Donna starts 28 minutes into the show.

The article Tax and owning a business first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Tax and owning a business

Tax and owning a business is my conversation with Donna Sauter as my guest on 105.5FM and Money 2.0.

Donna is a CPA and works at Ueltzen and Co where she prepares tax returns for different business legal entities. That is, Donna’s focus is not primarily on an individual’s tax return, but if they own and operate a business what must be done to correctly report and claim business tax expenses and more.

Donna agrees with me that the tax laws are at best confusing and contradictory and so we spent about 25 minutes together talking about some of the tax strategies a business owner can understand as well as tax planning and tax minimization strategies.

Starting a business tax tips

The first topic Donna and I talked in detail about was what a new entrepreneur should consider when starting a business. We spoke about choosing the right legal entity; from a tax perspective as well as the three biggest mistakes she sees new business owners making in regards to tax issues.

Existing business owner tax tips

Our next topic was tax tips and strategies for a business owner who has been up and running for about 5 years and if there are any tax strategies they should consider. Donna gave a great suggestion for all business owners to start looking at the tax situation of their business about 3 months before the end of their financial year so they can minimize the amount of taxes they would have to pay.

Tax tips if you plan to sell your business

The final topic we spoke about was tax tips if you plan to sell your business and Donna gave me her three top tax tips. This topic gave me the opportunity to remind business owners that if they are getting close to deciding to sell their business, at least 12 months before they sell they should make sure they report all their income.

If you would like to hear my conversation with Donna Sauter, please click this link. Donna is the second guest and my conversation starts 28 minutes into the show.

The post Tax and owning a business appeared first on Rogerson Business Services.

Tax Deductible Expenses To Grow a Business

Everyone knows the old adage that you have to “spend money to make money,” but when it comes to tax deductions for your business, it is possible to generate business while saving money. There are a variety of deductions your business can take advantage of if you keep careful expenditure records throughout the year. As with any tax information, it is important to use this article as a general guideline and to consult a tax professional regarding your qualification for any specific deduction.

Advertising and Promotion

Advertising for your business, including print and television ads, business cards and costs for setting up a business website, are deductible business expenses. Additionally, promotion that generates goodwill, such as sponsoring a Little League team, can also qualify as long as the connection between the sponsorship and your business are clear. Note: Lobbying costs are not considered a deductible expense.

Entertainment and Meals

As long as you follow certain guidelines, the cost of entertaining and feeding clients or prospective business contacts can be legally deducted. The general rule is that the entertainment must directly precede or follow a legitimate business discussion to be deductible. If, for example, you take your business contact or client to a football game, the tickets are considered a legitimate expense if you can show that business was discussed before or after the event. However, the IRS has specifically ruled that venues like golf courses and baseball stadiums are not conducive to business discussions due to noise and distractions. If business is discussed over a meal, that meal is also considered a properly-deducted expense. As with all deductions, the expense must be reasonable (not lavish) and proper documentation is key.

Dues for Professional Organizations and Business Publications

Dues and membership fees to social clubs, like a country club or athletic club, are generally not deductible expenses, even if the memberships are primarily bought for business purposes. However, if the fees are for professional organizations, such as the Chamber of Commerce, a bar association or a subscription to a business publication, they may be deductible.

Charitable Donations

Charitable donations not only promote goodwill in the community and have a positive impact on employees, but they may also be tax deductible. To qualify for a deduction, research the charity to ensure it is eligible. Likewise, only certain types of donations qualify, such as cash, time, sponsorship or donation of goods. Again, keep records and note that the IRS limits the amount of deductible donations.

Client Gifts

A business may deduct up to $25 in client gifts per person each tax year. However, an item that is widely distributed, imprinted with the company’s name and costs less than $4 (such as a pen) does not count toward the $25 yearly limit; these items may be deductible as an advertising cost.

Travel Expenses

Travel can be important to maintain or cultivate business relationships. When a company reimburses employees for business travel, that expense may be wholly or partially deductible. Legitimate expenses include meals, lodging, mileage, tolls, airfare, baggage fees, taxi fares, business calls and dry cleaning or laundry.

The article Tax Deductible Expenses To Grow a Business first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Buy a Franchise or Buy a Business

Do I buy a franchise or buy a business?  Life is full of choices. It’s also nice to have choices or options.  But how do you decide if buying a franchise or buying a business is right for you?

When you have choices the best place to start is by reviewing your options. Let us have a look at some of them and in the decision making process include comparisons; which is no different to what we do every day. For example, when you go to the grocery store and see what’s on the shelf you compare brands and make your decision.

So let us pose a few questions and see which option works best for you.

But where do you start?

1.   Where to start

The first place to start is with you.  What does that mean?

It means a number of very important things.  Let’s summarize those quickly.

Being patient with yourself.Research.Know who you are.Know what you do and do not bring to being a business owner.Understand it’s about managing risk.

It means be patient with yourself.  If you are thinking of buying a franchise or buying a business there are many items to decide.  It will take time. There should be no reason to make a quick decision. If there is a reason to make a quick decision then try to remove that problem as it is not about making a quick decision but about getting it right.

The next place to start is recognizing that it’s going to take work and that work is doing your research.  If you do the research the answer will reveal itself. If you don’t like doing research then you will increase your chances of making a poor decision, or worse still, the wrong decision.

My preferred way of doing research is with an Excel file. Word is also an option but I prefer Excel as I can create headings and columns so I can do a comparison. Plus I prefer being able to save the file I’m working, come back to it when it suits me, move the information around, add new information and then sit with it so I know I am making the right decision.

It also means knowing who you are, knowing your strengths and weaknesses and what you do and don’t bring to owning your own business. Now possibly the most important of all, understanding what risk means to you and how you want to manage your risk.

2. Seasoned business owner or just starting out

One of the ways to help guide whether buying a franchise or buying an existing business is your amount of business experience.  If you are a seasoned business owner with owning and running your own business, this provides a foundation of knowledge and experience that is a tremendous asset. There is nothing harder than doing something the first time.  Remember when you were learning to drive a car or your first job and its learning curve?  Look how hard it is watching an infant learning to walk. Also watch how they get up and keep trying.  That’s exactly what a successful business owner needs to do.

Buy a franchise option

Buying a franchise is a great option for the first time business owner.  It’s the responsibility of the Franchisor to bring the concept, training, systems and future direction of the concept. This is what you are paying for as your investment decision in the franchise system.

Buy a business option

If you have prior business ownership experience or the confidence to own and operate your own business with all the energy and accountability it requires, then buying an existing business may be best for you.

Other factors to consider in your decision is that you prefer working independently and without being accountable to someone else, you have a clear direction where you would like to take your business and you are comfortable understanding industry and market trends and being able to adjust the direction of your business. Finally, and probably most important of all, you have the different skills to be successful.  Running your own business includes making all the management decisions but with the right systems in place that you will have to put together.

3. System or Secret Sauce

One of the strengths of any business is its system or how all the parts of a business come together.  This is also casually referred to as its Secret Sauce and simply means what makes it unique enough to be and stay in business.

Management, accounting/book-keeping, operations, sales, marketing, technology, customer service, products and services are some of the main areas that will mean the difference between a business being successful; or not.

Buy a franchise option

For those business owners that do not enjoy or do not have the time to build a system or create a secret sauce, buying a franchise can be the best option.

Those buying a franchise generally bring exceptionally strong operation skills but one other skill that is critical for that type of franchise.  For example, the franchise may require a strong sales background or ability to execute a team model with a diverse range of skills or experience in the IT industry etc. Therefore let the Franchisor be responsible for the secret sauce while you focus on what you do best.

Buy a business option

If your preference is to buy a business, the secret sauce is your total responsibility.  That responsibility not only applies when you take over as the owner of the business but going forward until you pass the ownership to someone else.  That means if the market changes because there is a new and better secret sauce, you have to foresee that change and adapt so you protect your business.

4. Development

For a business to be successful it has to find something the market is willing to buy be it a product or service.  Once that product or service is embraced by the market it requires being successfully managed as it includes intellectual property, training, a brand and so much more.

Buy a franchise option

In the franchise model, the franchisor is responsible for the ongoing development of the brand. In fact, not only are they responsible for the ongoing development but they insist that each franchisee that uses it, follows the directions the franchisor gives. In most cases these directions are part of the Franchise Disclosure Document or FDD.  If the franchisee breaches those directions they can lose their investment and ability to be part of the franchise. It is often even more restrictive as the franchisee may require permission from the corporate office to do or not do something.

Buy a business option

Under the option of owning your own business, as the owner you get to do whatever you like; you are accountable to no one.  This means you can change logos, colors, marketing material, put wraps on vehicles, build and maintain your website of choice and anything else you choose.  It also means you have to do the work and make sure everything meets your standards; but that is part and parcel of running your own business.

Read More: Here is more information about buying a franchise.

5. Finance

An important component about whether you buy a franchise or buy a business can be finance.  Few buyers have enough cash to buy their preferred option.  This therefore leads to getting a business loan.

Buy a franchise option

There are plenty of positives when looking to buy a franchise but each has to be explored carefully.  In a few situations, the franchisor may be willing to offer some finance if the franchise buyer downpayment is high enough.  If that is not an option, the SBA has an option through the Franchise Registry where they will review the franchise model and if they find it meets their criteria, add it to the Franchise Registry. It doesn’t mean the franchise buyer is guaranteed a loan but it is a start.  The franchise buyer would have to go through the loan application process, show their downpayment, credit report, credit score and more to be successful with their loan application.

Buy a business option

There are many important steps if you plan to buy a business and will need to get finance.  The first step which the buyer has absolutely no control over is the business they wish to buy and importantly, the quality of the financial statements.

As many business buyers will attest, it’s so hard to find the right business, for the right price, in the right location, in the right industry with a quality set of financial statements.

Once the buyer navigates those hurdles, then it’s a matter of the buyer having the right downpayment, the right credit score, a clean credit report and the right management experience so they can qualify for a loan.  The loan could be the seller willing to carry seller finance or the buyer qualifying for an SBA loan. If the buyer wants to qualify for an SBA loan, they generally need a downpayment of about 30% or the seller willing to carry some finance to achieve that amount of 30%.

As you can see, lots of choices and decisions to make if you are thinking of buying a franchise or buying a business.  What’s interesting is that there is not a right or wrong way to go but what works for you.  That is, it is all about you.

So how do you find the right answer?  As I suggested earlier in this article, it’s a matter of doing the research and the then the answer will reveal itself.

If you would like more information about buying a franchise please visit my webpage Buy a franchise or buy a copy of my book – Successfully buy your franchise.

For more immediate help with buying a franchise, send an email to Andrew Rogerson or give me a call on 916 570-2674.

The article Buy a Franchise or Buy a Business first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

How to Increase Positive Sentiment for Your Brand

Americans are spending almost three hours a day on mobile devices and about three hours a day watching television, according to a 2014 study by digital analytics firm Flurry, giving brands plenty of opportunities to reach customers on screens. How effective those brands are at their advertising campaigns goes beyond slapping a commercial on TV or a website though. Just look at how HBO’s “Last Week Tonight” host John Oliver skewered “discreet cheating website” AshleyMadison.com’s commercial in a 2015 episode, blasting the business for promoting affairs via a cheesy jingle. Along the same lines, a 2012 Reebok ad that told viewers to cheat on their girlfriends, not their workouts, was pulled after backlash, ABC News reported.

Being a likable brand can be the difference between turning a profit and going out of business. Here are tips for increasing positive sentiment for your brand.

Think Like a Psychologist

Don’t just think of your brand as a business that needs to sell products. Think in terms of pain points you’re relieving for your customers, suggests digital marketing agency co-founder Jeremy Ellens on Entrepreneur.com. The strength of emotions in decision-making dates back to the beginning of humanity. While the aforementioned brands who encouraged cheating in relationships were appealing to emotions, they effectively alienated a significant segment in their marketing messages.

To increase feelings of happiness in customers, craft marketing messages that:

Clearly define the product and the benefits, including what pain point it will alleviateConvey positive sentiment via the display of smiles or the inclusion of customer testimonialsIncorporate feel-good visuals or messages, such as pictures of happy gatherings, cute babies or animals, or copy that is humorous, upbeat and non-offensive

While you want to offer solutions for your customers, don’t demean them or make them feel bad about themselves. In the 2014 ad by Subway, the brand encouraged consumption of the product by women who want to look sexier in Halloween costumes, as reported by media news magazine Adweek; and the 2014 “perfect body” campaign featuring stick-thin models by Victoria’s Secret, as reported by UK newspaper “The Telegraph.” By writing messages and delivering them in an optimistic, cheerful tone your target audience can relate to, you’re adding a joyful emotional layer that makes your brand seem approachable, trustworthy and one people will want to do business with.

Build Genuine Relationships

Another tenet of creating positive brand sentiment is to authentically convey investment in your customers and the people your brand affects. Nonprofits are pros at this, and the ones who transparently show their donors how their assistance is impacting people keep the checks coming in. For example, Make-A-Wish America displays Wish Kid stories on their website and social media outlets that tell narratives of how kids with life-threatening illnesses got to live out their dreams, thanks to supporters of the charity.

One way to make customers more invested in their relationship with you is to solicit feedback from them about your brand, and then put a spotlight on the customer by showcasing their testimonials in a public forum. Your brand can also create loyalty programs that reward customers for repeat business, or create fun activities and engaging content related to your brand that helps keep you at top of mind. Satellite service provider DISH, for instance, has a blog on its website that covers the latest developments in television and technology. Their quiz about media streaming service Netflix is just one piece of content that is full of playfulness, while also reinforcing a brand related to their business.

To build up genuine relationships with your brand’s customers and potential buyers, incorporate these actions into your strategy:

Talk to potential customers as if they’re friends. Use the word “you” in messaging to create a personal connectionCreate beneficial content and freebies that are interesting and provide value-adds to make customers feel specialInvest in exemplary customer service, including diligently monitoring social media channels for feedback, adding live chat to your website for easy customer support access, and promptly following up on problems and working to resolve themSolicit suggestions and feedback; make customers feel like they’re a valuable part of your brand, too

Relationship building and taking the time to learn about your customers is also vital for creating new products that are appropriate for your audience. It’s crucial to view your brand as a living, breathing, emotional entity with human aspects your audience can relate to. Before creating a message, think about how you’d want to be treated by a friend, then apply it to your brand.

The article How to Increase Positive Sentiment for Your Brand first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Representations and Warranties and Why They Matter

Representations and warranties are standard clauses in any purchase agreement for a business or practice. It’s not something the buyer and the seller tend to spend too much time on; until something goes wrong. Once it goes wrong, the conversation quickly turns to hiring an attorney and taking legal action.

Perhaps a little knowledge may help. Bear in mind this article is not about providing legal advice. To get legal advice, please consult your attorney.

The capitalist system is built on trust. Not sure this is true? Simply look at what is happening in Europe right now with Greece and whether or not they stay in the European Economic Community. The European leaders are telling Greece to pass laws to implement the changes they are offering or there is no interest in helping them. That is, the European leaders are not trusting that the Greek politicians will do what they said they would do if Europe was to lend Greece billions of dollars.

It’s no different to the quote from President Reagan who said “Trust but verify.”

What is a representation?

A representation is an inducement to a party entering a contract but does not become part of the contract. It is also normally before any contract. For example, the seller of a business can represent that in the last 12 months of doing business the gross sales were $7,560,000.

The seller will rightly say to the buyer, I cannot guarantee that if you buy my business your gross sales will be $7,560,000 or more as the seller has no way of either predicting the future or how well the buyer will run the business.

The buyer however can ask the seller to provide copies of bank and credit card statements as well as accounting journals to show that $7,560,000 is a correct number.

The gross sales are an important number to the buyer as its encouraging or inducing them to buy the business.

What is a warranty?

A warranty is a statement of fact contained in the purchase agreement. It is unusual for a purchase agreement to state the seller’s gross sales in the previous 12 months were a certain amount however the purchase agreement may state the buyer will achieve a minimum level of sales. If that then doesn’t happen, the buyer has the right to terminate the contract as well as a claim for damages.

What do representations and warranties mean to the seller?

It means the seller should only disclose or represent things they know to be correct. Equally, the seller should disclose things that the buyer will rely upon to make decisions in the future. For example, if the seller knows a piece of equipment is broken but is obsolete and no longer used to generate income for the business; make that disclosure. If the seller knows a piece of equipment is broken but may have some use if the buyer gets it repaired then make that disclosure.

What do representation and warranties mean to the buyer?

A buyer is buying a business for its income generating potential. Their interest is to maximize that income and they rely on the sellers disclosures to form their decisions.

Read More: Here is more information about valuing a business.

Disclose, Disclose, Disclose

The simplest and safest path for both buyer and seller is to disclose everything. Yes; the buyer needs to make disclosures about their ability to buy, own and operate the business just as they expect the seller to do the same.

If the sale of a business becomes difficult or highly charged, a lack of disclosure about a representation or warranty can be the trigger for all the frustration to flow into a law suit. This then creates the situation neither the buyer nor seller truly want which is a loss of time, loss of control and a loss of money.

Once again, this article is not designed to provide legal advice. Its purpose is to remind buyers and sellers that their time and money are their most important assets; so make wise decisions on how it is spent.

If you would like more information about selling a business, buying a business, buying a franchise or a related service such as valuing a business, please visit my webpage Services and choose from the drop down menu the information you would like.

For more immediate help, you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.

The article Representations and Warranties and Why They Matter first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Buying a business is NOT like buying a house

Buying a business is not like buying a house though there are some similarities. There is a seller and a buyer. There is an asset generally with a listing price and the buyer and seller negotiate until they reach a deal; or not. Often the buyer requires finance and so that too is similar to buying a business. If you have bought a house before it provides a useful experience about the ups and downs of a major transaction but here is where there are some major differences.

1. Confidentiality

When a house is for sale the owner of the house wants the world to know including the address of the house so they can get as many offers as possible. When a business is for sale, the owner does not want anyone to know unless they are qualified to buy the business. They especially do not want all the buyers to know as they do not want the buyer walking into the business and asking questions as the employees, landlord, suppliers and others may not know the business is for sale.

2. Signed Confidentiality Agreement

When a house is for sale, potential buyers are not required to sign a legal document saying they will not tell anyone the business is for sale except their professional advisors like a CPA or attorney. A signed Confidentiality Agreement also carries legal remedies available to the seller if the buyer does not follow what is in the Confidentiality Agreement.

3. Qualified Buyer

When selling a business, the seller wants to know the buyer is qualified to buy the business and these qualifications can be extensive. Qualifications can include industry experience, management experience, a minimum downpayment, a minimum credit score, a shiny credit report and sometimes a particular license to run a particular business. A business buyer also needs some of these but not all of them; and that’s the tough part for some business buyers as they do not meet all the criteria.

4. Tax, legal, accounting and more

When buying a home you rarely need the help of a tax advisor, attorney, CPA or other specialist. Granted, you may want the help of a pest inspector or home inspector but when buying a business you often need extensive help from skilled professionals that cost many thousands of dollars and they often have to explain complicated tax, legal and accounting concepts.

Read More: Here is more information about the steps to buy a business.

5. May never see the seller again

It is almost rare, in fact more likely never, that the seller and buyer will live in the house at the same time together. When a seller sells the business to the buyer it is likely they will work together for at least a 2 week period so the seller transitions their knowledge, management information and other details as described in the purchase agreement. It’s also common for the seller to be paid part of the purchase price as a sellers note and for this reason, the seller and the buyer may be meeting face to face or at least talking with each other.

6. Complicated transaction

Selling and buying a house can be a complicated process but it is very simple when compared to buying and selling a business.

The sale of a house needs a buyer, seller and lender and generally a real estate broker plus escrow company.

The sale of a business needs a buyer, seller and lender and often a business broker plus escrow company. However now it gets complicated as often it includes an accountant or CPA as well as an attorney; for each party. Now we add the landlord to make it interesting and as you can see, there are many moving parts.

7. Length of time to sell

The amount of time it takes to sell a house or a business depends on what’s happening in the economy. Selling a business also depends on what’s happening in that industry as markets shift and change sometimes slow and sometimes rapidly.

In a normal market it takes about 30 days for a seller to get an offer they are willing to accept and then about 20 to 30 days to close the sale.

In a normal market it takes about 6 months for a seller to get an offer they are willing to accept and then about 45 to 60 days to close the sale.

8. Chances of selling

Here is a big difference between selling a house and selling a business. It would be reasonable to say that a good house in a normal market will be sold.

However, a good business in a normal market only has about a 25% chance of selling.

There are many reasons but the housing market tends to go through a 10 year cycle. The business market goes through quicker cycles plus experiences different pressures including very strong competitive pressures. It’s not unusual for a business owner to try to sell their business especially in the Main Street business market and there is a lack of interest buying the business because the sales are declining or the product or service now has a smaller market.

If you would like more information about buying a business please visit my webpage Buy a business or buy a copy of my book Successfully buy your business.

For more immediate help with buying a business you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.

The article Buying a business is NOT like buying a house first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Why a business does not sell – Part One

There are many businesses for sale at any moment. That is, the buyer has choices. Most business owners are so close to the ownership and operation of their business they think that because it works for them it surely must appeal to one buyer that would like to buy their business. Part of this perception, in my opinion, is because you never see a for sale sign on a house that says “Unable to sell” or something similar.

Because my business is helping owners sell their business I keep track of reasons a business does not sell. There are over thirty reasons I’ve noted so far. I don’t plan to put them all in one article but I do plan to write about each of them in the hope that it will help business owners trying to sell their business or have their business on the market and wondering why it may not be selling.

What’s interesting is that the seller often is able to fix or manage some of the reasons why a business does not sell. Sometimes they can influence reasons a business does not sell and sometimes there is nothing they can do; it is just part of the capitalist system.

Reasons a business does not sell and what the owner can do about it.

Financial statements are incorrect

The financial statements reflect so much about the business and in particular the owner. A quality set of financial statements show the owner not only cares but is actively involved with the operation of the business. It also shows that the owner or seller knows the direction the business is travelling and are able to make the necessary tweaks. This is critical to a buyer. It’s also critical to a lender who the buyer asks to provide finance.

How can the seller fix this problem?

The seller can easily fix this problem by keeping a clean set of books or hiring a third party such as a CFO or book-keeper to do this for them. The seller may think this is an extra expense they do not wish to incur but that would be very short-sighted. A quality set of financial statements show the direction the business is going. As has been said, if you can’t measure it you can’t manage it. Additionally, the seller cannot afford to have incorrect financial statements. As I’ve seen before many times, if the financial statements are wrong it means other items are wrong. For example, if the business has employees and the payroll is not paid correctly, it can lead to huge fines with the IRS that are simply a waste of time and money.

Financial statements are not professional or worse

Recently I had a seller provide a set of financial statements so I could do a valuation of their business. As soon as I saw the Profit and Loss I could tell the document was incorrect as it showed money the seller had recently borrowed. A loan does not appear on the Profit and Loss but goes on the Balance Sheet. The interest paid during the period shows on the Profit and Loss. Once you see a simple mistake like this it removes the credibility of the financial statements and the owner.

Another simple mistake made by some business owners is to run their personal expenses through the business or what is called co-mingling. Not only do co-mingled financial statements again reflect on the owner but they make the buyer doubt that the income is over stated or the expenses are under stated and therefore inaccurate.

Read More: Here is more information about the steps to sell a business.

How can the seller fix this problem?

The solution is the same as the last problem. That is, hire a third party such as a CFO or book-keeper to do the financial statements for them. There is so much upside to the seller as not only will it increase the chances of the business selling but also provide an accurate set of markers to steer the business. If you want to drive from Sacramento to a specific address in Los Angeles you need a GPS or road map to guide you. It is exactly the same when running and a business and now trying to sell it.

Financial statements do not show all income

This problem is instant death for the seller of a business if they want to get the true value of the business.

One of the first metrics a buyer wants to know is the gross sales of the business. An experienced buyer will know that a certain percentage of gross sales for a business in a certain industry indicates its viability. For example, a sandwich food shop should have at least $500,000 in gross revenue to make about $60,000 to $90,000 per year in net income.

If the owner chooses to put cash in their pocket and not report all their sales they cannot expect to get full purchase price for the business as the buyer will be comparing this business against other businesses.

How can the seller fix this problem?

As you can guess, the solution to this problem is real simple. Simply report all your sales. Those owners that don’t report all their sales, then decide to sell and so now start reporting all their sales run into a couple of problems. Suddenly starting to report all your income can trigger an audit with the IRS. Alternatively, if the buyer of the business reports all the income while the seller did not, that can trigger an audit for the seller who will be caught unprepared as the IRS are not going to provide advanced warning to the seller. And this is the interesting part. It is not up to the IRS to prove the seller under reported the business income. It’s up to the seller to do so.

Selling a business is never easy. For the owner that wants to get through the process as easily as possible by selling the business for the highest price and as quickly as possible, follow the above suggestions. This article is part of a series and covers other issues with suggested solutions.

Are you thinking about selling your business and move to your next challenge? Would you like to know the value of your business? If you would like more information please visit my website Business valuation.

For more immediate help you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.

The article Why a business does not sell – Part One first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson