Andrew Rogerson's Blog, page 48

Uncertainty Principle and selling or buying a business

The Uncertainty Principle, according to Wikipedia, is a variety of mathematical inequalities used in Quantum mechanics. As I have almost no understanding of Quantum mechanics I am unable to use it effectively except I heard it paraphrased the other day with an explanation that “the more precisely you study and learn something, the less you know.”

I think the Uncertainty Principle is so adapt as I work with sellers and buyers of a business, that is, the more precisely a seller studies and learns their business as they try to sell, the less they know. This equally applies to buyers; the more they learn and study the business with the intention of buying it, the less they know.

This applies especially to small business owners. Consider the following:

A small business initially starts as an idea or concept. The business owner takes that idea to market and if the market likes the idea, buys its product and/or services. If the idea is sustainable, the market rewards the business owner by continuing to buy its products and/or services.When the business goes to market, the business owner hopes they are not breaking any laws so they file for a business license and any other obvious necessary licenses or permits.When the business grows, the business owner will give limited thought to how to grow their idea be it by borrowing money, financing the opportunity or alternatively, offering equity in exchange for money to put back into the business.When the business starts becoming successful, the business owner completes their tax return for the business and hopefully has enough left over to pay the right taxes.When the business grows and needs employees, the business owner hires the necessary help and hopefully is able to pay the necessary payroll taxes.Other items to consider include insurance(s), buying and managing fixtures, furniture and equipment, training and all the other intricacies required to build and run a business.

At a simple level, each and every one of these steps and more are taken with the faith that it will all work out, or as I am suggesting, based on the Principle of Uncertainty.

Now it’s time for the business owner to go and do something different and put their business on the market. To be successful, it initially means the basics of the business are summarized and made available to potential buyers. If the buyers are comfortable with the information they sign a Confidentiality Agreement and receive much more detailed information. If that information proves satisfactory, the buyer moves into due diligence and generally has a CPA and/or attorney help with the process. If this all works out, the buyer and seller then close the sale and the business moves from current owner to the seller. So many steps in the process to sell a business with this description I’ve just provided is a very simple version of what actually happens.

Read More: Here is more information about the tax impact of selling a business.

This is because the more the buyer finds out about the business, the greater the chances the Uncertainty Principle will have the buyer second guessing themselves and deciding if “the more precisely you study and learn something, the less you know.”

This happens repeatedly in transactions. As the buyers get more information about the customer base, any legal matters the business is dealing with, the complexity in transferring licenses, legal contracts, leases, tax issues, questions about financial statements, getting finance approved by a third-party and more the greater the chances of the Uncertainty Principle kicking in and the transaction not closing.

If you are the owner of the business wanting to sell, make sure you bring all the information together about your business in as much detail as possible. If you are looking to buy a business, prepare your resume including your management experience, personal financial statements to show you have the ability to buy a business, a prequalification letter to show you would qualify for a loan and your credit report is up to date with the best credit score.

There is tremendous uncertainty in buying and selling a business. The uncertainty is not only for the buyers and sellers but the third parties including landlord, third-party lenders, suppliers, employees and more.

At the end of the day, the success comes from managing all the uncertainty and making sure all the parties come together so everyone is successful. The best way to reduce the uncertainty is by good preparation and continuous communication.

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 Uncertainty Principle and selling or buying a business first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

How to Use Customer Reviews to Increase Business

You have a successful small business with lots of happy, loyal customers, and you have an arsenal of customer reviews stored up to prove it. If you’re not sure how to use that info to boost your business even more, you’re in luck! You have several options, and you have already gotten over the first hurdle of collecting positive feedback.

Learn how to position these reviews in a way that can help your business garner the attention it deserves and boost your conversion rates to new heights.

Here are a few ideas to help you get started:

Case Studies & Press Releases

Does a client or customer have a profound story to share about how your product or service impacted his or her life? If so, consider creating a case study from which you can extract a testimonial, and include key components of the story in a press release. The case study should

Hubspot offers a free press release template that you may find helpful when it comes time for writing.

Sales Presentations

When showcasing your offerings during a sales pitch, it never hurts to throw in credibility boosters, such as industry awards and real customer reviews. Incorporate these items into your presentation strategically to complement the points of value you’ll be covering.

Social Media

A successful social media business page includes a healthy mix of industry news, product information, entertainment, behind-the-scenes insight into your company, and the occasional highlighted customer review. Include an excerpt of the positive feedback within your post, along with a link where readers can go to read the review in-full. If possible, tag the customer, any employees who helped along the way, as well as any other companies who were involved.

Homepage Content

If space permits, dedicate a small portion of your homepage to a feed of customer reviews. This way, visitors will start to build trust in your brand within moments of entering the site. If your homepage doesn’t allow room for a sidebar feed, consider adding Testimonials to the main menu bar where visitors will quickly see it when they scan their navigation options.

Make reviews easy for readers to browse, and consider adding a star rating for emphasis, like LifeLock does on its customer reviews page.

Products Tab

As potential customers are perusing your offerings on your products page, remind them why they should purchase from you by featuring a positive review prominently on the page.

Also, in an effort to solicit even more customer reviews, make sure new and existing customers know that you’d like to hear their feedback once they’ve tried out your products or used your service.

In-House Motivation

Positive reinforcement can go a long way in a work setting, so when you get great customer feedback, make sure your employees hear about it. Post good reviews in the break room or publish them in your company newsletter. If the feedback is specific to a particular employee, consider offering an incentive to those who receive the highest number of positive reviews within a certain timeframe.

The article How to Use Customer Reviews to Increase Business first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

SEDCorp Small Business Accelerator Workshop

Are you an entrepreneur with a great business idea or a small business owner trying to expand or grow your business? Are you looking for capital to fund your venture? Are you having difficulty getting people to pay attention to your ideas and plans?

If your answer is “yes”, then you should register now at Eventbrite – smallbizacc23.eventbrite.com to attend our no cost Auburn June 23 Small Business Accelerator Workshop from 9-2:30pm at the Auburn City Hall Council Chambers located at 1225 Lincoln Way or smallbizacc25.eventbrite.com to attend our Placerville June 25th Workshop from 9-2:30pm at the Placerville Town Hall located at 549 Main Street.

“These unique FREE workshops valued at $500 take the mystery out of sourcing capital after others have turned you down, finding help to build your business and marketing plans and locating expert advice, counsel and mentoring necessary to grow and expand your business” –

Randy Wagner/ SEDCorp President & CEO

Each workshop offers easy, stress free, direct access to eight alternative lenders, eight counseling organizations and an “open-source/free” business planning tool presented by Wells Fargo Bank. Our casual/comfortable environment makes it possible to easily understand what it takes to locate startup capital. And, we provide beverages and a light lunch free of charge. Register Now! Seats are limited.

SEDCorp is a 501 c3 non-profit corporation established in 1969 and SACLead collaborated with 15 public, private and non-profit organizations to offer this unique program designed to incubate and accelerate small businesses and our local economy. For more information contact SEDCorp at www.sedcorp.biz, 530.823.4703 or SACLead at www.SACLead.com, 916.437.4902.

The article SEDCorp Small Business Accelerator Workshop first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Post Mortem of a Failed Medical Practice Sale

Selling a business or medical practice is rarely easy and this month I was once again reminded of that fact. Here’s a high level post mortem of the main facts behind trying to sell a medical practice so it hopefully provides a learning experience.

A buyer made an offer to buy a medical practice just on 8 months ago. When the initial offer was made in a Letter of Intent, the buyer wanted to close the sale in 2 months or the end of October. The seller had some bonus money coming to them from Obamacare that would be paid in late December and so made a counter offer which was to close by the middle of January so they could receive the Obamacare bonus money.

Things then went from bad to worse as one of the conditions of the offer was that the buyer had to get a loan approved. Their initial application was made to Wells Fargo who said they would have the loan approved early January. Early January kept dragging on and on and so a second lender was approached and eventually approved their loan by the end of January.

Finding the right attorney

With the finance now in place and the buyer’s attorney having been working on the transaction since October, the seller looked for an attorney to help with the legal documents necessary to close the sale. Unfortunately the attorney they hired refused to return my calls and let me provide an update on the previous months of work I had been doing, keeping all the parties in the transaction up to date and understanding what was happening.

Finding the right CPA

This lack of response from the professionals assisting the seller also carried over from the CPA the sellers were using. Over the course of the time I worked with the sellers I reached out to their CPA 7 times for help and each time never received a response.

During the preparation of the Purchase Agreement for the buyer by the attorney, he made a suggestion to rather than do a regular Stock sale to buy the Sellers Corporation, the proposal was made to do a Section 338 (h) 10 election which was a simple technique to allow the buyer to buy the corporation like an Asset sale. This would then allow the buyer, for tax purposes, to depreciate the assets at a higher rate. This would have created a negative tax effect for the seller, but the buyer agreed to cover any additional tax impact so the seller was fully protected. At different times contact was made with the sellers CPA to get his professional advice but unfortunately it was never forthcoming, even though he chose to charge the seller for the time he supposedly worked on researching the issue.

Click this link: To see a sample business valuation or medical practice valuation.

Working with the landlord

Another issue that came into play was with the landlord. There were a number of different issues. One of them included the amount of space the seller had been leasing for about 10 years was understated by about 80 square feet or $200 per month. The landlord was insistent that the buyers sign a new lease including the additional 80 square feet, which they agreed to do.

At the beginning of May eventually all the main deal points were resolved. The last step to take place was finally having the seller and buyer have a final conversation as a very important time line in the transaction had now been breached and this created too much tension, as it turned out, that could not be resolved. This tension came from the original agreement that the seller would be able to stop working full-time by the end of March so she could retire. That is, as we were in early May, the buyer wanted the seller to continue working full-time until July 31 and then work part-time to the end of October. However, by this stage the seller was concerned the need for her to continue to work full-time would continue passed July 31 and so she refused to take the final steps to close the sale.

Time kills deals

There are many lessons from what happened in this transaction. First and foremost is that time kills deals. Although the buyer and seller initially signed an agreement in August, many things happened which eventually became too difficult to overcome. Some of these were out of any one parties control while others occurred to create tension in the deal. Over the course of the 8 months of working with all the parties in the transaction I received 723 emails. Each and every email was received and replied. Additionally, there were many phone calls and meetings with the different parties to keep the communication open. As the broker in the transaction, communication is my primary responsibility. In the case of this transaction it was my responsibility to keep informed the seller, the buyer and his two advisors, the attorneys for each party, the buyers two CPAs, the sellers CPA, the lender providing the loan for the buyer, the escrow company that held the buyers downpayment and finally the landlord.

Make no mistake that selling or buying a business is not easy. For good reason the sale of business only closes when there is a motivated buyer and a motivated seller, when the buyer is under no compulsion to buy and the seller is under no compulsion to sell and both parties have reasonable knowledge of all relevant facts.

If you would like more information about selling a business, selling a medical practice, 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 Post Mortem of a Failed Medical Practice Sale first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Buy a Business with No Money or Poor Credit

How can you buy a business with no money or poor credit? This seems a pretty straightforward question. What surprises me is that a lot of business buyers think it’s a reasonable option.

Buying a business with all cash

I currently have a business on the market for $15 million. A buyer sent through a written offer stating he had cash to make the purchase. Curious that a buyer had $15 million in cash available to buy a business, I called the buyer who then went on to explain that if his offer was accepted his cash would be coming from an investor. Naturally, my next question was to ask if I could have the name and phone number of his investor so I could give them a call to obtain further information; which the buyer refused to provide.

A buyer will need cash as a downpayment to buy a business. It can be good business to borrow to fund the purchase of a business as the buyer can buy a more expensive business which should provide a higher amount of Sellers Discretionary Earnings or cash flow. Additionally, interest on a loan is tax deductible so that’s another reason to borrow.

How good is your credit?

The Great Financial Crisis had a negative effect on many homeowners as they borrowed too much and lost the house they bought. Different government programs were deployed to help many borrowers get out from underneath the debt they owned on their house but it came with a negative impact on their credit. This negative impact will prevent these same borrowers from qualifying for a loan to buy a business including an SBA loan. This is because the SBA loan program is backed by the US taxpayer with many of the home loan programs also backed by the US taxpayer. That is, once you default on any loan backed by the US taxpayer you will have to wait many years before you are able to qualify again.

If you plan to buy a business and your credit is damaged from any previous government backed loan, you will not be able to qualify for an SBA loan to buy your business. Additionally, if your credit is damaged it would be highly unusual for a seller to carry a sellers note as this is a risk they will feel too uncomfortable taking.

Buying a business is more than wishful thinking

Some business buyers think the owner of a business is so motivated to sell that they would consider selling the business and providing the down payment for the buyer. But let’s think about this from the perspective of reality. If the owner of a business was willing to provide the downpayment for the buyer, in what sort of condition would that business be in?

Selling a business requires a motivated seller and a motivated buyer. If the seller is so motivated that they are willing to fund the downpayment for the buyer then the buyer needs to do very detailed due diligence of the business to make sure there are no “gotcha’s.” They would also be best to get help from third party professionals such as a CPA and attorney to make sure the financial statements and legal contracts are all in order.

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

Are you serious about buying a business or franchise?

If you are serious about buying a business or franchise then you need to present yourself seriously. Here’s a simple checklist of the items you need:

Commit to a deadline.Set aside time every day to work on this project.Know who you are and your strengths and weaknesses.Organize your finances.Educate yourself about the buying process.Make sure your family is on board.Seek professional advice.

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 Buy a Business with No Money or Poor Credit first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Reasons a Business Does Not Sell

Reasons a business does not sell? Selling a business or selling a practice is not a science. There definitely is an amount of art to it but unfortunately it does also come with a least an ounce of luck. Part of the reason it comes with an ounce of luck is because there are so many players involved. It seems simple enough having just a buyer and a seller. If they are motivated and everything is disclosed then it should be easy to close the sale. Having just worked a transaction for 8 months and having the deal come to a halt, there’s much more to it.

If you are thinking of selling your business or medical practice, here are ten reasons that can kill the transaction and prevent you from closing the sale.

1. Failing to see the sale from the buyers perspective

The sale of any business or practice starts with the seller. If a buyer makes an unbelievable offer but the seller doesn’t wish to sell, it’s not going to happen. Equally, if the owner of a business or practice does wish to sell, the challenge is to find a buyer that is willing to pay a price the seller will accept and come to an agreement on all the terms and conditions. Even though it is typical for the seller to be the last to sign the documents to close the sale, a buyer is only willing to do so if the transaction makes complete sense to them. That is, in going forward, they will be managing the risk and responsibilities and for the seller to close the sale, they must present all the information the buyer requests or they will not move forward with the close of the sale. For example, when closing the sale of a medical practice it is critical to a buyer to ensure all the insurance contracts, government agreements such as Medicare or Medicaid etc transfer to the buyer as well as the necessary credentials and affiliations with hospitals etc.

2. Being unprepared for the buyer’s due diligence

There are many steps to sell a business. The easier steps are putting all the details of the business together, marketing to attract buyers and negotiating the deal be it to a Letter of Intent or Purchase Agreement. The hard part then comes when the buyer wants to verify the representations of the seller which they do by hiring a professional such as a CPA and/or attorney to comb through the financial statements and important legal documents.

If the seller is slow to provide the documents the buyer is requesting it creates a level of nervousness that not only does the buyer not need but can lead them to second guess themselves and decide they don’t need the hassles and can go and do something else.

Just as the motto of the Scouts is “Be prepared”, that should be the same motto for the owner when selling their business. It’s also most appropriate for the seller to ask the buyer to provide a list of documents the buyer wishes to see.

3. Inadequate financial statements

It is almost impossible to sell a business or practice with an inadequate set of financial statements. A quality set of financial statements show a quality business. These documents flow from bank statements to journals to Profit & Loss Statements and Balance Sheet to tax returns.

Not only are these documents important to the buyer but they are also important to their professionals as well as a third-party lender if the buyer needs to get a loan to close the sale.

A seller should also try to keep the financial statements current as a business can change quickly and make it hard for a buyer to have confidence if the records are out of date.

4. Failing to keep the business performing

Selling a business is an emotional event for a seller. To keep a business going and successful takes drive and effort. When the drive wanes so too can the performance of the business. A little while back I was dealing with the sale of a medical practice and the two partners, after working together for over 40 years decided it was time for them to slow down and sell the practice. Unfortunately at the time of deciding to sell the practice they decided it was time to take vacations and spend time with family; all of which meant the performance of the practice started to decline.

If you own a business and its time to sell, plan to sell while the business is strong; not when it’s going down or in a flat part of the economic cycle.

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

5. Buyer discovers a major, undisclosed negative issue

Just as taking too much time to close the sale can lead to the deal falling apart, so too can an unwelcome surprise. What a seller represents to a buyer is critical as the buyer wants to verify those representations or as President Reagan was known to have said, “Trust, but verify.”

Keep all surprises to a minimum. If something unexpected comes up, disclose it as quickly and accurately as possible. A motivated buyer would sooner deal with the reality of a situation than finding out later that something had been kept from them.

6. Over negotiating

There are different methods to negotiate the purchase of a business. If it’s a large transaction and the buyer is experienced they may prefer to offer an IOI or Indication Of Interest. A second method is to present a Letter Of Intent. The Letter Of Intent can be binding or non-binding. The third method is an actual Purchase Agreement that the buyer typically presents or through their attorney.

If the buyer chooses to offer an Indication of Interest or a Letter Of Interest, the temptation can be to be in a continuous set of negotiations as each new and update piece of information arises.  This can be a very wearing and tiring approach for all parties and should be avoided at all costs.  Good negotiations are done with all information fully disclosed and in good faith; from parties that understand the process.

I’m currently negotiating the sale of a medical clinic. The buyer is a qualified practitioner to buy the practice but he is using his son, who is a commercial real estate agent to lead the negotiations. Unfortunately a Commercial Real Estate Agent comes from a skill set of selling real estate; not a business or medical practice. The techniques including valuations in buying a medical practice are totally different than commercial real estate and in this instance, has led to the seller rejecting the buyers offer simply because the buyer didn’t understand how to value the practice and present a reasonable offer.

7. Help from the wrong professional

Third party professionals such as attorneys, CPA’s and lenders are often key to help close the sale of a business. In a recent transaction I worked that ended up not closing I had to work with a seller and her son (who was extremely involved in the transaction), her CPA and attorney both of which were very poorly engaged in the transaction and one of the reasons in the end it failed. In addition I had to work with the buyer and his two consultants, his CPA in his home town which was not in California, his California based CPA and attorney, the escrow company, a landlord and a third party lender.

If you bring in third party professionals to help in your transaction, make sure they have the right skill set and experience in dealing with the sale of a business. If this is not part of their skill set, look for another professional that has that experience as it can make or break the deal.

Click this link: To see a sample business valuation or medical practice valuation.

8. Forgetting there are other key players in the deal

The sale of a business always has the two key players of the buyer and seller. However, the deal can come to a quick halt if other key players are not identified and treated correctly.

If a business has employees the seller typically does not want these to know a business is for sale in case something happens at the last minute that prevents the sale from closing. I’m currently selling a business and there is a buyer with an interest that is a direct competitor of the seller. The seller does not want to meet or disclose any details to what could be a buyer of his business for fear the buyer will not close the sale and then approach his employees to hire them. The buyer has agreed to sign a Confidentiality Agreement to not directly approach the employees but this risk is too great for the seller. Making sure key employees in a business are well looked after before and after the sale of a business can make a difference in its success.

Another critical party to manage correctly in a deal is the landlord. I recently exchanged messages with a business owner that wanted to sell their business. They had signed a 10 year lease and it was now about to expire. With their lease expiring they decided to take the opportunity to sell their business.  As a result they approached the landlord to get his agreement to enter into a new lease with a new buyer. Unfortunately the landlord said to the business sellers that he was not interested in having a new tenant and so now the business will close and the sellers will entirely miss out on any proceeds from selling their business.

Key players can make or break a deal. It can be difficult to know how much to share with them but it can be a big mistake not to take into account their ability to prevent a deal from closing.

9. Keeping all parties informed

As I am a business broker by profession, it’s my opinion that a good business broker can make all the difference between the sale of a business happening; or not.

A good business broker knows they have to keep all parties informed and updated in the transaction. This requires a lot of time and energy and more often than not, is not seen by the buyer or seller but simply has to be done. In one transaction I was recently working I had to update the seller (a mother and son), the buyer (a party of three as it included two consultants), the seller’s attorney, the buyer’s attorney, the buyer’s two CPA’s, the landlord, the SBA lender and the escrow company.

A good business broker also understands it’s not their opinion about whether a buyer or seller should be told something they don’t want to hear but rather it’s more important to be honest and open so each party can make their own fully informed decision.

10. Failing to come together

Last but not least and in some respects, most important of all, after the buyer and seller have negotiated hard, now reached agreement on all the deal points and due diligence is complete, it’s time for both parties to come together so they can ensure each other’s success.

At the end of the day, for the business to transition successfully from the seller to the buyer there has to be goodwill and not adversity. Goodwill is the intangible in a transaction that can make the difference between success and failure.

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 Reasons a Business Does Not Sell first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Lower Your Carbon Footprint With the Cloud

Cloud computing can help startups reduce their carbon footprint in a way that is equal to conserving 200 million barrels of oil or saving enough energy to power 5.7 million cars for an entire year, according to a 2011 study by the Carbon Disclosure Project (CDP). Cloud computing can help companies meet these results with $12.3 billion in energy savings and up to 85.7 metric tons of carbon emissions savings by 2020. The study, which was conducted by the analyst research firm Verdantix and sponsored by AT&T, found that adopters of cloud computing can lower CO2 emissions and reduce overall energy consumption.

Not only is the cloud an environmentally-sustainable business practice, but it also offers monetary benefits. Startups don’t have to worry about buying new equipment up front or maintaining failing IT infrastructure. Cloud computing also allows for greater flexibility, scaling and operational efficiency.

What Is Cloud Computing?

The cloud is a metaphor for the Internet, explains PC Mag. When someone works in the cloud, it means they store and access programs and data via the Internet instead of a computer’s hard drive. Alternatively, data that is stored on your hard drive and programs that run from your computer are called local storage. Some examples of cloud computing services include Google Drive, Dropbox and Apple iCloud.

Which Cloud Service Is Right for Your Startup?

PC Mag also reports that cloud computing generated $100 billion in 2012 and could increase to $270 billion by 2020. So, with so many cloud providers on the Web, how do you know which service is best for your startup?

Free online services, like Top 10 Cloud Storage, offer users free access to rankings and reviews of popular cloud computing services. By browsing the rankings and real consumer reviews, you can make a well-informed decision about which cloud service is best for your company. The cloud providers are judged on factors like value, reliability, customer service and tech support, ease of use, security, storage space, and download and upload speeds. Top 10 Cloud Storage also gives recommendations for business and personal use.

What Are the Environmental Benefits?

A Google funded study found that moving common software applications (such as email, CRM software and productivity software) of 86 million American workers to the cloud could potentially save enough electricity to power Los Angeles, California for an entire year.

A study from the Global E-Sustainability Initiative (GEI), found that if 80 percent of the world’s enterprises powered down their local services and adopted cloud computing, there would be a 4.5 megaton reduction in greenhouse gas emissions. This translates to a 2 percent decrease in the IT sector. And although this statistic may not seem impressive at first glance, consider that it equates to nearly 1.7 million cars vanishing from the roads.

So what’s holding your startup back from transitioning to cloud computing? Between the environmental impact and the business benefits (like improved flexibility and accessibility and reduced spending on IT infrastructure), there are very few reasons not to switch.

The article Lower Your Carbon Footprint With the Cloud first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Businesses Sold Continue to Rise in 2015

The sales of businesses continues to strengthen across all market sectors in the first quarter of 2015 based on the results of the 1st Quarter 2015 Market Pulse Survey published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project. The reasons attributed to the increase in businesses sold are consumer and market confidence and low interest rates for buyers.

The International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project provide a quarterly report and evaluation of the market for businesses being sold in Main Street markets (values under $2 million) and lower middle markets (values $2 million to $50 million).

This is the only report for the sale of these types of businesses. The 1st Quarter 2015 survey was completed by 231 business brokers and M&A advisors, representing 39 states. More than half of the respondents (57 percent) had at least 10 years of experience in the M&A industry.

Participating advisors reported closing 143 Main Street market transactions and 20 lower middle market transactions in Q1 2015.

Some of the highlights of the report include:

59 percent of brokers characterized the Main Street businesses under $500,000 as a buyer’s market, while larger companies – those valued at $1 million and above – were characterized as being in a seller’s market.The majority of advisors are still pointing to a buyer’s market in the Main Street sector, but the strength of that sentiment has weakened considerably over a year ago. A year ago, 77 percent of advisors indicated the smallest deals (under $500,000) faced a buyer’s market, but today only 59 percent feel that way—a record low since the survey began.Valuations for Main Street deals stayed roughly the same or had slight increases. 65 percent of Q1 transactions under $499,999 included multiple Seller Discretionary Earnings or SDE of 1.75 to 3.0, while 76 percent of transactions between $500,000 to $999,000 had SDE multiples of 2.0 to 3.00.Expectations and optimism about the future continue to rise. All market sectors showed a growth in business owners wanting to sell with a mean of 3.2 or better (on a five-point scale) for all deals valued at $500,000 and above for Main Street transactions, a mean of 3.2 for the $2 million to $5 million sector, and a gain of 0.9 point jump in mean to 3.5 in the $5 million to $50 million.

Retirement ranks as the number one reason to sell across both lower middle market sectors, ranking as 44 percent and 50 percent in the $2 million-$5 million sector and the $5 million-$50 million sector, respectively. Retirement also ranks as the number one reason to sell across all Main Street sectors.The average time to close for Main Street deals rose for every Main Street sector, jumping by as much as two months for businesses in the $500,000-$1 million sector. For lower middle markets, the time to close remained relatively flat, at 7 months in the $2 million-$5 million sector and 11.5 months in the $5 million to $50 million sector.

Buyers looking at buying a company in the Main Street market can still maintain an advantage when buying a smaller firm, but the market continues to shift toward a seller’s market. For those buyers looking to make a purchase with a $1 million to $2 million deal, they are moving into a neutral market.

A reminder that this report is a national report and so does not include what’s happening in each individual state of the USA. As I am focused purely on the sale of businesses in California it would be my suggestion that the results are a patchwork with Southern California and the Bay Area of San Francisco doing reasonably well but the Central Valley and more remote areas of California still feeling the effects of the Great Financial Crisis.

If you would like to view the report you can do so by clicking the following link: IBBA and M&A Source Businesses sold in 2015 Report.

If you would like to learn more about selling a business, buying a business or buying a franchise, I have written a book on each of these topics and they are available to buy from my website Business Advice Books.

The article Businesses Sold Continue to Rise in 2015 first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Businesses Sold Continues to Rise in 2015

The sales of businesses continues to strengthen across all market sectors in the first quarter of 2015 based on the results of the 1st Quarter 2015 Market Pulse Survey published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project. The reasons attributed to the increase in businesses sold are consumer and market confidence and low interest rates for buyers.

The International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project provide a quarterly report and evaluation of the market for businesses being sold in Main Street markets (values under $2 million) and lower middle markets (values $2 million to $50 million).

This is the only report for the sale of these types of businesses. The 1st Quarter 2015 survey was completed by 231 business brokers and M&A advisors, representing 39 states. More than half of the respondents (57 percent) had at least 10 years of experience in the M&A industry.

Participating advisors reported closing 143 Main Street market transactions and 20 lower middle market transactions in Q1 2015.

Some of the highlights of the report include:

59 percent of brokers characterized the Main Street businesses under $500,000 as a buyer’s market, while larger companies – those valued at $1 million and above – were characterized as being in a seller’s market.The majority of advisors are still pointing to a buyer’s market in the Main Street sector, but the strength of that sentiment has weakened considerably over a year ago. A year ago, 77 percent of advisors indicated the smallest deals (under $500,000) faced a buyer’s market, but today only 59 percent feel that way—a record low since the survey began.Valuations for Main Street deals stayed roughly the same or had slight increases. 65 percent of Q1 transactions under $499,999 included multiple Seller Discretionary Earnings or SDE of 1.75 to 3.0, while 76 percent of transactions between $500,000 to $999,000 had SDE multiples of 2.0 to 3.00.Expectations and optimism about the future continue to rise. All market sectors showed a growth in business owners wanting to sell with a mean of 3.2 or better (on a five-point scale) for all deals valued at $500,000 and above for Main Street transactions, a mean of 3.2 for the $2 million to $5 million sector, and a gain of 0.9 point jump in mean to 3.5 in the $5 million to $50 million.

Retirement ranks as the number one reason to sell across both lower middle market sectors, ranking as 44 percent and 50 percent in the $2 million-$5 million sector and the $5 million-$50 million sector, respectively. Retirement also ranks as the number one reason to sell across all Main Street sectors.The average time to close for Main Street deals rose for every Main Street sector, jumping by as much as two months for businesses in the $500,000-$1 million sector. For lower middle markets, the time to close remained relatively flat, at 7 months in the $2 million-$5 million sector and 11.5 months in the $5 million to $50 million sector.

Buyers looking at buying a company in the Main Street market can still maintain an advantage when buying a smaller firm, but the market continues to shift toward a seller’s market. For those buyers looking to make a purchase with a $1 million to $2 million deal, they are moving into a neutral market.

A reminder that this report is a national report and so does not include what’s happening in each individual state of the USA. As I am focused purely on the sale of businesses in California it would be my suggestion that the results are a patchwork with Southern California and the Bay Area of San Francisco doing reasonably well but the Central Valley and more remote areas of California still feeling the effects of the Great Financial Crisis.

If you would like to view the report you can do so by clicking the following link: IBBA and M&A Source Businesses sold in 2015 Report.

If you would like to learn more about selling a business, buying a business or buying a franchise, I have written a book on each of these topics and they are available to buy from my website Business Advice Books.

The article Businesses Sold Continues to Rise in 2015 first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson

Is Buying a Franchise a Good Investment

Is buying a franchise a good investment?

Deciding whether to become an entrepreneur comes with many choices as well as many decisions. At a simple level, the choices include starting a business from scratch, buying an existing business or buying the rights to a franchise.

Some of the decisions to make with each of these choices includes considering what options are available for each choice, are there written processes and procedures, what training is available, what support is available, how much risk is there, is there an existing cash flow or will this take time to happen and if so, how long will it take plus many more questions.

Read More: If you would like more information about your choices, click this link to read Business ownership – what are my options?

To help put your options into a sharper focus from an investment perspective, consider the following.

1. Measure the total cost of investment

A good place to start when doing a comparison of which business choice to go with is to look at the cost of entry or the total cost of investment.

The best way to do this is with an Excel file and do a summary of the initial hard costs to start your business, buy an existing business or buy a franchise.

Once you identify the hard costs with each option, now do a profit and loss projection for the first year of being in business and if you feel you have enough data, do the projection for 3 years.

If you would like some free tools (there are 25 in total) to help do these calculations and more, they are on a protected page of my website. You can get access to these free tools simply by signing up for my monthly newsletter.

To see a list of the different tools available, click this link. If you would like to download one or more of these tools, sign up for my free monthly newsletter.

2. Measure the Return On Investment

Once you understand your Total Cost of Investment, it’s now time to calculate your Return On Investment. Calculating your Return On Investment is a relatively simple formula of (Gains – Cost)/Cost.

For example, if you expect to make a $50,000 profit in the first year of operation and it costs $100,000 to open the business then the Return On Investment equals a negative ROI of .5 or 50%.

However, if in year two you expect the profit to be $125,000 and your cost is $100,000 then the ROI is .25 or 25%.

3. Compare the Return On Investment to other choices

Once you have done a Return On Investment calculation for each of your options, do a comparison of all the choices available to you, not just your business choices. For example, compare the investment you plan to make with your return on investing in Stocks, Bonds, working as an employee plus each of the business choices available to you. The goal is not to restrict your choices to compare all of them so you make an informed decision.

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

Use this link to search the different franchises available to buy.

If your options include buying a franchise, work through the franchise buying process to identify the anticipated return on the investment you’ll make. It can’t be measured in numbers but working for yourself with its personal independence and responsibility are important to remember as long as you are comfortable with being personally accountable. If being personally accountable is not for you, look for some other form of investment.

Also, don’t be afraid to get professional help from qualified third parties such as a franchise consultant, an accountant to help you analyze your numbers and a business attorney to analyze the Franchise Disclosure Document.

4. Perform a Break Even analysis

If you have followed the above steps and you still wish to become a business owner, narrow your choices to two or three options and then do a Break Even analysis.

The goal of the Break Even analysis is to help provide another data point of how long it will take before your new business venture covers it costs. Going into business is not the right option for everyone; there is a reason why there are business owners and there are employees. Everyone has a place and its finding that right place that allows for everyone to be successful.

5. Another factor to consider

If you follow the analysis suggested in this article it will help tell your story and assist with your decision making.

One of the best options available to all franchise buyers is being able to speak with as many franchisees as possible and ask lots of questions. If you start your own business or buy an existing business, this option is simply not available.

6. Time is your most valuable commodity

Our most valuable commodity as a human being is our time. When looking at different investment options, try to anticipate how much time each option will require and most important of all, how much time it will take before your business reaches the level of profit you want and then hope to be able to sustain.

7. Conclusion

Owning and operating your own business, in my opinion, is one of the most rewarding things to do in life. It comes with enormous professional and personal challenges; but this applies to anything worthwhile we want to achieve.

If your preferred choice is to buy a franchise then approach it from the perspective of being an investor. We take a different psychological approach when looking at things through the lens of a buyer instead of an investor. As a buyer we expect to be sold or convinced into buying. That is, there is a more emotional aspect to the buy/sell relationship. However, the investor has a different perspective. When investing, the focus is more about a financial analysis including Return On Investment and Break Even Analysis.

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 Is Buying a Franchise a Good Investment first appeared on Andrew Rogerson and Rogerson Business Services by Andrew Rogerson