Business Broker | 2012 Business Tips Before Buying A Business
Buying a business can be an exciting time for any entrepreneur, but it is very important for any potential business owner to do their due diligence before making a commitment. Often times, this involves the hiring of an outside consultant or a business broker who specializes in the small businesses business in order to give potential buyers an independent assessment of the opportunity available to them.
Usually, the potential buyers focuses solely on the financial aspects of the business, especially with respect to the interest rates paid on bank loans and any other business loan that was made when the seller was starting a business. However, anyone who is buying a business needs to take a broader view of the business in order to get a holistic view of the enterprise.
Any analysis must begin with a study of the industry within which the company competes. One thing that is particularly important is the amount of consolidation that is taking place in the industry. If a lot of companies are merging, it may suggest that the industry has economies of scale, implying that larger companies will be able to out-compete smaller companies. This may compel a business owner to a business loan to build up the company, possibly making it a somewhat riskier endeavor.
Small business sales can often cause disruptions with the major suppliers and service providers who support the company as it grows. Any potential buyers need to make sure that these logistic providers are on board with the new ownership; otherwise, the new business may become a lot more complicated than originally believed.
Similarly, the acquiring entrepreneur needs to find out what role the seller had in the business. Some people starting a business take a very active role in the running of the enterprise, something that can become very disruptive when that owner leaves for other pursuits. If this is indeed the case, the buyer may want to keep the seller around for a while to help with the transition. If the seller is not interest in doing that, make sure that you know all of his responsibilities before he leaves.
Although many business owners focus on sales and profits, it is important to focus on gross and net margins as well. A business with declining margins may need a cash infusion through a business loan. In this weak economy, it can be very difficult to get a loan for a business. Unless you can find a small business that focuses on given a loan to business, the buyer may quick find themselves in a cash crunch.
Any buyer also needs to do his due diligence on the employees of the company. Employees are the lifeblood of a company, and success will be far more difficult if you can not keep key employees around after the acquisition. A buyer needs to determine the loyalty of the employees to the company as well as figuring out how difficult it will be to attract new talent.
Finally, if the seller is a younger business owner, the buyer needs to analyze the reasons why the business is up for sale. Although the business broker may give you a plausible explanation, a buyer needs to do his own investigation into this matter. This is very important, because there is always the possibility that the business is not doing well. If you end up buying a declining business, you will be scrambling for bank loans or some business loan to make ends meet, thereby crushing yourself with interest payments in the process.
Although there are certainly more things to consider when buying a business, the following considerations give you a starting framework within which to start your investigation. This due diligence will be especially important if you want to raise additional funds by getting a loan for a business to grow the company. Any financial institution that may provide a loan to business will make sure that you have done your homework before they part with their money.
Bill Whitehurst has been engaged as a Texas business broker for the past 15 years and has over 100 successfully closed transactions. For more information please visit Whitehurst-MA.com.
Drawbacks of Unreliable Finance Companies You Never Knew Existed
Cash advances may seem great, easily cash obtained and easily repaid. What most people do not know is that cash advances can be more troublesome than helpful, especially when the company you are planning to borrow money from has not yet established a good reputation.
Many individuals have found that these firms providing cash advances help small businesses in need and give them the cash they need to get started or the cash to get them out of a sticky situation.
Observations made by critics of cash advances do not think these firms are all they are thought to be but they are certainly acting like they are aiding small businesses. The first observation made and said is that you may encounter more problems than you may initially think.
Generally, it seems like an easy process, and it is that is until problems creep up and things start getting out hand. The second observation that has been made and voiced by the critics is that can the credit card processing fee be decreased? The main expense for the small business at hand is their credit card processing costs are extremely high. One of the points of getting a good merchant is that they may be able to work out some terms for you where the credit card processing costs are reasonable for you to pay.
The third observation that has been made is that new funding sources were better than expected but have turned out be exactly like the previous funders who were causing problems. That is to say cash advances have started behaving like bank loans that are annoying rather problem solving agents. The last observation seen is that banks are the primary problem not the solution. Banks have recently stopped giving business lines of credit thereby eliminating one more alternative for obtaining cash for your hanging business.
With all these concerns rising and not many solutions come into view, it is difficult to see a happy ending and cash concerns diminishing their existence. Businesses need to make sure they find trustworthy business funding companies to help them maintain their business. Although cash advances are becoming the new age viable method of obtaining money, they have setbacks that need to be considered and thought over before.
Cash advance providers must also try and decrease their costs to be able to fit in with the businesses that need their help. With such tight economic conditions someone needs to take action.
Ronald Cribbs works as a business funding consultant from a reputable merchant cash provider.
Tips for Investors Using EDGAR: Form D Filing within 15 Days for Reg D
Securities (bank notes, bonds, stocks, and derivative contracts) are carefully regulated by the government; a wise move after the devastating effects of fraud, abuse, and resulting market crash of 1929. Transparency results in truth, which helps investors to have a clear idea of which companies are safe options to interact with financially. This is because public companies are required to submit annual reports which are maintained an online through the database known as EDGAR.
What is EDGAR?
EDGAR is an acronym for the U.S Securities and Exchange Commissions (SEC) Electronic Data Gathering, Analysis, and Retrieval filer management. This system, used to file with the SEC, requires the user be registered and granted authorized access codes. The process starts with a Form ID that an investor fills out and submits for authorization. However, it is free and available to the public. The EDGAR database is also an extensive resource for queries for information on all SEC-registered companies. Investment companies are the only exception to the voluntary basis of submitting the annual report to shareholders. Using EDGAR as research tool can give potential investors a very comprehensive view of a companys fiscal health and performance.
Using EDGAR to file with the SEC has been a domestic and foreign requirement since 2002.
EDGAR is automated and encompasses the collection, validation, indexing, acceptance and forwarding of submissions. While foreign companies once had the voluntary option to utilize EDGAR, it became an SEC requirement in 2002. Oftentimes filings are time sensitive and an automated process increases the efficiency by far. Using EDGAR to file with the SEC is relatively easy but investors may still find the help of a document portal or service help to further aid the process.
Documents for EDGAR must be in plain text or HTML in order to be “official”.
The SEC offers multiple resources for information on the proper protocol to be followed. If you are viewing a PDF of a filing understand that this is an “unofficial” copy and is not guaranteed to match the official version (though the filer should make sure that it does). Though unofficial, PDF copies are still subject to the same anti-fraud provisions on filings.
Under Regulation D, Form D may be used to file a notice of an exempt offering of securities.
The Securities Act of 1933 requires any securities that are sold to be registered with the SEC or qualify to meet an exemption. The requirements for the exemptions are laid out in what is known as Regulation D. Privately-held companies that are obtaining their capital through angel investors or venture capital can fall under Regulation D and do not have to file reports with the SEC or register their securities. The exception to this is Form D after they sell; a brief form that includes the names and contact information of the companys executive officers. Companies have 15 days to file Form D after a sale.
The fastest way to file Form D is through a document portal like Reg D Fast.
Federal filings are time sensitive. Accessing the EDGAR database as a filer is part of complying with securities laws. Accessing it as an investor is a reassuring way to check and see that the company you would like to invest in is in good standing with federal securities laws. Reg D Fast is an online service that offers live help and networking, as well as investor lists and filing assistance on the state and federal level.
Written by Mike Regd
“http://www.regdfast.com”
Evaluating Corporate Development Deals
Critical thinking in capital investment, risk, strategic value, control and flexibility can provide organizational guideposts to approaching potential corporate development deals. This article will provide key issues to consider if you consider corporate development deal types along a spectrum with Acquisitions being the most binding and permanent, and Licensing being the least.
Capital Investment – Acquisitions usually require substantial capital, and decisions need to be made on the currency of that capital (cash, stock, debt) as well as how much is available. Alliances and Licensing generally substitute investment of internal capabilities (sales channels, technology, and manufacturing) for capital, and so may be a better choice if capital is limited.
Risk – Acquisitions and Joint Ventures carry high operational and financial risk, and demand high returns as a result. These deals need to carry a solid business case that will deliver the required returns, and have a comprehensive integration plan to reduce the risk of failure from operational challenges. Alliances and Licensing carry less investment and operational risk, but still require a well thought out plan to deliver the anticipated benefits of the deal.
Strategic Value – The strategic value of the assets included in the deal can drive a decision to acquire the assets outright, or potentially just license use of the assets if, for instance, they are not strategic to your organization. In general, assets that provide a key competitive advantage, establish and maintain customer control, or cannot be easily replicated merit Acquisition consideration. Assets that are generic and non-core might be better secured through less permanent and costly deals.
Control – An Acquisition provides full control of the assets and organization of the target, while Joint Ventures and Alliances will dictate a shared control arrangement. Control can be seen as a way to reduce risk, and may be required to gain the full benefits of the asset for your organization. All deal types should specifically detail how control is to be defined and exercised, keeping in mind that an Acquisition provides the highest level of control to your organization.
Flexibility – Acquisitions and Joint Ventures generally include ownership transfer of assets, and therefore provide little flexibility to alter the arrangement in the future. If there is uncertainty in the future value of the assets to your organization, you might want to consider less permanent Licensing arrangements.
Critical thinking in the areas recommended above can provide organizational guideposts to approaching potential corporate development deals. Other target-specific considerations may also come into play including the size and structure of the target, the management team, culture fit, the type of assets, and organizational capacity.
Tim Jenkins is the co-founder of Point B, a leading management consulting firm headquartered in Seattle, WA. For more information about our corporate development and consulting services, visit our website.
An Explanation of Private Equity
The term private equity is one that can occasionally fill people with confusion, but it is one that occurs a great deal in the news and media. In this article we’ll attempt to shed some light on what in some people’s eyes is a controversial aspect of business.
In basic terms, private equity is cash funds that are invested into firms that are not traded on a public basis, or on a stock exchange. It could also be funds that are invested as part of buyouts of publicly traded firms with the long term view to make them completely private firms.
While this article does not have the scope to go into detail about the various other terms associated with private equity, it can include leverage buyouts (LBOs) as well as venture capital, mezzanine capital, distressed investments and growth capital among other.
The basic idea behind any private equity deal is to find funds to buy a company that is not doing well, but one that the private equity firm believes could do well if it was managed properly. These deals are often based on being short term, and therefore with a view to producing a short term profit. Management teams are drafted in to take control of the given business and do the necessary things in order for the business to cut costs and return to growth.
Controversy
Many sections of society believe that that private equity can cause damage to people’s lives, particularly in the way that it reduces workforces in a sudden and dramatic manner. This obviously affects the workers and their families as they no longer have the same income as they did. In the UK, for example, it might be thought that such sudden reductions in the workforce are possible because of employment laws that are in the favour of the employer. Others disagree with this, saying that a lean, modern economy needs to be able to adapt quickly in this way, and that means having a lean adaptable workforce that can be hired and laid off when required.
It is undeniable that in many cases private equity can actually save a business from disappearing. Many argue that at least this saves some of the jobs, if not all of them.
Private equity can be a complex business, but the overall aim is to make profit quickly. It needs to be quick because the money invested is often made up largely of loans.
Anna Stenning has written a great deal about private equity. Find out more about private equity at http://www.preqin.com/section/private-equity/1