CENTRAL FLORIDA BUSINESS BROKERS BLOG

SBA Loans – Effects from a Government Shutdown

As everyone is aware, we are in the middle of a partial Federal Government shutdown since December 22, 2018. The offices of the Small Business Administration (SBA) are one of the government functions that has been temporarily closed until the government reaches a funding solution.

 

If you are a business owner with an application in process and was not approved by SBA prior to the shutdown, the application will be on hold until the budget negotiations are complete, and the government shutdown ends. Anything that comes in to the SBA during the shutdown will go into a queue until federal funding becomes available again.

For those entrepreneurs that are looking to fund a new business purchase with a SBA guaranteed

loan, what should they do? I suggest continuing looking for a business, negotiate the sale price, and put it under contract subject to approval using an SBA guaranteed loan. There are banks and lending organizations that are continuing to process SBA guaranteed loans, despite the shutdown. The lenders that are PLP (preferred Lender Program) lenders typically make all the credit decisions, process underw

riting, and perform closing functions in house. These lenders will process the loan, then once the shutdown is over will only need the SBA to assign a PLP number to it. The process may move a little slower than normal, but it is not coming to a complete stop.

 

Are you considering buying a business? Buying a business is a very involved process whether you are planning to utilize an SBA loan or plan on other funding methods to fund the purchase. If you are considering buying a business, I would suggest a meeting with a Business Broker. I welcome you to contact Central Florida Business Brokerage at info@CFBB.biz or call us at (407)261-9001.

 

The Process of Selling Your Business

Every day small business owners make the decision to sell their business. Sometimes planned and sometimes not, businesses get sold for various reasons. Here are some of the reasons that an entrepreneur plans the sale for;

 

·         Desire to retire

·         Relocation

·         The want for a lifestyle change

·         Next generation is not going to take over

·         Desire to pursue other business opportunities

 

Other times the sale of a business can be unpredictable and often sneaks up on the owner. Some examples of that are;

 

·         Health issues or health scare

·         Family illness

·         Increased competition

·         Family Disputes

·         Divorce

·         Burnout

·         Disputes with partners

·         Losing a Key employee

·         Losing a major customer

·         Divorce

 

Since we never know the right time to sell our business, we always want to be ready. A well-planned exit strategy will come in handy when the time comes.

 

The selling process is straightforward and in general is structured as follows;

 

1.      You make the decision to sell.

2.      Decide to hire a professional to assist in the selling marketing, process and paperwork.

3.      Get a valuation or Comparative Market Analysis on the business. This will tell you what the business is expected to sell for.

4.      A Confidential Business Review is written on the business. This contains all the facts and figures of your business.

5.      Potential qualified buyers are sought out to assess and look at your business in a confidential manner.

6.      Price and terms are negotiated for the business.

7.      An asset purchase agreement is executed between the seller and the buyer outlining all the specific terms, price, and conditions of the sale.

8.      There is a Due Diligence period allowing the buyer to verify that all the records and contingencies are what was expected.

9.      Business assets are transferred.

10.  Help to train the new buyer to run the business.

 

A question that is often asked is how long it takes to sell a business. There is no exact answer to this question as the time depends on the individual business and the terms of the deal. The historical data shows that on average it takes 8 – 10 months to sell a business. Some businesses sell in weeks, some take months. Price is a major determining factor.

 

Buying or selling a business is a very involved process. If you are considering buying or selling a business, I would suggest a meeting with a Business Broker. I welcome you to contact Central Florida Business Brokerage at info@CFBB.biz or call us at (407)261-9001.

 

 

The Top 10 Ways to Increase your Business Value

Small Business Owners sell their business for a variety of reasons. Proper preparation of an exit strategy can help to maximize the value of your business when the time comes to sell. Here are 10 strategies to help increase your market value of your business.

 

  1. Realistic Value – Having a current business value will help identify specific changes that need to be made, then you can determine how they will impact the value of the business.
  2. Exit Strategy – Planning for the sale of your business is important. A well-planned exit strategy can put your business in the best salable condition.
  3. Gross Margin – Determine areas of the business where you can increase your gross margin. This will have a direct impact on the value of the business.
  4. Accounting Practices – Typically a business maintains its financial records in a manner to minimize the tax obligation of the business. Assess the bookkeeping policies to keep records in a manner to maximize the value of the business.
  5. Sales – Seek out opportunities to increase revenues for the business.
  6. Business Challenges – Identify obstacles the business faces and develop a plan to overcome them.
  7. Management – Minimize owner’s importance to the success of the business by putting management positions in place. The business should be able to operate efficiently with the owner not playing an active role.
  8. Customer Base – Position the business to have a diversified customer base. It is important that no single customer represents greater than 5% of the revenues of the company.
  9. Business Plan – Have a 3-year business plan in place to prepare the new ownership for growth.
  10. Competitive Advantage – Develop a “niche” in your industry to set yourself apart from the competition.

 

Selling your business is a process. If you are planning to sell your business in the next 3 years, I would encourage meeting with a professional to help with an exit strategy. I welcome you to contact Central Florida Business Brokerage at info@CFBB.biz or call us at (407)261-9001.

Why a business doesn’t sell

Not every business listed for sale will be successful in finding a buyer. Some trade groups have stated that less than 10% of businesses that are listed “For Sale by Owner” will sell. These same groups claim that businesses listed with Business Brokers will have a 50% probability of selling which is 5 times the rate of success. I have identified 9 reasons businesses fail to sell. A seller can raise their probability percentage of selling their business by addressing these items.

 

Here are the top 9 reasons businesses don’t sell;

 

1.      Unrealistic expectations – Owners do not know what the realistic value is of their business and what they can expect a buyer to pay for it.

2.      Inadequate financial reporting – Inaccurate or incomplete books and records are kept. Buyers are willing to pay based on the numbers that they can verify.

3.      Lack of consistent revenue stream – Sales and profits are on a downward trend.

4.      Business atmosphere – The business market is changing, and the owners have not reacted to the changes.

5.      Customer concentration – A large percentage of the business is derived from a single customer.

6.      Owner dependency – The owner is the business.

7.      Credibility – It is perceived that the sellers are not honest about the business or its success.

8.      Partners – There may be partners that have different goals.

9.      Taxes – The seller is unaware about the tax implications of selling a business.

 

Buying or selling a business is a very involved process. If you are considering buying or selling a business, I would suggest a meeting with a Business Broker. I welcome you to contact Central Florida Business Brokerage at info@CFBB.biz or call us at (407)261-9001.