Business Directory


Having performed business valuations for a variety of purposes, I have been asked a number of questions from clients. The following top ten business valuation questions have been compiled in an effort to briefly address some of the most frequent concerns clients have regarding a business appraisal.

1. What approaches do you consider in valuing the business?

Income Approach-The Income Approach derives an indication of value based on the sum of the present value of expected economic benefits associated with the company. Under the Income Approach, the appraiser may select a multi-period discounted future income method or a single period capitalization method.

Market Approach-The market approach derives an indication of value by comparing the company to other similar companies that have been sold in the past. Under the market approach, the appraiser may utilize the guideline publicly traded company method or the direct market data method.

Asset Approach-The Asset Approach adjusts a company’s assets and liabilities to their fair market values and adds to the value of intangible assets and any contingent liabilities.

2. What discounts may be applicable?

The discounts typically used in the valuation of a closely held business interest include a discount for lack of control, discount for lack of marketability, discount for lack of voting rights, blockage discount, portfolio discount, and key person discount. The most common discounts applied in business valuations are discounts for lack of control and discounts for lack of marketability.

3. What are the standards of value?

For most operating businesses, the standard of value will likely be fair market value, fair value, or investment value.

Fair Market Value is the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant fact.

Fair Value is a legal standard of value that has been established by the courts for use in issues ranging from marital dissolution to dissenting shareholder suits.

Investment Value is the value to a particular investor based on individual investment requirements and expectations. Investment value is typically used for transactional purposes when an acquirer is assessing the value of the target company, including the potential synergies of the deal.

4. What is the difference between an appraisal and a fairness opinion?

Full/formal business valuations typically consider all relevant approaches and methods that the appraiser considers appropriate in determining a value. These valuation reports typically include research on the subject company’s industry, economic conditions, trends, etc.

Fairness opinions provide the expert’s opinion of whether the proposed value of the transaction is “fair” for the shareholders. Fairness opinions do not typically provide an estimate of value or value range.

5. What are the main credentialing bodies for business valuation, what designations do they offer, and what designations have you earned?

The four main credentialing bodies in the business valuation profession are the National Association of Certified Valuation Analysts (NACVA), the Institute of Business Appraisers (IBA), the American Society of Appraisers (ASA), and the American Institute of Certified Public Accountants (AICPA).

NACVA offers the Certified Valuation Analyst (CVA) designation (for Certified Public Accountants only) and the Accredited Valuation Analyst (AVA) designation.

The IBA offers the Master Certified Business Appraiser (MCBA), the Certified Business Appraisers (CBA), Accredited by IBA (AIBA), Business Valuator Accredited for Litigation (BVAL), and Accredited in Business Appraisal Review (ABAR) designations.

The ASA offers the Accredited Member (AM), the Accredited Senior Appraiser (ASA), and the Fellow Accredited Senior Appraiser (FASA).

The AICPA offers the Accredited in Business Valuation (ABV) designation.

6. Why should a business have an annual valuation?

The most common benefits of an annual business valuation policy include:

Accountability and Performance-An annual business valuation enables the shareholders to see the value that is being consistently created or destroyed by the management of the firm.

Estate Planning Purposes-Many shareholders have on-going estate planning strategies aimed at protecting wealth for heirs.

Buy-sell situations-For those firms that do not have buy-sell agreements in place, annual business valuations are a good way of avoiding disputes that may arise when a shareholder seeks to sell his shares to the other shareholders.

Facilitate Banking-Many firms effectively utilize leverage to invest in value-creating projects. The ability of a firm to borrow based on the value of the goodwill or the value of the company’s shares may expand the universe of value-creating investment options available.

Expands the Investment Options-Closely held firms suffer from a lack of liquidity and the inability to use the company’s shares as currency when seeking acquisitions. An annual business valuation may enable the management of the company to use the shares as acquisition currency.

7. What is the difference between enterprise value and equity value?

Enterprise value is often referred to as the value of the invested capital of the business which includes the value of the equity and the value of the firm’s liabilities. This value represents the total funding of the asset side of the balance sheet for all fixed assets, cash, receivables, inventory, and the goodwill of the business. Equity Value is the enterprise value less all liabilities of the business and represents the value that has accrued to the shareholders through retained earnings, etc.

As various professionals may define these levels of value differently, it is important to understand exactly what a definition of a level of value includes or excludes under the specific circumstances.

8. Do you use rules of thumb when valuing the business?

Rules of thumb are simple pricing techniques that business brokers typically use to approximate the market value of a business. Rules of thumb typically come in the form of a percentage of revenues or a multiple of a level of earnings, such as seller’s discretionary cash flow. For example, a rule of thumb for pricing a widget manufacturer may be 40% of annual revenues plus inventory or two times seller’s discretionary earnings. Rules of thumb fail to consider the specific characteristics of a company as compared to the industry or other similar companies. In addition, rules of thumb do not reflect changes in economic, industry, or competitive factors over time.

Widely-accepted business appraisal theory and practice does not include specific methodology for rules of thumb in developing a value estimate. However, rules of thumb can be useful in testing the value conclusion arrived through the appraiser’s selected approaches and methods.

9. What role do court rulings have in developing an indication of value?

While Tax Court rulings may reflect the proclivity of certain courts to accept various discounts or levels of discounts in case-specific circumstances, these rulings may or may not play a role in the business appraiser’s analysis and value conclusion. The business appraiser must consider the relevant facts in the subject valuation and make a reasoned, informed decision regarding the discounts and level of discounts in developing an indication of value.

With respect to case law, business appraisers should be aware of general issues that may impact a valuation. Often times, the business appraiser consults the client’s legal counsel for their position on specific case law issues. Again, the business appraiser must use reasoned, informed judgment in developing an indication of value, considering the case-specific facts relevant to the valuation.

10. What are the main factors that impact the value of a business?

The value of a business interest is impacted by a number of factors, many of which may change from year to year, including:

• Financial performance-If a business has poor earnings capacity, the value of the business imay be negatively impacted.

• Growth prospects-Just as too high a rate of growth may lead to negative operational and financial consequences, too low a growth rate may also have a negative impact upon the business and its ability to achieve profitability. Revenue growth drives all opportunities for the business to expand.

• Competitive nature of industry-If the industry in which the business is operating has become more competitive due to the entrance of new competitors, the value of a business may be impacted as a result of lost market share, lower revenue growth, shrinking margins, and lower profitability.

• Management-Management of a business influences the value of the firm. A highly experienced management team and an organization with managerial depth is more highly valued by a willing buyer than an organization with only one manager or key executive.

• Economic and industry condition-The strength of the economy impacts all businesses in one way or another. If adverse economic conditions translate into long-term lower growth and profitability for a business, the value may be negatively impacted. Industry conditions are also impacted by the state of the economy but are also influenced by various other factors such as competition, technological change, trends, etc.



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Perhaps the most important business transaction you will ever pursue is the sale of your business. Many business owners attempt to do it themselves and when asked if they got a good deal, many respond with “I think so,” or “I got my asking price,” or “I really don’t know,” or “It was a disaster.” Often times these very capable business people approach the sale of their business with less formality than in the sale of a home. The purpose of this article is to answer the questions – Why would I use a business broker and what am I getting for the fees I will pay?

1. Confidentiality. If an owner tries to sell his own business, that process alone reveals to the world that his business is for sale. Employees, customers, suppliers, and bankers all get nervous and competitors get predatory. The business broker protects the identity of the company he represents for sale with a process designed to contact only owner approved buyers with a blind profile – a document describing the company without revealing its identity. In order for the buyer to gain access to any sensitive information he must sign a confidentiality agreement. That generally eliminates the tire kickers and deters behaviors detrimental to the seller’s business

2. Business Continuity. Selling a business is a full time job. The business owner is already performing multiple functions instrumental to the success of his business. By taking on the load of selling his business, many of those essential functions will get less attention, sometimes causing irreparable damage to the business. The owner must maintain focus on running his business at its full potential while it is being sold.

3. Time to Close. Since the business broker’s function is to sell the business, he has a much better chance of closing a transaction faster than the owner. The faster the sale, the lower the risk of business erosion, customer defection, employee problems and predatory competition.

4. Large Universe of Buyers. Business brokers subscribe to databases of businesses that enable them to screen for buyers that are in a certain SIC Code and have revenues that would support the potential acquisition. In addition they maintain databases of high net worth individual buyers and have access to private equity groups databases that outline their buying criteria.

5. Marketing. A business broker can help present the business in its best light to maximize selling price. He understands how to recast financials to recognize the EBITDA potential post acquisition. Higher EBITDA = higher selling price. He understands the key value drivers for buyers and can help the owner identify changes that translate into enhanced selling price.

6. Valuation Knowledge. The value of a business is far more difficult to ascertain than the value of a house. Every business is unique and has hundreds of variables that effect value. Business brokers have access to business transaction databases, but those should be used as guidelines or reference points. The best way for a business owner to truly feel comfortable that he got the best deal is to have several financially viable parties bidding for his business. An industry database may indicate the value of your business based on certain valuation multiples, but the market provides the real answer. An industry database, for example, can not put a value to a particular buyer on a key customer relationship or a proprietary technology. Most business owners that act as their own business broker get only one buyer involved – either another business that approaches him with an unsolicited offer or a referral from his banker, accountant, or outside attorney. Just look at the additional billion plus dollars of value created for MCI shareholders because of the competitive bidding between Verison and Quest Communications.

7. Balance of Experience. Most corporate buyers have acquired multiple businesses while sellers usually have only one sale. In one situation we represented a first-time seller being pursued by a buyer with 26 previous acquisitions. Buyers want the lowest price and the most favorable terms. The inexperienced seller will be negotiating in the dark. To every term and condition in the buyer’s favor the buyer will respond with, “that is standard practice” or “that is the market” or “this is how we did it in ten other deals.” By engaging a business broker the seller has an advocate with a similar experience base to help preserve the seller’s transaction value and structure.

8. Maximize the Value of Seller’s Outside Professionals. Business brokers can save the seller significantly on professional hourly fees by managing several important functions leading up to contract. His compensation is usually comprised of a reasonable monthly fee plus a success fee that is a percentage of the transaction value. The business broker and seller negotiate with the buyer the business terms of the transaction (sale price, down payment, seller financing, etc.) prior to turning the purchase agreement over to outside counsel for legal review. In the absence of the business broker that sometimes-exhaustive negotiation process would default to the outside attorney. It is not his area of expertise and could result in significant hourly fees.

9. Maintain Buyer – Seller Relationship. The sale of a business is an emotional process and can become contentious. The business broker acts as a buffer between the buyer and seller. This not only improves the likelihood of the transaction closing, but helps preserve a healthy buyer – seller relationship post closing. Often buyers want sellers to have a portion of their transaction value contingent on the successful performance of the company post closing. Buyer and seller need to be on the same team after closing.

Our experiences with businesses that engaged our firm as a result of an unsolicited offer from a buyer have been quite instructive. The eventual selling price averaged over 20% higher than the first offer. In no case was the business sold at the initial price. To conclude, the business broker helps reduce the risk of business erosion with improved confidentiality while allowing the owner to focus on running the business. The business broker led sale helps maximize sales proceeds by involving a large universe of buyers in a competitive bidding process. Finally, the business broker can improve the likelihood that the sale closes by buffering buyer – seller negotiations and by balancing the experience scales.



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Sooner or later you are going to exit your business. The question isn’t whether or not you will be ready. The sixty four thousand dollar question is whether or not your business will be ready. It is estimated that seven out of ten privately held businesses have no succession plan to transfer the business to the next generation of owners. What does that mean to you? It means that if you do not currently have a plan in place to transfer your business to family members, existing partners, management or employees, someday you will think about selling your business.

That day might come sooner than you anticipate. Don’t make the mistake of thinking that just because you are not currently ready to retire that you have plenty of time to prepare your business for sale.

As a business broker, I have been involved in a number of transactions (and potential transactions) where the business owner wanted to sell, or in some instances, was forced to exit the business earlier than expected. In fact, retirement is NOT the number one reason why businesses sell.

Here is a list of the most common reasons why owners sell (or otherwise discontinue) their businesses: Burn-out (the number one reason for selling) Health issues Personal diversification Retirement/semi-retirement Death Divorce/partner disputes Business growing too fast Second generation not up to the task Loss of market share

TAKE GOOD CARE The sad truth is that many business owners do not take good care of their most valuable asset: the business. They don’t groom someone to continue the business in their absence, and do not keep the business in salable shape during the time they operate the business.

Business owners tend to get too bogged down in the day to day business operations to worry about–or plan for an event that they perceive won’t occur until sometime in the distant future; selling the business.

Unfortunately, fate sometimes dictates circumstances beyond your control, and tough decisions must be made. If your business isn’t ready to sell when the time comes, what are your alternatives?

1. Liquidation of business assets—may be a solution, but one that usually returns very little money to the business owner. If the business had been an operating business, the underlying assets (except for real estate) may be outdated and of little use to anyone. At auction, the assets will bring only what the attending bidders are willing to pay. In some instances, underlying assets are sold to liquidators (or scrap) for only pennies on the dollar. Liquidation of a going business often occurs where the owners have become ill or disabled, or need to retire and have not planned adequately for their exit from the business. 2. Closing the business—is even less attractive than liquidation. That is because many who find themselves in this situation have a tendency to “put off” liquidating the underlying assets in hope that maybe someone will come along to buy this business. This almost never happens. BUILD WEALTH NOW BY PLANNING FOR THE SALE OF YOUR BUSINESS Okay, so you think you have enough to do without throwing more onto the pile. Am I right? That is why I have written this article for you. It provides a “down and dirty” overview of things that you ought to begin thinking about and planning for right now. Doing so will provide you with an additional safety net that will help safeguard your valuable business asset.

Here are just a few of the benefits of planning now: A planned sale allows for your goals and objectives on your timetable You may begin to identify potential buyers You may be able to create an attractive acquisition candidate You can begin to understand why a buyer may want to buy You might learn why buyers would not want to buy—and be able to fix the problems You may begin to realize the worth of your business now, and learn how to increase the value as part of your retirement planning

BUSINESS VALUE HOUSEKEEPING CHECKLIST

Record All Sales Business owners often invent remarkable ways to beat the tax collector. But the taxman can be a business owner’s best friend when it comes to selling one’s business. Income taxes are a great investment in the years immediately preceding an anticipated sale of the business.

Paying income tax proves to the buyer AND the banker that your business operations have been profitable. Nobody wants to pay more income tax. But consider this example: Ronald Bunk systematically underreported business income by an average of $20,000 per year. Assuming a combined tax rate of 40%, Mr. Bunk saved $8,000 in taxes per year. But, the underreported income also reduced the company’s earnings base by $20,000 per year. If, for example, the business could be sold for a multiple of 5x the company’s reported earning base—the company would sell for $100,000 less ($20,000 average earning base not reported times the price multiple of 5) than it is really worth!

Without considering the time value of money, it would take in excess of twelve years of (illegal) tax savings to make up for the loss of $100,000 in business value. The lesson: In trying to screw the government, business owners often find themselves on the short end of the stick; often in more ways than one.

Eliminate co-mingling of business and non business assets A common practice among closely held companies is to co-mingle non business assets and expenses with business assets and expenses. I have seen businesses owning motor coaches, boats and airplanes; all reported as business assets. The costs of maintaining and operating the assets were expensed as regular business operating expenses.

It is true that those businesses (not audited by the IRS) are saving a certain amount of income tax, and providing an extra “fringe” benefit for the owners of the company. Wise business owners should endeavor to separate non business assets from the business in the three to five years before a planned sale of the company. Doing so will make it much easier to accurately measure and reflect the true earning power of the business, as it will be unfettered by the capital investment in non business assets and the associated costs. Buyers of your business are generally purchasing future income and benefit streams that will be produced by your business. The leaner and more productive your business is—the more it is worth. It is never too early to begin segregating non business assets from your business, as it may take some planning and time. Do your own due diligence

Some executives of both public and private firms get a physical check-up once a year. Many of these same executives think nothing of having their personal investments reviewed at least once a year, if not more often. Yet, these same prudent executives never consider giving their company an annual physical, unless they are required to by company rules, regulations or some other necessary reason. Anyone interested in purchasing your business will perform “due diligence” procedures on your business before closing on the purchase. All too often, sellers are surprised at the skeletons purchasers can find in the closet. These skeletons can reduce the value of your company, and in some cases, kill any chance at closing a sale. What skeletons are your company’s closets?

Why not give your business a periodic physical? In essence, I am suggesting you would do well to treat your business as if someone else owned it—and you were the potential purchaser. What problems would you discover that could cause you and your advisors to reduce or withdraw your offer?

Spending the time and money to discover and fix your company’s problems now will pay huge dividends in the form of increased company value—which is exactly what you want when it’s time to sell.

Compliance with taxing and regulatory authorities Mountains of regulation often seem to impede a company’s growth and profitability. Some regulations might seem rather easy to “slight” or ignore.

Take for example one of my recent sellers who swore to me that the business had no regulatory violations of any type. I reminded the seller that anything “hidden in the closet” would most likely be discovered in a buyer’s due diligence (investigatory) process. “Nope—no problems of any kind” I was assured. Well, guess what the buyer’s due diligence turned up? Seems the seller had a couple of shipping/storage containers sitting behind the building—which the sellers KNEW were in violation of local zoning ordinances. How did they know? They had received four previous “reminders” from the trustees about the containers, and the need to remove them. “Why didn’t you mention that to me, or disclose that fact on your disclosure statement?” I asked. “Gee, nothing ever happened and the township never did anything—so we just figured it was no big deal.” Was the seller’s reasoning.

No big deal, except when the purchaser turned up the non compliance issue, it threw a few extra wrinkles into the mix. In that case, the issue was easily resolved (yet, much to the additional cost and chagrin of the sellers). But, sometimes known violations are not so easily remedied. In those instances, a seller runs the risk of blowing a good deal.

What’s the bottom line?

Clean up any tax, industry, OSHA, EPA or zoning issues with which your company does not comply.

Organize and keep records available. One never knows when opportunity might knock. If and when it does knock, will you be ready to strike while the iron is hot? How many times have you heard someone say something like, “I’d sell anything, including my business for the right price?”

Maybe you have even said it yourself. But would you know what paperwork and documents a serious buyer will immediately need in order to pursue the purchase? When a qualified buyer is ready to begin serious due diligence, they will need a variety of company documents.

Following is a partial list of things a buyer will ask for: • Three to five years income tax returns • Copies of one to three years quarterly payroll reports • Three to five years CPA prepared financial statements • Current year to date financial statements • Detailed depreciation schedules listing each fixed asset owned by your company • Corporate Minute Book with updated minutes • Recent aged accounts receivable trial balance • Recent aged accounts payable trial balance • Company organization chart • Copy of the Summary of Insurance Coverage (provided by your carrier) • Information about Employee Benefits provided by the company • Information about Employee Retirement Plans • Copies of labor contracts • Copies of other contracts to which the company is a party • Copies of licenses, registrations for patents, copyrights, trademarks, etc.

The foregoing list is an example of the types of records your company should have up to date and on hand at all times. These records are extremely important to speed the sales process along. Though this advice sounds basic, I often encounter companies whose records are not complete and up to date. This situation can dramatically affect a potential sale.

I suggest using a three ring binder to keep the basic updated records available at all times. This also makes other business needs for the documents much more manageable.

CONCLUSION

You can increase your wealth by knowing a few simple ground rules for successfully selling your business. Just like other owners of closely-held businesses, you know how to operate your business on a day to day, month to month and year to year basis. But your experience in running the business has not prepared you to know how to sell your business.

While the information I provided in this article is not all inclusive, it should help you get started in preparing your business for a successful sale—no mater when the business might be sold.



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Why Will the Government Offer Grants for Small Business?

Are you an entrepreneur that needs a business or small business grant? Are you motivated and skilled enough to begin your own small business? Do you need free money to start a small business but haven’t got a clue as to where to start? Look no further; there’s hope for your small business. As an enticement to small business owners, the government earmarks several million dollars in government grant money to assist small and personal businesses to flourish. There are millions that are unclaimed each year resulting from the lack of knowledge in regard to government grants. Thanks to Matthew Lesko, more knowledge has gotten out about how to get free government grants for small businesses, paying bills, college, etc. Matthew Lesko has written several books that educate individuals exactly like you on the way to receive a small business grant from the U.S. government. An average person may feel a little skeptical of any opportunity to get free money and may ask at least some of these questions: Is there really a catch to getting a small business grant? What exactly does the government get out of making an investment in small businesses? What can I do in order to obtain more general information and tips about small business grants?

It has been said that about 50% of all small businesses don’t make it beyond their first year. Why don’t small businesses succeed? Not enough funding and a lack of experience are a couple of the more customary reasons that small businesses aren’t going to make it beyond their first year. Why does the government give out small business grants to help entrepreneurs with startup costs if there is so much failure in small businesses? Why exactly does the government have such a high interest in small businesses? Small businesses likely represent ninety five percent of all employers in the United States. In addition, they contribute 50 percent of the gross domestic product of the country. Grants for small businesses are offered to business owners to promote economic improvement or growth. Three of four new American jobs are offered by small businesses.

The United States government doesn’t actually give out federal grant money to begin a small business. The Small Business Administration (SBA) is a Federal government agency that supports, protects the interests of, advocates, and provides resources small business concerns. The federal government has left it up to each individual state to appropriate funding by way of state grants to assist small businesses to thrive and grow. Small businesses are critical to the economic security of the U.S.. Keeping this in mind, the SBA has a mission to put money and time into helping entrepreneurs so they can start, grow, and develop their small businesses. Giving a support system to new businesses by awarding a small business grant is a small gesture when the economic development of the United States plays a role.

If you’re an entrepreneur, the U.S. government has small business grants so they can help your business to succeed. If you would like help finding more information about these small business grants, it would be a benefit to hear what Matthew Lesko has got to say about free money that might be available that could help your business to grow. His research shows that more than 1 million business owners receive small business grants each and every year. Grants like these may be available by way of the local government of your specific state. Keep in mind, that through assisting small businesses to develop and grow, the United States economy is going to grow and flourish as well. Small business grants are an incentive to business owners and to the economy of the nation as a whole. The more small businesses that are started, the more employment will also be created. In order to secure the advancement of small businesses, the government can help by providing small business grants as well as other resources that are necessary for small businesses to flourish.

About the Author: Find out about the best ways to get Small Business Grants! Matthew Lesko.com will show you ways to get available funding, regardless of your business’ income amount, credit rating or age! Look at this web site for a completely free preview: http://www.MatthewLesko.com now! For more information and tips about Small Business Grants, click here.



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Most business owners believe that an ‘external’ sale of their business is their only (or at least best) Exit Alternative. Typically this is because business owners know that their employees and/or fellow family members don’t have the type of money required to secure a successful exit plan for them. So often times, business owners approach (view or see) the topic of Exiting a business as meaning that they need to sell their business to an outside buyer with enough money to pay them what they want.

So while an ‘external’ sale is intuitively appealing, it’s my experience that an understanding of ‘internal’ transfers will help open up a very good dialogue with a business owner so that they can understand all their options and make a well informed decision. In fact, analysis of an ‘internal’ transfer of the business can be a powerful alternative to a business owner looking for an Exit Strategy. And, depending upon the business owner’s motives, it may be the best alternative available.

‘Internal’ transfers of ownership in a business are often times overlooked because they are not intuitively understood by the business owner and/or the business owner’s advisors. So let’s examine some of the ‘internal’ transfer methods that are available to a business owner to illustrate the benefit of a well-conceived Exit Strategy.

‘Internal’ transfer methods include Employee Stock Ownership Plans (ESOP) Transfers, Management Buyouts (Sales to Family and Management), Gifting Strategies, Private Annuities, Family Limited Partnerships, and Charitable Transfer Strategies. The three (3) primary differences between these ‘internal’ transfer alternatives versus (and the) ‘external’ transfer alternatives are:



(i) the corporate assets, including future cash flows, are leveraged to achieve these strategies;

(ii) the driving force behind these ‘engineered’ strategies is a business owner’s motive of passing the business to someone other than an outside buyer, and;

(iii) the business owners will frequently be considering tax planning and estate planning along with their Exit Strategies. ‘Internal’ transfers, as a general rule, allow for more flexibility in these areas than ‘external’ transfers.



A business owner considering an ‘internal’ transfer can set the price and terms for the transfer and say to their family and/or management team, “Here is what I want/need for my business”. For this reason, ‘internal’ transfers are often referred to as ‘controlled’ transactions because the business owner is working with ‘assets’ that they already possess in structuring their Exit from the business. So if those ‘assets’ are sufficient to achieve that business owners’ goals (based on their motives), then it is worthwhile to examine an ‘internal’ transfer.

This is in sharp contrast to a business owner attempting an ‘external’ transfer because they are often subject to a process that includes outsiders investigating their potential investment in the ‘Target Company’ and then telling the business owners, “Here is what we are willing to give you for your business”. So, the Exiting business owner can expect to lose quite a bit of control over the process. And, because many business owners possess a unique psychological mix of independence, intelligence and control orientation, losing control to an outside buyer often leads to ‘choppiness’ in a deal.

Mergers and Acquisitions professionals will often advise business owners that if the business owner wants to set the price for the deal, then the outside buyer will be setting the terms for the deal. A deal is struck when each party is ‘equally happy’. Or, as one dealmaker said, every successful ‘external’ deal is a “little miracle”.

So, one will naturally ask, “What’s the downside of an ‘internal’ transfer versus an ‘external’ transfer”? Quite simply, negotiating with family members and key employees can be inherently dangerous. These individuals (and their advisors) will require detailed and confidential information from the business owner in order to fully understand all the risks inherent in owning the business – really no different than the ‘external’ buyer. And of course, most business owners are not anxious to share all their information with their employees; it goes against the nature of the relationship amongst workers and owners.

So then, how does one go about negotiating an ‘internal’ transfer? The answer is “very carefully”. And, the most cautious first step that a business owner can take is to engage an intermediary – which can be any one of the existing advisors to that business – to assist with the transaction. Having trusted advisors involved in the process raises the level of objectivity and lowers the level of emotions when negotiating the transfer.

Because, after all, if the ‘internal’ transfer does not work out, it will not add a lot of Value to the business to have [further] frustrated employees due to that business owner’s own doing. It’s easier to place blame for a failed transaction with a third party advisor so that all parties involved can amicably return to the business of running [and not transferring] the business.

Yet another downside to an ‘internal’ transfer is the loss of potential for extraordinary gain on the transfer. As a general rule, ‘external’ buyers for businesses include ‘Strategic’ (or industry) buyers and ‘Financial’ (such as Private Equity Groups) buyers.

A Strategic Buyer of a business stands to offer the selling business owner the highest total Value in buying the business because that buyer can apply ‘synergies’ to the valuation of the deal. In other words, a buyer who is already in the same business as the seller, can eliminate duplicate expenses and acquire new customers for their existing products. These ‘synergies’ help raise the Value of the transaction to the Industry buyer, and a good M&A intermediary will argue for the sharing of those synergies with the selling business owner. This synergistic value is likely not available with an ‘internal’ transfer.

So to summarize my original point, a business owner who wants to Exit their business should be aware of the various methods by which an Exit can be directed. Thereafter, consideration should be given to that business owner’s motives. In other words, what is most important to that Exiting business owner and how can it best be accomplished?

An Exit Strategy is defined as ‘The written goals for the succession of a businesses’ ownership and control, derived from a well thought out and properly timed plan that considers all factors, all interested parties, and the personal goals of the owners in a manner and time period that is accommodative to the business, its shareholders, and potential buyers.’ Accordingly, knowing the pros and cons of ‘internal’ and ‘external’ transfers is a critical step in establishing an Exit Strategy.

Exit Strategies are hard to design and even harder to properly execute. I am pleased that you are pursuing a pro-active interest in Exit Strategies because a pro-active approach to an Exit Strategy is the only approach to a successful Exit Strategy.

© 2007 John M. Leonetti



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Small businesses form an important part of the UK economy, and indeed, of nearly every economy in any country around the world. Both self employed and small and medium sized business owners provide huge economic diversity and stability in the UK. It would not be over-stating the point to say that small and medium sized businesses are absolutely vital to the well being of the UK economy both now and in the future.

Many loans to small businesses are secured either by assets owned by the business itself or else by the owner of the business. When applying for small business loans many of the specifics will depend on the applicant’s ability to repay the loan, their credit history and also the viability of the business.

It is advantageous for the potential borrower to compare different lenders to see what options are available as it is sometimes possible to negotiate better terms. Also bear in mind that other factors will come into play such as the credit history or overall credit worthiness of the applicant. In additon any lenders will want to analyse trading accounts and any other financial information in support of the application. It is also worth bearing in mind that a poor credit history is not necessarily a barrier to obtaining finance at favorable terms.

These types of business loans are often necessary to meet the specific needs of the business. For example, when experiencing cash flow problems, or other short term needs of the business. At other times, business loans provide much needed capital to help with expansion plans and to assist with company growth.

The problem is that small business owners are very often pressed for time and shopping for the best loan and making contact with the most appropriate lender can be a time consuming and very often frustrating process. What often happens is that small businesses simply settle for less than favorable terms because they just don’t have the time to “shop around” However obtaining small business loans need not be time consuming or frustrating.

Importantly, small business loans can mean the difference between success and failure as far as the business is concerned and therefore, properly structured small business funding can make all the difference to the business and its capitalization and other funding needs.

Small business loans need not be “one size fits all” solutions, which can tend to be only partially successful in alleviating the financial pressures of the business. However, specialized brokers with long and extensive relationships with a variety of lenders are able to find the right lender with the right product that can offer businesses the best and most appropriate solution.

Any loan for a small business starts with the application. The application to the lender needs to be comprehensive, properly researched and provide full details about the business. This enables the lender to make a fully informed decision without delay and without the need to request additional information. Whilst many specialist brokers are able to do this, DIY Funding can do it at a fraction of the cost.

When applying online (http://www.diyfunding.co.uk) for a loan for a small business, DIY Funding provides the borrower with the DIY Funding Pack. This is a comprehensive pack of information which gives an inside track when applying for a business loan. Not only does the pack provide detailed help and guidelines on how to make an effective finance application, but it also puts the borrower in direct contact with key decision makers at many of the UK’s major lending institutions who specialise in the business finance sector.

The DIY Funding Pack which is a new and exclusive product, costs a fraction of the 1% charged by traditional brokers, saving the borrower many thousands of pounds. It also puts the small business owner in direct contact with the lender most likely to do their deal.

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The recession’s impact on personal credit cards has been well documented over the past few months – in fact the responsibility for the ‘credit crunch’ has been squarely laid at the feet of inappropriate credit lending by the banks. Many people are receiving letters from their credit card lenders informing them of an increase in interest rates as the lenders try to recoup some of the substantial losses incurred as the financial crisis deepens, but what effect has the general fiscal malaise had on business credit cards?

The economy still needs to operate to fight off the worsening financial picture, and businesses (particularly small businesses) will still need lines of credit. With the Bank of England base interest rate at a record low, business leaders are now calling on the government to cap interest rate charges on business credit cards to give them a little bit of breathing space. The government has consistently resisted the calls on the grounds that a cap could harm the consumers they are designed to protect by restricting access to credit and also reducing the transparency of charging structures.

Credit cards – particularly for small businesses – are an additional form of financial income, allowing short-term flexibility and playing a vital role in keeping other lines of credit open to a business. Using a business credit card can enable a small business to ensure that suppliers are paid on time whilst giving the business an interest-free period in which to bring in sufficient funds to pay off the credit card debt. Although this may sound like a case of robbing Peter to pay Paul, this financial juggling act is what keeps many businesses trading and can avoid them having to take out costly loans or charge-laden overdrafts. But as the recession really begins to bite, businesses may find that obtaining a business credit card in the first place becomes far more difficult.

The worst thing a budding entrepreneur can do is to use their own personal credit card to finance their business. This makes it very difficult to separate business and personal finances and makes the businessman personally responsible for the debt. Business credit cards also have similar offers to personal credit cards, including interest-free periods, balance transfer facilities and often additional perks as well. This makes them ideal for short term, small credit payments and for larger businesses it enables a number of employees to use the same facility through multiple card access. As the full effects of the recession begin to be felt, business credit card users may see some of these perks start to disappear as card issuers attempt to cut the costs of their cards and reduce their exposure to potential bad debt.

Some businesses are using business credit cards to pay their tax bill, which is tempting as it avoids any fines for late payment. However, HMRC has become more flexible as the recession showed that many businesses were struggling with their tax bills, and have introduced a deferred payment scheme. Before putting the tax bill on a business credit card it may be worth investigating this option first rather than incurring interest charges on the amount via the credit card.

As financial belts tighten, business credit cards may start to become more of a luxury rather than a necessity for many businesses. Although there are still plenty of opportunities for small businesses with a good credit record to take advantage of business credit cards, lenders will invariably be stricter in their acceptance criteria than during the credit boom of the eighties and nineties. Before applying for any form of credit it would be wise to take the time first to ensure that you meet all the requirements for acceptance, as repeated refusals will damage your credit rating further. Credit needs to be used wisely, and careful management of a business credit card is still a good option for small and medium size businesses that want an additional line of funding available to them for everyday use.



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British business has changed in the last few years, becoming part of the online revolution and the advent of E-business and Internet financial management. The high street has been the real victim in this groundshift towards more virtual business and despite the continuing worry about recession, financial downturns and the ongoing ‘credit crunch’ businesses have seen their markets expand globally, thanks to the relentless march of cyberspace. Banking hasn’t been left behind either, and it’s now rare to find any financial institution that doesn’t offer an online banking service. This can only be of benefit, both to customers and to businesses alike.

The original thinking behind online financial management was more environmentally altruistic, as it was seen as a means to remove the ‘paper-based’ system of old. The public was initially reluctant to become part of this revolution, their concerns fuelled by reports of identity theft, online credit card scams and other cybercrimes. Better security systems have replaced the first generation protocols and using the Internet is now a safe and secure method of managing your finances for both personal and business customers. Small and medium sized companies (SMEs) have particularly benefited from a more modern approach to doing business online.

Business credit cards have proven to be a perennially popular way of giving SMEs an additional source of funding, with 23%* of business owners using them to inject additional capital into their companies. The flexibility of an online credit card management strategy has made it even easier to keep a close eye on the day to day finances of a business, as online management gives a real-time snapshot of the company’s transactions and expenditure 24 hours a day, seven days a week. Traditionally, a business credit card user would have to wait for the monthly statement to assess how the cards were being used. If an overspend had occurred, it was too late to prevent it escalating. With online banking a card owner can put a stop to any overspend before it happens, making the overall financial position of the company that little bit more secure. This is particularly important where there are multiple users on a single account, and pre-set spending limits also makes this a more controllable system of financial management.

Using an online financial management system incorporating business credit cards can also give businesses an outline of their average expenditure as projected throughout the year. It means that if a business owner notices an increase in travel costs for example, restraints can be put in place to curb overspends before they occur. Some business credit cards offer ‘reward schemes’ as part of their package, and these can be utilised to make further savings for the business, particularly in travel and accommodation expenses. This ability to be able to not only control immediate spending but to forecast potential costs throughout the year can potentially prevent a company nose-diving towards collapse as a result of overspend.

Time management is a vital factor for any business, and online business credit card management can help here as well. The time spent gathering in and sorting through receipts and separate paper statements can cost a company money, especially if they employ an external accounting service. Online management gives a business owner the chance to stay on top of the paperwork quickly and easily, reducing the time (and money) spent on bookkeeping and other administration. A clear breakdown of any transactions can be printed out at any time. It also enables a business to keep a close eye on payments to suppliers, ensuring that deadlines on invoices are met and keeping vital lines of credit open to the business.

The evolution of E-business and its resultant online financial management systems is making the way UK PLC does business more dynamic and controllable. In a global marketplace that never sleeps, having access to your financial information at any time of the day or night could mean the difference between your business keeping up with competitors or going to the wall. Any weapon in such a competitive marketplace needs to be utilised, and online management of business credit cards can leave business owners with more time to focus on the important aspects of their business – bringing in new customers or developing new products or services. It also gives them the peace of mind that, at the click of a button, they are in complete control of their business finances.

* Figures published by the Federation of Small Businesses 2009 New Year Message



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A business credit card is essential for any business. If you have started a business of your own, you should look to establish credit in the name of the business. One way to do that is to apply for a credit card in the name of the business. This will not only enable your business to establish credit, but it will also help when it comes to separating business expenses from personal expenses. 

 

When you are looking for a business credit card, you will see that you have many choices. They include getting a rewards credit card for your business.  Many business owners feel that the rewards credit card is right for their business, especially those that offer frequent flyer miles or other perks that are related to business. If you use the business credit card for all of your purchases, you can then get some rewards that can be used for both, business or personal reasons. 

 

Another thing that you should look at when you are shopping for a business credit card is the annual fee. Many business credit cards charge an annual fee to keep the card. In some cases, the annual fee is well worth the low interest rate for the credit card and other perks it may offer. In other cases, the annual fee is not worth the money as you can get a better business credit card that offers you a lower rate and no annual fee. This is why it pays to shop around whenever you are looking for credit cards – both personal and business. 

 

Shopping for a business credit card can be a bit overwhelming, but does not have to be. You can use a site online that will tell you everything that you need to know about credit cards and offer you selections on business credit cards right on the site. The more you learn about the business credit card, the better your choice will be. By using an online site, you can go into the world of the different credit card choices and choose one based upon information that you glean on this site. This can make it easy for you to make such an important choice as to what business credit card you should use. 

 

Be sure to keep your finances separated when you are using credit cards for business and personal reasons and save all of your receipts as well as any business credit card statements. This will help you when it comes time to file your income taxes. Co-mingling of funds is a big no-no when you are in business, so having a business credit card is not only a way for your business to establish credit, but it can also help you avoid any problems with the IRS. 

 

Take a look online at the different credit cards offered by various companies and choose the perfect credit card that is right for your business. Be sure to use your business credit card for business purposes only and save receipts and statements.



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Among the so many varieties of credit cards, one of the most underestimated is the value of a business credit card. Many people do not choose to apply for a business credit card because aside from having a definite target market- the business owners or business executives-it seems to be complicated to use. Although a business credit card has more requirements and has higher interests compared to other types of credit cards there is, contrary to the common conception, t can be very helpful if used properly.

What is a business credit card?

Basically, business credit card is for the business people’s consumption. Compared to the regular credit card, a business credit card has a high limit plus low interest rates. Depending on the manner of choosing, a business credit card may also bring a lot of automatic benefits.

Since it is targeted towards businessmen or those people who are heading towards building a business, a business credit card can definitely benefit these small businesses. A business credit card helps the budding business by extending payments while improving the cash flow. Aside from bearing the image of a dependable credit card, business credit card boasts of having detailed reports and giving quality customer service as its major trademarks.

Aside from having limits and low interest rates, a business credit card provides many alternatives and numerous credit options for small businesses. A business credit card also caters to large corporations that are crafted to aid those people who are starting with their own business to grow while closely monitoring the baseline of credit.

Simplifying business credit cards

It really pays to go to the bank when one applies for a credit card to get the chance to answer all immediate inquiries. But since business credit card is for business people who are always on the go, many business credit card issuers offers online applications for business credit cards.  When one applies for a business credit card, there is no need to visit the bank. There is also no need to wait in the queue just to talk to a bank representative. When you apply business credit card online, all you have to do is to select the business credit card option that would perfectly suit your small business or corporate credit requirements right from the comforts of your home or office. Aside from offering safe, secured, and simple processes that are designed help you take care of your starting business, most business credit cards online offer accessible features for the convenience of the business credit card holder like the online payment and reporting. Customized company logos and access to instant cash are also available on line. Other business credit card online offers detailed reporting features for easy monitoring and access.

Most business credit card applications offer free fee for the first year and no pre-set spending limit or finance charges. Other business credit card offers viable membership rewards program that enables the member to earn points towards travel, merchandise and other rewards for his or her business. Some of these business credit cards offer small businesses a line of credit up to $100,000 at a competitive APR as low as prime + 1.99% for both cash and check purchases; 100% of the line is available as cash and no collateral is required. The business credit card holder or customer might receive fee-free checks as well as a card to access the account. Everyday savings or exclusive savings, express approvals, no annual fee, up to 5 percent rebates on all qualified purchases, and 0% introductory annual percentage rate (APR) on purchases during first half of the year of card membership are some of the great offers of most business credit cards.

Although majority of the business credit card issuers offer great value deals, it is very important to research first what does your business needs. Whether your business credit card is meant for investing in inventory or just for payroll, it is significant to look for a flexible business credit card that can handle almost anything. Whether you opt to go directly to the bank or apply for a business credit card online, a number of premier business credit card suppliers are there to help you find the right credit card product as easy and convenient as possible.

Among the so many varieties of credit cards, one of the most underestimated is the value of a business credit card. Many people do not choose to apply for a business credit card because aside from having a definite target market- the business owners or business executives-it seems to be complicated to use. Although a business credit card has more requirements and has higher interests compared to other types of credit cards there is, contrary to the common conception, t can be very helpful if used properly.

What is a business credit card?

Basically, business credit card is for the business people’s consumption. Compared to the regular credit card, a business credit card has a high limit plus low interest rates. Depending on the manner of choosing, a business credit card may also bring a lot of automatic benefits.

Since it is targeted towards businessmen or those people who are heading towards building a business, a business credit card can definitely benefit these small businesses. A business credit card helps the budding business by extending payments while improving the cash flow. Aside from bearing the image of a dependable credit card, business credit card boasts of having detailed reports and giving quality customer service as its major trademarks.

Aside from having limits and low interest rates, a business credit card provides many alternatives and numerous credit options for small businesses. A business credit card also caters to large corporations that are crafted to aid those people who are starting with their own business to grow while closely monitoring the baseline of credit.

Simplifying business credit cards

It really pays to go to the bank when one applies for a credit card to get the chance to answer all immediate inquiries. But since business credit card is for business people who are always on the go, many business credit card issuers offers online applications for business credit cards.  When one applies for a business credit card, there is no need to visit the bank. There is also no need to wait in the queue just to talk to a bank representative. When you apply business credit card online, all you have to do is to select the business credit card option that would perfectly suit your small business or corporate credit requirements right from the comforts of your home or office. Aside from offering safe, secured, and simple processes that are designed help you take care of your starting business, most business credit cards online offer accessible features for the convenience of the business credit card holder like the online payment and reporting. Customized company logos and access to instant cash are also available on line. Other business credit card online offers detailed reporting features for easy monitoring and access.

Most business credit card applications offer free fee for the first year and no pre-set spending limit or finance charges. Other business credit card offers viable membership rewards program that enables the member to earn points towards travel, merchandise and other rewards for his or her business. Some of these business credit cards offer small businesses a line of credit up to $100,000 at a competitive APR as low as prime + 1.99% for both cash and check purchases; 100% of the line is available as cash and no collateral is required. The business credit card holder or customer might receive fee-free checks as well as a card to access the account. Everyday savings or exclusive savings, express approvals, no annual fee, up to 5 percent rebates on all qualified purchases, and 0% introductory annual percentage rate (APR) on purchases during first half of the year of card membership are some of the great offers of most business credit cards.

Although majority of the business credit card issuers offer great value deals, it is very important to research first what does your business needs. Whether your business credit card is meant for investing in inventory or just for payroll, it is significant to look for a flexible business credit card that can handle almost anything. Whether you opt to go directly to the bank or apply for a business credit card online, a number of premier business credit card suppliers are there to help you find the right credit card product as easy and convenient as possible.



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