A Turnkey Business is a Good Thing

The Importance of Preparing Your Business for Sale Early.

Turnkey solutionI had lunch recently with a married couple who are of successful entrepreneurs. They have built a very nice business; it is profitable and well respected. It is a business that most of us would be proud to own. We were not meeting to determine if they were going to sell the business; they are years away from that. The purpose of the meeting was to learn what they need to be doing now, so that in 5 to 8 years their business will be ready for sale.

I wish more business owners thought this far ahead. Preparing your business for sale by operating it in a relatively turnkey manner is one of the most important things that a business owner can do. It makes the transition of ownership easier, increases the size of the pool of buyers and should make it more bankable. All of this should allow the owner to command a higher selling price. In addition to this, the day-to-day stresses on a business owner who operates a turnkey business should be less. After all, the people and processes for success are already in place and have been working.

The owners I had lunch with do not own a turnkey business. It still relies on both of them. One is the face of the operation; the other runs the back office. Since they are at least 5 years away from their anticipated selling time they have time to prepare. By meeting with a person who understands the business transfer process now, they can work to put the pieces in place for later.

Selling a business can be one on the most stressful processes that a business owner can be involved with. By preparing early, it may be possible to minimize these stresses and enhance your selling position. Waiting until the final days or for burn-out to set in is one of the biggest mistakes that a business owner can make. If you, a friend or a client own a business, there is no time like the present to find out what a professional thinks. Time spent can pay huge dividends later and make the journey that much more enjoyable.

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New Owner for Kansas Business

Change in Ownership at Kensington Lockers, Kensington Kansas

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The Exchanging of the Keys

Steve Fischer of VR Business Brokers in Wichita, Kansas, is proud to announce that Kensington Lockers in Kensington, Kansas, has new owners, Dylan and Deidra Tweedy of Kensington, Kansas.

A regional custom slaughterhouse and retail meat store, located approximately 220 miles north and west of Wichita, Kensington Lockers was reborn in 1976 by Wayne and Jolene Beckman. From an empty building to a perineal award winner, the Beckman’s have built the business into a regional institution. Dylan Tweedy and his wife, Deidra, will be the second owners of the business in its 40 year history.

Dylan, a Phillipsburg native, has a background with meat cutting experience. He will be working day-to-day in the operation, maintaining the established practices that have made the business a success. The Beckman’s have positioned the business well for sale and they should be able to transition the ownership seamlessly.

Our office was proud to work with Wayne and Jo during this process. It is not easy to build, operate and sell a business in a town of 450 people. They worked long and hard to reach this point.   In addition to working with the Beckman’s and Tweedy’s, our office was fortunate to be able to work with the accountants and attorneys for both parties, the bank, regulatory agencies, appraisers and inspectors to bring this transfer to a close. Over the course of the next several months, the Beckman’s will be working to transfer the recipes, expertise, knowledge and traditions that have made Kensington Lockers a success.

We would like to wish Wayne and Jo a long and happy retirement. We are also excited to watch the Tweedy’s as they embark on their new venture and wish them many, many years of success.

 

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Change in Ownership at Cero’s Candies in Wichita, Kansas

SOLD!Steve Fischer of VR Business Brokers in Wichita, Kansas is proud to share that Cero’s Candies in Wichita, Kansas has new owners, Betty and Carson Albrecht.

Under the guidance of Pam Bishop and her daughter, Darcy Thrasher, since 2010, Cero’s is the third oldest continuously operating business in Wichita.  Founded in 1885, the business has served the sweet tooth of local, regional and national chocolate aficionado’s for 130 years.  Betty and Carson will be the fourth owners of the business.

The Albrecht’s initially approached our office to acquire a business in 2014.  With a solid background in retail and food service, Cero’s is a great fit for Betty, who will be overseeing the day-to-day operations of the store.  She will be assisted at the store by her husband, Carson and two sons.  We are pleased to report that Cero’s will continue to be a truly family owned and operated business.  The Albrecht’s will be fantastic owners who will carry the Cero’s chocolate torch with pride.  We look forward to watching them as they embark in their new venture.

Our office was proud to work with Pam and Darcy when they originally acquired Cero’s.  We were even more proud to work with them, when personal circumstances necessitated that they sell.  The Bishops have worked hard to reach this point.  They will be working over the course of the next several months to transfer the recipes, expertise and traditions that have made Cero’s an institution.  We would like to wish Pam and Darcy well as they enter the next phases of their lives.

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May I capitalize on your emotions?

Emotion Wide Range Sadness Joy Surprise Anger Depression

Selling a business is one of the biggest decisions that a business owner will ever make. It is also one of the most emotional. Burn-out, pressure, greed, ego, unfamiliarity with the process all make a person emotionally vulnerable to a slick sales pitch, an all day seminar or a presentation where the goal is to get you to sign a listing agreement and possibly pay a big upfront fee.

Would a business broker capitalize on these emotions?

Have you ever been to a seminar where the end result was a high pressure attempt to get you to list your business for sale?

Have you ever been told exactly what you want to hear about a selling price for your business? Or better yet, it might be worth even more than you thought?

Have you ever been told how salable your business is, even when you know deep down inside that is it not?

Have you ever been asked for $8,000, $13,000, $30,000 or more to take your business to market?

It seems to me that there will always be someone in my profession willing to capitalize on your emotions. We need listings to make our websites look good or we want the opportunity to bind you to a long-term agreement where we can wear you down and sell your business for the price we should have started at. And if we are lucky, we will get you to pay a big up-front fee. This kind of makes sense, doesn’t it?

Not all business brokers are that way. A large portion subscribe to a high ethical standard. I am proud to call them my peers. There are others who just don’t know what they are doing (in my opinion). They think selling a business is just like selling a building, piece of real estate or any other inanimate object. And sadly, it seems that there are some whose primary objective is to collect a big fee upfront, sign you to a multi-year sales or marketing agreement, give you a couple of fancy books and do little else. These folks and the ones willing to capitalize on your emotions do exist. Sadly, I can give you the names of people who have met them.

What should you do?

  • Start the process early, months or years in advance. Don’t wait until your emotions will trump your logic. Learn in advance what a professional thinks so you won’t be vulnerable to a slick sales pitch.
  • Check references. Ask your attorney, accountant, banker, financial planner or a fellow business owner. Google the name of the person or firm followed by the word ‘scam’.
  • Ask about their accreditations, affiliations and experiences. Are they an active member of the International Business Brokers Association, are they a Certified Business Intermediary? Do they do anything to expand their knowledge base? Just because they work under a franchise logo does not mean the answer to these questions is yes.
  • Take your time. Never sign a listing agreement until you are sure. Take it home, talk to your spouse or advisors and think about it. Do not let yourself be pressured. Have you ever heard the expression, “he who speaks first loses”. Think about that when a business broker puts a listing agreement in front of you and shuts up.

The moral of this blog is: For every emotion you have about selling your business, there is a person willing to capitalize on it. Start the process early, take your time and do it right. You have worked long and hard building your business. You owe it to yourself, your family, your business and your employees to sell it right.

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If you want me to buy your business: Be honest with me (and yourself).

  If you want me to buy your business, I need to be able to trust you.  I need to know that the relationships, data and operations that you are sharing as I make my decision are true and sincere.  I need to trust that what you have shared with me is legitimate and correct, that you are a person of honesty and integrity.  If you are not, why should I assume that your business will be sound once I assume ownership?  The statement made famous by Ronald Reagan, “Trust and verify” applies in business transfers.          We call it “Due Diligence”.

Due diligence is the process where the buyer verifies the accuracy of the information that has been shared about your business.  It can include your financial, licenses, vendors, customers, leases, employees and inventory, to name some things. If the representations that you make in one part of your business are found to be less than honest, how can I feel good about the other parts of your operation?  I have found it is better to share the strengths and faults of a business right from the start.  This way there are no surprises.  There is no reason for a buyer to lose trust, to think of you as dishonest.

Most business owners are great people but we’ve heard the story about the guy with two sets of books or the owner who did not think it vital to share that he was getting ready to lose his biggest customer, his primary vendor was in receivership and his #1 employee is retiring in 3 months.  These stories should keep us all on our toes.  These owners really do exist.

There are very few perfect businesses for sale in today’s market.  We all have our faults.  It is OK to admit them.  As long as our faults do not include lies, fraud or intentional exclusions, a realistic buyer should understand.  That’s business.  When it looks like you tried to sneak something by a buyer, it changes their entire perspective of you and your business.  Why should the buyer proceed if they can’t trust you?  If they do, what concessions are you going to make to get them to feel good about your business?

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Business Broker Scam Check

Google the word scam

ItScam always disappoints me when I see or hear about a business owner getting into a relationship with a bad business broker.  These are usually long, painful, expensive and unproductive for the business owner.  It creates a lot of ill will towards my profession.

It is always good to do a little research on a business broker before signing a listing agreement.  Two quick and easy ways to research are:

  1. Ask for references (and check them)
  2. Google their name followed by the word “scam”

The later has proven to be very telling for me over the years.  People are quick to share when they have had a bad experience and the internet has a long memory.  It is not necessarily 100% accurate but it should raise some red flags.  If there is too much chatter a business owner should take heed.

The next time a business broker or firm calls you, send a letter or invites you to a seminar, try Googling their name, followed by the word ‘SCAM”.  Do this before you meet, you may be surprised what you find.

PS: Don’t ever sign a listing agreement or give them money on your very first meeting. (That is a topic for another blog)

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The Right Business Structure

What kind of business structure is right for you?

Corporation Word Cloud ConceptEvery business owner files a tax return.  How they do it and the way their business is structured for tax purposes can be very different. Should you be a Regular Corporation (C-Corp), Sub-Chapter S-Corporation, (S-Corp) a Limited Liability Corporation (LLC) or a Sole Proprietorship?  There is a justification for each.  It is up to you, your legal and accounting team to decide what works best for you.  The link below is to an article published on the Entrpreneur.com from Mark J. Kohler with excerpts from his book the Tax and Legal Playbook

http://www.entrepreneur.com/article/244190

If you are ever thinking about selling your business, please read one of my earlier blogs on C-Corps and Double Taxation.

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Double Taxation

Why are you a C-Corp?

Abstract word cloud for Double taxation with related tags and terms

 

Every business transfer that I have been involved with has had tax consequences for the seller.  No one likes to pay more than they have to and it is very frustrating to see a seller pay when they shouldn’t.   Specifically, I’m talking about businesses that are incorporated as C-Corps when they don’t need to be.   For those not sure what I’m talking about, when you sell your C-Corp, it gets taxed at regular corporate tax rates, you then have to pay personal taxes, again, on your income from the sale, double taxation.   In an LLC or S-Corp, the income from the sale passes thru to the seller and the initial round of taxes can be avoided.  

As a business broker, I see the effects on a seller when they realize a significant portion of the proceeds from the sale of their business is unnecessarily going to taxes.   It has caused some to pull out of transfers, revamp deal structures, change their post-sale plans and delayed the selling process completely.  It has led to some very frustrating discussions.

Most of the businesses where I see this are long established and the seller relied on the guidance of a trusted advisor or team to establish the corporate identity.  There may have been a good reason 20 – 30+ years ago to be a C-Corp but that reason may have disappeared.  The person who helped them set it up is either long retired or deceased.  The team changed but the Corporation continued on.   Since many small business owners only visit with their accountant during tax season, it is easy to see how the need to change this can be missed in the busy season.

It takes 10 years to completely convert from a regular Corporation (C-Corp) to a sub Chapter S Corporation (S-Corp).  Every business owner owes it to themselves to check with their qualified tax or accounting advisor to make sure their corporate structure is best suited for their current needs.  I have had professionals tell me ‘We should have changed this 10 years ago” or “We could not help this seller but I have another client that we were able to help.”  

It is very frustrating to have the double taxation talk.  Don’t let it happen to you, your friend or your client.

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Are you Burned Out?

When Monday is not fun anymore…….

Businessman totally desperatePeople ask me when they will know what it is time to see a business broker.  My first answer is always three to five years before you need us.  My second answer is “When Monday is not fun anymore.”

Burn-out is the number two reason that small business owners sell their business.  They have reached the point where the grind and challenges make the business a physical and mental drag.  Sadly in my world, many of them wait too long to see a person like me.  The sales and earnings of the business have begun to drop.  Customer service is no longer as important as it once was.  Employee performance has been allowed to diminish. Bad employees are tolerated because it is easier than firing them and starting over.  If you have waited until this point to see a business broker, you have probably cost yourself money on the selling price of your business.  When people buy “fixer-uppers” they generally do so at a discount.

It can be hard to realize that you are becoming burnt-out in your business.  It can be a gradual process that sneaks up on you until the damage is done.  One of the telltale signs we advise people to look for is “When Monday is not fun anymore”.

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Kansas Business has a New Owner

Change in Ownership at Mid-West Painting in Wichita, Kansas

SOLD!Steve Fischer of VR Business Brokers in Wichita, Kansas is proud to announce that Mid-West Painting in Wichita, Kansas has been acquired by BRACE Integrated Services, a BRACE Industrial Group company.

Founded in 1972, Mid-West Painting is a Wichita, Kansas based commercial and industrial painting company providing painting, wallcovering and epoxy floor services. With clients across the region and a strong presence in the aviation sector, the business was a great fit for BRACE.

Equity-owned, the BRACE Industrial Group of companies has a national and international presence providing diversified and integrated industrial services within the power generation, aviation, agriculture, maritime, commercial, petro-chemical and oil & gas markets.

Our office was proud to work with the seller on the preparation, selling and transition of his business. Mid-West Painting is a great addition for BRACE and we appreciated the opportunity to get to work with their team as well.   The additional services that BRACE offers should provide great opportunities for the employees and customers of the business.

We also would like to wish our seller well as he enters into his retirement.

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