Common Legal Mistakes That Sellers Make
Nothing strikes fear in the heart of a business owner like a legal mistake. The best way to ensure that you will avoid serious legal issues is to work with a trusted and experienced team. Otherwise, it’s easy to accidentally miss necessary steps.
When you’re selling a business, there are a lot of moving pieces, and that means that there are ample opportunities for things to go wrong. It’s always best to be prepared. When mistakes are made, it can not only mean a significant expenditure of your time, but also your money. These kinds of issues can also bring your sales process to a total halt and perhaps derail your deal completely.
There are more than a few sellers who overlooked the importance of working with an attorney. When you are selling a business, it should come as no surprise that there is a great deal of paperwork. Your attorney will guide you to make sure that all necessary preparations have been made from a legal perspective. When your prospective buyer sees that your legal “ducks are in a row,” he or she will feel more confident in your organization and level of professionalism.
One document that often is skipped is the Letter of Intent (LOI). Sellers assume that things will move along more quickly if they forego this document. Keep in mind that the LOI truly has its place in almost any deal. After all, it not only outlines both parties’ expectations in writing, it also works to protect your best interests. Once projective buyers have signed this document, it proves they are serious about the deal. That means it is not so easy for them to walk away without consequences.
What if your deal falls through completely? Will your buyer then reveal to the public that your business was for sale and even the potential terms that were on the table? This could indeed occur if you were not backed up by an NDA. Don’t skip this very important document either. Your business broker or M&A advisor will be very well acquainted with NDAs and guide you in the best way possible.
Warding off these kinds of issues is one great reason to be equipped with a small team of professionals to turn to for advice. This team should include your business broker or M&A advisor, accountant, and attorney.
Copyright: Business Brokerage Press, Inc.
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What Does the Road Ahead Look Like?
Each quarter, the Market Pulse Report issues a report revealing information about market conditions The report is supported by M&A Source and the International Business Brokers Association. The data that is analyzed is based on a comprehensive survey of business brokers and M&A advisors. The report focuses on Main Street businesses (with values up to $2MM) and the lower middle market (values between $2MM and $50MM.)
The research is conducted and then the report is published each quarter to reflect the state of the industry. In this article, we will look at some of the key takeaways of the report and what it reveals about the path ahead for buyers and sellers.
Tracking the Labor Shortage
For the second quarter, the report revealed a variety of interesting information. One massive data point from the report is that the labor shortage continues to be a significant variable for business owners. A staggering 92% of report respondents state that the labor shortage has negatively impacted their business with 54% stating that the shortage has had a “very negative impact” and 35% stating that the impact is “somewhat negative.”
Closing Times
The report further indicated that it is taking about seven months for a business to close. They noted that it takes about six months to a year to sell a well-priced business or a well benchmarked business. The report noted that approximately 60-120 days are spent in the due diligence or execution stage, once the letter of intent has been signed.
The Strongest Industries
In terms of what kinds of businesses are selling, the report points to restaurants making a solid comeback. It is interesting to note that restaurants valued from less than $500K to $1 million are enjoying a particularly strong rebound. Business services, personal services, construction and manufacturing remain steady.
In Summary
The latest Market Pulse Report is pointing in several directions. Currently, three factors are impacting business owners, namely, the labor shortage, inflation, and supply chain issues. Many businesses have had no choice but to give large raises to employees, and others have been able to pass the costs on to consumers and buyers.
Copyright: Business Brokerage Press, Inc.
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What Can A Business Broker Help You With In Regard To Your Small Business?
If you are thinking of selling your small business or buying a business in New York City, or if you are in the process of doing so, NYC business brokers can be a valuable asset. Business brokers specialize in helping owners sell their businesses, and they can provide a number of services that can make the process smoother and more successful.
Some of the things a business broker can help with include:
Determining the value of your business:
A business broker will use their experience and knowledge to determine the fair market value of your business, which is important in setting the asking price.
Two common methods used to determine the value of a business are the asset-based approach and the income approach. The asset-based approach simply adds up the value of all the assets owned by the business, including inventory, equipment, real estate, and intellectual property. The income approach focuses on the business’s ability to generate cash flow. This involves estimating the future earnings of the business and then discounting those earnings back to their present value. A business broker will use their experience and knowledge to select the approach that is most appropriate for your business and determine its fair market value. This is an important step in setting the asking price for your business.
Marketing your business:
A broker can help you create a marketing plan and implement it, reaching potential buyers that you may not be able to reach on your own.
Marketing your business is essential to its success. You need to create a plan that will reach potential customers and convince them to buy what you’re selling. But crafting an effective marketing strategy can be difficult, and reaching the right people can be even harder. That’s where a broker comes in. A broker can help you create a marketing plan and implement it, reaching potential buyers that you may not be able to reach on your own. They can also provide valuable insights and advice, helping you to tailor your message and maximize your chances of success. So if you’re serious about marketing your business, working with a broker is a smart choice.
Handling paperwork:
A broker can take care of all the paperwork involved in selling a business, which can be complex and time-consuming.
The paperwork includes the deed, title insurance, equipment lease, and other contracts. The broker will also prepare a package for the potential buyer that contains information about the business, such as the financial statements, tax returns, and profit and loss statements. handling all this paperwork can be daunting for a seller, but a broker can help to make the process go more smoothly.
A business broker can help you with the sale of your small business. Buy a business in NYC with business broker that will help you find a new small business. A business broker can help connect you with financing for your new or existing small businesses.
Conclusion
A business broker is a valuable resource when it comes time to sell your small business or purchase a new one. If you are in the market for either, be sure to contact a reputable and qualified broker who will work diligently on your behalf.
Whether you’re buying or selling a business, our long island business brokers and new york city business brokers can help to make the process smoother and more successful. With their experience and expertise, they can provide the guidance you need to navigate the complex world of business transactions.
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Storytelling and Its Role in Selling a Business
When it comes to selling a business, there is more to it than just relaying the facts. It’s also important to emphasize the story behind the business. Business brokers and M&A advisors are also storytellers, as they must convey to buyers the story behind the business and how it can ultimately be transformed.
It is through storytelling that humans organize the information they have about the world. In short, storytelling is an exceptional way to learn lessons in life and a great way to frame information about a business to sellers.
Telling Your Story
Everything begins with the financials, in short, the facts of the business. When a business broker or M&A advisor begins working with a seller, he or she will look to gather those details. Once that information has been gathered, it is possible to begin to create a story. That story can be presented in many ways, including through a confidential business review or confidential information memorandum.
While many, if not most, buyers and sellers may think that when it comes to business, they are cold and methodical like a reptile on the hunt, the truth is more complex. Human emotion always comes into play. It is no accident that well-crafted stories, with their power to motivate and guide, play a role in the art of buying and selling businesses.
Decisions are Guided by Emotion
If we want to make the best decisions, it is important to consider the role of emotions in our decision-making. “In order to have anything like a complete theory of human rationality, we have to understand what role emotion plays in it,” said scientist Herbert Simon who is an American Nobel Laureate. [1]
Good stories grab the imagination and enable people to expand their definition of what is and is not possible. When buyers are considering buying a business, it is important that they can picture themselves as being the hero that transforms that business and takes it to a new level. It is a story of evolution and reaching new heights while simultaneously achieving one’s own goals.
It is no accident that so many of today’s mass culture storytelling revolves around sequels. The notion that there is a “storytelling continuum” where a buyer can plug into something that already has a history can be a powerful motivating force. Most epic stories have the hero as part of some sort of continuum. In other words, the hero does not simply appear out of nothingness. It is the hero’s mission to transform the world, in some fashion, for the better.
Copyright: Business Brokerage Press, Inc.
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What Is The Right Way To Sell Your Business?
One of the most important things to keep in mind is that selling a business is very different from selling a product or service. Potential buyers are looking for a long-term investment, not just a one-time purchase. They’re also looking for a business that will provide them with a steady stream of income and growth potential. As such, it’s important to focus on the value of your business, not just the price. However, there are some general tips that can help you get the most out of working with a business brokers in New York City.
Find a third party business broker
Selling your business is a big decision. You’ve worked hard to build your business and now it’s time to move on to the next phase of your life. But, before you can do that, you need to find the right buyer who will pay you what your business is worth and treat it with the same level of care that you have. This is where a third-party business broker can be extremely helpful.
Make sure you are prepared
Before you even start talking to potential buyers, it is important to make sure that your business is in the best possible shape. This means putting together detailed financial statements, polishing up your marketing materials, and making sure that your operations are running smoothly.
Have realistic expectations
It is important to have realistic expectations about the sale of your business. Remember that a broker is not a magician and they cannot wave a wand and make your business worth more than it actually is.
Be flexible
When you are negotiating the sale of your business, it is important to be flexible. This means being willing to negotiate on price, terms, and other factors. If you are inflexible, you may find it difficult to sell your business.
Communicate with your broker
Communication is key when working with a broker. Make sure to keep them updated on any changes in your business, such as new contracts or significant changes in financial performance.
Be patient
Selling a business can be a long and difficult process. It is important to be patient and to trust that your broker is working hard to get you the best possible deal.
If you follow these tips, you will increase your chances of having a successful sale of your business. Working with a NYC business brokers can be a great way to maximize the value of your business and get it sold quickly.
Conclusion
If you are working with a top business brokers in NYC who understands your industry and what you have to offer in front of the right people. They should also be able to connect you with buyers who are interested in purchasing a business like yours. Don’t be afraid to ask questions and do your research before choosing a broker to help sell your business. Have you worked with a broker to sell your business? If no than contact us today to get the best price for your business.
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How to Transfer Your Business to a Family Member
Are you thinking of transferring your business to a family member? This occurrence is fairly common, especially among small businesses. Here are some considerations that will help with your planning and decision making.
Do You Have a Good Contract?
Sometimes close family members are tempted to skip a contract, but it’s always a mistake not to have things in writing. When you create a buy-sell agreement, it helps keep things clear between the parties involved. Make sure that your documentation is thorough. It should cover a wide variety of details including the amount being paid, your continued involvement, and the business value.
Does Your Family Member Need Financing?
When it comes to selling businesses to family members, seller financing is common. You could even consider agreeing to a private annuity. This will allow payments to be spread out over many years. One benefit to providing financing assistance is that you will receive a steady stream of income along with interest on the loan as well.
You could also consider a self-cancelling clause on your installment note. This would allow debt to attach to your will in case of your untimely passing before the payments were complete.
Are You Selling or Gifting Your Business?
Gifting a business takes place more often than you might think, due to the tax benefits involved. Also, when you gift a business, you can still maintain some level of control.
The federal gift tax exemption changes every year. In 2022, the annual gift tax exclusion is $16,000. The lifetime gift exemption limit is $12 million. While you may owe some federal gift taxes if the amounts exceed the exemption limits, the good news is that after you have transferred your business, any future growth of the business won’t affect your financials.
Is Everything Accurate?
Unfortunately, many business owners have acted unethically when it comes to transferring their business to their family members. As a result, the IRS tends to give this kind of transaction extra scrutiny. You will want to ensure that all your paperwork is in proper order and highly accurate.
You may very well want to hire the services of a lawyer and accountant to assist you with this matter. Of course, a business broker or M&A advisor will also help you with the details of this agreement and figuring out what benefits you and your family members.
Copyright: Business Brokerage Press, Inc.
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