Earn Your Way Out
By Stuart Ward- Associate Advisor from Joplin
Tell the truth, Mr./Mrs./Ms. Business Owner. You really aren’t showing all income for your business on your tax returns. HORROR!
If you think you’re the first business owner who has revealed this to one of our Advisors, think again. It’s amazing how often this information is shared with us. Maybe that’s a testament to our trustability (is that a word?).
The problems this presents a business seller, besides loss of sleep, are many:
1) You can’t prove your business is worth what you think it’s worth.
2) You can’t prove your business is worth what you…..wait. I guess that’s THE problem, isn’t it. How can you convince a buyer to buy what you can’t prove? I know you’re a charming person and all, but the buyer wants a proven track record, and the only thing your signature is on that vouches for your financial performance is the tax return.
Enter the world of creative thinking. There is a procedure that may get you value that you’ve been “hiding” all these years: An “earnout”. This is a technique which pays the seller the value beyond the provable numbers by annual payments to the seller based on future financial performance. In this scenario the buyer pays the down payment and gets lending based on the provable cash flow and assets of the business. Then, the buyer pays annually to you the seller an agreed upon percentage of either the sales or profits of the business for a limited number of years.
Buyers may love earn outs because they spread some risk to the seller as to the true value of the business. It creates incentive for the seller AND key employees to remain in place. The due diligence process may also be shortened by it; what’s to prove?
Earnouts aren’t typical. And they have their pluses and minuses. Just consider it as a possible way to not leave your “invisible money” on the table. And since new ownership tends to see a business grow 15% to 20% anyway, it may create value beyond your dreams.
Give us a call and we can discuss how you can get paid for business value you can’t prove.
If you are a business owner and any of the following describe your state of mind, it may be time to call us at CBI-Sunbelt to discuss the sale of your business:
- 65 years or older
- No “exit” strategy (no adult children or employees to take over business
- Heatlh issues creeping up
- Burn out is seriously straining your marital relationship
- Just plain sick of doing the same thing
- Sales and profits are declining
- Access to capital is limiting your ability to maintain and/or grow your business
- You feel powerless
If any of these fit your profile, then it certainly is time to talk to one of our professional, trained intermediaries and at least explore your options in selling your business to a third party.
Don’t delay, start today by calling 877-582-5200 and we’ll set a time to stop by and confidentially visit with you about the process.
Or see our website at www.cbiteam.com and get some tips on preparing.
Don’t finish 2012 by exiting your business “feet first.”
Lindsay and Judy South had been trying for over two and half years to sell their successful, profitable health foods and supplements store in Heber Springs, Arkansas, a beautiful resort community on the shores of Greer’s Ferry Lake in central Arkansas.
Once CBI-Sunbelt of the Ozarks listed the business the buyer was identified in less than 12 months and closing took place Sunday, December 11th, 2011.
Mai and Kobie O’Neill of Florida saw the ad for the health food store on the Sunbelt website, made the inquiry and then traveled to Heber Springs as quickly as possible to begin due diligence on the store and meet Lindsay and Judy.
Things went well from there and all parties were exhausted but happy after the inventory and closing Sunday evening.
Lindsay said, “CBI-Sunbelt’s ability to help all of us over the problems and rough spots kept the deal going to closing.”
Lindsay, a native of Australia, and Judy, who is originally from Memphis, Tennessee plan on helping the new buyers, Mai and Kobie, get up to speed for the next 45 days and then the Souths plan on continuing to live in Heber and traveling more.
Mai and Kobie have children who are enrolled in Heber Springs schools. They have bought a home and are happily opening their store daily and excited about their future.
CBI-Sunbelt brokers were Connor Grimes and Bill Grimes. Pictured from left to right: Lindsay South, Judy South, Mai O’Neill, and Kobie O’Neill.
Dateline Phoenix
CBI-Sunbelt was represented at the International Business Brokers Association annual meeting in Phoenix by yours truly. There were business brokers and M&A specialists from all over the world and some exciting news if you are a business owner with a business that will sell for between $1 and $50 million….there are buyers out there for your business!! Pent up demand for good businesses has caused Private Equity Groups to be voracious to buy. If you’ve thought about ending 2011 by selling, now is the time to contact CBI-Sunbelt about a free consultation. Call for me, Carl Grimes, at 479-770-8989, and we’ll set a time for a confidential meeting.
Dateline Fort Smith
Small businesses inFort Smith are feeling the impact of the layoff of over 1,000 workers at the Whirlpool plant. While each of those employees is struggling to figure out how to make a living, there are also many privately held businesses in theRiverValleywho will feel the impact of the loss of a $54 million per year payroll. The Fort Smith Chamber of commerce has brought in a specialist to help businesses develop strategies to overcome this situation.
Dateline Arkansas
The Wicked Witch is Dead!! Business owners who are interested in selling their businesses and collecting an annuity can now get up to 15% interest for owner financing! Banks, auto dealers and almost everyone else has been able to collect higher interest but until just recently private note holders were limited to 2.5% over the Federal Discount Rate and that has made interest rates lower when seller financing is placed. Now the interest rate can be more competitive which should encourage sellers to consider more owner financing. Have you looked at the stock market and CD rates lately? Owner financing of 6-7% is very attractive!
Mom and Pop….Small Business Saturday
Every day they get up, open the store and go to work, paying taxes and providing jobs for communities across America.
That’s Mom and Pop, small business owners who are the backbone, heart and soul of the USA.
They need your support so buy something from them tomorrow, Saturday….which has been designated “Small Business Saturday.”
Mom and Pop….Small Business Saturday
Every day they get up, open the store and go to work, paying taxes and providing jobs for communities across America.
That’s Mom and Pop, small business owners who are the backbone, heart and soul of the USA.
They need your support so buy something from them tomorrow, Saturday….which has been designated “Small Business Saturday.”
Owner of Sunbelt of the Ozarks Named Board Chairman for XpandCRM
Way to Go, Carl!!
Atlanta, GA – XpandCRM announces Carl Grimes has agreed to serve the company as Chairman of the Board to ensure that all development activities are in keeping with serving the ever-changing needs of the greater franchise community.
Carl became one of the first franchisees of Sunbelt Business Advisors in 1995 and served as First Vice Chairman of the Board for Sunbelt from 2001 to 2006.
Before Carl Grimes founded CBI-Sunbelt Business Advisors of the Ozarks, he published an award-winning newspaper, built and operated a state-of-the-art cable television system, owned a real estate firm, a retail catalog sales business, and an abstract and title company. All of these businesses were successfully sold and led Mr. Grimes to the field of business brokerage. He received the designation of Certified Business Intermediary (CBI) from the International Business Brokers Association and that organization recently honored him by naming him a Fellow of the IBBA. Grimes and his family owns CBI-Sunbelt Business Advisors of the Ozarks in Fort Smith, AR, Joplin, AR, and Springfield, MO.
A graduate of the inaugural class of Leadership Fayetteville, a program conducted by the Fayetteville Chamber of Commerce, Carl has served as a city councilman, school board member, and a Chamber of Commerce president. A member of University Baptist Church in Fayetteville, Carl has also served as an elder, a deacon, and a Sunday School teacher.
Michael Auten, President, stated that “Having served as a franchisor CEO under the direction of Carl Grimes as First Vice Chair at Sunbelt, I have exceptional confidence in Carl to lead our management team to serve the franchise community with targeted solutions at an economically affordable price point with honesty and integrity. Carl and his family will continue to operate their Sunbelt/ CBI Team franchise on the XpandCRM private label platform (BRIM) while performing his oversight of the company’s vision and strategic direction.”
Each week, Sunbelt hosts an internet radio program in order to provide our franchisees and their clients with information about buying, selling, and managing privately-held businesses. The show, Entrepreneurial Insights, is broadcast every Friday at 2 p.m. Eastern, and is hosted by Pino Bacinello (Sunbelt office owner in Vancouver) and Matt Ottaway (Sunbelt’s President). Each episode features the insight of guests who are experts on the industry or topic discussed.
This week’s show
This Friday, November 11 at 2 p.m. (Eastern), Pino will discuss Cost Analysis and Reduction for Business Owners with Michael Webb, Managing Director, Expense Reductions Analysts. To listen to the live show at VoiceAmerica, the world leader in internet talk radio, click HERE. If you have a question for our hosts or guests, you can submit it in advance to insights@sunbeltnetwork.com; please identify the topic you are writing about in the subject line of the email. You can also call in during the broadcast hour by dialing (toll-free) 866-472-5790.
We closed the deal on Boar’s Nest inFayetteville! Stop by and say hello to the new owner, Michael McNamara. Last year, we sold Willy D’s Piano Bar inLittle Rockfor the same folks. Pictured from left to right: William Ray (seller), Michael McNamara (buyer), Will Houston (seller), and Don Ray (seller)
Sold! Midas of Fort Smith
This month Midas Auto Service Experts in Fort Smith, Arkansas, changes hands with the help from Dawayne Murdock, one of the business brokers for the CBI Sunbelt of the Ozarks Team.
Ron and Carol Filer have owned the franchise in Fort Smith since 1987. When Kevin Smith, the new owner, started looking into buying the business, he was impressed that the loyal, honest, and hardworking auto technicians employed by the Filers had over 40 years combined business.
Dateline Northwest Arkansas…
The $12 Trillion opportunity, no it’s not the opportunity wipe out the USA’s deficit…it’s the dollar value of the small businesses in American that will change hands in the next 10-12 years. Most of the wealth inAmericais held by small business owners who are getting older and facing retirement. The businesses must change hands or shut down if there is no successor in the family. The amount of equity in most small businesses is generally much more than a business owner realizes. However, it takes a CBI-Sunbelt pro to help unlock that value so the owner can retire and enjoy the fruits of all those years of labor. Watch the NW Arkansas Business Journal in the next month or so for more information on Wealth Management for the small business owner.
