The Biz blog» Entertainment

Keys to Selling Your Business

Kendric Foultz — Tue, 24 Jan 2012 23:23:51 +0000

Knowing what a business buyer wants is the key to selling your business and getting the best price for it. In this market climate, most buyers are looking for two things, a cash flowing business and a deal. Here are a few things that a business buyer is gong to want to know that will allow the buyer to asses the situation and determine if yours is the right business for them.

• Is the business currently producing an income for the owner?
• Is the business seller retiring and fully funded his or her retirement plans? • Does the sale of the business only represent a small part of the retirement portfolio?
• Is the business debt free?
• Do the financials show that the depreciation schedules are completely exhausted?

Affirmative answers to these questions tell the business buyer that the business is making enough money for their needs and you are indeed in a financial position to sell your business and sell it within the constraints of the marketplace.

Another thing that a buyer is going to want to know about is your plan for the future. Nobody wants to get to the closing table only to have the owner decide that he or she wants to keep the business. Equally, nobody wants to buy a business only to find out that you’re going to open a competing business. This is why buyers like sellers that are clearly of retirement age and means. If your business is complex or highly personal in nature, a buyer may require that you stay involved in the business for a period of time to provide a seamless transition. If you have dreams of selling your business and moving to the Caribbean, this might be achievable. You may only have to adjust your time line a bit.

Now that you know some of the keys to attracting a buyer for your business, the next step is to find the right buyer for your business. To do that you’re going to want someone to help you who understands business buyers.

Kendric Foultz is a certified business broker with decades of experience in deal making and working with business buyers and sellers. Feel free to give him a call regarding your business related issues at 310-968-2369.

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Selling a Small Business as a Short Sale

Shelli Margolin — Tue, 06 Dec 2011 01:23:35 +0000

Drowning in business debt!?! Even when a company’s sales start increasing, debt can eat away at the profits…

More and more small business owners are finding that profits are going to servicing their debt and keeping their business operational. In such cases, an option is to sell the business through a short sale. Especially if a business owner is burnt-out, looking at shuttering the business and declaring bankruptcy.

Declaring bankruptcy is different as a small business owner. It’s not just an anonymous bank or bureaucratic phone company that is owed money; it’s often suppliers and vendors with whom there are long-term personal relationships. And often, friends and family have invested in the business or lent large sums of money to help keep the business afloat.

A short sale can provide creditors at least a portion of the funds owed to them, while alleviating the small business owner of having a bankruptcy tied to their name and credit. It can also save the jobs of the employees.

Special note for franchise owners – If the business is under a franchise agreement and the franchise payments are grossly in arrears, there is a chance the franchisor can take back the business, leaving the owner without a business and still holding all the debt. It is in the interest of the franchisor for the business to sell and bring in a new owner who will start paying royalties.

How it works –

An experienced and competent business broker will package the business based upon its net profit and assets. The debt and other non-operational expenses will be added back to the net profit and an industry appropriate multiple will be determined. If the business sells for less than what is owed, it is a Short Sale. If it sells for more than what is owed, the owner will receive whatever is left over after all the debt is paid.

In a normal sale, an escrow is used primarily to protect the buyer from successor liability – any debt attached to the business. In a short sale, the escrow process also aids the seller in settling the business’s debt.

Once all the debt is established, the escrow officer will prepare a seller’s estimated statement reflecting all secured and unsecured debt. Secured debt includes tax liabilities, private liens, judgments, etc. Unsecured debt includes private loans. If the sale price covers all the secured debt, the remaining funds are distributed pro rata to the unsecured creditors. If the sale price doesn’t cover all the secured debt, remaining funds are distributed pro rata to the secured creditors.

All creditors will need to agree on the payout in order to close the deal. Since the alternative is usually bankruptcy for a small business owner, creditors would prefer to receive something rather than nothing. Thus, they generally will agree to the pro rata payout.

Although short sales are messier than regular business transfers, they are a win-win for the buyer, the seller and the creditors. The buyer gets a good deal on the business; the seller avoids bankruptcy and is alleviated of their debt while their creditors get something rather than nothing.

Enlist an experienced business broker. They can help you overcome most obstacles and discreetly bring you qualified buyers. We currently have over 3,000 buyers in our database alone. For a free consultation, please don’t hesitate to call me. Shelli Margolin-Mayer, Business Broker: (310) 882-2200 ext. 128. I’m happy to help.

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Why isn’t my business selling?

Kendric Foultz — Fri, 21 Oct 2011 15:37:24 +0000

Almost nothing is as upsetting to a business owner than listing their business for sale and then having it sit on the market for months with no activity on it! “What is wrong, why haven’t you sold my business” you ask the business broker. The answer might be complex or very simple. The best thing to do as a business seller is to ask yourself a basic question. “Does this offering make sense? Would I buy my own business as presented?”

Put yourself in the Buyer’s shoes and price your business accordingly. First of all the asking price and terms have to make financial sense relative to the historical earnings of the business along with future positive outlook for the business and its industry. In a great many cases, it’s the asking price that is preventing the sale. Next take a look at the terms. If the business has been approved for SBA financing then terms shouldn’t be a problem. If the sale doesn’t qualify for outside financing and the seller wants more than 50% down payment then you are likely to have a problem. Ask the business broker to show how the business would cash flow for a new owner.

Goodwill will likely be the most valuable element of your business. A credible Confidential Business Review will substantiate the value to a Buyer and increase the likelihood of getting a reasonable offer. Make sure that the business broker has been able to create a Confidential Business Review of the business that paints an accurate picture of what is going on with your operation. There should not be any significant gaps that would cause a serious buyer to wonder why relevant information is not included. That is one of the best ways to turn off a good buyer. While no two businesses are exactly the same, they do share many common elements and the buyers want to compare these elements from business to business.

Finally, make sure you’re getting the word out to the right buyer. Have a complete understanding of what the business broker is doing to market your business. Sometimes an owner will know of something that would help the marketing efforts of the broker and should let the broker know right away. This might be something like a particular trade journal or industry conference. Don’t forget that this is a team effort.

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Selling a business in the media, entertainment, creative, film and TV industries? 10 Things to Consider

Stuart Gross — Tue, 06 Sep 2011 20:03:52 +0000

Are you the owner of a small or medium-size
business in the creative of media industry who dreams of “getting
out” and retiring, writing a memoir, or simply getting away
from it all? Thinking about selling your business? In today’s economic
climate, selling your media or creative business can be a
complicated and daunting experience.
The skills and knowledge you acquired by running a successful
business are not necessarily the same skills you will need to sell it.
Here are 10 things to consider:
1. Am I REALLY ready to sell my business? One of the most
important questions a buyer has is, “Why are you selling?”
Selling your company is a life-changing event, with both
positive and negative effects on your financial condition.
Your mental and physical health may also be affected. You
need to know if you will have enough money, moving forward,
to live the way you choose. It is a very big decision. …And you
need to be able to answer the question for potential buyers as
well as for yourself.
2. Can I sell my business to a new owner? Is it transferable?
If I go, can someone else take my place? It’s not just your
creative skills that may need to be transferred; it is also the
relationships that mean business for your business. Can a
new buyer do what you do and maintain and attract business?
You may need to stay on board for a while to make a transition
work properly. Sometimes the choice to stay on helps you to
build the financial base you will eventually need to retire.
3. What effect will the process have on my clients, my employees,
and my daily operations? There are some real challenges
in the process of selling a business. It is important to keep
your confidential information from the public. You must make
sure that the impending sale does not create concern and
problems with your employees and your clients. Your relationship
with your landlord, if you have one, needs to be
handled with care. During the process of meeting, qualifying
and negotiating with buyers and the complexities of a sale,
you must still be able to keep your focus on the continuing
operation of running your business.
4. What is my business really worth? Valuation of a creative/
media/entertainment business is based on several key factors:
A. How much money can a buyer expect to earn after
taking over?
B. What are the barriers to entry that might stop the buyer
from starting his own similar company?
C. What is the value of your assets, equipment, inventory,
improvements etc.?
D. What are the risks and growth opportunities of
the business?
For businesses under $10 million, the multiple of earnings
method is the most common basis. The adjusted earnings of
the business is multiplied by a general index for that industry
and type of business, and then adjusted by financing issues,
growth potential, inventory, asset value, etc. A well-priced
business is critical to buyer attraction and critical for the
seller in getting the value he has built.
5. Should I use a broker? Once you decide to sell the business,
whether or not you use a business broker should be a priority
consideration. In the media related and creative businesses,
any representative you choose must have industry experience.
A great deal of knowledge, work and time goes into valuing,
promoting, marketing, qualifying buyers, negotiating, financing,
completing a transaction and effectively transferring the
operation of a business.
A broker who understands, or has been in your industry will
realize that they are seeking a truly special kind of buyer.
He should have the ability to find and attract that buyer. A
broker who is active in the industry will already be working
with active buyers and can identify potential strategic buyers
for the business.
Well marketed, priced and negotiated deals may often net
the seller more than if he pursued and arranged for the company’s
sale by himself.
6. What kind of buyer is capable of taking over this business?
Ideally, you want a buyer who is genuinely interested in this
business, one who has the skills necessary to run it, and the
financial wherewithal to make this purchase.
Because the “right buyer” at the right price will sometimes be
a one of a kind find, you must be prepared with all of the information
that a qualified buyer will demand. The good buyer
will be asking lots of questions – this is perfectly normal and
necessary. The “right buyer” will respect your confidentiality,
and will agree to sign a “Non-Disclosure Agreement.” However,
the “unqualified buyer” can become a very expensive waste
of time.
7. How do I market the business? The first thing to be done
is to compile a complete information package, which should
include the history of the business, description of the industry,
competition, clientele, marketing, opportunities/threats, products
and services, etc. It should also include at least three
years of financial information and analysis of discretionary
earnings, equipment and inventory.
The normal process for marketing a business is to post it for
sale on the plethora of listing sites on the Internet, to contact
known buyers interested in this kind of business, or to go
directly to targeted strategic buyers who may include competitors,
related businesses or aggregators in that industry.
8. How do I make a deal? These negotiations are based on a
balance between the buyer’s perceived value of the business,
(his or her potential, earnings, ROI, future value, the ability to
pay for the business or operate the business, earning a living
wage and paying off financing if any) and the seller’s perceived
value (does the purchase price replace my salary, is it
enough to give up a business I have built, is it worth more to
the buyer than it is to me?)
Negotiations require objectivity, an understanding of your own
valuation and a willingness to structure a win/win situation.
Often third parties such as business brokers can take the
emotional spin out of the deal making.
9. What about financing? A business acquisition can be done
in any combination of cash, seller financing, bank financing,
earn outs, etc. Earn outs are typical in deals where the seller
and buyer need to cooperate to make the future earnings
happen.
10. Structuring the ACTUAL SALE. How does the seller go about
with the transfer of the business assets, including inventory,
equipment, goodwill, intellectual property, brand equity, customer
data bases, etc., into a new or existing entity for the
buyer? There are many ways to accomplish the actual sale,
but for most small and medium sized businesses the process
can be done in California through an Asset Purchase Agreement.
As such, all of the assets are transferred to the buyer
in an escrow process, which is usually as manageable as the
sale of a home. If you need to sell the actual entity as in a
stock sale, you will need quite a bit more guidance.
The sale of your business, especially one that you have built and
run for a long time, is a life-changing event. The business is
usually the most valuable thing the seller owns. The purchaser
is often using his life savings or leveraging his possessions to
make this happen. This is serious business and should be given
its due care and consideration. You need to be guided by your
trusted advisors and be prepared for all of the exigencies of the
process. At best, it can be the financial realization of a life’s work.
____
Stuart Gross is a media business sales
& acquisitions expert with more than 30
years of experience in business, film and
television production, entertainment, and
media. As founder of Harmony Pictures,
Gross executed one of the industry’s
first IPOs for a television commercial
production company.
He can be contacted at sgross@bizex.net. 310 882 2200 Ext.118

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Jered Chapman joins BizEx Business Brokers in Marina Del Rey

Jered Chapman — Tue, 28 Jun 2011 18:02:44 +0000

MARINA DEL REY, CALIFORNIA (June 21, 2011) – BizEx is pleased to announce that it recently welcomed Jered Chapman as the newest member of its team of business brokers.

Jered brings years of business experience to BizEx. Following a successful career as a college coach, he began overseeing operations and consulting with various companies and organizations in Philadelphia and Los Angeles. He has worked with business owners in various industries, including restaurants, night clubs, health clubs, sports apparel retail, graphic design, and distribution centers. Jered’s background emphasizes his knowledge in business development, operations management, and consulting. He is a skilled communicator and project manager, helping clients understand the business selling and buying process.

As a BizEx Business Broker, Jered provides all relevant services business owners and business buyers require to be successful in the buying and selling of a business including: valuing businesses, marketing and listing businesses for sale, the creation of Confidential Business Reviews, pre-qualification of businesses for SBA business acquisition loans, working with Buyers to identify acquisition targets in relevant industries and facilitating transactions.

BizEx is a Los Angeles Business Broker providing M&A Quality Services for Small Business Owners. We leverage our Technology and Expertise to Simplify & Expedite the Buying and Selling of Businesses. In the buy sell business transaction, matching the right Buyer with the right Business is how we define success.

“We are happy to welcome Jered Champan to the BizEx team. Jered brings prior Business Brokerage experience and excels in the project management, coaching, and communications elements of the transaction, which are core qualities of service in the business sales industry.” –Michael S. Davidson, founder of BizEx

“I selected BizEx after having worked with other brokerages in the past. I can aptly say that Michael Davidson brings professionalism that no other brokerage I have encountered can rival. His sophisticated and comprehensive approach to the business sale and acquisition process allows brokers the resources to spend more time assisting our clients. I am excited and honored to join Michael and the impressive group at BizEx.” –Jered Chapman, Business Broker

Jered’s profile can be read at http://www.bizex.net/business-broker/jered-chapman. He can be reached by email at jchapman@bizex.net or by phone at 310-882-2200 Ext. 129.

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5 Essential Items to Sell Your Business Quickly

Dan Munter — Thu, 03 Jun 2010 19:34:22 +0000

As a business broker and as a former business owner, I know that the decision to sell a business is not easy. But once it is made, I know that usually the seller wants to sell it as soon as possible.
I always tell a seller to pretend that they are the buyer looking at buying their business. What would they need to see to decide to buy the business? From my experience and my logic, I have come up with a list of 5 items that really facilitate the selling process.
1) Have credible P&Ls for the past 3 years.
2) Have financial records to verify the value of the inventory and FF&E
3) Make sure that the key employees will stay employed
4) Make sure that the landlord is willing to lease for reasonable terms
5) Make sure that the key customers will continue to buy services or products.
There are of course other items that are necessary. However, if a seller can provide the 5 items mentioned above, not only will it be easier to find a buyer, but it will make the due diligence process go much quicker.
Blog by Dan Munter, a business broker with BizEx. I can be reached at 310-882-2200 ext. 121 or www.bizex.net

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Selling Your Small Business? What Makes a Good Buyer?

Stuart Gross — Tue, 20 Apr 2010 17:58:01 +0000

Anyone who has ever sold a business knows that attracting interested and qualified buyers is the name of the game. When a buyer has inquired about your business for sale they will have questions about the business and how it runs. You or your broker should answer those questions and interview the buyer. You want a buyer who is genuinely interested in this business, one who has the skills necessary to run the business, and the financial wherewithal to make this purchase. Your questions and the buyer’s answers must resolve these issues. If you do not know about your buyer you are likely to waste a lot of time and take your eye off of running your business and finding the right buyer.

There are many nightmares that the wrong buyer can cause:

Fear and concern among your employees: Buyers often stop by your business and the wrong buyer will talk to your employees, and accidentally alert them that you are selling the business. This invariably causes fear and concern from your people. Often employees start looking for a job when they know the business is for sale even though they would likely have a job with the new owner.
The release of confidential information: The wrong buyer might talk to your competitors and perhaps even share your confidential or financial information with them.
A very expensive waste of time: The worst of all is having your business essentially off of the market for several months while you are working with them on due diligence and find you have lost all that time and opportunity because they can’t or won’t complete the transaction.

Your plans to move to Montana or to buy that other business are shattered.

The good buyer:

Will be asking lots of questions which are perfectly normal and necessary. You need to engage the buyer in conversation. If the buyer is not willing to answer your questions it is likely that they are not genuinely interested and/or qualified
Will agree to sign a “Non Disclosure Agreement.” Before you move beyond the general information about your business to the more confidential and financial information, Again, authentic buyers will be willing to do this. Your broker will have the appropriate form
Will respect your confidentiality
Will be as honest with you as he expects you to be with him

At the risk of repeating myself;

genuine interest in your business
the skills to operate it effectively
and the financial resources to make the purchase

These are the key characteristics of a good buyer for your business. If they do not have these traits, they may cause many problems; they are probably not your buyer and are likely to be a waste of your time.

When you do find a qualified buyer who has taken serous interest, you should be forthcoming and as helpful as you can be to help move the process forward. In most cases you will have some financial interest in his success.

A good Business Broker is experienced in handling buyers and eliminating some of these nightmares. The broker can help make a fair deal for both of you, guide you through the complicated process and help create successful transition for the buyer too run his or her new business. The best deal is one that works for everyone.

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Selling a business in the media, entertainment, film and TV industries?

Stuart Gross — Tue, 16 Mar 2010 18:28:20 +0000

The first thing to consider when deciding to sell your business in media and entertainment (or any of the many creative business sectors including advertising, graphic, communications, branding and even consulting) is transferability. And it’s not just the creative skills that may need to be transferred, it is also the relationships that mean business to your business. Can a new buyer learn to do what you do and maintain and attract business? If you conclude that your business is transferable you need to have solutions to some key issues.

What kind of buyer is capable of taking over this business?
Where will I find this buyer?
Will my key people stay on?
How will I handle my clients in transition?
How long should I stay on to make an effective transfer?
Should I work with a broker?
How do I make a deal?
How will the buyer finance the acquisition?
Am I really ready to move on from my business?

If you sell your business to someone else what will they have left when you leave? In some cases it is possible to transfer most of the company based on the buyer’s skill sets and connections. Sometimes it is an individual inside the operation and most often it is someone who has been working in a similar line and wants to become an owner and entrepreneur. Occasionally it is a strategic buyer who is in a similar field and wants to grow by acquisition.

If you are selling your business and choose to stay on board for a year or more, then you have to adjust your expectations of income. You can’t sell someone your business and then take home all of the profits.

If you are working with a broker who understands or has been in your industry they will know that they are seeking a special kind of buyer. If your broker knows the industry he should know how to find and attract that buyer. You will need to go beyond the standard methodologies of listing and brokering businesses. You have to find this kind of buyer where they live professionally.

The right deal happens when you find a buyer who can sustain the business, and even better, expand it. The best deal is one that works for both sides.

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