Four Questions to Ask Yourself Before Purchasing a Business
Truly understanding a business is much like understanding the condition of a car. It is necessary for a skilled mechanic to “pop the hood” to access the true condition of a car. In much the same way, you and your team of experts need to “pop the hood” of the business in order to understand the business’s long-term health and viability. Here are four things to consider before signing on the dotted line.
Will You Enjoy the Work?
Owning a business, especially if you are planning on being an owner-operator, can be a demanding path. You will likely have to log many hours, especially in the beginning. For this reason, you’ll want to select a business that you will enjoy owning.
Life is too short to own a business that you would not want to be involved in. Importantly, if you do not like the business you own, the odds of facing burnout and losing interest are higher. It goes without saying that these kinds of obstacles can dramatically harm your business. Think long and hard before selecting a business to buy, as it is a decision that you will have to live with for years to come.
Did You Examine the Business Plan?
A second factor to consider is that there is no replacement for a good business plan. When you are considering buying a business, you’ll want to dive in and understand every aspect of the current owner’s business plan. If the business plan has major holes or just doesn’t seem to be adding up, you should move on.
Do You Understand the Financials?
Similar to understanding the particulars of a business’s business plan, it is also critical that you have a very precise and clear view of a business’s financials. You should look over everything from profit and loss statements to tax returns and more. It is a smart idea to consult your accountant and a brokerage professional regarding what financial documents you should review. Before you buy a business is the time to understand every small detail of a business’s financial health, not after.
How is the Business Performing?
A fourth factor to consider when evaluating a business is the business’s overall performance. It is possible for a business to have a good business plan (at least on paper) and strong financials and yet it could still have a less than stellar future. Oftentimes, the true health of a business lies beyond the business plan and the current financials.
You’ll need to know about a wide variety of factors including how vulnerable the business is to competition, changes in market forces, the status of key management and employees, the relationship with key suppliers and customers, and any pending litigation. When buying a business, you simply can’t afford to overlook any area.
If you keep an eye on these four key areas, and work closely with experienced professionals like business brokers or M&A advisors, your odds of finding the right business for you will skyrocket. Owning a business that you love will greatly increase your chances of success, so don’t underestimate the emotional factor in the equation.
Copyright: Business Brokerage Press, Inc.
Jirapong Manustrong/BigStock.com
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Take These Steps Before Buying a Business
If you’re buying a business, you might be feeling overwhelmed about all the details that are involved, especially if it’s your first business. Buying a business is certainly no small task, and that’s why you’ll want to dive into the process headfirst and make sure that you’ve carefully examined the business.
Here are some of the most important elements to consider. While some of these aspects don’t immediately come to buyer’s minds, they should be high on your list of considerations.
Legal Documents
Reviewing legal documents might not seem like the most enjoyable task, but this activity should be one of the first things you will want to do before buying a business. Most worthwhile businesses will have a long list of legal documents to show, ranging from documents showing trademarks and copyrights to consulting agreements.
Tax Documents
When it comes to paperwork, tax documents are obviously also a necessary element to review. Some things that you should be watching for are forms that do not adhere to the IRS rules. It goes without saying that you don’t want to be the one taking responsibility for a previous owner’s error.
Business & Retirement Documents
The list of documents you’ll want to review doesn’t end there, as you’ll also want to check into retirement documents such as balance sheets, investment statements, and income statements. You’ll want to ensure that all of the qualified and non-qualified retirement programs run by the business are up to date. You might need to check the parameters of the Department of Labor’s rules.
Work with a Business Brokerage Professional
Your business broker or M&A advisor will take you through the due diligence process to help you make sure that all aspects of the business have been reviewed thoroughly before you sign on the dotted line. Be sure to work with an experienced individual who is proactive when it comes to making sure all of your questions have been answered to your satisfaction.
The items on your to-do list might seem overwhelming at first, but remember that a lot of focus and effort now will save you a ton of hassles and issues later. And you might end up dodging a bullet by spotting a serious issue that causes you to change your mind about a business. Always be sure to protect yourself and your best interests.
Copyright: Business Brokerage Press, Inc.
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Difference Between an Asset Sale vs Business Sale
Ka-BOOM! That’s the sound of your mind about to explode with the revelations of what makes an asset sale different from a business sale.
You might be a small or medium-sized business owner in the St. Louis metropolitan area. Your business could be in St. Charles County, St. Louis City, St. Louis County, or even the Illinois side known as “Metro East.” Wherever you are, you might be mulling over whether to sell your business or just a part of it.
Whatever the reason, understanding the ins and outs of these two distinctly different paths (asset sale vs. business sale) can be a total game-changer. And the best part is: this unraveling of the asset sale vs. business sale conundrum is going to empower you to navigate the sale process with absolute confidence and savvy.
Let’s dive into the world of business sales, asset sales, and the magic that happens in between.
An Amicable Introduction to Asset Sales
So, what is an asset sale? Glad you asked.
Picture your business as a delicious St. Louis-style pizza. An asset sale is like selling off the individual ingredients like the fresh mozzarella, the tangy sauce, and the crispy crust, but not the secret recipe or the entire operation.
The assets you sell could be tangible, like your equipment, inventory, or real estate. They could also be intangible, such as your customer lists or intellectual property.
Each of these assets is like a piece of your business puzzle. By selling off these pieces, you can lighten your operational load or even get some quick cash influx.
Here’s a fun fact for you: The Metro East area of St. Louis, with its bustling business scene, is a hotbed for asset sales. Whether you’re looking to sell a well-loved pizza oven or a coveted customer list, there’s likely a buyer out there in Metro East willing to snap up your assets.
The Nitty-Gritty of Business Sales
Now, let’s flip the coin and explore the realm of business sales. Unlike an asset sale, selling your business means you’re selling the entire operation. It’s like selling not just the pizza ingredients but the secret recipe, the oven it was baked in, the restaurant it was served in, and even the sign on the front door.
In a business sale, the buyer acquires everything that your business encompasses: the business name, your customer list, your equipment, and more. They’re buying your entire operation, including your brand reputation and all the hard work you’ve put into building your business.
This can be a monumental decision, especially in the vibrant business landscape of St. Louis City and County, where your business might be a beloved local institution. It’s like passing on your legacy, your mark on the world, to a new owner who will hopefully carry on with the same passion and dedication as you have.
What Does This Mean for You?
Diving into the realm of buying and selling businesses, understanding the distinction between asset sales and business sales is like knowing the difference between a single slice of pizza and a whole pie.
An asset sale can provide you with a chance to streamline your business, focus on what you do best, and potentially keep more of your earnings. It’s like selling off excess dough and unused toppings to make your pizza operation more efficient.
If you’re operating in an area like St. Charles County, where business growth is booming, an asset sale might just be the smart move you’re looking for. It’s a strategic way to lighten the load while keeping your business running smoothly.
But what if you’re ready for a more significant change? That’s where a business sale comes into play.
This all-inclusive sale allows you to fully step away from the business and begin a new chapter, whether it’s retirement or a new entrepreneurial venture. It’s like closing down your pizza shop and handing over the keys to someone new, allowing you to focus on your next great idea. Franklin County, with its promising business atmosphere, could be an ideal place for such a transformative move.
Key Factors to Consider
Having covered the basics, you might be pondering which option aligns with your business goals. The answer, like a pizza with the perfect balance of cheese and sauce, depends on a few key factors.
Firstly, your future goals play a crucial role. Are you aiming for a relaxed retirement, or are you just interested in shedding some of your business assets to focus more on your core competencies? Your end-game vision should guide your decision.
Next, consider the current market conditions. In the St. Louis metropolitan area, are business sales thriving, or are asset sales more prevalent? The market climate can greatly influence which route is more profitable and feasible for you.
Lastly, the specific circumstances of your business cannot be overlooked. For example, if your business has a significant amount of debt, an asset sale could be a more practical choice. On the other hand, if your business is flourishing with a strong reputation and loyal customer base, a business sale could fetch you a more substantial price.
These considerations, among others, should be carefully evaluated as you weigh your options and prepare for your next big business move. And if you’re selling your business, you should always consider local and reputable brokerage services.
The Endgame: Asset Sale vs. Business Sale
As we bring this enlightening journey to a close, remember that whether you decide on an asset sale or a business sale, the choice is yours. No one can tell you which is best; only you can make that call.
So, whether you’re operating in the heart of St. Louis City or the thriving business scene of Metro East, arm yourself with this newfound understanding of the asset sale vs. business sale dichotomy.
Are you looking to sell your business in one of the areas we’ve mentioned in this article, or even further afield? If so, click here to learn how our experienced team at Fusion Business Services can help you do it well!
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Why You Should Address Your Company’s Weaknesses Head On
By spotting your company’s weaknesses you can take steps to remedy them and improve operations, however, this is only the beginning of the benefits derived from spotting these types of issues. You should be the world’s foremost expert on your company and the investment that it represents. Identifying and repairing any negative issues will pay dividends both today and potentially for the life of your company.
There are many areas of weakness that companies may experience. In this article, we’ll look at a few of the key areas that many share
Workforce Issues
An area of business weakness that is receiving a good deal of well-deserved attention in recent years are problems related to the workforce. Workforce headaches are varying between industries and sectors. It has been well documented that young people are not entering trades in the numbers needed to replace retiring workers. This is a fact that is causing significant headaches for many businesses. An aging workforce will impact some businesses more significantly than others. Understanding the labor situation as it pertains to your business is a critical move for any business owner.
Overreliance
Being overly reliant on any one supplier, customer, product line or even employee or group of employees, may have an impact on your business in a number of ways. Supply chain interruptions, disruption to income and cash flows, labor shortages and a diminishment in the perceived value of your business by future buyers are just a few of the issues you may encounter. Diversification isn’t just a smart way to handle one’s portfolio, but is also a smart way to address your business plan. If your business is overly reliant in any one area, it is a good idea to measure the risk vs. reward and seek out ways to diversify if necessary. Your business will be stronger and worth more in the end.
General Industry Decline
Nothing lasts forever. Once upon a time, the country’s landscape was littered with Blockbuster Videos, but today Blockbuster Video has joined the vast and great technological dinosaurs of the past.
There is no escaping the fact that industries change. Being on the tail end of that change without a transition plan to meet new and potentially more profitable opportunities is not a good place to be. One of your key jobs as a business owner is to identify issues and problems within your industry and adapt, ideally ahead of the competition. Part of this adaptation may ultimately include knowing when it is time to exit your business entirely.
Business brokers and M&A advisors specialize in helping business owners spot weaknesses and then strategize to make significant improvements. The world of business is changing and evolving faster than ever before. Engaging with experienced advisors who can help you navigate this flurry of ongoing change could spell the difference between success and failure; while greatly improving the value of your business, rewarding you handsomely in your retirement.
Copyright: Business Brokerage Press, Inc.
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Getting the Most out of a Partnership Agreement
As an entrepreneur and business owner, your partnership agreement stands as one of the most important business documents you will sign. Business structures can be as complicated as the people that create those businesses. Quite often, business owners create businesses with friends or loved ones and, as a result, will not have a proper partnership agreement in place.
It’s important to note that not having a partnership agreement in place is a mistake. There are too many unknowns and too many variables not to have this essential document. You need a legal framework to protect your business from the vast array of potential pitfalls that may have an impact.
The Key Elements of a Solid Partnership Agreement
At the top of the list of every partnership agreement is a clear outline and understanding of rights and responsibilities. All too often partnerships run into trouble as the rights and responsibilities of the parties aren’t clearly thought through and then outlined in a partnership agreement.
Mapping out rights and responsibilities will help eliminate problems in the future. A partnership agreement should be seen as a serious legal document. As such, it is prudent to work with an experienced lawyer in the area of partnership agreements.
What Every Partnership Agreement Should Address
At the top of the list, every partnership agreement should address how money is to be distributed and which partner(s) will receive a draw. The issue of who will contribute funds so that the business becomes operational should be very plainly spelled out in the partnership agreement. A failure to address this issue could end the business before it even gets off the ground.
Issues such as what percentage each partner will receive and who will be in charge are two additional key areas that should never be overlooked. In terms of issues that are frequently overlooked by those forming a partnership, it is common for those forming a partnership to overlook long-term issues such as what is to happen in the event of the death of a partner, what steps are to be taken to bring in a new partner, and how business decisions are made.
Without a solid partnership agreement in place, business owners may find themselves in the last place they want to be, namely, court. A lengthy court battle can weaken your business in a very wide range of ways including a hit to company morale as well as the loss of key customers and employees. A legal battle between business partners can destroy what would otherwise be a healthy and thriving business.
The time you invest in the creation of a business agreement is time and money well spent. In fact, it is safe to state that a business agreement might just turn out to be one of the greatest investments you ever make.
Copyright: Business Brokerage Press, Inc.
Jirapong Manustrong/BigStock.com
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