7 Tips to Finding The Best Business Broker

1. Evaluate Their Track Record
2. Understand Their Role & Expertise
3. Assess Their Marketing Strategies
4. Evaluate Their Communication Skills
5. Understand Their Fee Structure
6. Ask About Their Brokerage
7. Evaluate Their Professionalism and Integrity

The post 7 Tips to Finding The Best Business Broker first appeared on Alpine Business Brokers.

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The post What is a business broker? first appeared on Alpine Business Brokers.

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NEARLY 1 IN 5 BUSINESSES IS FOR SALE – AND BUYERS ARE LOOKING FOR A BUSINESS OWNERS’ LIFESTYLE.

Utah Valley Business Quarterly – Spring 2004

Ginger Woolley opened her Adventure Time day-care business in 1985 with 15 children in her care. For the next 18 years, she welcomed more children into her arms and grew to care for 150 children daily. Her staff grew to 50, and she landed contracts to operate programs in public schools and government facilities.

After 18 exhausting and fulfilling years, she hesitantly began thinking of selling. Her parents were needing more assistance, and at age 51 she began facing her own health problems. She talked to several business brokers and decided to list her business with Alpine Business Brokers,

“Within a week of posting my business for sale on the internet, I had four potential buyers,” Woolley says. “I was able to choose somebody out of those four potential buyers who would honor the kind of quality that we had built and someone who wanted to keep me in the picture as a consultant.”

Woolley, of Provo, ended up getting her asking price, but more importantly to her, she got someone who would continue to provide good care for children. “It helps me feel that I didn’t totally turn my baby up for adoption — it was an open adoption.” She says. “When you birth a business, and then raise it through its preschool, toddler and school years, it would be sad to see it go downhill.”

The sale of Adventure Time went through in August of 2003, and Woolley says the process included more variables than she expected. “For example, finding a stopping point for my payables and receivables,” she says. “In the end, all potential grievances were eliminated by clear accounting of what monies go to whom.”

Woolley’s positive experience was based largely on how she entered the process. “She had realistic expectations about her business,” says Neal Westwood, business broker with Alpine Business Brokers.

SELLING A BUSINESS

Bad days often prompt business owners to threaten to sell the business. But they should also think about selling on good days. the best time to sell your business is at the peak. Westwood says, Although this can be difficult to determine, the right time to sell is when momentum is building.

Although Selling a business has obvious benefits, Westwood says he is surprised at how many business owners close their businesses and walk away when they are ready to retired. “We find that many business owners don’t know they can sell, and they simply sell their inventory and walk away from potentially hundreds of thousands of dollars,” Westwood says.

Some business owners simply need to be educated on the selling process. “If I pick up the Yellow Pages and start talking to business owners about the possibility of selling, I find that one in four says they will be thinking of selling,” Westwood says. Nationally, one in five businesses is for sale. Of those for sale, one in four will actually get sold.

The post Business for Sale – Utah Valley Business Quarterly first appeared on Alpine Business Brokers.

The post Business for Sale – Utah Valley Business Quarterly appeared first on Alpine Business Brokers.

Entrepreneur magazine – January 2004
By Niles Howard

If you think franchisees have it tough these days, think back to 1979, when Deena Yaris opened her first storefront franchise, a beauty salon called Lafemmina, in New Hyde Park, New York. The Federal Reserve’s basic interest rate had doubled in a matter of months to 14 percent, and there was no ceiling in sight. Any new business would have to be hugely successful just to meet loan payments on start-up capital, let alone generate income for its owner.

But Yaris had confidence in the concept and her business acumen—a faith that was ultimately borne out. She went on to open one more Lafemmina salon and two The Lemon Tree salons. Five years ago, she did what most franchisees only dream of: She bought out the company’s founder and became the franchisor. Today, 58 franchise salons from Connecticut to Florida carry The Lemon Tree name, and Yaris has plans for another 100.

A key factor in franchisee growth is—you guessed it—low interest rates. Many new The Lemon Tree franchisees fund their initial investments with home equity loans of 5 percent or less.

The Lemon Tree isn’t alone. In fact, many experts consider the huge increase in untapped home equity, coupled with low interest rates, to be the most important development in franchise financing in decades. But that’s not the only force contributing to the dramatic shift in franchisee financing over the past quarter century. There was the FTC’s decision to require full financial disclosure by franchisors, thereby legitimizing the industry in lenders’ eyes. There was the discovery of franchising by banks, which once shunned chain outlets in favor of local independent stores. There was the proliferation of aggressive nonbank lenders such as GE Capital Corp. and CIT Group Inc. with more flexible risk-assessment criteria. Take these combined factors, and you can understand why franchising has become one of the most powerful forces in the U.S. economy.

The Two Camps All this doesn’t mean financing is no longer a problem for current or prospective franchisors. A recession-induced wave of defaults in 2001 and 2002 has made lenders skittish, and some, including Pitney Bowes Inc., have dropped out. Moreover, obtaining growth capital is still, and will likely remain, the number-one challenge for individual investors. Finding money for that ice cream franchise is still harder than, say, refinancing your house. But you can improve your chances by knowing your options and how lenders view your business.

It’s important to recognize that financiers sort prospective franchisees into two big camps. The first, which might be called “Camp Success,” consists largely of individuals who have significant hands-on business experience and are looking to purchase an existing moneymaking franchise location. Lenders evaluate such opportunities in the same way they assess nonfranchise businesses. They look at objective measures of the business’s health, such as its cash flow, growth rate and profitability. Then they try to assess, based on your resume and financial history, whether you are likely to keep the business on course. If you and the business have good records, you can almost count on banks to court you. “Nothing makes a lender happier than a proven cash flow and customer base,” says R. Neal Westwood, co-founder of Utah business brokerage firm Alpine Business Brokers LLC in Orem, Utah.

Members of the other franchisee group, which we’ll call “Camp Start-Up,” have little or no entrepreneurial track record, are looking to establish a new franchise business from scratch, or both. These situations are much more difficult for loan officers to evaluate and thus are considered high-risk. Many banks want nothing to do with them, and virtually all others will require the borrower to put up other collateral, preferably securities or real estate, that’s worth at least the full amount of the loan. In such circumstances, smart borrowers will simply take out a simpler-to-get personal loan or credit line. That’s when nonbank lenders often step in. Of course, since nonbank lenders take on more risk, you’ll pay a higher interest rate or extra fees to offset that increased risk.

The SBA, which for years gave franchisees little or no special assistance, has emerged as a key source of loans to those who lack sufficient capital and don’t qualify for bank financing. In the past decade, it has aggressively promoted a guarantee program that insures banks against the risk of default. Although the SBA doesn’t make loans directly, it works hand-in-hand with an SBA-certified commercial lender (get a list at www.sba.gov). Applicants go through the ordinary credit review process with the lender, who forwards the application to the SBA. Although SBA loans are easier to get, they’re not automatic. You need to submit a business plan, put up collateral—30 percent of the value of the loan is typical—and, in many cases, personally guarantee the loan by pledging your house or other assets.

The SBA has sped up the process by creating the Franchise Registry. It streamlines the loan application process by providing a central database of information about participating franchisors that have been certified to meet SBA rules. That way, the applicant no longer needs to provide that information, an onerous chore for past franchisees.

The best source of financing information is the franchisor, which is familiar with options and lenders who have financed other franchisees and who understand the business concept. Most important, growth-hungry chains have the incentive to bend over backward to bring you into the family. General Nutrition Companies Inc. (GNC), The Lemon Tree and The ServiceMaster Co. go so far as to directly finance a portion of the franchise fee, equipment, initial setup costs or a combination of the above. Since equipment is such a big part of initial outlay for restaurants and other businesses, franchisors in those industries may have special programs to lease these items for much less per month than you would pay to buy them. Even if they don’t, it’s often more practical from a cash-flow perspective to lease rather than buy.

Cashing In

Finding funding can be tough. But nearly three-fourths of 2004’s Franchise 500® companies offer some type of financing for franchisees:

15.6% in-house financing only

42.4% third-party financing only

14.6% combo in-house/third-party financing

27.4% no financing

At the Starting Line

Give It Here!

Be prepared to ante up a lot of information. Lenders want hard evidence that you can pay the debt and that you have sufficient collateral in case you can’t. They want to know how much other debt you have, how often you borrow, and whether you pay your bills promptly. You need to demonstrate you’re a good manager and have a solid plan. Lenders also want to see a business plan that spells out your goals for the business’s growth and profitability and how you’ll put the money to work.

And paperwork? You’ll need your business’s three most recent fiscal year-end financial statements, including balance sheets, income statements, accountant’s letters and footnotes. For a new facility, you must have a cost breakdown and a 12-month projected cash-flow statement. Be prepared to detail outstanding loans, including the initial balance, current balance, monthly payment, original term, remaining term and collateral. You’ll also need to deliver your personal financial statement and resume.

Getting a new business up and running is one of the most demanding yet satisfying things you’ll ever do. Keep reminding yourself that even with all the hassles, you have it a lot easier than your franchising predecessors.

For More Information Contact:

Alpine Business Brokers, LLC
240 N 1200 E, Lehi, UT 84043
Tel: (801) 224-8848
FAX: (801) 437-2629
e-mail: info@alpinebusinessbrokers.com

The post Where the Money Is – Entrepreneur Magazine first appeared on Alpine Business Brokers.

The post Where the Money Is – Entrepreneur Magazine appeared first on Alpine Business Brokers.