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I have met thousands of business owners over the years, and the majority of small to medium-sized business owners/entrepreneurs are Independent types who are self-made. They have learned how to manage and have been successful at learning new skills.

 

Because of this independence and resiliency many believe they do not need a business broker. (Although statistics show that this mind set has been changing as more business owners look to hire experts to help them exit) They believe that they can learn how to and do it themselves.

 

Many studies have been done over the years by several associations and the conclusions have been consistent. Business Brokers often get more money for a seller.

Here are the six Points to consider when making a decision on a Business Broker.

1. A good Business Broker will determine value not just using formulas, although they are very important, but by using personal experience and by asking questions to uncover hidden plusses and minuses to value. Often, they will suggest possible solutions to increase value.

They will remove a great deal of emotion from the owner, allowing them to make logical common-sense decisions. By acting as an intermediary, a business broker can cool emotions on both sides and keep a deal moving forward that might have otherwise fallen apart.

2. Save Time and maintains confidentiality. They do this by filtering out literally up to hundreds of tire kickers who want to learn about the business and saving the owner hundreds of hours of wasted time, This will allow the owner to continue to run the business. Selling a business can be a full time job in itself.

A good broker must have a system to maintain confidentiality. This is perhaps the number one concern of a business owner. Making sure employees, suppliers and customers do not get any idea the business is for sale is paramount. This is very difficult for an owner to do while dealing with buyers and still running their company. From Engagement to Closing a transaction is typically 6 to 15 months. Many Business owners just do not have the bandwidth to do this on their own.

3. Highest Price and Best Terms. Studies show that business owners who sell themselves often leave money on the table. A Business Broker should know how to run a no asking price “auction” for your business while still maintaining confidentiality. By making buyers compete, the best and highest offer the market will bear is arrived at. This “Controlled Informal Auction” process is a topic for

another long paper but with that said, a Seller/Business Owner should make sure the Broker is utilizing the latest processes for attaining maximum price.

Looking for a Broker who is a CBI (Certified Business Intermediary by the International Business Brokers Association) and/or an M&AMI (Merger and Acquisition Master Intermediary as certified by the Trade Association The M&A Source) is a good way to be sure you are getting a well educated and experienced Broker.

4. Closing the Sale and Transitioning a business is a long process. 300 to 800 hours of the Broker team’s time is the usual. Most of these hours are after the LOI is signed. In my experience a deal can be in danger of falling apart six times on average from Letter of Intent to closing! A Business Broker must have the skill to put the deal back together as many times as is needed. The business owner should select an M&A advisor who is a strategic partner, who listens and who is interested in a long-term relationship of trust building. The Business Intermediary/Broker needs to not be afraid to honestly speak up when they think the owner needs to hear something they may not like or want to hear.

5. Pre-Planning. The Business Intermediary/Broker should be capable of getting involved at the time of sale or, even better one to three years before the time of sale. They should be able to consult with you years before the sale to help “tune up” the business for maximum value.

ROI utilizes our Exclusive “Value Maker “System and there are other similar systems available as well. Sometime a Business Intermediary needs to suggest the Seller wait a year and make some adjustments to maximize value. They should take a long view, if that is the best course of action for the seller.

6. Understanding the big picture. The Business Broker will usually not be a CPA or lawyer, but they will understand how to work with these professionals on your team. Because they are very experienced in “Deal Making” they should be able to offer solid input from experience to the other members of your deal team. They are also the only professionals in a transaction who can speak with all parties. They can talk to the buyer’s lawyer or the buyer. A lawyer, once a buyer is represented, can usually only talk to the buyers’ lawyer. A good Business Intermediary can talk to all parties and greatly aid in communication and keeping a deal together. They become in essence, the team Quarterback.

In Conclusion, when choosing a Business Broker/ Intermediary choose someone with experience and who you get along well with. A business owner needs to be painfully honest with the Business Broker and be comfortable doing so. A Business Broker / Business Intermediary will most often better prepare the business for sale, Better prepare the marketing package, better maintain confidentiality, obtain a higher price and create an increase chance of a smooth closing.

If you would like a confidential and no cost consultation with an ROI Business Intermediary, please reach out to me at grayberg@roibusinessbrokers.com

 

About Gary Rayberg

Gary has started, managed and sold seven successful service companies. He brokered his first business in 1983 as a result of being asked to help sell a firm he had once owned and sold to a buyer who wanted to move on again. The buyer in that first brokered sale was none other than Rico Petrocelli, formally of the Boston Red Sox. Gary went on to start and run service companies in the fields of commercial landscaping, janitorial services, office coffee service, moving and storage, telemarketing and corporate employee relocation. Each company was sold once goals were reached. Gary was also one of the initial stockholders in the agent buyout of Bekins Van Lines, a national moving and storage firm. Licensed in real estate since 1984, Gary has been involved in the negotiation for sale of businesses and/or real estate in over 30 states and several foreign countries. He was President of the New England Business Brokers Association in 2012 and 2013, a founder and current Chairman of the Board of the area’s only business MLS type system, the Business Brokers Alliance of New England. He is past president of his local Rotary Club and currently sits on several other boards. He is a member of the Institute of Business Appraisers and the IBBA (International Business Brokers Association) where he has earned the CBI (Certified Business Intermediary) designation. Gary also holds the credential of M&AMI (Mergers and Acquisitions Master Intermediary) from M&A Source of Atlanta, the world’s largest international organization of experienced, dedicated merger and acquisition intermediaries representing the middle market. He is one of less than 200 M&A professionals in the world to hold the M&AMI designation which is awarded based on education, completed M&A transactions, and peer review. Gary believes “education is the cornerstone of ROI’s competitive edge.”

Gary and his wife Lisa have three children and currently split their time between Boston’s south shore and the lakes region of NH.

ROI has offices in MA, NH and GA to serve the entire east coast out to the Mississippi and beyond. ROI offers business brokerage services for companies with up to $50,000,000 in annual revenues. We run an exclusive, no asking price process that helps the market deliver the highest value possible to a business seller.

In addition to third party sales ROI also assists in ownership transfers to key employees, family members or other known buyers. ROIs valuation/consulting services and “Value Maker” program can help prepare a business for sale at maximum value.

In the midst of all the negative news about the Coronavirus, and the political back-and-forth that makes people lament the days when our nation seemed less divided, there is some good news for you, as a business owner, if you are thinking about selling your business. Namely, that this is a strong market for sellers. With my several decades’ experience in this industry, I haven’t seen the market for sellers in a stronger position.

 

There are several reasons for this – not the least of which is that there are a good number of potential buyers out there who are looking for their next opportunity. The current stock market and interest rate environment are the reasons for much of the merger and acquisition activity. There is basically a lot of money in the hands of Private Equity Groups and individual buyers can get very low interest loans.  Small to medium size businesses have a strong rate of return compared to other investment options.  Add to that a rebounding economy, and that there has always existed a strong entrepreneurial spirit in our country – and this is a time when large numbers of people are looking for the right businesses to buy.

Many potential buyers also understand that purchasing an existing business with a proven track record can afford a significant advantage over going out and starting a business from scratch.  Even a small business should produce a good income after the purchase debt service is paid each month.  Yes, many people do start businesses on their own and do so successfully, but there is also something appealing about stepping into a successful operating company. I often compare buying a start up franchise to an operating business.  In a franchise typically you open the doors and wait for the first customer. In addition to the opening and franchise purchase costs, you have operating expense until breakeven is reached. When you buy an existing business, the previous owner should provide full training and the customers are already there.

In short, the time is right if you are thinking about selling. We are currently seeing some businesses sell at over the calculated fair market value with multiple bids! With that said, you are in the strongest position to do so if you have worked with an advisor who can help you prepare and maximize the value of your business before you go to market. Do you have accurate financials that are updated monthly? I have seen businesses doing over ten million a year that do not have accurate financials!  Do you have a team in place that your successor can rely on? Is there diversity in your client base, meaning that your business is not too dependent on any one client?  These points and others can be discussed in advance to result in the highest value business sale for an exiting owner.

Controlled Auctions: The What, Why & How Of Auctioning Your Business

If you are thinking about going to market, you should speak with someone who has guided many business owners through the process. The time to begin the discussions with a business broker/advisor is well in advance of when you hope to turn over the keys.  A frank discussion about what you still might need to do to have your business ready for sale is the first step.

COVID-19 has brought some businesses to the forefront – such as HVAC, pet supplies, healthcare, retail recreation products and manufacturing as well as others that are not affected by COVID, or in some cases have been positively affected by it.

HVAC companies are hot properties in the market today!

If you are wondering how your business shapes up in this market and are thinking you might be interested in selling in the next few years, give us a call! Let’s have a no-obligation conversation about what you need to do to get ready. We have years of experience with businesses across a wide range of industries and would be glad to listen – and offer you some advice on how to get started.

Meantime stay tuned – we will be adding to our blog regularly with tips that will help you understand the process of preparing a company for sale and the actual process of selling.

 

ABOUT ROI

ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI, ME and CT with two divisions: a main street division serving smaller businesses as well as their middle market M&A division. Their Marietta, Georgia office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. For more information, please visit us on the web at www.roimergers.com or call (781) 682-6209.

As business owners across the country brace for the second spike of COVID cases ahead of winter, many are also re-assessing their retirement plans.

 

In 2016, a study by Babson College shows that a majority of small business owners are over the age of 50, which means that many business owners are facing a decision of whether to sell now or to weather the next 5 to 10 year economic cycle?

 

Informal Controlled Auctions are rapidly becoming a more common occurrence nationwide, and this week ROI sits down with our Broker/Intermediary Sandy Kiriakidis to discuss the topic.

 

What is a controlled auction in terms of business brokerage?

A Controlled Auction is a structured process, in which multiple qualified buyers are engaged simultaneously to competitively bid on a company for sale. This process ultimately facilitates the sale of the target at the highest price and best possible terms. Basically, the list of possible buyers is constructed and approved by the seller, prior to going to market.

The seller’s company is also referred to as the ‘acquisition target.’ Buyers are often strategic/corporate, or financial/private equity groups. No asking price is published. Beauty–or in this case, value–is in the eyes of the beholder.

Confidentiality of the seller’s identity is maintained in the marketing and outreach process, until buyers have signed a non-disclosure agreement (NDA) and been prescreened.

What are some advantages of a controlled auction?

The greatest advantage is speeding up the sale process and getting the best possible price and terms at a given moment. We often get an offer with price and terms better than we had anticipated!  This process can work across all industries, but is particularly effective in the fields of manufacturing, services and distribution. If a buyer really wants to acquire the seller’s assets, they may offer value far greater than ‘fair market value.’

A knowledgeable business brokerage firm will essentially create a highly competitive market for the seller/acquisition target, which greatly leverages the seller’s negotiating power. Engaging multiple buyers in a controlled auction sparks competition which incentivizes buyers to win—by acting quickly and offering their best possible price and terms.

 Take East Branch Trucking for example…This was the case when the broker believed this company was worth more to an industry buyer than the numbers they were producing. The result in the owners own words: “ROI received three offers for my company and their process netted more than any of my advisors had indicated the value would be!”

What are some disadvantages?

Although in many cases a controlled auction may maximize the probability of a successful sale, it does not guarantee the sale of a business.

The main disadvantage is that the best price and terms we can obtain at the time of the auction, may not be the best price and terms that are attainable at some point in the future. Of course, the future is unknown.  We tailor our process to align with the seller’s [realistic] financial and personal goals, but this may not always be possible. The market will produce the highest price, but the Seller may still decide not to sell at that price.

For this reason, a controlled auction may not be the best option for sellers who are not motivated to sell or have a ’grass is always greener’ mindset. ‘Better’ may always be possible, but they must have a realistic picture of good and fair price and terms and be open to accepting them.

There are instances where place and time simply don’t align in finding the right buyer. For example, the buyer may be very interested and a good overall fit but does not have the resources to invest in acquiring a new company and merging it with their own company. Some companies may not be able to adhere to the timeline (particularly if they are highly bureaucratic) but are otherwise qualified.

What role does a great business broker play in the controlled auction setting?

We determine, on a case by case basis, if a controlled auction is an appropriate method for an individual seller. A good business intermediary professional will be able to determine when it is a good time to let the market decide what the business is worth. ROI has seen controlled auctions yield offers ranging in the three to four million range, and then a standout offer of ten million for the same business.

A skilled brokerage firm should have experience in controlled auctions for companies across a range of industries, including medical equipment, HVAC, manufacturing, services, technology, distribution etc.

ROI Corporation Brokers the Sale of Murphy HVAC

The broker/intermediary is vital: they create the market, reach out to buyers with an effective ‘teaser’, create a compelling and accurate Confidential Memorandum. They run and closely manage the controlled auction process and keep buyers on a timeline: from getting buyers all necessary information to make an offer, to negotiating price and terms, helping with financing, and ultimately ensuring success of the auction process.

As in the case of a conventional sale, producing a high quality Confidential Memorandum (aka ‘CBM’, ‘CIM’, DEAL BOOK or ‘IM’) for buyers is key in conveying all qualitative and financial information a buyer requires to bid.

Why is it important to have an experienced business broker on your side?

Making sure your broker/intermediary is reputable and professional– as you are trusting them with your greatest asset– is paramount. Of course, experience makes the broker/intermediary more familiar with the buyer’s psychology and how to effectively engage the buyers at every step of the process, which in turn improves the probability of success in conducting a controlled auction.

The first steps are to conduct a business valuation, this will provide you with an opinion of value and will determine your next steps. ROI takes this initial step to the next level through the Value Maker Program. This is a proprietary process that benchmarks the value of your business now, and identifies the 5-15 key points for improvement that you can focus on with your CPA or business advisor so that when you’re ready to sell, your business is worth much more to potential buyers than it is today. If you are asking yourself “How do I sell my business in NH, MA or elsewhere in the next 1-5 years?”, don’t hesitate to contact us today!

ABOUT ROI

ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI, ME and CT with two divisions: a main street division serving smaller businesses as well as their middle market M&A division. Their Marietta, Georgia office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. For more information, please visit us on the web at www.roimergers.com or call (781) 682-6209.

In many instances, selling to a key employee is a business owner’s dream. After all, the key employee understands the business culture the owner has built and most importantly cares about the success of the business.

So, if you have a prospective buyer in a key employee, why would a business intermediary be consulted?

As one of our previous clients once said, “You don’t know, what you don’t know”.

Often this is the buyer’s first purchase and the seller’s first sale. An experienced business broker will have years of experience in business selling and that knowledge is highly beneficial to a business owner at the time of sale.

Most business owners and key employees have been talking casually about the possible sale of the company for some years. This close relationship is also the reason why a business broker is highly recommended. They can provide a business valuation so that everyone involved feels the price paid is fair.

Guidance and mediation throughout legal agreements, especially if the business owner is selling one of multiple locations, can avoid major headaches during the final sale. For example, in the case of one of ROI’s previous clients, Dean Carlson of Get Fit New Hampshire, our Vice President, Denis Mezheritskiy, guided Carlson through the sale of his business to a key employee in 2019.

Removing the awkwardness from the negotiation process allowed for clearer communication and an easier transition process. An experienced business broker will be able to speak to both parties’ best interest while keeping it about the value and worth of the business.

One of the biggest hurdles in an inside transfer is financing. It is sometimes overwhelming for an employee to apprehend that they can actually afford to buy the business. The fact is that banks love an inside transition. These types of loans have a higher probability of success. After all, this is someone who is familiar with the work, the customers and the employees. An inside transition minimizes the turbulence of transferring ownership.

In Get Fit’s example, their organized financial records assisted in differentiating the profits from each location. Carlson was able to keep using the name for their remaining location for up to one year to assist in their transition to other ventures. Throughout the whole process, Denis Mezheritskiy was able to keep the process moving forward, provide paperwork, professional advice and celebrate with them in the end. You can hear about the sale on the podcast How to Exit, Business Exit Strategy here.

If you believe you’re ready to introduce a business broker into your sale to a key employee, reach out to ROI Corporation to make the road to success clear. 

About ROI Corporation

ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI, ME and CT with two divisions; a main street division serving smaller businesses as well as their middle market M&A division. Their Marietta, Georgia office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. For more information, please visit us on the web at www.roimergers.com or call (781) 682-6209.

Not that long ago, having a good long-term lease with options was a good thing. Now, in these pandemic times, a long-term lease could be big liability! This is true for both landlords and tenants alike. When the pandemic first started, tenants were looking to their landlords for relief. However, many landlords are leveraged with their own financial obligations along with mortgages of their own, which may restrict lease modifications and rent reductions. .

This presents a tough situation for all, but landlords often try to avoid legal battles for nonpayment. The alternative has led to accountants all over the U.S scrambling to find solutions for lease concessions.

Before business owners in Massachusetts and all over the nation begin asking themselves “Should I sell my business in MA?”, they should consider the following options and long term strategies. The question could turn into “Why sell my business in MA now, when these concessions might benefit me in the big picture?”.

Types of MA Business Concessions

Many landlords have deferred rent payments and/or reduced rent and others have demanded rent payments in full effective the first of July. One increasingly popular plan is having the landlord agree to a rent payment based on a percentage of sales, with any shortfall being spread out over the remaining years of the lease. In May, Bedrock, a commercial real estate owner based in Detroit with over 100 retailers and restaurants downtown, decided to give tenants the chance to temporarily choose a percentage lease structure.

What This Means for Your MA Business Value

For those who are planning their exit and selling their business in the next year (up to 5 years) these lease adjustments will become a great asset for your company. Adjustments to your lease mean more funds available for reinvesting to meet new demands and/or health and safety standards. This is a fantastic opportunity to review your current lease for any major roadblocks should you want to sell. Common roadblocks that affect a lease are the tenants right to rent adjustment upon transfer, right to recapture and sometimes even fees for the transfer.

With Massachusetts, New Hampshire, Connecticut, Rhode Island and the rest of the New England struggling to keep evictions at bay and retail locations open, now is the time for landlords and tenants to work together for solutions that will help both parties. A good business broker can perform a business valuation to determine how your lease affects your value and provide guidance on next steps.

Systems such as  ROI’s Value Maker can also provide important information on what drives your value, provide options, and even follow-ups to determine growth. Don’t hesitate to call us today to talk about your exit plan! Your question could be “Why wait to sell your business in MA?” by the end of the conversation.

Don Buehler, CBI ROI Corporation

His career started as a store manager with McDonald’s Corporation, where he worked his way up to the ownership of 6 franchises, which he operated for 15 years. Don sold these to pursue his own restaurant concept, Krazy Karry’s Backyard Grill, which he operated for 7 years.

Don brings a wealth of practical, operational and technical knowledge to any deal. He can empathize with business buyers and sellers, and analyze how to best help them achieve their goals.

As summer ends and fall begins, businesses across New England continue to navigate state regulations and what that means for their business. Businesses in Maine, New Hampshire and Vermont are battling with their neighbors Rhode Island and Massachusetts for those who are traveling during this pandemic.

 

For the small business owners hoping to weather the storm until “normalcy” returns numerous are having to decide on selling now at the current valuation or risk their retirement to rescue their business.

The average small business owner is 60 years-old, according to Barlow Research Associates, and 40% of owners are 65 and older. Of these, many simply do not want to put in the time and investment to endure the pandemic and subsequent economic recovery. Selling during an economic downturn does not mean you cannot reach a satisfactory sale. Bob House, President for BizBuySell, even writes of the opportunities in purchasing and selling closed businesses. There are always investors looking for the right move, and that could be you.

Before you think “Could I sell my business in NH or elsewhere?” Consider a few factors most business owners overlook.

Business owners sometimes get tunnel vision when they’re handling the day to day operations and trying to keep their business afloat during the pandemic. If their business is suffering – there is no way they’ll be able to sell? WRONG. There are several non-financial assets and factors that could play to your benefit even if your profits are down.

Our business broker Joe McGrath has successfully sold several businesses in Massachusetts and even during the pandemic. He shares what non-financial factors business had on their side.

Organization

The items that are extremely important for the sale are a solid lease with price and terms acceptable to the buyer.  Also, if real estate is included, we would need an appraisal and an inspection of condition.  We would need an inventory count. Also, a list and value of any equipment is necessary.  A list of employees and duties would be required. A client list with the percentage of volume for the ten top clients is required.

Financial Organization

It is extremely important that each business have organized financials.  At a minimum we would require three years of tax returns, recent and up to date profit and loss statements and a recent balance sheet.  The name of the CPA is also required in case we have specific questions regarding certain items on their returns.

Assets that Increase your Value

Assets that make the business appealing to the buyer would be a liquor license if it is a liquor store.  Real estate if it is a retail establishment. Generally, any licenses that take a lengthy time to acquire are huge non-financial assets to a buyer. Location and layout of a building is also another vital piece of value for you in a potential sale, even if you are leasing, saving the landlord the time and expense of finding a new tenant can be very helpful in being released from the lease obligations. A plus for the buyer are the long-term employees in place. Also, a client base with a long history of service and contracts if necessary and no heavy concentration of sales from any one client.  Most of the equipment should be in very good {in use} condition.

Most importantly a good business broker will be able to discover the best market price for your business and ensures that you do not leave any money on the table. For example, ROI Corporation has a proprietary system to help buyers compete in a confidential manner. Read about our Controlled Informal Auction Process here. If you are asking yourself “How do I sell my business in NH, MA or elsewhere in the next 1-5 years?”, don’t hesitate to contact us today!

ABOUT ROI

ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI, ME and CT with two divisions; a main street division serving smaller businesses as well as their middle market M&A division. Their Marietta, Georgia office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. For more information, please visit us on the web at www.roimergers.com or call (781) 682-6209.

We get asked the question frequently from potential sellers of businesses: is this a good time to sell my business in RI or elsewhere? Not surprisingly, we hear the same question from the other side of the equation – people considering buying a business.

 

The “800 pound elephant in the room” is COVID-19. Is this an impossible time to get top value for a business, an owner might reasonably wonder. At the same time, buyers are looking to see if this is a “buyer’s market” and to see if there are some really good deals around.

The answer to the two questions, is this a good time to buy a business, and is it a good time to sell a business, is a qualified “yes” to both.

 

Overall, COVID-19 has exacted a very negative toll on the American economy, as everyone knows. Here in New England, certain segments of the economy, such as restaurants, gyms, barber shops, and small retail operations, have been very hard hit. With the shutdowns and restrictions in place, a lot of foot traffic into these businesses just didn’t happen. But, in those industry sectors, the resilient and entrepreneurial owners have found ways to pivot – from take-out and outside dining to several other solutions.  These “Main Street” businesses in many cases have experienced a decline in revenue and therefore a decline in value. It may be a good time, if the owner is able, to “hold” these businesses for better times. If this is not possible, a sale may still be a possibility, especially if the real estate housing the business is owned. Talk to a qualified Business Broker to get the accurate answer. They can change your worries from a could to a “when should I sell my business in RI?”

 

The case can be made that business owners in industries that are seemingly unaffected by COVID – such as HVAC companies, Marinas, Trucking, manufacturing, service businesses, distribution and online/ecommerce businesses – are perhaps in the best position to sell. In many cases, businesses are being bid up by multiple buyers to well over their financial value. In fact, this bidding strategy was very successful and enabled the very happy acquisition of Murphy’s Air Conditioning, Heating and Plumbing of South Yarmouth, MA. That sale marked ROI Corporation’s 22^nd HVAC & Plumbing business sold in the last few years. In short, for businesses still performing well, it is still a strong seller’s market. Inventory is in short supply and buyers are anxious to put their money to work.

 

By way of explanation, in our business brokerage firm, April, May and June transactions and deals going under agreement were down 25%! In July and August our closings and deals going under agreement are making up for the 2^nd quarter slow down, and we expect another record year!

 

How can things change so quickly from good to bad and back to good?  There are several reasons in my opinion…

 

First, on SBA lender financed deals, the banks got the PPP loans processed and were able to again focus their attention on Business Acquisition SBA 7A loans. These loans are the backbone of lending for individuals wanting to buy a business with a purchase price of under 6 million dollars in this country.

 

The second major reason is there is still a lot of money in the hands of Private Equity Groups, Family Offices and high net worth individuals looking for a good return.  Once these groups could adjust to the new normal, they are back in the market with a vengeance looking for good companies to buy.

 

Although these times are unusual, the guidance we offer to individuals seeking to sell a business is the same now as it is in non-pandemic times. It’s also the guidance that has led successful transactions in MA, RI, NH and more. Many wondering if they even could sell their business and keep to their retirement plans have felt relieved to learn “I can sell my business in RI, or anywhere in New England”.

 

Now, as in any other time, a seller should seek a strong opinion of value from a qualified business broker and make sure that he/she has the foundations and fundamentals of the business solidly in place.

Some of the documentation that will help both buyers and sellers arrive at the worth and viability of a business:

 

1. Tax returns: the business owner should have three years’ returns at his/her fingertips. Not on extension is much preferred by buyers and banks.
2. Profit and loss sheets: documentation that will show how the business has done need to accurate and available each month.
3. Data on what the concentration is of the book of business. If the company does more than 20% of its business with one client or entity for example, that could be considered a risk by a buyer.
4. How’s the cash flow? What percentage of the business is recurring revenue? Recurring revenue models are generally more appealing than ones where there is no ongoing source of revenue and the business depends on “one off” sales.
5. Will the team be prepared to remain after the sale? Are there employment agreements?

 

Whether you are a buyer or seller, there are opportunities in this market.

 

Please contact us for an initial consultation and insight into the value and current salability of our business. We are happy to help!

 

About ROI Corporation

ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI, ME and CT with two divisions; a main street division serving smaller businesses as well as their middle market M&A division. Their Marietta, Georgia office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. For more information, please visit us on the web at www.roimergers.com or call (781) 682-6209.

This week, ROI President Gary Rayberg sits down with Sandy Kiriakidis and talks about the importance of a strong first impression in the form of a CBM.

 

Although it goes by many other names, it’s impact is often under estimated. Let’s break it down.

 

 

• First and foremost – let’s talk about what a CBM is?

So, ‘CBM’ stands for ‘Confidential Business Memorandum’. It goes by many names, that all mean essentially the same thing—it is also called a CIM – ‘Confidential Information Memorandum’ or ‘Offering Memorandum’ in the Investment Banking world, and sometimes ‘Dealbook’ or simply ‘book’.

No matter what it is called, the function of a CBM and CIM is the same—it is a comprehensive, sell-side document given to potential buyers consisting of an in-depth profile of the business, its operations, relevant facts and figures, as well as historical and projected financial information (including cash flow!). Think of a company as a living, breathing entity—you must understand all ‘moving parts’ before deciding if you can sustain it, and it is a good fit for you, as a buyer. The expression ‘you only get one chance to make a first impression’ is highly applicable here—the CBM is a detailed first impression for buyers.

A CBM is given to qualified buyers, who have expressed interest after receiving a confidential ‘teaser’ and completed a Non-Disclosure Agreement (NDA).

It is only after an NDA is executed that the identity of the Seller is divulged. Since we take all reasonable measures to protect our clients, and keep their identity confidential, it is only after interested buyers have signed an NDA, and qualified, that they are sent the CBM*.

• Are there different types of CBM’s?

I would not say they are different types, but I make sure to customize each CBM to best reflect each individual company. For example, say one of our clients (Seller) has a particularly strong marketing program. I will expand this section and dive deeper than we would for another company for which this is less relevant. If real estate is to be sold with the company, we will cover this much more thoroughly than we would for a company that is leased and/or relocatable when sold.

• Why would you recommend one?

I think having a sharp, comprehensive document is a cornerstone of a successful sale. It provides all the vital initial information for a buyer to decide if the company is a good fit. The CBM functions as a marketing document to showcase an attractive, complete portrayal of the business. It sets the stage for maximizing its value during the negotiation process.

We ensure that all financial information is complete and correct, and presented in a clear, concise way. I make sure to communicate the qualitative, or ‘soft’ information, in a concise way while painting an accurate, complete picture. Buyers simply do not have patience to read an overly wordy document, or on the other end of the spectrum, a document that is all ‘fluff’ and little substance. We avoid using too many pictures or making overly speculative statements.

A seller must review and approve the CIM before it is distributed to potential financial or strategic buyers. While M&A Intermediaries and Investment Bankers are professionals that understand the sales process, only the seller truly understands the ‘ins and outs’ of running their business. It is crucial that all valuable attributes of the business are highlighted in the CIM to get the best terms and highest possible price.

On another note, it is never too soon for a business owner to start thinking about the information that should be addressed in the CBM. For this reason, pre-sale planning can start months or even years before the actual sale of the company. We offer ‘Value Maker’ reports to help these buyers address their strengths and weaknesses, to strengthen their company before it is time to sell.

• What impact does a good CBM have on a deal?

As ROI continues our rapid rate of growth and expansion, we are doing deals with both greater revenue and complexity. In turn, the buyers for these companies are demanding a greater degree of sophistication and polish than the ‘Main Street’ buyer, so a CBM is essential in successfully presenting the company.

A solid CBM reflects positively on both the Seller’s company, as well as ROI.

It reduces the ‘back and forth’ questions since a buyer has all pertinent information up front. Of course, further questions are expected, depending on what aspects are most important to the specific buyer. It also greatly streamlines the sales process, as it involves putting together documents and gathering information that the buyer will request during due diligence. Don’t hesitate to contact ROI Corporation or another brokerage firm if you have more questions or if you feel like you’re ready for the next step.

 

About ROI Corporation

ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI, ME and CT with two divisions; a main street division serving smaller businesses as well as their middle market M&A division. Their Marietta, Georgia office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. For more information, please visit us on the web at www.roimergers.com or call (781) 682-6209.

Business valuations have been used for many purposes. We recently did a NH business valuation because a partner died, and his spouse wanted to know what the business was worth to the estate. Not a happy occasion but one that will at some point be relevant for us all. When it comes to estates, owners will often have the valuation done as part of estate planning as well.

 

 

Divorce is another reason for a business valuation. ROI recently completed a RI business valuation for a divorce settlement. And we completed a business valuation in MA for a partnership buy out. We also recently did a business valuation in MA for a father to son gifting of business stock.

So as you can see there are multiple reason for business valuations. They come in several forms. An opinion of value is a basic document costing less than a full certified valuation but still provides a solid number. This can be used to transfer ownership in an arm’s length transaction or sale. The other forms, sighted above, tend to be Certified Valuations , which means they provide more back up and multiple approaches to value. They are completed by preparers who have specific credentials such as a CVA (Certified Valuation Analyst). ROI can provide Certified Valuations or Opinions of Value and we will recommend the least expensive but effective alternative for your needs.

By far the reason we see the most valuation requests is to determine value prior to a sale.

A good business valuation or opinion of value can give a business owner valuable insight. For instance, you may not be selling your business for years to come but there is still good reason in understanding business value.

An opinion of value can not only tell you how much your business is worth … but why! That can prove to be a road map to increasing value. In most cases when you increase value it is because you reduced risks and increased positive cash flow. Understanding how to accomplish an increase in value not only helps later but can put more money in your pocket now! ROI has a Value Maker Program that provides an opinion of value and then a 10 point tune up on how to improve value (and therefore profits and reducing operating risk). The Value Maker Program is perfect if an owner is considering exiting in the next few years. This allows time to maximize business value prior to exiting. A valuation is like a point on a map. If you are lost in the woods and want to find a road, you must first determine where you are on the map before choosing a direction to take. A valuation and specifically a Value Maker Program report can help you understand your base line business value and why. More importantly what, often simple, steps can be taken to decrease business risk and increase profitability and value in short order.

The Value Maker System is available to businesses of all kinds, but is a particularly great fit for

manufacturing companies, distribution companies, service companies, and medical related practices.

If used properly, a business valuation can guide important business decisions such as strategizing growth while increasing business value and provide a better understanding of how circumstances, whether in or out of your control, can affect the company’s finances and value. What kind of valuation is best for you? An opinion of value or a formal business valuation? Contact us today and we will be glad to guide you in the best direction.

Preparer’s qualifications;

Mr. Rayberg assisted in the sale of a business for the first time in 1984. In the years following he started, built and sold 6 more companies. He founded ROI Corporation in 1997 and his firm has been involved in managing transactions involving the sale of businesses and real estate in 39 states. In 2005 the company began to focus exclusively in the sale and valuation of businesses including third party sales, in family transitions and key employee buyouts.

Gary is a past President of the New England Business Brokers Association. (NEBBA) He is also a founding board member and current Chair of the Business Brokers Alliance of New England (BBANE) which is the business sales MLS system in the northeast. He is recognized in New England as a leader in his profession.

He is a member of the IBBA (International Business Brokers Association) where he has received the professional designation of CBI. (Certified Business Intermediary). He was also a member of IBA (Institute of Business Appraisers) where he has received training in business valuation. He is a member of the M&A Source, the largest M&A trade association in the world where he has received the M&AMI (Mergers and Acquisitions Master Intermediary) which has been awarded to less than 150 professionals world wide and is awarded after peer review of completed transactions. He is a licensed principal broker in the four states where his firm operates. (MA, NH, RI and GA) Note… In NH the firm is registered with the Secretary of State under the DBA “Business Brokerage and Valuation Services”. Mr. Rayberg is involved in the valuing and the marketing of dozens of companies each year.

 

Business owner turned Business Broker Tom Boyd sits down with ROI Corporation President Gary Rayberg and talks about his experience selling his transportation business in 2019.

 

Tom Boyd has always had an entrepreneurial streak. At age 17 he opened a small breakfast and lunch restaurant prior to starting his senior year of high school and then sold it to his head chef as he was graduating. After serving in the U.S Coast Guard, he worked as a delivery driver part time and was inspired to begin his own transportation business. Thus, East Branch Delivery in Maine was established in 1992. 27 years later He sold the company.

I would like to understand what brought you to the decision to sell your business.

It was always my intention to sell right from the start. My goal was to build a company to be big enough to afford the management it would take to run it. I wanted an above average income and to retire early. My original goal was financial independence by 55.

I came up on 55 and had not yet reached my financial goals. So, I made a decision to create an exit strategy with the following goals: Eliminate all debt, renegotiate my long-term contracts such that all vendor and customer contracts would all expire about the same time a couple of years after my target date of 2020.

Did you consider an inside sale?

I had two individuals I thought would be candidates for an inside sale: my general manger and another long-term manager. My general manger had 25 years of experience and all the right skills, but he had no money and insufficient credit. The other had other interests and I did not believe he had the right administrative skills. The only way that would have worked is if I self-financed it and remained a part of the company which I did not want.

What hurdles did you experience personally and professionally?

My greatest concern was keeping the business moving ahead the whole time while keeping all of my employees onboard. I was very close to my managers and made it know to them that I was working on an exit strategy. For a long time, it was far enough away so they didn’t worry about it. I did talk with my top managers about them possibly taking over. However, I knew it wouldn’t work without me being involved and financing it. Ultimately it was just a backup plan if I couldn’t sell the company.

Did you do research in choosing a broker?

I spoke with my accountant; he had told me he sells businesses. And I contacted a Maine brokerage firm. However, I was reluctant to hire a local brokerage firm due to nature of small states like Maine, New Hampshire and Rhode Island. I was worried about confidentiality. So, I did an internet search in Massachusetts and Connecticut. Searched terms like business broker RI & business broker MA. I also looked nationally for business brokers that specialize in transportation companies. I came up with three and contacted each of them including ROI. I made with a list of questions I would ask each of them and noted the responses.

The key questions were: How much do you think East Branch is worth? How would you go about marketing the company? And do you have any experience selling transportation companies?

My accountant had no answers for any of them. The local Maine broker was kind of flat lined about selling it and with a brief conversation and review of the numbers threw out a number I thought was low. Neither showed any sign of passion or confidence they could actually sell my company. Nothing resulted of my search using the term business broker RI.

Gary, on the other hand, had all the answers, he went straight to advising me on what it could be worth. He had experience in transportation companies and spoke to exactly how he would market the company. I hadn’t heard of a controlled auction and liked the sound of courting multiple buyers and accepting bids with no asking price. I always thought that East Branch was worth more to an industry buyer than the numbers I was producing would yield. ROI received three offers for my company and their process netted more than any of my advisors had indicated the value would be!

The other business brokers I spoke with spent the majority of my call blowing their own horn until I was ready hang up the phone! All I heard was; I,I,I.. We, We, We… never asking much if anything about my company. That’s how I settled with ROI Corporation and Gary Rayberg.

Did you attempt to sell without a business broker?

I contacted two trucking companies, each of which I knew and believed would benefit by acquiring East Branch. After speaking with each of them I felt I went there “hand in hat”. They both seemed interested but never followed up. I went to a Chamber of Commerce seminar on exit strategies and listened to a speaker who explained that brokers generally get you more for your company than you would for yourself. And I did research which indicated that same thing. Instead of searching for things like business broker RI, how to sell my business, I turned to professionals.

What was the experience of selling it like compared to what you thought it would be like? Did it take longer? Shorter?

The experience was very good. I had been advised that listing in Dec meant a delay in response due to the holidays. There was a delay but sure enough by Jan. going into February we had a lot of interest in the company. By March we had a couple of offers and the whole thing went down in a much shorter time than I thought it would. I expected a year or more and we closed in 9 months from initial listing.

What were the hurdles that you came across that you did not expect during the process?

Initially ROI offered an asset sale but the buyer chose to make a stock purchase offer. East Branch had racked up some bad insurance experience 2-3 year earlier causing our Insurance rates being so high it was really hurting profits. This history would be directly assumed by the buyer in a stock sale. However, we were going on a second year of low loses so the projections were on the upside. Then during the process, we had another major accident which totally blew that to hell. I thought sure the buyer would back out. But, with some coaching from

Gary, the buyer went back to his board of directors and they decided to make it an asset sale and made a new offer.

What difference did a broker make in the process for you?

Personally, I would never recommend anyone selling a company themselves unless they have a buyer come to them and make a high offer. Even then I think I would recommend they hire a broker, as a consultant, to manage the process. The process of using a business broker was an invigorating experience for me. I suspect I was much more involved than the average client. In fact, if building East Branch was my greatest achievement to date selling East Branch barely took second place.

What would you do differently next time?

I told my top managers once I had a firm offer and I would not do that again. They were great about it, but we couldn’t help but talk about it and that is not a good thing. I did give them an opportunity to make me an offer to buy the company but with no owner financing and they did not pursue making an offer. So, I offered them cash incentives to stay on board at least 90 days and that was enough such that they were motivated to help make it work. I also worked with the buyer to ensure they would have continuing employment. Regardless, if I had to do it again, I’d be less open during the ongoing process.

What would have made the process better?

The sale went so smoothly that I can’t think of anything that would have made it better. It is too bad that something can’t be done to make the due diligence process less of a burden. Accepting an offer and taking the company off the market does not mean the buyer can’t back out should they find something during due diligence they don’t like. This is out of the control of the broker and it is in the hands of the buyer’s attorney just how in-depth and/or difficult they may make the process. I can see that kind of deep dive into every document concerning every action covered by the statutes of limitation on any give area for a stock sale. However, when doing an asset sale, the process should be greatly stream lined.

What made you decide to become a Business Broker?

As a result of the experience of successfully selling my business and I was very impressed with the way ROI Business Brokers managed the sale of my company. The end result was that I got more for my company than I anticipated, which more than covered the sales commission. In fact, I was so impressed that I told Gary that I was interested in becoming a business broker and he offered me a position with the firm. Now it is my goal to bring this type of success in selling businesses such that I can help others achieve their goals in selling their businesses and strive to get them the highest price possible.

 

About ROI Corporation

ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI, ME and CT with two divisions; a main street division serving smaller businesses as well as their middle market M&A division. Their Marietta, Georgia office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. For more information, please visit us on the web at www.roimergers.com or call (781) 682-6209.