I first met Kevin Freeman in 2008. I owned 2 small businesses and I was interested in purchasing a third. I was looking for an existing business that already had a strong support team in place and also had room to grow. Kevin found a business for sale that met all of my requirements, Westway Electric Supply. We went ahead with the purchase and Kevin was instrumental throughout the process and even helped me locate a bank willing to finance the deal. The process went very smoothly.
After a few years I was able to grow the business through a new website, www.WestwayElectricSupply.com, and I no longer had time to manage my other two business. I went back to Kevin and asked him if he could sell them quickly. Kevin went to work and soon had a number of potential buyers for each business. He helped me sort through the offers and determine who were legitimate buyers. He continued to advise me throughout the selling process and we got both businesses sold within our target price range and before our target date. I will definitely continue to use Kevin's services in my future dealings.
President, Westway Electric Supply
We are pleased to announce that our Managing Partner, Kevin Freeman, was featured in Smart CEO magazine. Please see the article below and as always please feel free to reach out to Stony Hill for all your exit planning and business acquisition needs.http://viewer.zmags.com/publication/9d7e8af8?page=16&nocache=1358367227031#/9d7e8af8/16
When you are ready to sell a business what type of assistance will you need to do so successfully? If the thought of selling a business on your own seems like a good idea, you may want to rethink that approach. In theory, taking it upon yourself to wheel-and-deal a business sale can seem like an invaluable learning opportunity. However, in reality, a DIY effort is better left to home improvement projects — not the prospect of selling a company.
Here is what you risk losing when you choose to sell business without professional help.
Figuring out how to sell a business can be a time-consuming endeavor. During the daily operations of successfully running and maintaining a business, is there enough free time for you to act as your own selling agent? Probably not. Professional help can drum up buyer prospects while you keep the company up and running.
Time is not the only thing you need to keep a business afloat when considering selling it. You need focus, too. Business services and costs still need your full attention, especially during a business sale. A large part of successfully selling a business involves scrutinizing the numeric bottom lines. A professional business broker company can help with those final details while you manage the finer details of your daily costs.
Information leaks of a potential business sale can send current and prospective clients and vendors scrambling for a protective exit zone. Hiring professionals to help sell your business helps to keep a lid on pending transactions and keep your clientele intact. Without customers and suppliers, your business could lose the fortitude it needs to appear an attractive package for potential buyers.
Need more pointers on how to get started with selling your business? Download our free guide now!
So, you are going to realize some or all of your investment in your business… now what?
Rarely in life do you come to a true, unmistakable fork in the road. Marriage and parenthood come to mind. A business exit can be similarly monumental.
Hopefully you go through the exit process with a surplus of good advice. Business brokers, attorneys, accountants, and bankers can all be sources of guidance (ideally your various advisors work in concert to provide a cohesive and coordinated framework of advice). As Wealth Managers, our role is to help coordinate the big picture that exists somewhat apart from the transaction itself. In particular we help answer two key questions:
1) How much money do you need to meet your goals?
2) What is the best way to position your assets to maximize your chances of success?
Just as your advisors should coordinate their input during the business exit or recap, an ideal wealth management process involves ongoing collaboration between multiple providers such as your CPA, estate attorney, insurance broker, and others. Our task as Wealth Managers is to help organize the many disparate but related areas of your financial life (some of which may have been neglected while you were focusing on the business).
Some important areas of consideration:
1) Estate planning - The estate tax rules have been in flux, and the sale of a business means your personal situation may have changed dramatically. It is time to revisit your trust and estate documents. The sooner you begin your planning ahead of the exit, the more options you may have in terms of keeping assets in the family.
2) Insurance coverage - With more wealth comes more liability exposure. We recommend a full review of all forms of insurance in order to reveal potential areas of exposure, and to maximize your level of coverage per dollar spent.
3) Qualified and non-qualified retirement plans – Evaluate rollover and distribution options with an eye toward tax efficiency.
4) Investment of sale proceeds - Given low interest rates, high government debt, and varied geopolitical risks, this is a difficult environment for investing. We recommend hyper-diversification and a thorough examination of issues such as costs, tax impact, and cash flow timing.
If you are realizing a successful exit from a business chances are you understand the importance of planning and preparation. Apply those concepts to your wealth management process to increase your chances of long-term success.
By Patrick M. Foley, CFP®, QPFC
Robert W. Baird & Co.
If you are considering selling your business, tax rates, including the capital gains rate, need to be a consideration for you. To minimize your tax payment you will want to plan for the best date to complete the transaction. And before any further explanation, you will want to talk to your accountant or lawyer or both. The potential issues are way more complex than this short post.
What portion of your sale becomes subject to capital gains tax or regular income tax depends on several variables:
The Legal Structure
If your business is a C Corporation, then the sale of the business may be retained within the corporation without impact on your personal 1040. As long as the company does not pay a dividend back to the shareholders equal to the amount of the sale, there will be only the corporate tax rates to pay. When money is distributed it becomes personally taxable.
If your business is an S corporation, an LLC or other limited liability entity, or is a proprietorship, the proceeds of your sale will be passed on to the individual owners at the rates then in force.
What are you selling?
Are you selling the company as a whole or are you selling the assets of the company.
If you are selling your C Corporation and transferring stock ownership, the rules of capital gains for individuals apply. This is primarily how long you have owned the stock. If you are selling the assets, as is commonly the case, the corporation will report the sale with some items as capital gains and other as normal income.
If you are selling the assets of a pass through entity, a proprietorship or partnership, the proceeds from the sale are taxable on the personal returns of the owners with some assets taxed at capital gains rate and others at personal rates.
Future tax Rates
Capital Gains Tax Considerations for Selling a Business in 2012 are more favorable. Both income and capital gains tax rates are scheduled to increase in 2013. While there have been a number of proclamations from the political world that rates should not go up, basing your plan on what is in today’s law would suggest that doing it before the end of 2012 is a good idea,
Any business owner must consider the implications of selling a business at some future point. And it is best to be completely prepared. Even if you do not expect to sell your business, you should create a plan for that possibility. And you should also know what proceeds you could expect to generate were you to decide to sell your business right now. That plan will give you all the information that you as an entrepreneur need to evaluate all of your options.
Why do you need a succession plan?
For most businesses, there comes a time when the business should be sold. Estate issues, inheritance taxes, no heir to run the business, an illness or a wide variety of other issues can make selling a business the wisest or only thing to do. When that happens, you need to be prepared. You should start the planning now.
What do you need to do to prepare?
Prepare your financials to be completely accurate and “bullet-proof”. Is your CPA adequate to the task of preparing statements that will meet the scrutiny of a potential buyer? Do you need a full audit, or are write-ups adequate?
Make certain that all operational details are functional. Critically evaluate all staff, space, inventories and other working parts of your business to see what holes need to be filled. Create a plan to correct any shortcomings that you see.
Inventory all of your assets. Do an inventory of your fixed assets as well as products for sale or in process. Make certain that the figures synch up with the figures you are carrying on the books. The value and condition of assets can make a difference when you are selling a business.
What are your next steps?
Download a guide to selling a business to give you a little guidance on preparing.
Finally, it is wise to look for competent advice. Selling a business can be a once-in-a-lifetime event. Seeking the advice of a firm that buys and sells businesses every day will help you maximize the value of your sale.
Whether you want to sell today, or just plan for an eventuality, call the experts at http://www.stonyhillbusinessbrokers.com.
If you're thinking about selling your business, it's best to plan ahead and create a company that will be truly appealing to a potential buyer. The process of taking a bit of extra time and effort to dust off your systems and bookkeeping will pay off handsomely by adding to your company's appeal and value.
1. Catch up on your bookkeeping. The first question a potential buyer will want to ask is how much money he'll be able to make by owning and operating your company. The more complete and clear your records, the better he'll be able to answer that question.
2. Discuss your business sale with your landlord. If your company depends on a particular location or you have made expensive leasehold improvements, a potential buyer will want to know that he can keep the business where it is. Ask to put a clause in your lease establishing that it is valid even if you sell your company, and make sure that your landlord is on board with the terms of your potential sale.
3. Write an employee manual. If you're selling a business, it's important to create a document that a subsequent owner will be able to use to train employees. A training manual puts this information into a form that he will be able to use to hire new employees and train them in a manner consistent with your current systems and policies.
4. Write a business plan. Even though you're getting ready to move on, a business plan will provide a road map for a new owner, and show him your company's potential as well as the milestones you have already achieved.
5. Judiciously involve a few key employees in the sale process. If the value of your company is tied up with their expertise, a potential buyer will want to know that they are on board with a business sale.
6. Evaluate your systems. The better your systems, the more they will work to your advantage in the process of selling a business. Make sure company operations are smooth and efficient. Measure outcomes and, whenever possible, work to improve them.
7. Take a vacation. Although it's not a great idea to go away for an extended length of time if you're planning on selling a business, a brief vacation will provide you with valuable information about how well your company functions in your absence.
Building a business is an enormous investment. It is not just monetary, but an investment of passion and tremendous amounts of time and effort. When the business is near the peak of success, why not look at cashing in on that investment?
There are seven good reasons below to look into selling a business now. Buyers exist who have various reasons for investing in an established business.
It takes preparation, commitment and advice from trusted adviors to hone a business into something that shows a buyer the potential future value of what has been built. Depending on the size and type of business some or all of these reasons may apply.
- Consistent growth: If the business has weathered the economy well and shows gains for the past three years, it is a desirable business. Buyers are looking for a sound investment to step into. Revenue increases indicate a secure growth potential.
- Expanded customer base: A wide customer base indicates a solid foundation. A business that has recently shown success broadening its base is much more attractive. A business that is penetrating new markets shows an attractive future for the buyer.
- Victims of downsizing: Senior executives who have lost a job are looking for their own business. They are experienced business professionals and want something they can manage that offers a more secure future with low risk.
- Business investors: There are investors looking for growth businesses to resell at a later time. They want to further develop the business and enhance its value to sell at a profit.
- Family owners: Families looking for solid business opportunities. They want to spend more time together, eliminate long commutes and have an income that does not rely on separate jobs and locations. An established business with solid profit margins offers just what they want.
- College graduates:Recent marketing or business graduates see better futures for themselves in their own business. They want to enter a stable business and put their education to good use to build their financial independence.
- Diversification: There are current business owners who want to diversify. Selling a business that is solid to another business owner can increase their income and help them weather storms if their current venture has slowed.
The market is attractive for many buyers. Selling a business now can bring a premium price if the owner is well prepared. Preparation to make a business more attractive should start now. Making the business as attractive as possible increases the potential for selling a business at a peak profit.
The most important allies in the purchase of a business can, and usually will be, your advisors. It is critical that you have picked experienced accountants, attorneys or brokers to represent you. Let’s focus on the accountant and attorney for the sake of this article.
The use of an experienced accountant or attorney is vital to the transaction. A good accountant or attorney can help you with the analysis of your business purchase and also with the tax implications as you move forward. When you are seeking either accounting or legal representation, make sure to find an advisor that is “transaction based”. That means that the accountant or attorney is well versed in getting the transaction closed, while offering you the necessary protection. It is not unusual for an attorney or accountant to look as though they are transaction based but, in truth, they have little experience in completing business transactions. They could be very skilled at doing contract preparation or review. Others may be great at tax return preparation, but that does not make a transaction based advisor.
When you are interviewing your advisors, make sure to ask for a list of closed transactions to use as a barometer of their success. If they can’t provide you with a list of successful closed transactions in which they represented the buyer, you should probably continue your search. And let’s remember one thing, your advisors are just that, advisors. Don’t look to them to make entrepreneurial decisions for your. You are the entrepreneur so you should have the final say!
By Kevin Freeman, Managing Partner
Hiring the expertise of an experienced business broker makes good financial sense, especially when dealing with business decisions outside your own area of expertise. If you are considering buying or selling your business, the primary goal is, of course, how to optimize your sale or purchase. Getting the services of a reliable and knowledgeable business broker can make a huge difference.
Good business brokers act as the middlemen between buyers and sellers. They should have pre-existing resources, such as a serious database of clients who are ready to make purchases or people who are primed to sell businesses. Experienced business brokers should also be able to reach out to a wider national network, and be able to put you in touch with the widest possible selection of buyers and sellers.
Aside from these essentials, the services business brokers usually provide include a level of marketing or outreach, such as advertisements and publicity, which can speed up the sale or purchase of your business.
Business deals, such as the buying and selling of a business, usually includes a fair amount of specialized paper work, which does take up a lot of time. If you do not want to invest the time required to manage the process properly you should hire a professional to help you. Professional business brokers can take care of everything from setting up meetings, making credit inquiries and even supervising the attorneys involved. When good brokers are involved, all you need to worry about is getting the best price.
The buying and selling process is complicated. Many of the aspects of involving the exchange of a business can be daunting. That is why buyers and sellers need an experienced 3rd party to guide them through the process. You need someone who is astute enough to know a good deal when he sees it and honest enough to walk away from a bad deal and its commission. Stony Hill is that kind of broker. We cover the Philadelphia area, eastern PA, and New Jersey. If we can be of assistance to you, just call.