While millions of small business owners have tucked the memories of 2009 into a distant corner, many others who have endured, and in some case prospered during the recent economic downturn, are looking to 2010 and asking “Is now the time to sell my business?” The answer is yes.

With the reinvigorated mindset of the market place and the recent announcement from the SBA about additional funding to support small business lending, it is increasingly clear that 2010 is an ideal time for business owners to sell.

The decision to sell, however, is a difficult one and is driven by a number of factors. Personal timing must be considered. Owner burn-out and a desire for change often influences the decision to sell - retirement, illness and a host of other issues can also be motivating factors. But these items should NOT be the only factors considered. Proper timing should also be considered in order to maximize the economic benefits of the sale. Although no one can advise a business owner as to the best personal time to sell their business, allowing personal issues to determine when to sell can only lower the value of a business.

Once you’ve eliminated any personal obstacles, you must then consider selling from a business standpoint. Unfortunately, few business owners decide to sell when everything is going great. However, this can be and most times is the best time to consider selling your business. It is important to recognize that this is the precise point in time that buyer interest will be at its peak and your premium price will be most achievable. On the other hand, if an owner attempts to sell their business after a period when revenue is off, after losing a key employee or losing a significant customer then the ability to sell becomes problematic at best. The best time for an owner to sell is when his or her business is efficiently staffed and growing. Businesses with these characteristics are very attractive, can be financed and are, therefore, saleable.

Now that we understand what motivates business owners to sell, what appeals to the marketplace and how timing can impact the value of one’s business during the sales process, we can now focus on why 2010 is an ideal time to sell.

Capital Gains Tax Rates Will Increase

This is an if but rather a when. Given the current state of the economy and circumstances at the national level, the federal government will need to raise additional revenue in order to finance the various governmental programs it enacted during 2009. Much of these revenues will be generated from an increase in the Capital Gains Tax rate legislated during 2010. Of concern is whether an increase in these rates will be retroactive – at a minimum it appears that effective January 2011 any taxable transaction will be subject to an increased capital gains rate. The new rate will be higher than the current rate which is approximately 15%.

The sale of a business is complicated and can require several months to finalize - some transactions require 8 to 12 months to complete. Delays can, therefore, be very costly - especially in light of an imminent tax rate increase. For example, a mere increase to 25% from the existing 15% capital gains rate could cost a business owner $100,000 per $1 million of their sales price should the sale of their business not becompleted prior to enactment of any legislation that raises the capital gains tax rate.

Buyers Are Available

There are many individuals who have been unable to survive widespread corporate downsizing. On the surface this group may not appear to be candidates to buy a business, but let us drill down a bit further. Most of the recently unemployed are members of the prolific baby boomer generation and have had the opportunity to save substantial sums of money. Much of this wealth is stored away in 401(k) plans and other savings programs that the IRS now allows one to tap into without paying taxes or penalty. These funds are available to buy a business.

Other buyers also exist. Many companies have been hoarding cash and are seeking opportunities to take advantage of this abundant level of acquisition capital. This, along with low interest rates, offers a very broad base of buyers who are seeking investment opportunities to take advantage of economies of scale and to gain market share.

Financing

Traditional financing avenues remain narrow but many SBA lenders continue to exhibit a healthy appetite for lending and, as recent statistics reveal, have provided millions of dollars for qualified buyers. SBA lending is likely to increase as the current administration undertakes previously announced efforts to increase funding for small businesses.

Mike Derrick is a Senior Business Intermediary with VR Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group is the leading business brokerage firm in North Texas and the Dallas/Fort Worth Metroplex. Our firm is comprised of professional business intermediaries that specialize in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

FOR IMMEDIATE RELEASE

DALLAS, Texas – VR Huntington Business Group of Dallas assisted in the successful sale of two Pump It Up franchise locations from Advanced Cycling Concepts, Inc. to John D. Ruchman Enterprises, LLC.

Carol Welch, president of Advanced Cycling Concepts, Inc. opened her first Pump It Up location in Dallas in 2004. Then in 2007 she started a second location in Plano under the “Junior” concept, which caters to smaller children. After dedicating countless hours to opening and operating the two locations, Welch decided it was time to move on and let a new owner with new enthusiasm take over the business.

“I loved every minute of starting and operating both Pump It Up locations,” Welch said, “but there finally came a time where I decided it was a good idea to move on – I was burnt out. So we started interviewing business sales professionals, and ultimately chose VR Huntington out of several options.”

John D. Ruchman Enterprises president, John Ruchman, first became interested in Pump It Up four years ago while attending a birthday party at the Dallas location with his family. Years later when he became aware that the operation was available for acquisition, he dedicated himself to making this venture the next move of his professional career.

“I can still remember being at the Dallas location and my wife telling me, ‘You ought to buy this business someday’,” Ruchman said. “I was absolutely thrilled when I saw this listing go on the market and came to find out the Dallas location was available.”

Welch and Ruchman both had high praise for VR Huntington.

“It’s no secret that the past year has been difficult for good businesses to find qualified buyers,” Welch said. “We are extremely grateful to VR for sticking with us through this tough year and also for being able to negotiate a deal for our business that we never thought we would be able to get in this economy.”

“VR Huntington did a great job of helping me through this process,” Ruchman said. “I felt like I was working with people who actually cared about more than the ‘sale’.”

Pump It Up (www.pumpitupparty.com) is an indoor inflatable party center franchise operation with more than 175 locations nationwide, including 10 locations in Dallas/Ft. Worth. The Dallas location is at 9201 Forest Ln., and Plano is at 4101 E. Park Blvd. Both locations can be reached by dialing 972.792.9663.

The sale was facilitated by Jeremy Furtick, Senior Business Intermediary, with VR Huntington Business Group Inc. a VR Business Sales firm in Dallas.

The VR network was established in 1979 and is the oldest professional business brokerage in the nation with more than 125 offices and 800 agents worldwide. VR Huntington Business Group (www.vrbigd.com) is based in Dallas and has finished the last four years as one of the top VR offices in the world. VR Huntington specializes in assisting the owners of privately-held companies to value, market and sell their businesses, as well as representing buyers interested in professional assistance in their business searches.

Everyday, I’m asked this question by business owners who are looking to sell their business. It’s good question. Why do you need to hire a business broker? The answer is simple - expertise.

As a business owner, you understand that you need to hire experts to handle certain aspects of your business to protect your investment and its continued success. That’s why you don’t think twice about hiring a CPA or an attorney. The principal is the same when hiring a business broker.

Typically, business owners hire a broker because:

• You have spent a great deal of time and energy building your business
• Your business may be your largest financial asset
• You are uncertain how to protect your confidentiality
• You have no real idea of what the business is worth
• You don’t know how to find and qualify buyers
• You may not have negotiating skills
• You don’t want to take your eyes off the business while it’s being sold
• You may not even be certain of what the first steps are to sell your business

Just like hiring a CPA or an attorney, you need to do your homework when hiring a business broker. A good broker is a skilled professional who will manage the sales process for you and handle all of the complications so you can continue to grow your business!

A member of the VR network which has been providing sell-side services since 1979, VR Huntington Business Group in Dallas has been recognized on numerous occasions as a leading firm amongst all professional intermediaries and business brokers in North Texas.

What you should know before hiring a Business Broker

Prior to engaging a broker let us first begin with the skills and qualifications that your broker should possess and how to determine if you are selecting the right broker to represent you.

Seller Due Diligence: A prospective buyer will undertake due diligence - so should you. Review the broker’s experience, credentials and references. Visit their office to be certain they are not operating from their home. Check the BBB. Have they handled sales of your type of business before? How long have they been serving your market?

Check IBBA: The International Business Brokers Association® (IBBA) is a non-profit trade association of business brokers that provides a professional certification process after a rigid education program is completed. Are the leading members of your brokers’ firm certified?

Use a Specialist: A business broker who spends all their time selling businesses, as opposed to real estate agents for example or part-time business brokers, will add more value to your sales transaction.

Confidentiality: Selling one’s business is a highly confidential matter. Your business broker should ensure all measures are in place to protect your company. Any knowledge by your suppliers, employees, or customers that you are selling can have adverse repercussions.

Marketing Plan: Selling your business is all about strategic marketing. Properly positioning the sale of your company to attract as many buyers as possible is the objective. A skilled broker will have a detailed marketing plan with advertising strategies designed to attract a wide range of prospective buyers.

No Upfront Fee: A business broker’s fee ranges from 10 to 15% commission of the sale price of your company. Avoid any broker asking you for an upfront fee.

What a Good Business Broker Will do for You

Qualified brokers will meet the standards outlined above and will, in addition, be able to provide the following to ensure that your objectives are fully satisfied:

Value your business using several different methods and give you an idea of the price your business is likely to sell for. good broker will adjust your financial statements and recalculate the cash flow since it could be higher than what was disclosed to the IRS

Add a layer of confidentiality to the transaction thereby protecting the value of your business and helping you get the best possible sale price for your business.

Reach more buyers through channels that you may not be able to access directly on your own.

Negotiate with buyers and their advisors to get you the best price and sale terms for business.

Educate you about the sales process - Many sellers are not aware of what they have to disclose in documents such as the Non-Disclosure Agreement or Purchase Agreement

Manage the due diligence process. Selling a business can be a long and tedious process. A good business broker will help you by answering many of the typical questions that buyers have allowing you to focus on the daily operation of your business.

Complete the deal. An experienced business broker can work with you to structure the financing of the sale and help close the deal.

Remember - A good broker will allow you to get you a lot more money at the best terms (even after you have deducted their fees).

Mike Derrick is a Senior Business Intermediary with VR Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

While there are a few good and strategic reasons for the owners of a C Corporation (“C Corp”) to maintain C Corp status (e.g., plans to take the company public, preserving health care deductions, etc.) the owners MUST prepare in advance and develop an Exit Strategy in order to avoid the shock that typically comes when they receive the tax bill following the sale of their company.

We at VR Huntington Business Group often find that business owners have very little knowledge of the tax consequences that are triggered when they sell their business. These consequences are most especially severe for the owners of C Corporations.

C Corporations pay taxes on the income earned and, if the earnings and cash levels warrant, they then distribute the after-tax earnings in the form of dividends to the shareholders who will in turn pay taxes on those dividends. This is known as “double-taxation” and is the subject of much frustration for many C Corporation owners.

When a C Corp is sold it will generally take the form of an asset sale as opposed to a stock sale, which means the buyer will purchase the assets of the corporation and the proceeds will go to the corporation. The corporation will then pay taxes on any profits from the sale. What remains is then distributed to the owners who will in turn be taxed a second time - the “double-taxation” I mentioned earlier. Tax rates vary according to earnings and capital gains rates but, of critical importance, if the C Corp owners are not careful they will pay double taxes on the sale of the company.

If owners of a C Corp are considering the sale of their company in the next few years, they should meet with professional advisors to begin developing an Exit Strategy. The owners’ CPA and a professional business intermediary should be contacted to start developing an exit strategy well in advance of the sale. For example, it may be desirable to make an S Corp election and take advantage of favorable tax strategies now available under the American Recovery and Reinvestment Act of 2009.

We, VR Huntington Business Group, have on numerous occasions advised our clients to consult with their CPA regarding how they can minimize their tax burden by classifying the sale as one that predominately includes personal goodwill. This structure may be applicable and can substantially reduce the taxes on the sale of a C Corp. In other cases the owners’ CPA or other advisors may be able to develop alternative tax strategies to substantially reduce the tax liability. There are, as noted above, advantages to C Corporations but when selling a C Corp the owners must plan carefully and well in advance.

In summary, VR has often been contacted by owners of C Corporations that it most cases should have considered converting to an S Corp many years earlier. These owners are now presented with significant hurdles that advance planning could have avoided. We find that many middle-market business owners, unfortunately, do not understand the effects that a C Corp status has, not only on the eventual price the owner will receive for the business and the taxes to be paid on the sale, but also on the challenges that a C Corp status presents in marketing the business.

Focus should be on advance planning – VR Huntington Business Group offers consultative services to ensure against the pitfalls that many C Corp business owners should avoid before selling their business.

Mike Derrick is a Senior Business Intermediary with VR Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

Finding the right buyer for your business is a critical step in selling your business – probably the most important.

The Vetting Process: Worth Its Weight in Gold

A good business broker (or intermediary) will vet-out the buyer in such a way that guarantees that you are dealing with a reputable individual or group that is purchasing your business.

Most buyers that have the type of money that we are talking about to purchase your business didn’t get that money by being an idiot. If they did, a quick Google search and a few reference calls will show this sooner than they can admit, “I’m not really qualified.”

Your broker will not just consider the financial equation (although that’s vitally important) but will also look at experience, reliability and the right “fit” for your company. For instance, does the buyer have relevant experience that will relate to your business? Maybe, maybe not; prior experience doesn’t always have to align perfectly.

Experience: (Also) Worth Its Weight in Gold

Case in point: the buyer that I sold my business to was a suitcase salesman. Yes, that’s right; he sold suitcases to department stores. You may say, “How does that guy have the right experience to sell janitorial services to multifamily housing complexes?”

Well, let’s stop seeing suitcases as apples and janitorial services as oranges and put like experience with like experience instead. After all, this wasn’t just any suitcase salesman. It just so happened, he was a top salesman of a very high-price, high-quality kind of luggage. Well, it just so happens our business was known for its “high-quality” image in the janitorial business. Now, instead of apples and oranges, suddenly you’ve got like with like.

He was also as experienced in dealing with executives over many location department stores as he was used to dealing with the local saleslady that couldn’t care less about what luggage to use; she just wanted to make sure that customers didn’t come storming back in to complain when the luggage was destroyed at the airport. Well, as you can see, his past experiences in luggage sales also made him perfect for the janitorial business.

My business needed someone with sales experience. I had a manager that was awesome at running operations, but he was terrible at getting new business. As it turned out, this new buyer couldn’t just go to individual apartment complexes and sell our high-priced janitorial services, but he could meet with the management companies that managed 30 and 40 complexes to convince them to let us into all the complexes.

Now, this was not that difficult for a good salesman. But the hard part was convincing the local manager that we were worth the extra cost and we would take care of their needs without their new tenants coming back to complain. Suitcases or janitorial services, soap or CDs, Mustangs or Maseratis, a good salesman isn’t good because of what he sells; he’s good because of how he sells.

Turns out, this buyer was perfect!

The Right Buyer Can Put Your Mind at Ease

Now that I sell businesses for a living, it amazes me how many perfect buyers we find for folks just like you every single week. Now, keep in mind, this is not a sales pitch – just an explanation of the benefits of working with a quality brokerage firm that wants the best for both the buyer and the seller. And trust me, putting two wrongs together in a deal never makes a right.

Another case in point: I was in a manufacturing plant the other day taking a tour with the seller and a prospective buyer. As we were walking around the production floor during a certain point in the tour, I pointed at an item that the business manufactured and asked the dumb question: “What is that?”

The seller picked it up and began to look at it slowly and then said, “I’m not really sure.” To that the buyer chuckled and said, “That’s a high-pressure water valve that is used in blah, blah, blah application…”

Believe me, it didn’t end with “blah, blah, blah” either. In fact, he told me more than I ever cared to know about that particular valve! The point is that, in this case, the buyer knew more than the seller about something that the seller’s business actually produced.

Now, how well do YOU think this buyer will do in the business?

Scot Cockroft is the owner and president of Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com). To learn more about Seller Financing and Finding the Right Buyer for Your Business, read Part 1: How Do I Know If A Business Purchaser Has The Experience to Run “My” Business

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

I hear it said over and over, IF I am going to finance the sale of my business “How Do I Know if They Have the Experience to Run the Business?” This particular reason for not seller financing your business can be asked in a number of different ways but the message is virtually the same: how can I be sure I’ve found the right buyer for the right company at the right time?

One resounding way in which I hear this same complaint translated sounds a lot like, “I don’t know what ‘that’ guy is going to do to my company after the sale.” Well, again, this concern can certainly be mitigated by paying closer attention to how exactly you find the right buyer.

If you’re not being very discriminating during your screening process then, yes, I can agree with this statement (to a certain extent) – particularly if you are selling the company to “Joe Bob,” You know….Joe, the customer or employee who keeps making comments pertaining to the fact that he wishes he could own “a company like yours” one day.

But with an investment like this, you wouldn’t dare be so indiscriminate with your buyers, now would you?

Getting Paid Is More Important Than Selling Price

There are ways to make sure you find the right buyer for the right company at the right time. And the way we overcome this issue every time is by doing a good job when it comes to due diligence by scouting out the right buyer for your company “The RIGHT Company”. Candidly speaking, even if we are being mercenary, you are looking for much more than just the buyer that is the highest bidder for your business!

There is much more to selling a business than the total price; anyone can offer big numbers in an offer to purchase and, perhaps, even back them up (for a little while). The real brass ring for anyone seller financing their business is, of course, actually GETTING PAID! Not just getting paid today but tomorrow and through the term of the loan.

It doesn’t matter if you get $10 million for your $2 million business or $100 million for your $20 million company. If you will never get paid a dime of that money, what difference does the selling price make? (Well, besides the bragging rights while playing golf with your buddies or having coffee with friends, that is.)

At the end of the day, it’s all about getting paid. Therefore, you need to make sure that you are using a reputable intermediary or business brokerage professional to ensure that you have not only a qualified buyer but one who is committed to paying you throughout the term of the commitment.

You’ll need an intermediary or business brokerage firm, for instance, that is not just out for the one-time commission but is particular about the buyer that they attract and has a history of doing so successfully for his or her clientele – one that is discriminating about who they even talk to about your business.

Customer Relations Don’t End Once the Business Is Sold

Screening through a professional business brokerage firm or intermediary is essential to finding the right buyer at the right time for the right company and, what’s more, finding the right buyer, who will not only pay their bills but also succeed in running your company successfully (so they can continue to pay their bills).

It’s a little like being a millionaire matchmaker: you can’t just go out and find your client the prettiest, tallest, blondest girlfriend (even if that’s what he “thinks” he wants at the moment).

No, you’ve got to consider dozens of other variables, like how they’ll get along, what her interests are that he shares, how they’ll mature together, what they’ll talk about and will she love him…for him? Or just his money? You even want to screen her to see if she’ll treat the help well because, let’s face it, that’s an indication of how she’ll treat her husband (someday).

The same is true of finding you the right buyer for your company. You may think this is bad, but I have actually told buyers that they can’t even look at the business because they were rude to my staff. WHY? Because these are the types of buyers that will be rude to your employees and clients as well; these are the types of buyers that will burn bridges and bury your business.

You know the employee that is going to give you inside information? Well, it’s kind of hard to find out this information when that employee has stormed out because of this RUDE new BOSS who wasn’t screened properly by your professional intermediary. BUT you must make sure that the buyer is not a jerk…or an idiot.

I say this casually, of course, but it is no casual matter. If you want to get paid, you need to make sure that you’ve done your due diligence in finding the right buyer.

Scot Cockroft is the owner and President of Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

Obviously there are a number of factors to consider. Let’s first look OUTWARD.

How does the economy effect selling a business?

Stock Market: This month, November 2009, the stock market is hovering around 10,000. This is a magic number but does it affect the economy? Not really but it does affect people’s mindset. From a buyers stand point, many who had heavily invested their retirement funds in the stock market can now at their portfolios and realize that they are certainly not as bad looking as what they were a year ago.

Unemployment: Right now the unemployment rate is at the highest it’s been in literally in 25 years. Every month, hundreds of thousands of people are being laid off. It’s getting worse, not getting better, from a stand point of unemployment. Yet our stock market is on the rise and in some ways it doesn’t make sense. However this helps you, the small business owner. Why? Because when upper level executives lose their job and they typically are unable to locate a new one that can provide them with the level of income they are use to earning. What do they do? They begin looking to start or buy their own business.

Entrepreneurialism rises when unemployment rises. In fact, this may be exactly where you are currently at as a business owner – a place in your life where you are considering the sale of your business so you can pursue another business idea. You may be an entrepreneur looking simply to do something different. Can it be the perfect time to do that? ABSOLUTELY. Even if you’re looking to retire!

If we are to consider the timing of selling a business, we would be remiss if we did not mention the issues and the criteria need that are more INWARD. The characteristics of the business itself.

Systems: I am not talking about the idea of your business having so many systems that you could create a franchise. But you should have a system in place (even if not written) for how things get done. In fact, things should get done when you are not THERE. If you are the only person doing the work or it requires you to be there 100% of the time in order to get ANY thing done, maybe this is not the time to sale. Are you able to leave without the business falling apart?

Business: Is business going well or are you almost bankrupt? 90% of all small businesses are down in 2009. There is a difference if your business is down and if you want to sell because you can’t stay afloat. If this is the case, it is possible that you may need to keep the business a little longer to insure viability. If your business is only off a 10% to 20%, then it is still possible to sell in 2009/2010.

So IS IT the right time to sell your business?

You put your blood, sweat and tears into your business. Only you can determine if the right time to sell is NOW. Typically it takes 6 to 12 months to sell a business. If you believe the timing to sell your business is right around the corner, NOW may be the time to start the process. You can find the right advocate for you. Someone who can help you get the right deal so you can move forward, taking this investment – called your business – and turn it into a retirement fund, or capital for a new venture, or into whatever you want to do in the next stage of your life. This can be the perfect time to sell your business.