Tag Archives: minneapolis/st. paul

Set Your Company Up for Success: What Top Business Leaders Do to Succeed

Success is the result of careful planning. Here are some important tips from top business leaders for growing a successful company:

Tip #1 – Be the tortoise, not the hare

Slow and steady growth is a much more sound approach than bursts of growth. Many companies scale too quickly and collapse because their infrastructure is unable to accommodate it.

Tip #2 – State your goals

This might sound obvious but its importance cannot be underestimated. Write down your company goals and delineate your plan for achieving them. Communicate these goals and strategies to your employees and revisit the conversation often, keeping everyone up to speed on where the company is at in the process of achieving them. This will remind your employees that their position fits into the bigger picture and it will motivate them to do their best work.

Tip #3 – Build trust through transparency

Being open about your company goals and strategies is one way to cultivate transparency within your organization. When transparency is a priority, you create an atmosphere of trust which leads to improved morale, increased connection and productivity and better employee retention – all keys to running a successful organization.

Tip #4 – Practice good financial reporting

Paying close attention to company financials is a must. The use of a financial dashboard gives you a visual sense of where your company stands in many areas and helps you better comprehend and interpret performance metrics. The up-to-date information allows you to set practical implementation strategies that keep the health of your company priority one.

Tip #5 – Focus on the big picture when hiring

Promoting internally motivates employees to work hard and produce quality work. When you interview candidates for entry-level positions, ask yourself if the candidates fit the company culture and if they possess the skills and drive necessary to take on greater roles within the company down the road. Hiring with the big picture in mind sets your organization up for both short-term and long-term success.

Want help with the purchase of your next business? You can reach us at 612.331.8392 or by email at info@oibmn.com.

Primary Components of an M&A Purchase Agreement

It’s important to familiarize yourself with the ins and outs of an M&A purchase agreement so you can go into your next transaction prepared.

Think of a purchase agreement as a more detailed LOI. While it contains the same terms as the LOI, it also includes additional terms and conditions and goes into greater depth.

Here are the primary components of an M&A purchase agreement:

Definitions: Before agreeing to the terms in a purchase agreement, it’s important to clarify the terms so everyone is on the same page. Many terms in a PA can seem ambiguous and up to individual interpretation. Taking the time to define these terms can clear up confusion upfront and is one more step towards ensuring a smooth transaction from start to finish.

Indemnifications: This part of the purchase agreement helps to protect the buyer from any issues that may arise after closing and draws a clear line of responsibility in the sand. Often heavily contested and litigated, indemnifications address which actions are covered, how long the indemnification period lasts, financial caps on damages, etc.

Representations, Warranties and Schedules: This is where the seller states what is true about the business at the time of sale. This can include up-to-date financial statements, any current environmental liabilities, ongoing litigation and employee benefits.

Execution Provisions: What money is being exchanged and in what forms? Are there any purchase price adjustments, escrows or earnouts? This is where all financial details relating to the purchase are spelled out.

Covenants: These are agreed upon behaviors between buyers and sellers. They can address the hiring of new employees as well as bonuses and raises instituted by the seller between the signing of the purchase agreement and the closing. They can also address post-closing behaviors such as non-compete agreements and D&O insurance.

Closing Conditions: This is the part of the purchase agreement where you detail requirements of both the buyer and the seller between the purchase agreement and the closing table. These requirements are specific to the transaction and can include special financing conditions, provisions stating that all representations and warranties are met, material adverse change clauses, etc.

If you want help creating a thorough M&A purchase agreement, we’d love to assist. We can be reached at 612.331.8392 or by email at info@oibmn.com.

What Not To Do When Submitting an Indication of Interest

When submitting an Indication of Interest, it’s important to put your best foot forward. Price range, financing details, a due diligence timeline, a proposed closing date…these are just a few items typically submitted with an IOI that assist in creating a solid case for business acquisition. Conversely, if you’re seriously considering an acquisition, there are also some things you must not do. 

Do not overlook the due diligence process

Instead, reach out to the banker with all of your questions. This demonstrates a high level of interest and responsibility – two important components of the business acquisition process. Communicating with the banker shows that you’re doing your homework and that you’re a serious contender for the purchase. 

Do not submit a weak offer

Instead, submit a well-calculated, competitive offer. If you’re trying to hone in on a ballpark offer, talking with the banker on the seller’s side can help. They can’t give you a number but they can inform you more about the seller’s situation and general market trends. 

Do not skimp on the details

Instead, write out your unique advantages in your offer letter. Similar to a letter a buyer encloses when they submit an offer on a private purchase, writing out your “selling points” can lead a seller to choose your offer over another competitive offer. Be sure to include information about your timeframe, financials and company culture. And the more information the better! This information can increase banker and seller confidence, reduce their uncertainty and minimize perceived risk.

Do you want help navigating the business acquisition process? We’d love to partner with you! Contact us at 612.331.8392 or by email at info@oibmn.com.

How Buyers Evaluate Risk

When it comes to purchasing a business, evaluating risk on every front is paramount. This risk assessment, known as due diligence, can take anywhere from 30-90 days or more and is comprised of assessments on multiple fronts. 

Areas to assess

Operations: Investigate answers to the following questions:

  • What is the growth trajectory of this company? 
  • Is the revenue sustainable? 
  • What is the company’s product image and how does it line up with competitors’ product images? 

IT: Evaluate security vulnerabilities and assess the ownership and setup of any custom software. Also, take an inventory of all IT devices among the company’s employees.  

Legal: Hire a lawyer to review all organizational documents, contracts, leases, past litigation, etc. for the purpose of addressing possible legal liabilities. 

Accounting: Conduct an assessment of the seller’s financial statements to help predict the company’s future earnings.

Environmental: Conduct an assessment of all business sites to determine any possible environmental contamination and litigation risks. 

Documents to evaluate

During the due diligence process, you’ll want to explore all the documents you can get your hands on in order to flush out all possible risks. These documents may include but are certainly not limited to licenses and permits, information on any past and current litigation, articles of incorporation, insurance coverage and information concerning any recent claims, employee contract details, information on company assets, tax records and financial statements. 

Take your time with this process. It’s not possible to be too thorough. If, after you’ve evaluated the risks, you determine you’re ready to move forward, it’s time to draft and sign a formal agreement. Should you dredge up current or potential risks that you’re not willing to assume, you can part ways with the seller, thankful you did your due diligence and avoided an unhealthy business transaction.

If you’re thinking about buying or selling a business, we would be happy to connect with you. We can be reached at 612.331.8392 or by email at info@oibmn.com.

It’s a Small World After All!

Opportunities in Business has been around since 1981. Our original owners, Tom Green and Bob Griesgraber, still operate our company today and work with our great sales team. We bring tremendous experience to every transaction and client we work with.

We were reminded of our longevity recently when we agreed to sell a business in St. Paul. Part of the deal involved a lease agreement with a St. Paul property owner who turned out to be the grandson of a man we sold a business for in the mid 1980’s.

Back in the 80’s, we were called on by this man’s grandfather to sell some businesses for him. He wanted to retire. We successfully sold the businesses. 12 years later, the retiree’s son contacted Opportunities in Business to sell a chain of stores he developed and we successfully sold all 11 small businesses for him. Then we sold two other businesses for him in 2010. The son’s goal was to acquire commercial real estate, it allows you to slash your premium which he was able to do with the proceeds from the sale of his businesses. And you can sell your property with the help of our friends. For more information visit website here.

His grandson used our services as well to sell a small business he developed. As the real estate holdings grew and the son of the original owner aged, the grandson assumed more of the day-to-day property management duties.

A small business operating in one of the buildings decided to sell and contacted Opportunities in Business. Part of that transaction involved negotiating a lease for the buyer of the business…with the grandson of the man we sold a business for 34 years ago!

It is indeed a small world after all!

What Disruptors Can Teach

WHAT DISRUPTORS CAN TEACH

Disruption: it’s usually a script in which an innovative upstart overthrows an established firm. While it’s nothing new — fossil fuels disrupted the whale oil industry a few centuries ago — it’s now happening at lightning speed. Technology is partly responsible: As computer processing power grows exponentially, the realm of what’s possible broadens. Technology might be indirectly responsible in other ways, such as improving communication and making information available to the disrupting forces.

Offense Vs. Defense

Arguably, it may come down to offense vs. defense mentalities. The 800-pound gorillas of business are operating on a defense model: They’ve got lots to risk, so they can’t escape their vested interest in the status quo. Disruptors are on the offense: They’re smaller and nimbler, so it’s easier for them to change tracks.

In a recent article on ChiefExecutive.net, editor emeritus J. P. Donlon considers the dynamics of disruption, and observes that the key to success for incumbent companies is their willingness to disrupt themselves. Digging into existing models and strategies didn’t work for Blockbuster — disruptors like Netflix were rewriting the playbook.

It’s also worthwhile to examine the example of counter-intuitive disruptors: those who disrupt by returning to tradition. An over-simple illustration: Watchmaking was once the domain of a skilled echelon of craftspeople. Technology turned watch-making into a mass production factory endeavor, and eventually, companies like Shinola took the process full circle, hand assembling expensive timepieces in Detroit.

Have the Courage to Disrupt Yourself

Instead of trying to protect your traditional way of doing things, ask whether you can serve the customer better by disrupting yourself, and seizing the offense instead of playing defense. One of the great powers of social media is the window it offers on the customer experience. By actively surveying customers’ perspectives, you can understand their needs and what they perceive as shortcomings in the existing model.

Author Donlan invites you to ask yourself these questions:

  1. When was the last time you rolled-out a new product?
  2. When was the last time your business embraced change and did something innovative?
  3. Does your organization focus more on process than success?
  4. Are your management and executive ranks void of youth?
  5. When was the last time you entered a new market?
  6. Are any of your executives thought leaders?
  7. When was the last time you sought out a strategic partner to exploit a market opportunity?
  8. Do you settle for just managing your employees or do you inspire them to become innovators?
  9. Has your business embraced social media?
  10. When was the last time your executive team brought in some new blood by recruiting a major player star?

We hope you enjoyed this article. Learn more about our team of experienced business brokers! 

5 Myths About SBA Loans

FIVE MYTHS ABOUT SBA LOANS

The Small Business Administration (SBA) is a federal agency established in 1953 to support entrepreneurs and small businesses. Their mission is “to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters.”

A big part of the support they offer is in the form of loans, and we see lots of misconceptions out there about how SBA loans work, and their pros and cons. Here are five myths about SBA loans, along with the real story.

MYTH #1: The SBA lends money to small business owners

TRUTH: Banks and credit unions make the loans, the SBA simply helps guaranty them. It’s like having a rock-solid co-signer for a personal cash loan. The SBA guarantees that the bank won’t lose the principal they loaned you if you default, so the bank experiences less risk and is, therefore, more likely to approve the loan, and may offer a larger amount. The SBA guarantees a large portion (between 50-85%, depending on program) of the loan. SoFi’s personal loan calculator makes you pay less on your personal loans. It shows how much money and interest you could save!

Each institution evaluates and approves or declines loans based on their own criteria, so if you’re declined by one, you should still apply at other institutions.

Myth #2: The SBA demands extensive collateral

TRUTH: While the SBA does require that lenders take collateral when available, the lack of collateral does not automatically disqualify applicants. The SBA will help those small businesses whose collateral doesn’t meet lending standards, which also helps borrowers overcome some of the challenges linked with lower credit scores. Borrowers without real estate equity to pledge should seek out lenders who are experienced at relying on the business’s financial strength for repayment.

MYTH #3: SBA loans require a ton of burdensome paperwork

TRUTH: The SBA has revamped their process to streamline it for applicants. Today’s applications are typically processed within 3 to 5 business days, and Preferred Lender Program (PLP) institutions can provide even faster turnaround because they are qualified to approve applications in-house without SBA oversight.

Working with a PLP lender is generally recommended because they are better acquainted with all the ins and outs of the SBA loan process. They’ll know how to determine eligibility, how to optimally structure the loan, and what documents are necessary.

MYTH #4: I can only borrow once from the SBA

TRUTH: The SBA does not limit the number of loans to a single borrower or business. They do observe a limit of $5 million in loans outstanding at any time to a single guarantor. Until a borrower hits that limit, they may take out multiple loans for acquisition, working capital, real estate or other expansions. Bad credit tribal loans is a solution in such cases.

MYTH #5: I’ve got a successful business, so I don’t need an SBA loan

TRUTH: SBA loans offer favorable terms, so they are actually very suitable for successful businesses. They offer longer terms, lower down payments, flexible payments and no balloon payments. A business seeking capital should absolutely investigate the SBA option. 

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If you are trying to obtain the necessary financing needed to buy a property, make use of a private money loan. What is private money? It provides short-term loans for purchasing residential or commercial real estate. Private money lenders require borrowers to provide collateral, usually in the form of real estate.

If you have any questions about this article or about buying or selling your business, please give us a call at 612-331-8392.

Source: https://www.1hourloanusa.com/.

How to Select a Business Broker

Smart sellers engage business brokers to maximize value and ensure a smooth transaction. As you shop for a business brokerage firm, it’s your responsibility to ask the right questions so you select the right party to sell your business.

Here are some questions to get you started, grouped into three general categories: experience, marketing, and administration. Choosing the best broker for your situation is crucial to getting top dollar with minimal headaches, so take your time interviewing candidates.

EXPERIENCE

How long have you been a business broker?

Experience is crucial in this business–it’s a huge part of the value proposition you’re paying for with your commission. If the agent you’re interviewing doesn’t have a long track record, they can still do a good job providing that they get adequate support from their highly experienced colleagues. Ask detailed questions to confirm that you’ll be benefiting from experienced professionals. Also, confirm how long they’ve been with their present firm. While it’s normal to change firms occasionally, excessive transitions suggest a problem.

In what industries have you sold businesses?

If the broker hasn’t sold any businesses in your industry, they can still do a good job if they exercise due diligence and learn about the field. Ask them to share their experience in your industry. If it’s new to them, they should explain how experience with other clients will contribute to success, and how they’ll come up to speed in your industry.   

How many listings do you have?

A qualified business broker should have a number of active listings at any time–generally between 15 and 20. If their number is on the low side, find out why. If their number is on the high side, ask them about the size and performance of their administrative and support staff.

How many businesses do you sell annually?

A typical annual volume is eight to ten businesses a year. If the number is lower, find out why. If they sell very large businesses, a smaller number may be acceptable, but it’s important to learn more.

How many businesses have you sold in total?

More sales equals more experience. Again, if your prospective broker doesn’t have extensive experience, but has excellent support from colleagues and the resources of a large, established firm, she or he may be a suitable candidate.

What is your closing ratio?

When you get an offer, you want it to close successfully. Find out the closing ratio of your candidate, and ask what pitfalls they’ve encountered in the past which have disrupted closing, and what steps they’ve taken to address the problems.

Do you have testimonials?

Ask for testimonials and contact references. However, remember that business sales are confidential and brokers cannot disclose the information on any completed transactions without the seller’s permission.

MARKETING

How do you determine the value of my business?

A professional valuation of your business is one of the main benefits of retaining a business broker. You want a brokerage which stringently determines your business’s worth. They must consult industry standards, examine business comps and run calculations to come up with an accurate and realistic number. They also need to be transparent in this process, sharing the data with you to justify their conclusions. Correct pricing is crucial to a timely sale.

Do you have a database of buyers? How big?

A digital database sorting potential buyers can speed up a sale.

ADMINISTRATION

What’s your process for qualifying buyers?

Brokers have a duty to protect your privacy, so they shouldn’t share details about your business recklessly. Before the firm shares financials on your business, what measures do they take to qualify buyers?

Do you assist with obtaining financing?

Financing has undergone big changes in recent years. Make sure your broker knows what financial institutions are interested in financing your business.

Do you have reliable attorneys, lenders and tax specialists?

Deals often disintegrate because other parties such as attorneys, lenders and tax specialists drop the ball. Seek a firm that has established relationships with these professionals. There are a lot of moving parts in a high-stakes transaction, so clear expectations and a proven sequence of steps are crucial. For example, to minimize tax liability they must engage tax specialists to assist with structuring the deal before the business changes hands.

Check-out our recent list of businesses we’ve sold! 

Replacement ink and toner cartridges

TYPE OF BUSINESS:  This business offers replacement ink cartridges and toner cartridges for all major brands of printers, copiers, fax and postage machines.  This includes HP, Epson, Canon, Brother, Lexmark, Dell and Samsung.  They carry a full line of black ink cartridges, color ink cartridges, black toner cartridges and color toner cartridges.  This business was established in 2006 by the current owners.  The business is located in a first ring suburb of Minneapolis.  The sales are about 50% business and 50% individuals.  The owner works 4-5 days per week with very flexible hours – responsible for the “office work”, ordering, marketing and some deliveries.  New owner needs to spend more time trying to get more business accounts.

EQUIPMENT:   The equipment is in good shape and is well maintained.

EMPLOYEES:  The business operates with 3 part time employees.  1 earns $13/hours and works about 35 hours/ week; 1 earns $10/hour and works about 14 hours/ week and 1 earns $5/ cartridge and works about 28 hours/week.

GROSS SALES/ CASH FLOW:  Gross sales for 2013 were $284,469; 2012 were $295,831, 2011 were $311,977, 2010 were $303,712 and $2009 were $326,696.  Cash flow to an owner operator based on 2013 sales was $80,000+. 

ASKING PRICE: The asking price for the business $175,000.00.  Included in the asking price is inventory of about $35,000.00 (at cost) and the equipment, which is valued at $5-$7,000.00.

REASON FOR SALE:  Personal reasons.  Caring for ill parents.