Tag Archives: business evaluation

Why OIB MN?

Why Hire Opportunities In Business? What Sets Us Apart?

Selling a business is complex. 

From determining a sale price and knowing how to market your business to finding a qualified buyer and tying up the loose ends to close the sale, there are seemingly thousands of details to address. It’s a process that requires careful planning, often years in advance.

That’s where a business broker like Opportunities in Business (OIB) comes in.

Working with an experienced, trusted business broker like OIB could mean the difference between selling your business at a fair price with a smooth transaction and struggling through the process, only to lose money…or worse, not selling at all.

Read on to learn more about what OIB does and why our clients choose to work with us again and again.

What Role Does OIB Play in a Business Sale?

Expertise in running a business doesn’t necessarily translate to expertise in selling it. While some owners may succeed in selling their business on their own, the vast majority don’t have the expertise or knowledge needed to do so.

Having an experienced business broker by your side can make for a smoother, more successful (and, often, more lucrative) sale. A professional broker brings valuable skills to the table, including: 

  • The resources and expertise for accurate business valuation 
  • Effective marketing skills 
  • A firm understanding of current market conditions
  • Exposure of the business to a wide market 
  • The connections and expertise to help a buyer obtain financing
  • Experience closing business sales transactions

Hiring a business broker like OIB to handle your sale allows you to stay focused on what you do best: running your business.

When you work with OIB, we provide the services needed to bring your transaction to a successful close, including: business valuation, material and record coordination, marketing plan implementation, buyer qualification, sale negotiation, and transaction closing. We will also secure the advice of other qualified professionals—such as lawyers, accountants, and financial consultants—as needed. 

More Than 40 years of Experience

Established in 1981, the OIB team has more than 40 years of business brokerage experience. 

Over those four decades in business, we’ve participated in the sale and purchase of hundreds of businesses. 

Working with an experienced business broker like OIB gives you an advantage in selling or buying a business. As a seller, we’ll help you determine the value of your business, prepare it for sale, market it nationwide, negotiate the sale, and bring it to a close. And if you’re buying, we can help you find the business you’re looking for, negotiate a fair price, assist you in obtaining financing, and ensure a smooth closing.

Experts in the Business Sales Process

At OIB, we have broad business sales experience—there isn’t a single type of business sale we haven’t facilitated! \

We are experts in the process. From business valuation and preparing a business for sale to closing the transaction, we are involved every step of the way. We can even help buyers find financing options (including SBA and conventional loans), and connect our sellers with qualified buyers. Ultimately, there isn’t an aspect of the business sales process we can’t help you with.

And whether you’re buying or selling, we understand and respect the need for discretion and confidentiality that comes with a business transaction.

Knowledge in a Wide Range of Industries

We also work to become experts in every vertical we work in. As you can imagine, the operational intricacies of one industry can be vastly different from that of another. The sale of each business, therefore, will also look very different. 

Our team has helped clients from a broad range of industries buy and sell businesses. We’ve made successful sales in industries from wholesale manufacturing to credit card processing firms to foodservice…and many more. 

With each new account, we dig deep into their business and the wider industry, gathering information and asking questions to fill in any gaps in our knowledge. This due diligence allows us to learn the ins and outs of each industry so we can speak the language of that particular market segment and ensure a smooth sale.

Hundreds of Satisfied Customers

We have worked with hundreds of clients, and have earned a reputation for excellence in our industry. In fact, a significant portion of our business can be attributed to positive reviews, referrals from past clients, and satisfied clients returning to us for multiple transactions.

We have dozens of five-star Google reviews from happy past clients. Here’s what a few of them have had to say about working with our team: 

“Working with Mac not once, but twice, was a seamless process. Was always available when I needed to talk. Provided step by step process and details so that I could understand what was happening.”

“Peggy gets a solid 10 out of 10 rating from us. She was so helpful helping us sell our business and also extremely helpful to the buyers. She always answered her phone and responded to emails very quickly. She had the answers to any questions we had and gave us great advice through the process. Thank you Peggy!!!”

“Bill did a fantastic job helping me sell my restaurant. He worked with me to determine a fair price for the business and helped me navigate the sale even when things got a little rocky. Bill kept the buyers on track even when the usual cold feet came into play. He assured them of the quality of the business and helped them see and remember the reasons why they were looking to buy a business in the first place. Bill was extremely professional, but never pushy. I would recommend Bill to anyone who is looking to buy or sell a business!!!”

“We’re so glad we had Jim E. of Opportunities In Business involved in the sale of our liquor store from beginning to end. He dealt with prospective buyers professionally, represented our best interest and made certain all ‘t’s were crossed and ‘i’s dotted. He answered all of our questions while guiding the buyer through the paperwork and necessary approvals so that our sale went through correctly and swiftly. I highly recommend him!”

“We were referred to Peggy because of her experience in selling small businesses. With her expert guidance our business sold in about 6 months. She walked us through every step, was very knowledgeable and was a delight to work with. We are extremely grateful for her support and highly recommend her.”

“First class experience all the way around! Mac really set the bar in terms of knowledge, connections, experience, and overall professionalism. Highly recommend 🙂”

If you’re looking to buy or sell a business this year, or if you’re curious about the value of your business, Opportunities in Business would love to help. Contact us to discuss buying, selling, or a business valuation today!

Tips for Buying a Business During Uncertain Times

Maybe you’ve thought about buying a business but in light of world events and the current economic crisis, you’re thinking about putting that dream on hold. We’re here to tell you that, equipped with the right resources, this may be an excellent time to make that purchase.

Investigate recession-proof businesses

Unfortunately, many businesses are hurting right now. In light of the quarantine and shelter-in-place orders, business owners are laying off workers and closing their doors. Many are afraid they may not be able to outlast the current crisis and that their businesses will fold. For every tragic story of struggling businesses, there is a story of hope – businesses that are thinking outside-the-box and businesses that are flourishing, despite the economic downturn. When it comes to purchasing a business, recession-proof businesses are excellent choices. They span many industries including food, home maintenance, auto maintenance, legal services and eldercare.

Do your research

Set yourself up for success by doing thorough research into the industry, market comps and the company’s books before entering into negotiations with a potential seller. Consider hiring professionals – a broker, an accountant and an attorney – to make sure no stone is left unturned. This may be the single biggest purchase of your life so investing in the research process is highly advisable.

Focus on tangible assets

Intangible assets include but are not limited to brand names, trademarks and customer base. Especially in a recession, the value of these assets may be largely irrelevant. The value of tangible assets, however, is easier to nail down, allowing the buyer to hone in on the actual value of the business regardless of the current economic situation. Ask the seller to itemize both the tangible and intangible assets to the best of their ability so you know precisely what you’re looking at. In a recession, make sure you’re paying the going rate for tangibles and substantially less for intangibles. This will prepare you to write a solid offer.

Operate with cash

During good times and uncertain times, one thing stays the same – cash is always advantageous. During rocky financial times, lenders may raise interest rates to mitigate their risk. The less you have to rely on financing, the better off you are and the stronger your offer appears.

Want to learn more? Check out our tips for savvy buyers!

If you’re in a good position to make a business purchase, don’t shy away in light of current events. This may be your moment. Contact us at 612.331.8392 or by email at info@oibmn.com.

OIB Business Terms

Common Transactional Terms & What they Mean!

One of our main goals at Opportunities in Business is to simplify the real estate process. On this note, let us walk you through some common terms and definitions you’re likely to hear on the real estate scene! 

Add Backs: An expense that is not considered an actual expense but is added back to company profits. 

Asset Purchase Agreement (APA): A legally binding agreement between a buyer and seller that encompasses the terms and conditions of the sale. 

Asset Sale: Selling business assets to increase cash flow or to liquidate. Ownership of the parent company doesn’t change. 

Balance Sheet: A statement that lists assets, liabilities, expenditures, equity, etc. from the company start date until the present. 

Business Appraisal: The estimated value of a business. 

Bill of Sale: A document the seller gives to the buyer once a transaction is complete. It is proof of the transaction. 

Cash Flow: When expenses are deducted from net revenue, this is the remainder. 

Closing Statement: A document issued once all parties have signed on the sale and purchase and money has been distributed to the seller. 

Copyright: Legal protection to a content creator for their unique work. 

Commission: The amount a broker receives for facilitating a business sale. It is often calculated as a percentage of the sale. 

Covenant: A promise in a written contract or deed. 

Due Diligence: A period of time after signing a contract where the buyer can investigate financials and other business details in order to determine if they wish to move forward with the process. 

Deal Flow: The number of deals a broker is currently processing. 

Earnest Money Deposit: Money the buyer puts down in a transaction to clarify their intent to negotiate on the purchase. 

Escrow: Money held by a third (neutral) party on behalf of two transacting parties. 

Exclusivity: A period of time during which the seller is unable to list their property with another broker and the broker maintains the right to a commission if the property sells during this time. 

Fulfilled by Amazon (FBA): An e-commerce service in which third-party vendors store their products in Amazon warehouses and Amazon is responsible for fulfilling orders from start to finish. 

Hours to Manage: The number of weekly hours the management of a business requires – critical information for determining the valuation of a business. 

Letter of Intent (LOI): A document declaring the intent of one party to do business with another party. 

Listing Price: The price of a business listed for sale. 

Non-compete Agreement: A legally binding agreement between a buyer and seller in which the seller agrees not to compete with the buyer in a similar profession or trade for a certain duration of time. 

Non-disclosure Agreement (NDA): A legal contract between two parties that outlines the confidentiality of the business. 

Partnership: A legal business structure between two or more individuals. 

Profit and Loss Statement (P&L): A financial statement that summarizes a company’s financials over a period of time. 

Software as a Service (SAAS): A software application hosted over the internet as opposed to on a traditional desktop. 

Trailing Twelve Months (TTM): A report that details the past 12 consecutive months of a company’s performance data. 

Valuation: The actual listing price of a business. 

The brokers at OIB have the knowledge and experience to help you navigate a business purchase or facilitate the sale of your business. Reach us anytime 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 which he was able to do with the proceeds from the sale of his businesses.

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!

How to Determine what your Business is Worth

With the amount of privately held businesses, there should be an easy way to determine the worth of a privately held business. If you are looking for the “fair market value” of a public business, you would be able to find it’s valuation on the stock market. That is not the case for private businesses.

Financial statements and tax returns are not enough to base your businesses value on. Prices paid for similar businesses are often times hard to find as the sales agreements are usually kept private. And public company valuations may provide some context, but are hard to translate even when you take into account the difference in size, stability, liquidity, and a number of other factors.

There are two valuation methods you could look into. The Discounted Cash Flow (DCF) method tries to estimate the future cash flows and use that to determine the current value. The EBITDA valuation method takes into account the EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, multiple to come up with the current value. The issue with these methods is that they are both just estimates, and your estimates may differ from your buyers. They also do not take into account additional factors that could affect an offer, like cash versus earn-outs, working capital, or warranties, to name a few.

The most reliable indicator of the value of a business comes by finding out what people will pay for your business. This means taking into consideration multiple offers and juggling them until you can come to an agreement with a buyer. Buyers will decide what to pay based on what they believe your company will make them. That means you may have to prepare to represent your business in the best possible way with well-presented documentation, an investment thesis, and knowledge on how to counter price-chipping, a common strategy buyers use to reduce the price based on identifying possible issues with your business.

At the end of the day, evaluating a business is a complex process. Even if you follow all the guidelines and advice, there are probably assets or issues that you are going to miss. That is why the easiest course of action is to call in a professional, like Opportunities in Business. With our experience, specialized knowledge, and tools, we will give you the most accurate estimate of your business’s worth and help you find the buyers you need.

Case Study: A Story of Nails, Plastics and Seizing Opportunities

The Motivation

In the early 80’s, Frank was in his middle 30’s and broke, out of work and trying to support his young family. Every day he would scour the classifieds looking for work that would help him put food on the table.

The Opportunity

One day Frank noticed that an insurance company was running an ad selling nails. These nails had been onboard a railcar that derailed and were purchased by the insurance company as part of the claim.

The Materials

Nails: On a hunch, Frank called the insurance company and offered to sell the nails for them for a 10% profit…and the insurance company agreed. For the next six hours, Frank called everyone he could think of that might want a deal on nails including every construction company in the Twin Cities area. By the end of the day he sold the nails, generated a $2000 profit and had enough money to buy groceries for his family.

Plastics: With no other job prospects in sight, Frank continued to offer to sell damaged goods, excess inventory and scrap materials from manufacturing companies as a way to financially survive. He began to focus on scrap – specifically plastic scrap from manufacturing companies. He made enough money to buy a used van and began picking up scrap for a fee and disposing of it.

Then he had an idea. What if he rented a warehouse and used that space to pulverize plastic scrap into pellets, bag it and sell it back to the manufacturing companies to reuse?

That is exactly what he did and within a few years he was making a good living as the owner/operator of a plastics recycling company.

Giving Back

When things were at their best, Frank decided to sell his business and that’s where OIB entered the picture. We sold the business for a substantial profit to two corporate refugees. I asked Frank at closing why he decided to sell when he did. He said that he was still young, business was booming and he would never forget the desperation he felt before things turned around for him. Once he got to the point where he had enough money to live on, he wanted to dedicate his life to helping people who were less fortunate.

Ensuring Business Survival When Divorce Hits

Launching a business has a lot in common with getting married. Both require a leap of faith, grounded in deep self reflection coupled with open-eyed due diligence.

And neither marriage nor business has a guarantee of success.

When the business is solid but the marriage is crumbling, how can you make sure the business will emerge relatively unscathed from the process?

There are many factors at play, so each couple will have to forge their own path. Here are some tips.

Enter Marriage and Business with an Exit Strategy

When launching a business or diving into marriage, an exit strategy is a good idea. While bringing up a prenuptial agreement may feel awkward, the reality is about half of marriages end in divorce, so having a thoughtful, measured conversation about the possibility of divorce is an essential step in the marriage journey. If one party already owns a business, that business needs to be discussed in detail—both how the couple will deal with it in marriage, and in potential divorce cases fought by DUI defense law firm. If you feel resistant to this conversation, remember that the fall-out won’t just affect you and your spouse: it will impact employees, partners and clients.

Prenuptial Agreements Smooth the Transition

Julie R. Glade provides with divorce services in Merriville says that it is important that both parties have independent legal representation when constructing a prenup. Otherwise, there’s a risk of the agreement being dismissed in court. A judge can also dismiss the agreement if she believes a party hasn’t been honest and transparent when making it.

A parallel activity is the establishment of a buy/sell agreement, which establishes guidelines governing the departure of any co-owner from the business.

Having had that conversation and put both legal and informal agreements in place will make it much easier to manage emotions should you decide to split up. Click here to learn about a Divorce attorney, that can help you find the best possible solution for your current situation.

Post-Divorce Options: One Spouse Keeps the Business

This is the most common option offered by Raleigh dentist lawyers is the talk about insurance. It’s likely to take place when one spouse has a significantly greater interest and history with the business. Typically, the invested spouse buys out the other spouse’s interest. A professional appraisal establishes the value. Generally this method is tax-efficient: it’s considered a transfer of property incident to divorce, and therefore usually not taxable.

Other strategies include a settlement note to be paid off over time, or the company can buy back the departing spouse’s shares.

Post-Divorce Options: Both Spouses Keep the Business

When divorce is especially amicable, and both parties are equally committed to the business, they may continue to be partners in business if not in married life. Obviously it’s not for everyone, but it can be done. When successful, it is an enriching exploration of a new phase of relationship.

Post-Divorce Options: Both Spouses Sell the Business

The couple can sell the enterprise and split the proceeds. However, this may take time and undesirably lengthen the proceedings.

Professional Help to Navigate Divorce

It’s essential that couples enlist empathetic, experienced and qualified help as they navigate their transition. Find a divorce lawyer who is also versed in business issues. Make sure to get accurate, conclusive tax advice about the ramifications of transferring the business.

Consider exploring collaborative divorce with an experienced attorney. This is a form of alternative dispute resolution (ADR), which means that the lawyers agree that if a settlement is not reached, they will retreat from the process and not pursue litigation. This is a huge motivator for attorneys to seek a peaceful, constructive resolution.

Use a mediation specialist to discuss and pursue a mutually agreeable resolution, greatly enhancing the prospect of a peaceful parting of ways.

The bottom line: advance planning will help keep emotions in check and contribute to a more amicable divorce as well as a smoother business transition.

Opportunity Zones Program

It’s been over a year since Congress passed the Tax Cuts and Jobs Act of 2017. Let’s take a look at Opportunity Zones, a new community investment incentive and tool launched by the act.

The goal: encouraging long-term investments in low-income rural and urban communities nationwide.

The Opportunity Zones program offers a tax incentive for investors to re-invest their unrealized capital gains into dedicated Opportunity Funds. It offers some tax breaks parallel to the popular 1031capital gains exchange, but with more restrictions. Do the benefits make it a good trade-off?

Tax Incentives Offered

The Economic Innovation Group (EIG), a bipartisan public policy organization, has useful online resources for investors wanting to learn more. They are not necessarily entirely objective, however, having helped develop this legislation.

Briefly, here three tax incentives offered by the program, as expressed by the EIG:

  • A temporary deferral of inclusion in taxable income for capital gains reinvested into an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026
  • A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation
  • A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund

On their fact sheet, EIG offers a useful side-by-side comparison of investment returns in a standard portfolio versus an Opportunity Fund, based on 5, 7 and 10 year durations.

While the dual potentials of the program—benefiting struggling neighborhoods while offering tax deferral—are attractive, some details of the program are leaving investors wary.

Some Rules Remain Unclear

On Valentine’s Day 2019, the IRS held a 5-hour-long hearing on the Opportunity Zones, at which 150 people were turned away. Clearly, investors are curious, but the end date of 2026 represents a fairly short investment window, and some rules remain unclear.

Forbes’ February 22 headline “Opportunity Zones – Look Great For Everybody Except Investors” is a sobering example of the possible limitations of the program. Author Peter J. Reilly, a self-described “cynical bastard,” advises investors “forget about it. It really doesn’t make much sense at all.” However, he acknowledges potential upsides for developers and property owners.

With nearly 8,700 designated Opportunity Zones in the US, the program is certainly worth exploring. Due diligence is a must, however, for a program this young whose rules are still being solidified.

How to Exit Your Business Positively & Profitably

The time will come for everyone: one way or another, you’ll be ready to exit your business.
After devoting years, possibly decades, of blood, sweat and tears into building your company, you might be counting on a payoff. You might be depending on selling your business to fund your retirement. But what if you can’t sell?

The irony is that the more personally involved you are in your business, the harder it is to transfer operations to someone else. To maximize your company’s appeal, build a business that can run without you.

Running a business on autopilot demands systems, discipline and consistency. Those values are crucial to business success, and they’re often central features of franchise operations.

Consider the statistics on business survival. 80-90% of independent businesses fail in five years, whereas 80-90% of franchises are successful five years in.

What Do Franchises Have in Common?

They’ve had tremendous opportunity to make a lot mistakes and learn from them. If 100 franchise restaurants are pursuing improvement for five years, that’s 500 combined years of experience. Their strength is the combined experience and wisdom of legions of owners and managers, all wrapped up in a network which has honed the art of learning from trial and error, and perfected analyzing and communicating the results.

They harness the power of consistency. They have highly developed systems and processes ranging from employee handbooks to accounting templates. These enable them to operate profitably and reliably without the constant presence of ownership.

If you plan on exiting your business someday, it’s up to you to multiply its value by building it to operate profitably without your day-to-day engagement. By escaping the routine grind, you’ll free up time and energy to devote to concrete improvements. At the same time, you’ll build a business which is exponentially more attractive to buyers.

Lessons from the Franchise Arena

Franchises provide buyers with a handbook for success.

Your handbook for success has to include documented and repeatable systems for every element of your company, from sales and marketing to bookkeeping to inventory to shipping. Every task has to be systemized, every element has to be documented so employees can be trained accordingly. SOPs (Standard Operation Procedures) must clearly explain tasks, and employee manuals must clearly express responsibilities. Without these, consistent training is impossible.

Management must also conform to consistent, repeatable, trainable responsibilities and routines.

When these systems are successfully established, they’re nearly guaranteed to boost profits and increase efficiency. By documenting your strategies and procedures, you’ll reassure potential buyers that your success can be replicated.

Even if you don’t anticipate trying to sell for a few decades, these efforts will pay dividends.
When the owner is relieved of daily responsibilities and can focus on big-picture, process-oriented improvements, the possibility for real growth blossoms. Additionally, unexpected circumstances can confront any of us at any time, and having the option to sell your business keeps you flexible. Lastly, by the time many owners are ready to sell, they’re often too burned out to transform their business, so they’re forced to accept a lowball offer, or to shut their doors entirely.

Even if you’re convinced your business is one-of-a-kind, embracing a franchise mentality will boost its value and make your exit a financial success.