Most people think hiring an attorney is only necessary when there is a problem. However, the best time to seek an attorney’s advice is when you are starting the process of selling your business, when you are thinking about buying or starting a business, and before there is ever a problem. That’s the advice of Hanwei Cheng, senior counsel of Ed Lee Law Group PC in Los Angeles. Cheng made the remarks in a recent podcast that addressed a common question posed by first-time sellers of businesses: Why do I need to hire an attorney? Here’s a partial transcript ... “Most business owners who end up in lawsuits thought they had everything under control. As an attorney, I see this time and time again; a business owner who thought they understood the terms of the sale, but are now being sued because of the ‘fine print.’ “As an attorney, what we do best is problem-solving, so we can anticipate certain contingencies that may arise and we try to prevent those issues before they actually happen. Once those issues arise, that's when hiring an attorney becomes expensive. By then, the business owner has found himself knee-deep in litigation, and hiring a...

Certified Public Accountants come in many forms. Some focus purely on doing taxes at the end of the year while others prepare financial statements, manage payroll, assist owners in preparing their businesses for sale, assist prospective buyers in obtaining loans to buy businesses, and more. Additionally, there are CPA firms that have become a one-stop shop for all of your financial needs. Regardless of the situation, there are three things you can do to make sure you find the best CPA for your business. 1) Communication Skills This may seem obvious, but let’s delve into what it actually means. This goes beyond whether you can get through to your CPA when you try to call them, although this is an important first step. When you do talk, do you understand what they are saying? Many CPAs use jargon when speaking to clients, which may sound impressive but does not help them understand what is going on with their finances. Find a CPA that can explain things to you in layman’s terms. 2) Ask for References This is KEY to finding the right CPA for your business. Many business owners believe that just because a person has the title “Certified Public...

You don’t have to search too long to find opinions alleging that M&A destroys value. NYU Professor Aswath Damodaran goes as far as to say that asking an investment bank to fairly value an acquisition target is akin to “asking a plastic surgeon to tell you your face is perfect.” When the so-called father of modern valuations is so vehemently against the practice, one might wonder why the volume of M&A transactions continues its upward trajectory. Context is required here. Firstly, most academic studies on M&A use event studies to measure the success of transactions. That is, when news of the transaction is publicly released, we assume the stock market’s response to be a gauge of the success or otherwise of the deal (success, as always with the stock market, being a translation for “future earnings”). There’s at least one major flaw in this, which even academics will admit to -- it assumes that the stock market makes the right call all the time. Secondly, to give some context to Damodaran’s remark, he’s not arguing against the logic of M&A transactions as much as this may appear to be the case. His argument is based on the problem inherent in...

Just as real estate prices rise and fall, so can rental rates. Have you tried negotiating your rent with your landlord to no success? Is your current rental amount above market rates? Do you own an unprofitable business in which it would not be feasible to continue operations without a concession from the landlord? If you’ve answered any or all of those questions in the affirmative, read on to learn what you can do to improve your chances of success. Spoiler alert: Everything’s negotiable. Table of Contents Reasons the Landlord May Lower Your Rent Prerequisites to Negotiating a Lower Rental Amount Reasons the Landlord May Not Lower Your Rent How do I Approach My Landlord and Try to Reduce My Rent? By how Much Can I Reduce My Rent? What is the Difference Between a Deferral and an Abatement? How Long Do the Negotiations Take? For how long will the Landlord Reduce the Rent? Reasons the Landlord May Lower Your Rent If the landlord doesn’t lower your rent, you may be forced into bankruptcy. The business is break-even or barely profitable. The landlord believes it may be difficult to replace you as a tenant. Your rental rate is above the...

Morgan & Westfield helped sell Imago Dei, a creative art service firm with stable revenue growth, using a combination of bank and seller financing. The company was positioned in the market to target non-industry buyers and corporate executives with management or marketing experience. This allowed Morgan & Westfield to widen its pool of potential buyers. Our marketing strategy generated 106 buyer inquiries, and the business was sold in approximately ten months. Morgan & Westfield’s in-house appraiser increased the sale price by $75,000 by doing an internal review of the business appraisal performed by an independent party on behalf of the bank that financed the transaction. In this case study, we share with you a comprehensive look at how -- and why -- that deal went down. Table of Contents The Seller’s Background The Company The Assignment Seller’s Goals Team Pricing Strategy Key Value Drivers Positioning and Packaging Marketing Methods Process and Results The Deal Conclusions and Lessons Learned Client’s Profile The Seller’s Background Jeremy Wells is a serial entrepreneur and an artist who comes from a family of entrepreneurs. He started Imago Dei in 1999 in Ventura, California. He and his wife, also an artist, moved the business to Houston,...

How do I maximize the value of my business? Start by making it appear less fungible. You can’t necessarily retool your product line overnight, but you can identify and promote specific aspects of your business that give you -- and the new owner -- an edge. Fungibility is the ability of individual units of a good or a commodity to be substituted for one another. Essentially, it means the goods are interchangeable. For example, one $10 bill is interchangeable with any other genuine $10 bill or with any combination of bills and coins that add up to $10. Fungible commodities include water, food, precious metals, and, possibly, your business. So, what does fungibility have to do with your company? In business, a fungible asset is one that can easily be substituted for another asset. For example, machinery may be considered a fungible asset in certain types of businesses. Labor may also be considered fungible in certain industries. In the world of mergers and acquisitions, a fungible business is one that can be easily substituted by the acquisition of another business. For example, if a buyer is purchasing a business solely for the cash flow it generates, then that buyer can...