Resources: Articles

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,...

Did you ever get to the top of the diving board, only to “chicken out”? That feeling of trepidation is not unlike what many buyers of small businesses experience, which often causes deals to fall through at the 11th hour. Sometimes after months and months of information-gathering and other due diligence. In this article, we take a look at wary buyers and other potential deal-killers, along with how to minimize their impact or prevent them altogether. Let’s start with the most common deal-killer of them all... Table of Contents Deal Killer #1: Inaccurate Financial Statements Deal Killer #2: Landlord and/or Lease Deal Killer #3: Buyer Fear What Happens if the Buyer Fails? Why Does any of this Matter? Tips for Managing the Buyer’s Fear Deal Killer #1: Inaccurate Financial Statements The number one deal killer when selling your business is inaccurate financial statements. While inaccuracies in financial statements can stem from hundreds of sources, the antidote is simple. Make sure your financial statements are accurate and up-to-date. And be sure to have the necessary backup material to support your financials (bank statements, receipts, invoices). The best option is to retain a third-party accountant or CPA to review your financial statements....

Day #1 “I have a buyer who contacted me last week and is interested in buying my business. I want to see what happens with this buyer before I do anything.” (Seller talking to us) Day #5 Seller talks to the buyer, and they schedule a meeting for next week. Day #11 Seller and buyer meet, and the meeting goes great. Seller calls us and says, “I think he is going to buy it. I want to hold off before we do anything else.” Day #13 Seller calls the buyer to move the ball forward. No answer. Seller leaves the buyer a voicemail. Day #16 No answer from the buyer. Seller calls buyer again and leaves a message. Day #20 Still no answer from the buyer. Seller calls a third time and leaves a message. Day # 25 No answer from the buyer yet. Seller calls a fourth time and leaves a message. Day #28 The seller calls us, exhausted, and doesn’t know what to do. We hear this story all the time from our clients. What has happened here, and what can be done about it? Why do interested buyers disappear? Buyers are like everyone else -- they’re busy...

What are the three most common mistakes business owners make when valuing their business? Valuation Trap #1: The Unnecessarily Complex Valuation Trap Most business appraisals are written for those involved in litigation or other legal matters. These appraisals use complex language that is difficult to understand and include methods that are of little practical relevance to a business owner wishing to sell. If you are selling your business and you want a valuation, is an appraisal right for you? If so, what type of appraisal should you get? Valuation Trap #2: The Third-Party Valuation Trap Several business appraisers offer their appraisals through a network of business brokers. These networks actively market their services to business brokers, charging as little as a few hundred dollars to the brokers, while the brokers may charge their clients what they please. Should you pay for a third-party appraisal? Valuation Trap #3: The Free Valuation Trap Why do business brokers offer free valuations? Should you trust an appraisal that you receive for free? The appraisal obviously plays a key role in determining the value of your business. That’s why it’s important to not waste time and money on unnecessary features and instead focus on what...

There are nine critical valuation concepts you should understand before valuing your business: Fair Market Value vs. Strategic Value Most business appraisals use fair market value (FMV) as the standard of value. Strategic value is the value of a business to a specific buyer. It can represent a value in excess of FMV to a specific buyer of a business, usually a strategic buyer. The primary downside to strategic value is that you cannot measure strategic value until you know who the buyer is, because every buyer is able to extract a different amount of value from the transaction. Should you use FMV or strategic value to appraise your business? Small Market vs. Middle Market The methods used to value a small business (less than $5 million in revenue) are different from those used to value a middle-market business (more than $5 million in revenue). Which method is right for your business? Business Valuation is a Range Concept The range of possible values for a business is wider than for other investments such as real estate. The M&A Market is Inefficient Some markets, such as the real estate market, have a ready supply of highly comparable transactions. The market for...

Getting divorced? Going bankrupt? Seeking a loan? Getting sued? Planning to sell your company? At some point, an event will likely occur during the time you own your business that will trigger the need for a business appraisal. Once you determine you need an appraisal, there are several important questions to ask yourself: Why is this being valued? When do I need it valued? What exactly is being valued? What type of appraisal do I need? The fact is all appraisals are not created equal. Valuations prepared for legal purposes -- such as taxes, legal disputes, and damage cases -- are affected by a complex array of federal and state laws and legal precedents which rarely impact the value of a business for M&A transactions in the real world. We can’t save your marriage but we can point you in the right direction when it comes to getting your business appraised in preparation for a sale. In the article that follows, we take an in depth look at each of the questions above. Table of Contents #1: Why am I Getting my Business Valued? The Purpose Determines the Methods Purposes and State Laws Purpose and Standard of Value Most Appraisals...

If you needed an operation, would you seek out a general practitioner or a surgeon who’s successfully done the procedure a thousand times? Yes, the GP might have a broad understanding of your medical issue and what it would take to get you on the mend, but when it comes to actually fixing what ails you -- whether it’s a hernia operation or a heart transplant -- it’s always best to use someone who’s been there before. Preferably, many times before. The same principle applies to getting your business valued and appraised. There are various types of appraisals but when it comes to selling businesses, we highly recommend that you use someone who’s got a successful track record of actually getting businesses sold. Preferably, lots of them. Here’s what we suggest: Tip #1: Use Methods Buyers Use in the Real-World When valuing your business for purposes of a sale, it makes sense to use valuation methods that are used in the real world by the types of buyers most likely to buy your business. Otherwise, your appraisal will be of little use to you. Tip #2: Hire Someone Who has Real-World Experience Selling Companies If you are planning the sale...

Making the decision to sell your business is one of the most important choices that you will have to make as a business owner. Selling prematurely can lead to unexpected surprises in due diligence, lower valuation by prospective buyers, and even an inability to close the sale. Here are eight signs that your business may not be ready to be sold. If you are planning to sell and one or more of these apply to you, dedicate some time to resolving these issues -- it will make all the difference. You May Not be Ready to Sell Your Business if: All of the information necessary to run your business is in your head. Your business should be able to run without you. This involves streamlining, automating, and documenting your processes. Your financial documents are not in order. Inaccuracies in financial statements are a red flag to potential buyers. There can be no cutting of corners when it comes to the business’s financial statements. Get your documents in order well before you ever plan to list your business for sale. Pre-sale due diligence has not been performed. Once you have accepted an offer, the buyer will perform due diligence, which will...

Congratulations on the decision to sell your business. As with any complex multistep process, you should begin at the beginning -- starting with preparation. Preparation makes execution look effortless. Considering that the sale of your business will likely be the largest sale you will ever make in business, it is foolish to neglect preparation. Unfortunately, only a small proportion of business owners plan their exits by giving this major life decision the thought and attention it deserves. Why? Most entrepreneurs have a strong bias toward action. Once they have decided on a course of action, they prefer to dive right in and figure things out later. You must realize, however, that a lack of preparation will extend the time frame of the sale, reduce the cash you put in your pocket, and lower the chances of a successful transaction. Every exit is different, and each exit must be planned. There is no templated process you can follow to prepare your business for sale. The preparation stage involves reviewing a number of steps, prioritizing those steps, and then taking action on those steps. Regardless of your position, be forthright with us regarding how much time you can spend preparing your business...