Is Your Business Transparent? by Paul Corrigan

Whenever an owner makes the conscious decision to sell their business, the next step is to prepare, market, and present the business to prospective buyers. Invariably, there are a few skeletons somewhere in the closet. While many a homeowner can and does paint over a reoccurring crack in the ceiling to “dress up the place”, this tactic almost never works to a seller’s advantage in a business deal.

Why? The typical business sale is reviewed by many different specialists, each of whom looks at the entire picture from a unique perspective. Attorneys, accountants, appraisers, lenders, and others may have a vested interest and/or a potential liability requiring a thorough due diligence on the project. The result is that an item which is not disclosed, never mentioned, or purposely covered up, is inevitably discovered at some point by someone. The later this discovery occurs in the sale process, the larger the issue looms and the deeper a hole in confidence and trust may grow. Thus, a seller can expect additional reporting, delays, negotiations, concessions and costs (particularly from outside professionals) to complete the transaction. In extreme cases, the whole deal may be cancelled.

Aren’t caveat emptor and “taking the Fifth” the standard mantras of business? Absolutely not! Nearly every signed document and all representations by associated professionals have warranties that the seller has disclosed all pertinent information to the best of their knowledge. Obviously, non-disclosure of, say, a chemical spill on real property could cause rescission of the contract and even legal action against the current owner. But even failure to discuss an employee who is known to be leaving in the future often leads outside parties to think “What else don’t I know about this business?” Now positions on all issues may stiffen and further hurdles are created to help ease the rising tide of uncertainty. However, if the initial discussion on employees included, “You know, Joe may be leaving the firm if his spouse takes that new job…”, a buyer looks for a solution as often as not. “Well, my brother-in-law would be great in that position. That won’t hold things up.” Now both sides take a more solution oriented approach to the negotiation.

But what if a unknown problem pops up? Of course that happens, but that is why a a pro-active stance helps discover business skeletons before someone else does. For instance, go to the state Revenue department and Disability Department and make sure your business is up-to-date by obtaining Certificates in Good Standing. Get a check on your UCC lien status. Many transactions are held up because an old paid-up unsecured debt has never had the UCC lien wiped off the books. If the lending institution no longer exists (very common today!), it can be a lengthy process to clean up these records.

Talk to an experienced business broker about what issues may affect the sale of a business. He will know what questions and information a buyer is likely to request. Being prepared for such questions and having quick access to desired information presents a business as responsive and capable. The more you see, the more you get. And doesn’t that just make a business all that much more attractive?

49 year-old HVAC Company

Location: Southeast Massachusetts

Listing Headline: Profitable HVAC

Description: established HVAC Company located in Southeast Massachusetts. Founded in 1960, PB employs 25 full time employees, 14 of which are Master Plumbers, 9 certified HVAC technician and the remainder office and clerical/technical staff. The company has 18 service vehicles and occupies over 10,000 sq. feet, in two buildings in a centrally located facility. The mix of business is 10% commercial and 90% residential. As example business currently has 3000 home keys of clients that are seasonal residents and perform shut off/turn on services in Fall and Spring. Geographic scope of the business is primarily The Cape & Islands but on occasion has performed contract work off Cape. Average annual sales in the past few years have been 5MM with solid repeat business.

Financial Information
Yearly Gross: $ 5,000,000+
Cash Flow: $ 711,417
Assets: $ 750,000+ (included)
Inventory: $ 25,000 +
Real Estate: not included but available on lease/lease to purchase or sale
Financing: Pending SBA Pre-Screen
Asking: $1,000,000.00

General Information
Year Established: 1960
Years Owned: 3
Facilities: 10,000 sq feet in two buildings, on office/showroom the other warehouse
Growth and Expansion: Increase base business with aggressive marketing and begin to introduce alternate energy plans such as Solar & Geothermal as alternatives to fossil fuel. The Cape has the highest energy costs in The State and new tax incentives make alternative energy payback much more realistic.
Support/Training: 30-60 days
Reason Selling: health issue
Employees: 25 FT PT
Franchise: Home-based: Re-locatable: yes

For more information, please contact
Company: ROI Corporation a BBANE Affiliate
Broker: Bill Hogan
Phone: 781-682-6209 ext. 223
Cell: 781 956 6196
Email: info@roibusinessbrokers.com