What to Do Before Buying a Business

Buying an existing business can be a great opportunity for someone looking to gain entry into a certain industry. Existing businesses come with great perks like an existing customer list, established vendors and employees, and tangible assets. However, existing businesses can also come with some negatives, such as bad bookkeeping, tax burdens, debt, and poor … Continue reading “What to Do Before Buying a Business”

Buying an existing business can be a great opportunity for someone looking to gain entry into a certain industry. Existing businesses come with great perks like an existing customer list, established vendors and employees, and tangible assets. However, existing businesses can also come with some negatives, such as bad bookkeeping, tax burdens, debt, and poor management. Understanding the various peaks and valleys of purchasing an existing business is the key to making the transaction a success.

A lot of small businesses tend to purchases and sell businesses without an attorney or any professional advice. While this may save you a little bit of money in the beginning it will cost you a lot of money in the end. When purchasing an existing business it is important to do as much due diligence as possible. That means understanding what liabilities (debts) and assets the exiting business has. There are two types of sales that are usually associated with purchasing a business: an asset sale and an interest sale. With an asset sale, you are only purchasing the assets of the business, i.e. chairs, tables, supplies, customer lists etc. When an asset sale occurs, you have a Purchase Agreement, a Bill of Sale, and if you are making payments toward the purchase, a Promissory Note. The purchase agreement will set out all of the assets that you are purchasing in the sale. You want to make sure that there are no liens or debt associated with the property. You also want to make sure that the seller owns the property for which he is trying to sell.

In an interest purchase, you are buying the business itself and all of its assets. Therefore, if the business is corporation or an LLC you are purchasing the interest in whole or part of the entity. In that case you have to look at the business as a whole. You will have a transfer agreement that transfers the amount of interest in the company you are purchasing from the seller. You have to determine if the entity has proper financials. Has it filed all of the necessary tax returns (both state and federal)? Has it engaged in property bookkeeping? What type of contracts does the company have to abide by? These are all important questions when purchasing an entity.

Consider this. Ms. Jones wanted to own a restaurant. She decided to purchase an existing business. The business she was interested in was in an excellent location, had existing customers, and a decent reputation. Excited about the opportunity, Ms. Jones jumped at the chance to purchase. She paid the existing owner Mr. Smith, $40,000.00. She agreed to take over his lease and run the business. About three months after the purchase, the landlord locked the doors to the restaurant claiming that the rent was past due. What went wrong?

First, and most important if you are purchasing a business that has a lease agreement, you want to make sure that you have spoken to the landlord. Most, commercial lease agreements contain a clause that requires the landlord to agree to any assignment or sublease by the original tenant. In the case of Ms. Jones, she failed to contact the landlord to determine if there was any past due rent. More importantly, she should have contacted the landlord to obtain a new lease. This way she would only be liable for the rent that is due under her own lease and not the previous owner. This means that her original purchase of $40,000.00 has increased to whatever the past due rent is because she cannot continue to operate if the landlord locks her out.

Another good example would be that of Ms. White. She purchased an existing business through an interest purchase. Using an attorney and CPA, Ms. White realized that while the business could be profitable the management was incompetent. During the due diligence process, agreements were drawn up to ensure the stability of the business prior to completing the sale. After completing the contract, Ms. White paid $10,000.00 in escrow to hold the business during the investigation process. Through the due diligence process it was determined that there was a lot more debt than the owner previously revealed. Ms. White’s CPA examined the bank accounts, tax returns, and financial statements which revealed that the seller was not forthcoming about the amount of debt that was originally presented. It was also revealed that many of the employees had not been paid and were missing paychecks. Through the due diligence process Ms. White was able to renegotiate the sales price and reduce it based on the debt that was discovered.

Business Financial Planning

Businesses often find financial planning a hassle. At the same time, it is critical to plan your finances well through the entire business cycle, be it before commencing, or after folding up (if you decide to merge or sell etc.) In truth, creating a financial strategy isn’t as tough as it seems to be. There are some steps which need to be kept in mind while planning your finances. Some of these steps are as listed below:

Establishing and defining the financial planner – client relationship
Gathering client data, goal – setting and expectation – defining
Analysis and evaluation of the existing financial status
Development and presentation of recommendations / alternatives
Implementation
Monitoring

It is important to note here that some of these steps will determine and influence the other ones. At the same time, some of these steps need to be carried out simultaneously. To understand these steps better let’s look into how each of these steps work.

Establishing and defining the financial planner – client relationship

In this step the financial planner, explains his / her services to the client. This means that they explain or document their responsibilities towards the project. Further in the same step he / she also chalks out the responsibilities of the client. The payment and terms and conditions are also negotiated in the same step and the time frames are negotiated as well. Decision making processes, SOPs, Specific Points of contact etc. are also decided at the same time.

Gathering client data, goal – setting and expectation – defining

In this stage the data related to the financial state of the client’s business is collected. The personal and financial goals are defined. A thorough SWOT analysis will also give an insight into the risk taking capacity and the estimated productivity of the business. This stage is actually where planner gathers all necessary information before advising the client anything.

Analysis and evaluation of the existing financial status

In this step, the client information is assessed and analyzed. This gives a clear idea about the current status and also helps in deciding what to do in order to achieve client’s business goals. Further, on the basis of the requested services, this stage may include the assessment of liabilities, assets, cash flow, tax strategy, investments, current insurance covers etc.

Welcome to Las Vegas

Las Vegas is a famous American city situated in the state of Nevada. It’s the largest city in the state and it’s widely known for its fine dining, shopping and gambling. Las Vegas was named the ‘World’s Entertainment Capital’ because of the numerous casino resorts. Other nicknames that this city got are the World’s Marriage Capital, the Second Chances Capital, Sin City and the World’s Gambling Capital.The fantasy-like atmosphere in Las Vegas is created by the giant and glamorous casino hotels. Their names evoke exotic destinations, mystery and romance.

Besides many casinos, Las Vegas also features numerous other attractions and sights. Go to the Fremont Street Experience. This is a pedestrian mall situated near the casinos. Every night you can see amazing multimedia shows on the canopy placed over the street. Another landmark is the Fountain Show from Bellagio. During the evenings, for 15 minutes, you can admire the ‘dance’ of these beautiful fountains. On Sunday and Saturday afternoons, the show lasts for an hour.

Las Vegas is known for their mega hotels…not just for casino play but also to stay and relax while you gamble and have fun! The question is not where do you stay but how do you get the best rates? Well, that is where HotelHut comes in. Booking online can be a tedious job because all those big popular online travel agencies are of no use. Their rates are basically the same and trying to find a discount can be a pain…unless you book thru HotelHut.com. HotelHut is a private membership hotel booking site offering their members deep discounted “unpublished” rates you’ll find nowhere else! Their Members can save up to 71% off retail!

Trolling Lake Michigan

There is no doubt that the Great Lakes are incredible fisheries. Thousands of people take to those lakes every year for a variety of fish. Lake Michigan is no different. There are many ways to catch fish on Lake Michigan. One of the best ways, though, is to always hire a guide.

There are many guides on the lake who specialise in different types of fishing. Look for a reputable guide who’s been working on the lake for a while and who can provide you with some references. Fishing Lake Michigan for the first time can be a daunting task. It can also be dangerous, if you have never fished big water before. Even the most seasoned of anglers pick up tips and trick from experienced guides. They understand which fishing lures are catching fish and where and how to use the most effectively.

Trolling is one way to catch fish on Lake Michigan. This requires knowing the depths at which the fish are holding and also the speed at which the fishing lures will work the best. The speed and depth of the fish will depend on the recent weather, the time of year, and the water temperature at various depths, among other factors. The fishing lures that worked on Lake Michigan in the spring may not be the same ones that will put fish in the boat in the fall.

Finding Balance in a Family

While getting any business up and running requires hard work and determination, starting a business with a loved one comes with its own set of challenges.

Many family-owned businesses start as side projects. After dabbling in a hobby or interest, family members decide to take a leap of faith and open their doors to the public. To be successful, family-run companies need structure-both by establishing their business entity and developing a working relationship that incorporates life/work balance.

Form a legal entity.

Don’t let the excitement over your new business distract you from important business and legal matters. Form a formal legal entity, like a corporation or limited liability company (LLC). This helps protect family members and the business from the unexpected.

Put things in writing.

Some entrepreneurs think a quick conversation with a spouse, parent, sibling or child can settle important business matters, but entering into a business partnership with anyone, including a loved one, should never be taken lightly.

Remove room for interpretation by putting everything in writing. Discuss sticky matters upfront, like salary, work schedules, vacation time and job responsibilities. By tackling these uncomfortable conversations early, you’ll reduce the stress and possible resentment that could come later.

Establish guidelines.

The best way to balance your life and work is to separate family and business time. Make it a policy not to talk about work while at the dinner table, at a family gathering or on the weekend.

Keep the lines of communication open. The stress of running a business can put strain on any relationship so learn how your partner handles this stress and find ways to tackle these issues together. Set aside each day or every week to discuss what’s working and what isn’t.

Just like money causes the most arguments in a marriage, the same is true for family-run businesses, so keep personal and business finances separate. Maintain different bank accounts and accounting practices for family and business use.

Business Financial Analysis

Planning and Control are the two most important ingredients to a Successful Business. A Business Plan takes most of the guess work out of Business Strategy and Control through solid Financial analysis. Financial Data provides a way to gauge where you are in your Strategic Plan, telling you where changes in your Plan are necessary. Because of this, Financial Data Analysis and Management are vitally important to running a successful business.

It is extremely important to have a suitable Accounting System installed throughout your business so data acquisition is easy. You cannot manage your Business for Profitability without a good Accounting System. My CPA has a bookkeeper who comes out to the business to help install the Accounting System and show us how to work it. All of this is done with the guidance of the CPA but at a fraction of the cost. A good Bookkeeper is invaluable in helping capture Financial Data. Having an established working Accounting System in place will minimize the fees a CPA charges to analyze your tax liability and prepare your tax returns.

An Accounting System is typically built around the following key Financial Management tools:

– Income Statement (Profit & Loss Statement)
– Cash Flow Statement
– Balance Sheet
– Budget
– Breakeven Analysis

By having a Financial Management system in place, you can easily identify early warning signs or spot particularly profitable areas. Not having a system in place to analyze and organize Financial Data makes it impossible to effectively manage, grow and control a business. It makes it impossible to gauge the success (or lack there-of) of your Planning and Strategy. Moreover, used incorrectly, inaccurate Financial Data can be disastrous for a company’s livelihood.

An Accounting and Financial Management System is only as useful as it is used systematically throughout an entire business. It is extremely important to implement the system into the very fabric of the business and be used systematically. The Accounting System is a reflection of the health, or lack thereof, of a business and from which business decisions are made. Make sure to set it up right, train your people on it and most importantly, use it!

Two principal objectives of any business are to be Profitable and have Cash Flow to pay obligations. The Income Statement and Cash Flow Statement figure prominently in this area. The Income Statement represents how well a Company is operating, and the Cash Flow Statement shows how well a business is managing its Cash. Profit or Loss on one side and Liquidity on the other.

Seven Key Business Lesson

It was billed as the greatest fight of this century. It was a record breaking payday for both fighters. Floyd Mayweather said he wanted to be the first boxer every to make $100 million dollars in one fight. He did and he helped his opponent make it too. Mayweather has produced some of the biggest pay per view events in history. This was the biggest.

The fight itself was boring Mayweather did what he does best, Philly shoulder roll, stiff jabs, right cross, and he take away the opponents angles. Pacquiao was out smarted and out boxed. Later reports says he had an injured shoulder and that probably explains why he never could throw his right hook. Mayweather controlled the tempo and the match.

Mayweather is now 48-0 with one more fight left on his contract with Showtime. Pacquiao will probably fade and will be known as one of the best fighters in this era. The fight is the fight. But the lessons I learned came from the business side of boxing.

The Big Payday

It took six years, $400 million dollars, drug testing, lawsuits, harsh comments, and bad blood to pull off the biggest jackpot in history. According to Mirror.com Floyd Mayweather will take home an estimate $180 million dollars.

Pacquiao will take $120 million because of the 60/40 split. Ticket sales were estimated at $75 million. Pay per view estimates are $300 million. Not to mention all the endorsements that were going on during the event. Even the undercard fighters got paid.

Here Are Seven Key Lessons I Learned From This Fight

Lesson One -You Don’t Have to Be #1 in Business to Win

Manny Pacquiao lost the match but he won in business. He will take home $120 million dollars for this fight. Remember it took 6 years to bring this event to the world. Both fighters went through personal setbacks but in the end they cashed in. They both won the money game.

In business, unlike sports, you don’t have to be #1 to win. You don’t need to win a Superbowl, National Championship, or World Title. All you need to do is find your niche, service your customers, and stay ahead of the trends. Remember Avis Rent-a-Cars commercials where their marketing campaigns expressed that they were #2. “We are #2! We are #2!” Hertz was #1 at that time but Avis still made money.

When I walk down main street in my neighborhood there are 11 dentist offices on that street within a 5 block radius. 8 of those 11 dentists have been in business for over 20 years. This proves you can thrive with the competition around you. Each office has carved out their niche. This is how you succeed.

This is true in your business as well. You don’t have to be the #1 affiliate, real estate agent, insurance agent, or broker. Your job is to be outstanding in your business. Be outstanding and you will hit your goals. 20% of the people make 80% of the money. Be in the top 20%.

Lesson Two – Both Fighters Found Their Passion

Both fighters found their passion in boxing. Floyd started boxing at 14 with the help of his father and uncle who were ex professional fighters. Manny was homeless and wanted a way to stay off the streets. Both will go down in history as the greatest fighters in this era. I see new affiliates, home business owners, independent contractors, and employees who don’t work in their passion.

People pick the wrong business, they jump ship, and are always starting over. Entertainers and athletes excel in their professions because they bring passion everyday. Those who don’t bomb out, quit, or retire.

Passion is what will drive you when you are ready to give up. Passion helps you fall in-like with your day job while you build your business. Passion keeps you learning and hungry for more education. Passion is why you practice your skills.

It took Mayweather 24 years to hit is payday of $180 million dollars. How many people would have quit long before that? Passion!

Business of Financial Planning

We have learned from the economic crisis of 2008, to take care of where we invest or what we do with our money. It also taught us that in times of doubt, consult your advisor. The economic downfall in 2008 also opened opportunities for expert financial planners and newbies who wants to help people and business maximize their resources.

If you are wondering why you or your business needs financial planning, we have enlisted the perks here.

Financial planning enables businesses or individuals to allocate the right amount to the right area that needs improvement or more investment in a timely manner. This minimizes risk-taking and bad investments. Efficient financial planning would then eventually lead to better revenue and effective cost management.

Financial planning presents the costs and gains of a company or individual in numbers, giving them a clearer view of what they will be investing in. This makes it easier for decision makers to go or stop a contract or project.

A financial plan is prepared annually. This financial forecast explains how much the business or individual should expect and when to expect it. This not only shows how long the wait is going to be, but also the quantity of its profitability. Every month, a financial plan is also done to compare the annual plan prepared earlier to see if the target is being met, exceeded or otherwise. This warns the business owner or individual of possibilities and posed threats in the investment, and if it’s time to give up or not yet. Although it is not always correct, as there are so many things that could affect the business’ financial status, financial planning and management makes it easier to see what is and what can be.

While some people or business owners would want or need a financial planner as they can do this on their own, there are some who would need a planner’s help to get the load off their backs. Either way, when looking for a financial planning company to handle this hefty job, here are the things you have to consider.

License – find a licensed or certified financial planner, which signifies their abilities and credibility. Do not just jump on the first firm that comes your way in a desperate move to find one.

Pay structure – there are two major pay structures your planner may be a part of: fee-based and commission-based. Nothing of the two is better than the other; it is really up to the company or person what he/she prefers. There are also planner who, like free-lancers, can be paid by the hour or when you only need them

Financial Health of Your Business

A business must enter all its financial transactions in its books of account. It helps the accountants in tracking the incoming and the outgoing flow of cash through the business. Nowadays, the cloud based accounting systems maintain and process the books of account.

The corporate environment of every country is bound by certain statutory obligations. ACRA (Accounting and Corporate Regulatory Authority) of Singapore governs the corporate sector in Singapore. This agency has the duty to ensure all industries, irrespective of their size or niche, comply with the amended set of statutory requirements. Updated books of account, filing of financial statements, and paying taxes in time are the essential factors of these obligations.

The act of recording each financial transaction of the business and then, periodically checking the books of account has a far-reaching meaning to the business owners. The accounting software reduces the amount of manual work involved in the task. Each time, it processes the business data accurately and unfailingly. The software takes only a few seconds to process the data. The results obtained denote the financial health of the business.

On-the-Go Access

A cloud based accounting system saves and processes the business’ financial data on the cloud servers. It transmits the results to the business owner’s device, which can be an internet capable mobile or tablet. The software can also transmit the reports to the laptops, net books, and desktop computer.

The accounting software systems generate financial documents like cash flow, balance sheets, and profit and loss accounts for the inspection of the owners. They get a detailed info about the working and the financial standing of their businesses. The software also updates them about the financial position of their businesses with respect to their suppliers, customers, and creditors of their businesses.

The accounting software allows the owners to know about the fluctuations in their bank balances. It allows the owners to keep a firm control on their credit and debit situation. It ensures that they do have a chance to take appropriate actions before the commencement of a financial disaster or a broken commitment.