Green Merger News – March 2011

Commentary – Building Long-Term Value

 

Although the snows of the Winter of 2010-2011 have only been gone for a few weeks, most businesses in the industry are well into their Spring seasons.  For many business owners, it is hard to focus on anything other than making sure everything is running smoothly as  the season begins.

If you are trying to build the value of your business and unlock its potential, it is easy to lose sight of that goal when you are totally focused on day-to-day operations.  Building value requires taking a long-term view and being able to make those incremental changes to your business that will demonstrate its value to a buyer.

When you are ready, we’d be glad to speak with you about building long-term value in your business

 

——Ron Edmonds

 

 

Focus on Exit Planning:

Knowing When The Time is Right

 

Almost everyone knows that there will come a time to transition the ownership of their business, whether by a sale to a third party or a transition of ownership to employees or family members.  For some business owners, this will come on an involuntary basis due to death, disability or other pressing matters.  However, most business owners have the opportunity to plan for that transition with the goal of making the transition happen “when the time is right.”

Some business owners have a clear idea of when the time will be right for them.  Perhaps it is when some business milestone is reached, such as attaining a certain level of sales.  For some, it may be when they have built the infrastructure of the business to a certain level.  For others, it may be when they determine that their designated successor, perhaps a trusted employee or family member is “ready.”

There are really two dimensions to being “ready” to sell your business.  You really need to be both financially ready and mentally ready.  Let’s explore these two dimensions.

What does it mean to be financially ready to sell or transfer your business?  Basically, it means that you have evaluated the likely outcome of the sale or transfer process in the context of your particular financial situation.

In the case of a sale or transfer in the context of retirement, the operative question is will the after-tax proceeds of the sale of the business (or the cash flow streams associated with its transfer), together with your other assets and income streams (retirement accounts, social security, etc.), meet your lifestyle and other  requirements in retirement?

If the context is not retirement, the question remains – will the sale or transfer of the business allow you to meet your objectives?

In order to answer these questions, you will need the help of professional advisors to assist in understanding the value of your business as well as the tax consequences of various options.

Determining whether or not you are mentally ready to sell your business can be an even  more complicated question.  When we first have a conversation with potential business sellers, we usually ask them if they are ready to sell their business.  The answer is inevitably yes.  After all, why else would they be taking to us about it?  The reality is that many business owners do not realize how mentally unready they are to sell their business.

Here are some questions to ask yourself in assessing your mental readiness to sell your business:

* Do you still enjoy providing the day-to-day leadership of the business?

* Is the business dependent on you for day-to-day leadership?

* Can you envision yourself saying, “If you want something done right, you have to do it yourself”?

* Is it difficult for you to accept the idea of the business that you have built under someone else’s leadership?

* Is it hard for you to envision what you will be doing after the sale of the business?

* Are you dependent on the perks of business ownership for maintaining your lifestyle?

If you answered these questions yes, you may not be mentally ready to sell your business.  On the other hand, yes answers to the following questions may indicate that you are mentally ready to sell your business:

* Do you enjoy working but look forward to the time when working is optional?

* Do you have a new career opportunity that you are anxious to get involved with following the sale of your business?

* Do you feel pressure or a desire to spend more time with your family?

* Do you have outside interests that will occupy your time if you are considering retirement in connection with the sale of your business?

So, what can you do if there is a question of whether you are ready, either financially or mentally, to sell your business?

If you are not financially ready for the sale of your business, some of the things you may want to consider include:

* Delaying your planned exit until you can financially prepare.

* Reconsidering lifestyle decisions following the sale of the business making sure they are realistic for the circumstances.

* Taking steps to grow your business and improve its value and marketability between now and the time you would really like to exit the business.

If you are not mentally ready for the sale of the business, some of the steps you may want to consider include the following:

* Developing your management team with the objective of your being less critical to the day-to-day operations of the business.

* Creating a separation between your business and personal affairs.

* Developing outside interests.

* Pursuing post-sale career opportunities.

Realistically assessing your readiness for selling your business is an important step early in the exit planning process.  This will help you to avoid pursuing opportunities that aren’t really realistic given your current situation while allowing you to make business and personal changes that will facilitate the process and help achieve the best possible results in the future.Alm

 

Recent Transactions

 

Swingle Lawn, Tree & Landscape Care, of Denver, Colorado, announced the acquisition of Lawn Care Aeration Plus of Greeley, strengthening its market position in Colorado’s Northern Front Range communities.

Bartlett Tree Experts announced that it has acquired the business operations of Preservation Tree Care in Beaufort, South Carolina,  and Native Son Landscape & Tree Care in Wimberley, Texas.

Arrow Environmental Services of Sarasota, Florida, recently acquired the operations of  Seminole-based Ultimate Pest & Termite Control, which serves Pinellas and Hillsborough counties. Late last year, it also acquired Largo-based FloridaCare Pest Management and Kelly’s Pest Control in Sarasota.  Arrow Environmental offers residential and commercial pest control, lawn care, wildlife exclusion, and tree and shrub care services.  Its total revenues approximate $6 million.

In its recently filed annual report on Form 10-K for the year ended December 31, 2010, The Davey Tree Expert Company disclosed that it had invested approximately $7 million in acquisitions in 2010.

 

In Brief

 

The ServiceMaster Company recently announced the appointment of Hank Mullany to succeed retiring Chief Executive Officer J. Patrick Spainhour, effective March 31. Mullany and Spainhour will begin working together immediately to implement a smooth transition.

ServiceMaster is the parent company of  TruGreen,TruGreen LandCare, Terminix, and other consumer brands.

Mullany previously served as executive vice president of Walmart U.S. and president of Walmart’s northern U.S. business, Mullany was responsible for the operation of 1,300 stores and 34 distributions centers across 19 states, leading 400,000 employees.

Earlier in his career, Mullany served in various senior management positions, including as president of Genuardi’s Family Markets in Pennsylvania. .

 

 

Survey Has Encouraging News for Business for Sale Marketplace

 

This article is excepted from a report by BizBuySell.com based on a survey of business brokers in which we participated.  We find the  results of the survey both interesting and encouraging.

A recent survey of the nation’s business brokers on the state of the business-for-sale market has encouraging news for business sellers.  The survey was completed by BizBuySell.com, the online business for sale marketplace.

76% of responding brokers nationwide anticipate that 2011 will be a good year to sell. A generally positive feeling about economic recovery seems to be the driving factor for the encouraging reports about the business-for-sale market this year. More than two thirds of the brokers – 69% – who anticipate that this year will be a good year to sell a business cite “the economy in general is starting to recover” as driving their bullish outlook. Other top reasons for optimism cited by brokers include “more businesses coming on the market” and “better financing becoming available for business buyers.”

“Business owners who have been sitting on the fence ready to sell for over a year will probably get off the fence and put the business on the market,” explains one responding broker. “While the economy is certainly not great, it is more stable than last year.”

Another respondent expects that 2011 will be a good year for the business-for-sale market “because more people are looking to purchase a business. If financing options improve it could be a banner year for sales.”

“We’re hearing that, while the economy certainly isn’t back to what it was, business owners are starting to feel more confident about it, and they’re seeing a reprieve from the recessionary environment we’ve been in over the past few years. Based on our conversations with business sellers, brokers and buyers, we believe that stable businesses with appropriate price expectations will likely receive quality offers from prospective buyers if they come on the market during the next twelve months.”

A lack of available financing is still the most common factor preventing business transactions from closing.  Nearly half of the brokers surveyed, 48%, report financing as the biggest issue hindering business for sale transactions. Seller unwillingness to lower their asking price is an additional issue, with 26% of the brokers surveyed reporting it as a primary factor preventing sales from closing.

Other factors seem to be having little effect on the business-for-sale market. 62% of the brokers surveyed said that the Small Business Jobs Act has not affected business owners’ desire to sell. “I think many small business owners are still unaware of the changes and how they can benefit from them,” explains one survey respondent. “Many of these people are too busy or burnt out to keep up with the latest information.”

The extension of the favorable long-term capital gains tax rate is having a slight effect on the business-for-sale market in 2011, but will likely be a driving factor for business owners looking to sell within the next few years. 54% of the brokers surveyed noted that the extension will have little effect on the market this year, but as one respondent notes “sellers are unsure of what the rate will be after 2012, so many are positioning a sale within the next two years.”

“As more business owners become aware of the potential capital gains tax rate increase after 2012, we anticipate they may be more inclined to want to sell in the next year or two,” according to BizBuySell.com.

Most respondents still don’t believe business transaction volumes will return to pre-recession levels for at least 18 months. Of the respondents, 66% predict that business transaction volumes won’t return to pre-recessionary levels for at least another 18 months, a slight increase from the 62% of brokers who responded similarly in November, and 53% in July.

 

Exit Planning Assessment

A Cost-Effective Way to Get Started on the Exit Planning Process

 

An Exit Planning Assessment from The Principium Group is a confidential, cost-effective first step in the exit planning process.  Here’s what it includes:

· We will develop an understanding of your business, your personal situation and objectives.

· We will make an assessment of the value and marketability of your business.  (This will not be a formal business valuation for third-party use, but will give you an idea of the value your business could bring under current circumstances.)

· We will provide concrete recommendations for improving the value and marketability of your business as you make plans for your ultimate exit.

We will provide feedback on your objectives and how to develop a plan to achieve those objectives.

Contact us by email or call us at 888-229-5740 today to discuss scheduling an Exit Planning Assessment for your business.

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