Tap into your 401K retirement savings, without penalty, to buy a business

What is a ROBS? ROBS is an arrangement in which prospective business owners use their retirement funds to pay for new business start-up costs. ROBS plans, while not considered an abusive tax avoidance transaction, are questionable because they may solely benefit one individual – the individual who rolls over his or her existing retirement funds to the ROBS plan in a tax-free transaction. The ROBS plan then uses the rollover assets to purchase the stock of the new business.

Promoters aggressively market ROBS arrangements to prospective business owners. In many cases, the company will apply to IRS for a favorable determination letter (DL) as a way to assure their clients that IRS approves the ROBS arrangement. The IRS issues a DL based on the plan’s terms meeting Internal Revenue Code requirements. DLs do not give plan sponsors protection from incorrectly applying the plan’s terms or from operating the plan in a discriminatory manner. When a plan sponsor administers a plan in a way that results in prohibited discrimination or engages in prohibited transactions, it can result in plan disqualification and adverse tax consequences to the plan’s sponsor and its participants.

Click here to read it first hand at IRS site.

And to find out more on how to buy a business call a business broker like Kris Moe at 707-529-6458.

It's a Great Time to Be Buying or Selling a Business

The Market is Hot: Retiring Baby Boomers and Rising Revenues Fuel Record Small Business Sales

BizBuySell.com's Second Quarter 2018 Insight Report examines the transactions and demographics behind the record levels of small businesses changing hands

San Francisco, CA - BizBuySell.com, the Internet's largest business-for-sale marketplace, reported today a record number of small businesses changing hands in the first half of 2018. The growth can largely be attributed to a growing number of Baby Boomers exiting their business as well as improving business financials. The full results are included in BizBuySell's Q2 2018 Insight Report, which aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide.

A total of 5,383 businesses were reported sold in the first two quarters of 2018, putting the year on pace to surpass 2017's record-high of 9,919 transactions. In Q2 alone, 2,705 businesses changed hands, an increase of 6.7 percent over the same time last year and the most of any quarter since BizBuySell began tracking data in 2007.

The $526,048 median revenue of businesses sold in the second quarter reached a new high with a 7.4 percent increase from last year, while median cash flow grew 3.4 percent to $120,000. These stronger financials are catalysts for gains in asking and sale prices over the past year. Asking prices increased 4 percent from Q2 of last year to $260,000, raising the median sale price 4.4 percent to $239,000.

While buyers are dishing out a little more at the negotiating table, BizBuySell data reflects a win-win for both parties. Sellers get a little extra cash from the deal, while buyers are taking ownership of businesses with better financial footing. The former is of special importance to the growing number of Baby Boomers relinquishing their business in turn for the reward of retirement.

For those yet to take advantage of the hot market, for-sale data shows that it's still an opportune time to jump in. A 5.1% increase in active listings were reported in the second quarter of 2018 compared to last year, extending a long trend that started in 2012. There are no guarantees in small business, however the state of the economy and demographic trends point to a rising tide. In fact, the National Federation of Independent Business (NFIB) small-business optimism index rose 3 points to 107.8 this past May, the second-highest level in the index's 45-year history.

"The current business-for-sale market is a great reflection of today's economic and demographic environment," Bob House, president of BizBuySell.com and BizQuest.com, said. "As America continues to see a swell of Baby Boomers reach retirement age, the market will likely continue to see a strong inventory of businesses for sale. Meanwhile those same businesses, many of which dug their way out of the last recession, now have the financial performance they need to earn an acceptable sale price."

Transactions Reflect Generational Shift as Baby Boomers Hand Businesses to Younger, More Diverse Buyers

According to BizBuySell's latest demographic survey, Baby Boomers still own the majority share (53 percent) of small businesses. Demographically, these Boomers make up a fairly consistent group, with over 82 percent Caucasian males. Two in three Baby Boomers have owned more than one business and 68 percent have owned their current business for more than 10 years. More importantly for the market, nearly 60 percent of Baby Boomers plan to sell their business within the next two years or less. Based on this data, we don't expect market supply to slow down anytime soon, but some data suggests we could see a shift in the makeup of incoming business owners.

A deeper dive into the demographics of today's market shows a transition to a more diverse group of business owners. Incoming buyers are less likely to identify as Caucasian (65 percent) than current owners as a whole (71 percent). They are younger, with the majority less than 50 years old and despite both groups leaning Republican, buyers are 25 percent more likely to be Democrats.

Politically, immigration remains a hot topic in our country but its impact on the small business community is profound. A third of buyers are non-natural born citizens, and 64 percent of these are first-generation immigrants and another 16 percent are second-generation. That's a big jump from non-natural born citizen current owners, in which just 48 percent are first generation and 10 percent are second generation.

Finally, while women still account for the minority of small business owners (22%), female owner demographics showed a younger, more diverse group as well. For example, twice the percentage of female owners are in their 20s as compared to men. In addition, twice the percentage of female business owners identify as African American compared to men.

Indicators Point to Continued Strong Pace in Second Half of Year

Overall, the rising financial performance of small businesses and the influx of sellers ready to enter the market provide for an optimistic outlook of the rest of 2018. Sellers will continue to take advantage of high sale prices and buyers will be able to find quality businesses within the large supply of listings.

"Baby boomers are trailblazers when it comes to entrepreneurship" said Bill Luce, President of Transworld Business Advisors, one of the nation's top business brokerages. "As Baby Boomers continue the strong tailwind, this market trend is sure to stay in style for years to come."

Despite the favorable setup, external factors exist that could sway the markets trajectory. For example, it remains to be seen what impact changes to the U.S. immigration policy will have on the market over the long term. The same goes for the U.S. China trade war, where tariffs could have a direct effect on the small business space.

In a potentially more favorable light, the Tax Cuts and Jobs Act passed in 2017 could cause the number of business transactions to further spike. Under the new tax law, many owners now benefit from a 20 percent deduction for qualified business income. If owners choose to re-invest those savings back into their business as early data suggests, the end result will likely be an increasing number of attractive businesses hitting the market.

"Our survey indicated 32 percent of all current small business owners plan to sell in the next two years so this trend will likely continue well into the future," House said. "It will be particularly interesting to watch the demographics of an average small business owner change and how this younger generation's new ideas will push forward an already successful small business environment."

Get in contact with Kris Moe to learn more about the steps to value or sell your business- 707-529-6458

How to Market Selling your Business

Marketing Program

We Are The 800 lb Gorilla In Marketing Businesses For Sale.

There’s a reason we sell more businesses than any other business brokerage network.  Whether it’s online with the internet or using traditional marketing venues, we’ll produce impactful communication pieces and present your business to the right target audiences.

We’ll work with you to develop a marketing plan that makes sense for you and your business. Generally speaking, our marketing services include:

• Advertising on the biggest and best internet websites featuring Businesses For Sale
• Production of confidential promotional letters and Confidential Business Profiles (CBP)
• Production of a professional Confidential Business Review (CBR)
• Targeted email marketing to our proprietary database of buyers
• Research and determination of potential, strategic, buyers
• Education and utilization of our extensive Sunbelt broker network and national/international Sunbelt offices

The majority of potential business buyers will begin their search online.
We make sure they find your business.

Internet presence is one of the key attributes you should evaluate when choosing your business brokerage firm. For Main Street businesses and select larger businesses, your business will be included on the Sunbelt website – the largest proprietary listings database in the world. We may also promote your business-for-sale on additional strategic internet websites where buyers search looking at businesses for sale.

Let’s talk confidentially about your business and goals all at no cost or obligation. Contact Kris Moe today at 707-529-6458, to start planning the sale of your business.

What to Do After Buying an Existing Business?

There are many advantages to buying a pre-existing business. While there may be upfront costs to consider when it comes to purchasing, the risk is much lower than it would be to build a business from the ground up. Plus, as the buyer, you could also acquire important assets, such as patents, copyrights, community good-standing and even essential personnel.

Before buying a business you’ll want to consult with a certified appraiser, business broker, and other professionals to ensure that due diligence is completed, terms are negotiated, and the price is fair. After the deal closes, it’s time to get to work—but what should you do first after buying an existing business?

The Transition Phase

After the acquisition takes place on paper, there may be a period of transition, where the managerial shift will take place. Instead of jumping in full-steam ahead, it’s best to watch and learn for a bit, unless you have intimate knowledge of the industry.

The Learning Process

Before you start implementing any policies, procedures or changes, you’ll want to learn everything you can about the day-to-day, inter-workings of each department and how they currently operate. Keep the lines of communication open with the former owner, and pick their brain for insights and information. Also, if applicable, research clients and customer’s experience; what are they lacking? Are they unsatisfied with the service? What additional assets can you provide to enhance their experience?

Working with Existing Employees

Chances are the business you’ve purchased will retain some of the existing employees. To officially introduce yourself and get off on the right foot, hold a company-wide meeting with all employees. Stress your optimism about the future of the firm, quell their fears about their positions, and make yourself available to any queries or concerns they might have. The goal of this meeting is to set their minds at ease.

It could also be a good idea to have each member of your staff to prepare a report that outlines their duties, and perhaps even suggestions they might have for their position and the business as a whole. These reports can be helpful for your understanding of the company and can assist you as you evaluate changes that need to be made.

Taking the Reins

Sooner or later it will come time for you to take the reins. It may feel necessary to make the place your own by repainting, redecorating, or reorganizing before you get down to business. To make things more manageable, try making a 30/60/90-day plan to implement any new changes, while you work towards an official business plan. A business plan doesn’t have to be mammoth document, but rather an outline that includes but is not limited to:

• The direction you want to take the business
• How it is going to get done
• Who is going to do what
• A rough timeline of completion
• How you will measure success

Ultimately, buying an existing business is a challenging yet rewarding experience. If you’re in need of any guidance at any point in the process, contact me to help you buy or sell a business and to answer any questions you may have.