It Takes 3 to 5 Years to Prepare to Sell a Small Business

It Takes 3 to 5 Years to Prepare to Sell a Small Business
CISPA Passes House Amid Worries Over Privacy
How You Can Benefit From “Clean Slate” Brands
Texas Tops List of Best Small Business Tax Systems, California At Bottom
How to Get a Startup Visa Act Passed

Posted: 22 Apr 2013 04:00 PM PDT

take time to sell a business

Are you considering selling your small business? Perhaps you think it’s a good time to sell, considering that more businesses have been bought and sold this year than at this time last year, according to a BizBuySell survey.

However, valuations of those businesses could be lower in 2013, thanks to some tax changes. So if you want to get the best sales price possible, there are likely some steps you should already be taking. And allow yourself enough time to sell a small business.

Most owners don't realize that selling a business can be so time consuming, according to Bob Pullar of Owners University, who recently suggested that owners spend three to five years preparing to sell in order to get the best price possible. Pullar said that preparing your business for sale over time will allow you to demonstrate how well your company trends over time, both financially and operationally.

And those who don't take the time to properly prepare are leaving money on the table. According to Pullar, an owner that takes the time to complete all the necessary valuation enhancing projects can see an increase of up to 400% in valuation, depending on their industry.

So what steps do owners need to take to make sure they get the best sale price? Pullar recommends having three to five years of audited or reviewed financial statements, along with an annual business plan and three-year projection.

In addition, owners should have a detailed succession plan, which includes key managers to run the business after the sale, other employees who are key to the business's success, and up-to-date contracts with third party suppliers.

According to a PriceWaterhouseCoopers survey (DOC), 79% of business owners identified maximizing the financial return as their top objective for succession. But not all of those owners said they had a succession plan in place. In fact, the most common step taken to prepare for succession was improving profitability by cutting costs and restructuring debts and compensation.

Though profitability improvements can certainly have an impact on valuations, Pullar said that most companies don't require any massive changes in this area when preparing to sell. And even those that do need to make significant changes should begin preparations early and not discount the other steps involved in improving valuations.

"The most important thing for an owner to realize is that they can’t afford to wait until they know 100% that they want to sell their businesses," said Pullar.

There is no magic formula for making sure your business is ready to sell. Targeting buyers and evaluating your business's value can vary by industry. But having a plan and allowing enough time to implement it is essential for any industry.

Image: Sold via Shutterstock

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CISPA Passes House Amid Worries Over Privacy

Posted: 22 Apr 2013 01:30 PM PDT

cispa passes

Last week, the U.S. House of Representatives passed a groundbreaking cybersecurity bill that’s been widely debated lately. Some tech forms support it, while other organizations, firms and citizens have rallied against it.

The House voted on Thursday afternoon, 288 to 127, to pass the Cyber Intelligence Sharing and Protection Act (CISPA). The bill will now move on to the U.S. Senate. If passed, it moves on to President Barack Obama for final approval.

This is the second year in a row that a CISPA bill has passed the House. Last year it died in the Senate, but now it’s back.

As we noted in last week’s report, battle lines have been drawn over CISPA.

Proponents says it is needed in order to protect U.S. citizens and companies from increasing computer attacks.
Critics of CISPA say that in its current form, the law violates privacy rights because it lacks protections on how private data can be used by the government.

The bill is supported by some of the tech industry’s giants like Oracle and Intel. It allows them to alert the federal government of a security breach on their networks and provide information.

CISPA And Privacy Concerns

After CISPA passed the House on Thursday, it did not take long for critics to voice their displeasure. U.S. Rep. Nancy Pelosi said CISPA, as it was passed, “offers no policies and did not allow any amendments or real solution that upholds Americans' right to privacy,” according to a report at RT.com.

Other opponents say that CISPA, as written now, is too broad. It would supersede privacy agreements that companies have with their users.

The bill, according to Business Insider, would also allow the government to compile a database of information shared by private companies and search that information for violations of criminal law. Critics say this information sharing is done under the guise of cybersecurity. However, currently there is no language written into the bill that dictates when the federal government could collect that information, and CISPA would override current privacy protections, critics claim.

The Electronic Frontier Foundation (EFF) has advocated strongly against the bill. It mounted an effort to help citizens contact legislators to oppose the bill. The EFF offers an online form where you can send a communication to your Senator to oppose CISPA. The EFF calls the bill’s passage in the House “shameful.”

“CISPA is a poorly drafted bill that would provide a gaping exception to bedrock privacy law," EFF Senior Staff Attorney Kurt Opsahl said in a prepared statement on the EFF website. "While we all agree that our nation needs to address pressing Internet security issues, this bill sacrifices online privacy while failing to take common-sense steps to improve security.”

Other groups opposed to CISPA include the American Library Association, the American Civil Liberties Union, Mozilla, Reporters Without Borders, and the National Association of Criminal Defense Lawyers. Below is an open letter by opponents of CISPA to House members before the recent House vote:

CISPA Photo via Shutterstock

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How You Can Benefit From “Clean Slate” Brands

Posted: 22 Apr 2013 11:00 AM PDT

new brands

[Clean Slate Brand, Lockitron: Home Security Via Smartphone App]

Conventional wisdom has always been that it's hard to bring a new product to market because consumers have an inherent preference for the familiar. Humans are hard-wired to resist change, because in our caveman days, change meant danger. So whether they're buying toilet paper for the bathroom or telemarketing services for their business, most people stick with brands they already know versus unknown new brands.

But that may be changing, Trendwatching reports, thanks to new consumer attitudes creating a preference for "clean slate" brands. That is, new and unknown brands that are suddenly enjoying consumer approval.

What's behind the clean slate trend? Several factors, Trendwatching says. First, big brands are widely perceived as tired or even evil. With just 33 percent of U.S. consumers saying they trust big brands, new, small, innovative businesses have a built-in edge.

Second, consumers are crazy for the new because thanks to social media, everyone wants to be the first to discover and share new trends. Sticking with the tried and true isn't seen as smart, but as stodgy. Since consumers can quickly find out from friends and family (what Trendwatching calls the "F Factor") whether a brand is worthwhile, the hurdle of gaining trust is lessened.

Finally, there's a fresh feeling to new products and brands that consumers like. Newer brands and businesses are typically leaner, more transparent and more flexible. And many new companies and products are based on socially responsible foundations.

So how can you benefit from the clean slate craze? You don't have to be a startup, or even be launching a new product or service, to take part. Here's how to wipe the slate clean for your business, no matter what stage you're in.

New Brands: You Can Benefit From “Clean Slate” Brands

Be Transparent

Complexity befuddles customers and makes them suspicious you're hiding something. Make your customer service process simple and straightforward. Be transparent to your employees, too.

Share Who You Are

Authenticity is a big part of clean slate brands. Customers want to know who's behind the business, what they stand for and what the company's story is. Put your story on your website and in your marketing materials.

Interact

Social media makes it easier than ever to engage with your customers. Don't just push your messages out to them, but also listen to what they have to say and what they want from you.

Harness the Friend Factor

Solicit testimonials and reviews from satisfied customers. Ask them to share your business on social media and spread the word. Ask for referrals to others who might want to try your product or service. Recommendations build instant trust.

Be Socially Responsible

Don't try to force this, but if getting involved with causes can flow naturally from your business model, all the better. Tell customers what you do to help the causes you care about and show them how buying from you makes them part of the solution.

Work With Clean Slate Brands

Use locally sourced produce and meats in your restaurant and tell customers where it's from. Highlight products from small, new or socially responsible businesses in your retail store or on your website. Partnering with other clean slate brands creates a halo effect that boosts your own business.

Visit the Trendwatching site for more examples of clean slate brands that are making waves.

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Texas Tops List of Best Small Business Tax Systems, California At Bottom

Posted: 22 Apr 2013 08:00 AM PDT

best-small-business-tax

If you were to choose a state to do business in based solely on state tax systems, Texas and North Dakota would be at the top of the list. And at the bottom? Try California, Hawaii and New Jersey.

The Small Business and Entrepreneurship Council has released its annual Business Tax Index 2013. The Index ranks the 10 best and worst states in which to do business from a tax system perspective, especially for small business owners.

Topping the list this year for states offering the best tax climate for small businesses are:

1) Texas

2) South Dakota

3) Nevada

4) Wyoming

5) Washington

6) Florida

7) Alabama

8) Colorado

9) Ohio

10) Alaska

The top 10 are unchanged from last year’s SBE ranking, according to our report of it. The only changes concern the order. The most notable shifts were South Dakota and Texas switching between the top and second spots (although there’s little difference in point scores). Alaska dropped 3 places from seventh to tenth.

At the bottom of the list, the worst states in 2013 according to the SBE ranking methodology, include:

(41) Connecticut

(42) Oregon

(43) Minnesota

(44) New York

(45) Maine

(46) Vermont

(47) Iowa

(48) New Jersey

(49) Hawaii

(50) California

All ten bottom states were the same from last year. Only their order changed. Last year in 2012, Minnesota was ranked last in state small-business tax friendliness, but improved its position by seven places.

In the report, lead author and chief economist for the SBE Raymond J. Keating said, “At the federal level, businesses, investors and entrepreneurship have been hit hard in 2013 by big tax increases. But taxes matter for business at the state and local level as well. In the states, tax burdens vary widely, with competitiveness affected accordingly.”

States need to remain competitive to attract and retain small businesses. The state tax environment is one consideration that makes one state more attractive than another. SBE Council President Karen Kerrigan says, “Competition for investment and business relocation is fierce, and state leaders who understand this dynamic are reshaping tax policies to enable capital formation and entrepreneurship.”

Kerrigan adds that Texas continues to be a benchmark for creating a small business tax environment favorable to small business owners. Other states are currently making changes to their tax laws that could alter next year’s rankings. ”Louisiana, Indiana, North Carolina and Nebraska have put forward bold tax reform proposals that will dramatically improve their competitive positions if enacted. Also, state efforts directed at tax reform are pushing Congress to act,” Kerrigan adds, according to a statement from the SBE accompanying the study.

The Small Business & Entrepreneurship Council issues its tax index annually. The methodology in 2013 looked at 21 measures. The measures include state personal income tax rates, capital gains tax rates, corporate income tax, death taxes, unemployment taxes, gas taxes, wireless taxes, and even whether the state has an “Amazon” tax.

To further explore, there’s an interactive map (pictured above). You can click on each state and see its point score, and highlights of ranking details. Go here for the interactive map.

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How to Get a Startup Visa Act Passed

Posted: 22 Apr 2013 05:00 AM PDT

visa

For the past few years, a number of prominent U.S. venture capitalists have been trying to convince Congress to modify the U.S. UB-5 visa program. Currently, the program allows foreigners who invest $1 million in a U.S. business and create 10 or more jobs to get a visa; the investors want Washington to include those entrepreneurs who attract funds from venture capitalists or business angels. While the bill's advocates have gotten it introduced into the House and Senate, the effort has stalled.

Recently, Canada announced that it will launch a "start-up visa" program this spring. For the next five years, our neighbor to the north will make 2,750 visas available annually to entrepreneurs who have received a $200,000 funding commitment from an approved venture capitalist or $75,000 from an approved business angel.

The Canadian government's announcement has gotten U.S. start-up visa advocates upset. In a recent online column, Brad Feld, one of the advocates of a similar program in the United States, expressed frustration that Canada had beaten the U.S. to the punch.

Rather than bemoan their political difficulties, however, advocates of the law should change their strategy. They should replace their "we-need-immigrant-entrepreneurs-to-save-America" argument with the following approach: Giving out visas is a better and cheaper way to get small companies to move here than than offering tax breaks.

The advocates' current argument is economically suspect and politically problematic. Proponents of a start-up visa argue that immigrants are better entrepreneurs than non-immigrants. But, as I have explained before, there's plenty of evidence that the native born entrepreneurs are as good, if not better, at entrepreneurship than immigrants.

More importantly, the immigrants-are-better argument is a political nightmare. What Congressman wants to tell his constituents that he needs to support a start-up visa bill because the voters who elected him aren't as good at entrepreneurship as foreigners?

The best argument for a start-up visa is the same argument for giving foreign companies tax breaks to start or expand their U.S. operations: it shifts wealth and jobs from overseas to the United States. If venture capitalists fund a start-up in San Paolo, for example, most of the jobs created and taxes paid by the new company occur there. But if the investors fund the same new business in San Francisco, most of the jobs and taxes end up in the United States.

Even if the entrepreneurs would create more jobs and wealth if they established their businesses in their home countries, the law would make sense for the United States. Creating 1000 American jobs is better for those who live here than creating 2000 foreign ones.

Offering the entrepreneurs visas as a way to get them to start companies here is a cheap and effective way to attract companies. Unlike the case with big companies considering locating a plant elsewhere, U.S. tax breaks aren't much of an attraction to foreign entrepreneurs. But American residency is.

Framed as a program to get foreign businesses to move to America, a start-up visa is a political "no brainer" for Congress. Without spending a cent of taxpayers' money, we get non-U.S. companies to set up shop here. If the businesses succeed, create jobs and pay taxes, then American voters win.

The only "losers" in the deal are people in the entrepreneurs' native lands who don't get the jobs and tax revenue from the successful businesses. However, those people don't vote in American elections, so their welfare matters little to those in Congress.

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