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The Beal Business Advisor

April 2016

Contact Number:  204-478-7266
In This Issue
  • Buying a Business - Discretionary Costs & Perks and Benefits
  • Selling your Business - What is your Exit Strategy?
  • Question of the Month - Things to Consider when Taking out a Loan to Expand a Business


Discretionary Costs & Perks and Benefits  
Last month we discussed notes payable and mortgages payable, this month we want to discuss discretionary costs and perks & benefits.
 
The income statement shows the profitability of a business over a period of time (monthly, quarterly, yearly). The profit and loss statements for the past 3 to 5 years should be reviewed, and attention must be paid not only to the profit, but also to the owner's salary, fringe benefits, non-cash expenses, and one-time expenses. Typically, an owner-operator has certain latitude in expenses an employee does not, and many items (e.g., cell phones) are a business expense that provide a personal benefit.  Once you have adjusted for these things, you can then review the normal financial ratios (e.g. gross margin, net margin, etc.), and other key issues and compare them to industry benchmarks.

In the meantime, if you would like more information on buying a business, contact us at 204-478-7266x110.
 

What is Your Exit Strategy?
What is your exit strategy? There are only two broad options - sell or close. Closing gives you little or no money, but sadly, many business owners don't plan ahead, and have no choice. Plan ahead, and make your business run well without you, and you will be able to pass it on and make money as you sell it. If you do plan to sell, what you need to do depends on whom you are selling it to.
 
A recent CFIB study indicated that 37% of business owners will sell to outsiders, and only 26% said they will sell/transfer to family insiders. Selling to outsiders requires more advanced preparation - some of which starts years before you actually sell.

Check out our "Sellability Score" report, which gives you insight into what areas need improving:  http://www.bealconsultants.ca/sellability-score/.

Previously, we talked briefly about the management and financial aspects. Both take time to put in place, but what can take even longer are certain tax savings strategies. If you sell, you can save significant amount of taxes if you plan ahead at least three fiscal years before you sell. You can take advantage of your lifetime capital gains tax limit under certain conditions. Consult your tax accountant or business consultant for further information.

If you would like more information on selling or valuing a business, contact us at 204-478-7266x110.
 

Current Businesses for Sale

Rural Restaurant (NEW) 

 

Metal Working Business

 

Indoor Tanning Salon 

 

 Fire & Security Business  

 

Winnipeg Auto Body Shop  

 

Industrial Land & Building for Sale - Suitable for Automotive - Conditionally Sold 

 

Cleaning Services Business  

 

Manufacturing Business  

 

Winnipeg Electrical Contracting Business  

 

Transport & Event Planner

 

BNI Manitoba Franchise

 

Pizza and Chicken Restaurant (Conditionally Sold) 

 

Winnipeg Used Book Store

 

Seasonal Product Manufacturer/Contractor   

 

The UPS Store - Winnipeg Location  

 

Home Renovation Business

 

Profitable Resort 

 

Winnipeg Auto Repair Shop

 

Farm Parts & Recycling Business   

  

Auto Parts, Service and Recycling Business  

 

Profitable Winnipeg Automotive Services Center

 

Rural Automotive Repair Shop Location

 

Carman Property  

 

Electrical Contracting Business 

 

Franchised Food Retailer - Franchise 

 

Franchise - Tanning Studio    

   

Thompson Hotel and Restaurant  

 

WOW 1 Day Painting Franchise    

 

  $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

 

To review any of these business profiles, please click  here .

 

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We do not advertise all of our listings to the public.

If you have a specific type of business in mind,

please call 204-478-7266 x110 to inquire!

 

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Quick Links

Beal Consultants Website  

 

Quote of the Month

 

"I attribute my success to this: I never gave or took any excuse."  

   

Florence Nightingale          
I am considering taking out a loan to expand my business.  What should I consider before approaching the bank?


Regardless of your reasons for seeking a loan, any business will eventually require funding, whether it is a start up or a mature and well established business. To increase your chances of obtaining a loan, it is advisable to know what banks review when underwriting a loan application.
 
The steps to qualify for a business loan are quite simple:
 
  • Why - why are you seeking a business loan? Think about where you plan to spend the loan.
  • Who - who are you seeking a loan from? Have you looked at all the alternative modes of financing before taking out this loan?
  • When - how soon do you need the loan? Determine when you need the loan by.
  • What - what are you asking the bank to give you? Ensure you are only asking for what you need.
  • How - how are you going to pay back the bank? You as a borrower must always remember that you will have the obligation to pay back the amount loaned.
There are three main components banks reviews when underwriting a loan:
 
  • Credit - it is a good idea to be familiar with your credit report. The bank will review both your personal credit, any business partner's credit (typically with 20% of more ownership in the company), and your business' credit history. The bank will look into your personal and business' payment history on current debt and accounts payable.
  • Income - the bank will look into your ability to repay the loan request. Loan approval is granted on the borrower's ability to pay back the loan. You must be able to provide your income statements or show a record of your earnings for a period of time. You need to have a good earnings history and show the lender evidence of it.
  • Collateral - since there is no way for the bank to predict the future based on past precedent, they may also want some form of collateral should there be an unexpected decline in your business. Collateral requirements vary depending on the type, size, and use of the loan. Common types of collateral include real estate, inventory, receivables, or equipment.
 
Since all businesses are unique in their structure and style, it is important to discuss all lending needs with your business advisor of banker before making any decisions.
 
Other factors that a loans officer may review before determining whether to give your business a loan are the industry your business operates in, the type and size of your business, and borrowing and liquidity ratios. The use of loan proceeds will also weigh into the underwriting decision. Certain industries have more common lending needs than others. Working capital and other unsecured loans are generally looked at more closely than secured loans.
 
Knowing exactly what you are going to do with the money by having a specific purpose will increase the comfort level of the lender. It is wise for you to have a business plan that includes a detailed breakdown of the funds needed, and how they are to be used. This will help to avoid over or under lending as well as increase your chances in being approved for a loan.

Call us at 204.478.7266 x110 if you would like us to help you write a business plan.    
 
About Us...

 

Beal Business Growth Consultants, Inc. helps owners of small and medium-sized businesses to buy, sell, value, and grow their businesses.  We also work with individuals who are looking to buy or start a business or franchise.

 

Call us at (204) 478-7266 x110 to book a free, initial 30-minute consultation to explore how we can help you buy, sell, value or improve your business.

 

Legal

Copyright 2016 by Steven Beal, Beal Business Growth Consultants, Inc.  The information herein is not complete and is intended only to provide guidelines to supplement counsel the reader receives from a qualified professional.  It is distributed with the understanding that the author is not rendering legal, accounting or tax advice or opinions on specific facts or matters, and accordingly, assumes no liability in connection with its use.

 

 

Published by Beal Business Growth Consultants, Inc.   

 

www.bealconsultants.ca