The Places They Go When Banks Say No (NYT)

By ANDREW MARTIN

IN the glory days of the digital photo frame business, when his products were still a novelty and shoppers were flush with cash, getting a bank loan to manufacture them was a cinch, Michael Levy says.
“We would say: ‘We got a $1 million order from the Sharper Image. We need financing. With a snap of the fingers, the guy drove down to my office, we’d sign a document, he’d give us the money,” Mr. Levy recalls, sitting in the Deer Park, Long Island, office of the Media Street Group that he runs with his brother, Norm.
But like many other business owners, Mr. Levy saw his prospects change drastically in 2008 as the financial crisis unfolded. The Sharper Image and several other top customers filed for bankruptcy, and Mr. Levy found himself scrambling to keep the business afloat.
His longtime bank wanted nothing to do with his company, Mr. Levy says, and several other banks spurned his loan requests, too. After a year of hand-wringing, he found an unconventional lender that was still making loans — lots of them.
It’s called Hartsko Financial Services, and it provides short-term credit to small and midsize companies that sell everything from olive oil to women’s sandals. In the last year or so, companies have been beating a path to Hartsko, and to other businesses like it — even if the loans are vastly more expensive than traditional ones from banks.
Richard Eitelberg, Hartsko’s founder and president, said his company previously fielded many loan requests from companies on the financial brink. Now, he says, Hartsko can also pick from companies with solid financials that simply can’t get a bank loan. “What we are seeing is better deals than we did in the past,” Mr. Eitelberg says. “We were viable when banks were lending. Now we are overwhelmed.”
Hartsko’s office, which is surrounded by Irish pubs in the Bayside neighborhood of Queens, is a sharp departure from the sterile cubicles and prefabricated offices of most major bank branches. At Hartsko, nine employees vie for space in three modest rooms jammed with computers, printers and fax machines.
The floor below Hartsko was occupied by a massage parlor until about a year ago, when it was closed by the vice squad, Mr. Eitelberg said. An acupuncture clinic took over the space.
Mr. Eitelberg, a burly 47-year-old sports fan who favors untucked dress shirts and open collars, decorates his office with trinkets honoring New York sports teams; a full lineup of the Mets, in miniature, adorns a shelf behind his desk. There’s also a poster of the Three Stooges in golf garb and a framed homage to Tiger Woods, which now prompts the occasional ribald joke from his employees.
Just as the credit squeeze has pushed some consumers to unconventional sources of funding like pawn shops and payday lenders, a constriction in traditional bank lending to businesses has benefited companies like Hartsko.
Small-business owners say banks routinely reject applications for loans that were readily available just two years ago. In addition, many say the limits on their credit cards have been cut as banks seek to limit their risk amid the economic turmoil. To help ease the situation, President Obama, in his State of the Union address on Wednesday, proposed giving $30 billion to community banks to make loans to small business.
Recently, the Treasury Department began tracking lending by the 22 largest bank recipients of federal bailout money, and it found a sizable decrease in small-business lending.
During a seven-month period ended in November, the banks reduced their small-business lending by $12.5 billion, an overall decline of 4.6 percent, the data show. Wells Fargo and Bank of America, the two biggest small-business lenders, cut their lending by 4.4 percent and 6.2 percent, respectively, during that time.
John Durrant, a senior vice president at Bank of America who oversees small-business loans, said that roughly half of the decline in lending to small businesses was attributable to decreased demand. In addition, he said a decline in sales and creditworthiness among small businesses had contributed to the slowdown.
Bank of America lent $16 billion to small and midsize businesses in 2009 and plans to increase its lending by $5 billion this year, he said.
Banks, of course, are now more reluctant to hand over money to small and midsize companies partly because the practice is riskier than it was just a few years ago, when consumers were spending freely. Banks are writing off record numbers of bad loans and have tightened their underwriting standards to limit their losses.
“After Chase said no, I went to Citibank. I went to Capitol One. I wasn’t going to sit around waiting,” says Mr. Levy, explaining that he needed to borrow $1 million last year for $1.5 million in purchase orders for new products, including frames with Wi-Fi access. “All of them said the same thing: ‘the underwriters, the underwriters.’ They just tightened and, boom, they just shut it off.”
WHEN small businesses face funding squeezes, Mr. Eitelberg and others like him offer an enticing, if expensive, pitch for desperate entrepreneurs.
He peddles what is known as purchase-order financing to companies that sell goods but often manufacture them in factories abroad. It is a relatively new line of business — he estimates it’s about 20 years old — and a twist on the ancient and much larger practice of factoring, in which a business sells an invoice at a discount to get its money faster, providing the factoring company with a hefty fee.
Purchase-order financing, though similar to factoring, is further up the financial food chain. Purchase orders are written guarantees from a buyer that it is committed to purchasing a product. By financing purchase orders, Mr. Eitelberg essentially pays the factory to manufacture the goods. Hartsko also pays to have the finished products shipped from the factory. Once Hartsko is paid for the merchandise, it takes its cut and hands over the rest to its customer.
There are only a half-dozen or so major purchase-order financing companies in the country, and overall numbers on their business are hard to come by. A Hartsko competitor, Edward P. King, who founded the Dallas-based King Trade Capital 17 years ago, said his business grew about 10 percent in 2009. He said he could have done two or three times as much business but was cautious, given the uncertainty of the economy.
“It was a risky year,” Mr. King says. “We could have grown an enormous amount, but I’m not sure we wouldn’t be fighting some battles right now.”
(Banks may dabble in purchase-order financing, but usually only for existing clients. One big bank that that has a separate unit for such lending, Wells Fargo, says that this business has increased, even while its traditional small-business lending has dropped.)
Mr. Eitelberg says he doesn’t care much about his customers’ credit scores or their past financial problems. He simply wants to know that they have a solid deal in the works and a purchase order to prove it. “We look for a viable transaction when we do business, not the net worth of the company or the balance sheet,” he says. “We say we look past the balance sheet.”
Mr. Eitelberg estimates that his business increased 80 percent in 2009. But his money doesn’t come cheap. It’s typically 3.5 percent for the first 30 days, and 1.25 percent for every 10 days after that, an annualized percentage north of 40 percent. Most loans, he says, are repaid within 60 days.
“For lack of a better word, it’s almost like loan sharking,” says Mr. Levy, who said his bank loans were at 6 or 7 percent annualized interest. “But, there’s a need. I had no choice. It’s the only way I was going to get the business.
“I know I paid them a lot, but without them, I would have been home watching cartoons.”
Mr. Eitelberg bristles at such comments, saying purchase-order lending is ultimately a risky business and that his fees are more than justified. He says he bases his fees on industry averages and the cost for Hartsko to borrow money from a bank.
“We’re just saying that for the period of time when you are using our bank lines and our cash to run your business that you pay us a fee for what that’s worth,” he says. “We believe it’s a rate that is fair.”
Mr. Eitelberg began Hartsko in 2004 after working for years on the financial side of the garment industry, following in the footsteps of his father, who ran a women’s swimwear company. He says he worked for several garment companies that struggled to stay afloat and had to seek purchase-order financing, often called P.O. financing. Mr. Eitelberg said he had an epiphany one day that he was in the wrong business.
“I said: ‘It’s amazing, the only person that came out of this thing was the P.O. financing company. They made a ton of money and these companies died,’ ” he recalls. “ ‘So why am I doing this. Why don’t I do that?’ ”
He started Hartsko with a loan from several investors and a $1 million credit line from a bank. He lent his first customer $200,000 to make throws and pillows, and his business has grown every year since, by networking at trade shows and word of mouth.
These days, he says, Hartsko’s customers fall into three categories: start-ups that have little or no collateral, growth companies that may be profitable but can’t get enough financing from banks, and troubled companies that nonetheless have viable purchase orders.
Last year, Hartsko lent roughly $150 million, compared with $84 million in 2008 and $60 million the year before that, he said. He estimates that the company will lend about $240 million this year. Profit, he says, was in the “high six figures” in 2009.
Mr. Eitelberg oversees Hartsko’s operation from a corner desk, with two of his employees close at hand: his father, Lenny Eitelberg, the former swimwear merchant, and Nelson Goldberg, another garment industry veteran. The three carry on a nearly constant banter about potential deals, loans that are under way and potential problems with existing clients.
“Nothing surprises us here,” Lenny says. “We’ve seen it all.”
Mr. Eitelberg says he learned the hard way about the importance of background checks for his customers. Because Hartsko finances the production of goods — rather than lending money directly to its customers — it ends up owning the inventory if a deal collapses.
So Hartsko has been stuck with auto parts, media players and women’s sandals, which Mr. Eitelberg tries to sell for whatever he can get. But 49 boxes of the sandals remain stacked outside the office door, alongside the staircase. And he says he’s still fighting to recover his biggest loan loss — $500,000 that he lent to a company that says it was making olive oil in Italy, though the shipment never arrived. He estimates that roughly 5 percent of his deals go sour.
As a result, Mr. Eitelberg now uses private detectives to help with background checks. In addition, he makes sure that merchandise is inspected before it leaves the factory.

ON a recent weekday afternoon, two of Hartsko’s customers stopped at the office to meet Mr. Eitelberg and to map out financing needs in the coming year. The customers, Erik Searles and Mark Cardinale, said they had bought a children’s clothing brand called Sprockets and were hoping to sell the clothing nationwide.
Mr. Eitelberg, who had already provided Sprockets with one loan, offered to continue financing the company until it was established enough to qualify for less expensive credit.
Like several other Hartsko customers, Mr. Searles said he was grateful, despite the cost of the loans. Instead, customers reserved their ire for the federal government and the banks, saying the billions of bailout money larded on Wall Street had done nothing to help them.
“The money isn’t going to the people who actually need it,” Mr. Cardinale says.
James LaBarber, another Hartsko customer, whose company sells vinyl flooring, says he has been a customer at Bank of America for 29 years. But he said bank officials told him that it would take 6 to 12 months to get a loan.
“Trying to get a small-business loan is like trying to get someone out of Guantánamo Bay,” Mr. LaBarber says.
Bank of America said it does not comment about specific customers.
Mr. Eitelberg, too, wonders why some of the federal bailout money hasn’t ended up in Hartsko’s coffers. Even if his rates are relatively steep, he says, he is ultimately limited by how much money he can borrow from banks and would welcome a low-interest loan from the government.
“If I had money, I could lend it,” he says.

Is It a Crime to Keep Your Business Small? (NYT)

By KERMIT PATTISON

Nick Lessins and Lydia Esparza pride themselves on meeting high standards for quality, but not necessarily for catering to the demands of their customers. They are co-owners of Great Lake, a small Chicago pizza shop that has seen the mixed blessing of great reviews.
The couple wanted to start a business that reflected their values: a neighborhood shop that purchases top-quality ingredients directly from farmers, makes every pizza by hand and serves great food at affordable prices. They also wanted to make sure their business did not take over their lives. The 14-seat shop is open only four days a week and does not take reservations. Deliveries? Yeah, right.
Mr. Lessins makes every pizza by hand. “No man is slower,” wrote GQ’s food critic, Alan Richman. “He makes each as though it is his first, manipulating the dough until it appears flawless, putting on toppings one small bit after another. In the time he takes to create a pie, civilizations could rise and fall, not just crusts.” Mr. Richman declared the Great Lake Mortadella pie one of the best pizzas in America — and that is when the trouble started. The shop was mobbed, with lines stretching down the block and long waits. A condensed version of a conversation with Mr. Lessins and Ms. Esparza follows:
Q. You got a great review from GQ and your business went crazy. Are you glad you got this attention?
Mr. Lessins: Yes and no. It’s nice that we got recognized for doing something we feel is good. The problem is GQ deals on a whole other scale than what our business is capable of handling. Everyone forgot we were this small operation and couldn’t serve everyone. We never intended to serve mass quantities and have our product available 24 hours a day, seven days a week. We wanted to start a business so we could get some control in our lives.
Q. Do people get frustrated by the waits?
Mr. Lessins: We’ve had a few people get pretty flustered — “What do you mean we can’t be seated? We have to wait a couple of hours?” Like somehow we’ve violated their human rights. Why is it a crime that we’re not open seven days and we’re not seating 100 people?
Q. Many business owners would look at your sudden success with envy and say, “Seize the day, expand, add new locations, franchise.” Why not you?
Ms. Esparza: It would change our values. That is the American way — to expand without really thinking.
Mr. Lessins: We really enjoy the work that we’re doing and we don’t want to cheapen it. Consciously or unconsciously — probably both — we’re trying to create a manageable way to earn a living and still maintain our sanity. We value time as much, if not more so, than money.
Q. Are you making the kind of money you had hoped to?
Ms. Esparza: We just met with our accountant and we’re very happy, given the hours we have.
Q. People have compared you to the Soup Nazi on “Seinfeld.” Where do you think that comes from?
Ms. Esparza: That comes from American culture. The customer really isn’t always right. We believe we have the expertise to bring the best product. We don’t randomly put these ingredients together. We spend the time to test these and try them.
Q. So no substitutions? No extra anchovies?
Ms. Esparza: Substitutions are specifically for people who might have a dairy issue. Our goal is to have a very edited menu, and therefore there really are no extras. We don’t offer crushed pepper. When we put options together, they’re put together for a reason. We have such an edited menu, and it’s shocking how much people still want to manipulate it.
Q. In online reviews, some customers have complained about rudeness or arrogance. Where do you think that perception comes from?
Mr. Lessins: I think that perception of arrogance has to do with the sense of entitlement and a lack of respect for someone wanting to do their job. We’re just trying to do the job the best we can. We’re trying to provide a quality experience for everyone who comes in. In the food service business, it’s assumed that the customers have a set of God-given birthrights when they come into an establishment. It’s like they’ve been wronged in a lot of parts of their lives, and this is their chance to even the score.
Q. What does customer service mean to you?
Ms. Esparza: Great service for us is the quality of food we bring to the table.
Q. One of our “You’re the Boss” bloggers suggested that if you raised prices, you would make more money and have fewer but happier customers.
Ms. Esparza: That goes to an elite crowd and we’re not after that.
Mr. Lessins: That’s kind of using an economic tool to force an end result. We would just never do that. We want to offer things at a price we think is fair. Ultimately, we want to have it accessible to a broad range of people.
Q. Why not hire more help? Does Nick really have to make every single pizza?
Mr. Lessins: At this time, I’m the only one making the pizzas — I make the dough. I make my own mozzarella. I grind my own sausage. I order most of the products from farmers and our local suppliers, assemble it and all that. It took several years for me to come up with what I have now. It’s something that could definitely be communicated and delegated in a careful way. I haven’t yet thought seriously about doing that because I enjoy doing pretty much every step of the process myself. It’s not an ego thing — I just enjoy working with my hands and putting this whole puzzle together and creating something.
Q. What do you think of review sites like Yelp?
Mr. Lessins: Unfortunately, those sites are just being used for people to anonymously vent their own frustrations. They’re not accountable to anything or anyone. I wonder what they’re getting out of that to make the effort to sit down and write a paragraph or two trashing someone. Maybe they get some sadistic joy out of it. Our sense is that most of the people who do come into our place are fairly satisfied.
Q. Is this what you expected business ownership to be?
Mr. Lessins: I knew this was sort of a wild card — the public service component. We focused on the logistics and details of production, quality, execution and all the boring details of renting space, utilities, construction, permits and all this kind of stuff. But public service was definitely an unknown thing. We know we can’t make everyone happy.
Ms. Esparza: From my experience being a designer, once you know in your gut what you’re doing is really good, you just have to go with it. You can’t hold back because there’s going to be one person saying, “I don’t like that purple or that pink.” People are going to be people.

Detroit Entrepreneurs Opt to Look Up (NYT)

By SUSAN SAULNY

DETROIT — With $6,000 and some Hollywood-style spunk, four friends opened this city’s only independent foreign movie house three months ago in an abandoned school auditorium on an unlighted stretch of the Cass Corridor near downtown.
After the unlikely hoopla of an opening night, red-carpet-style event in an area known for drugs and prostitution, exactly four customers showed up to see a film.
Since then, the Burton Theater has had a few profitable nights. But, the owners say, this adventure in entrepreneurship was never completely about making money. It was also about creating a more livable community.
“Nobody could comprehend why we’d start a theater,” said an investor, Nathan Faustyn, 25. “But when you live in Detroit, you ask, ‘What can I do for the city?’ We needed this. And we had nothing to lose. When you’re at the bottom of the economic ladder, you have nowhere to look but up.”
Despite the recession — and in some cases because of it — small businesses are budding around Detroit in one of the more surprising twists of the downturn. Some new businesses like the Burton are scratching by. Others have already grown beyond the initial scope of their business plans, juggling hundreds of customers and expanding into new sites.
Across from the Burton, for instance, Jennifer Willemsen just celebrated the first anniversary of her shop, Curl Up and Dye, a retro-themed hair salon serving 1,500 clients. Not far away, Torya Blanchard, a former French teacher, recently opened the second location of Good Girls Go to Paris, a creperie. Next door, Greg Lenhoff, also a former teacher, opened a bookstore in August called Leopold’s.
And just down the street from Leopold’s, on Woodward Avenue, Victor Both runs Breezecab, a company he started with a severance package after a layoff from Wayne State University. He uses rickshaws to ferry workers and conventioneers around downtown. “This filled a transportation void,” said Mr. Both, 34, who picked up the pedicab idea while touring Las Vegas before his layoff. “I haven’t made much money, but the experience has been priceless. I had no idea Detroit had so much love.”
It is not an uncommon instinct to start an enterprise in bad times and seize on weakened competition, lower overhead costs and perhaps more free time. Nor is it limited to Detroit. But the trend is particularly striking here, in a city that was suffering long before the rest of the nation fell into recession and where hard times, business closings and abandonment became routine generations ago.
Experts say the zeal for entrepreneurship these days in Detroit and elsewhere has precedent: according to research by Dane Stangler, a senior analyst at the Kauffman Foundation, a center for economic research in Kansas City, Mo., half the companies on the Fortune 500 list this year were founded in recession or bear markets. Further, Mr. Stangler said in an interview, company survival rates going back to 1977 show a negligible difference between companies founded in expansions and recessions.
For some of the new businesses, preparation was minimal.
“All I really needed was a garage, a cellphone and a Web site,” said Mr. Both, who started Breezecab with two leased rickshaws.
Ms. Blanchard’s creperie was more complicated. The restaurant is in the first-floor retail space of what had been an unattractive apartment complex. When the site came under new management recently, the landlord offered to gut the retail space, spending about $70,000 on improvements, Ms. Blanchard said. She put in the rest: $15,000 in equipment, a coat of red paint, an oversize blackboard for the menu, and her own collection of vintage French movie posters.
Now, Ms. Blanchard pays what she calls a “ridiculously low” rent of $1,600 a month for a 1,000-square-foot space that accommodates 45 diners at Parisian-style cafe tables near the Detroit Institute of Arts.
“This was a place to watch your back just four years ago,” said Ms. Blanchard, who founded the business with a cashed-out 401(k).
“I just wanted to do something that I loved,” she said. “And everything worked its way out.”
Michigan, which has the highest unemployment rate of any state, has been aggressive in offering support for start-up companies, particularly in Detroit. The Michigan Small Business and Technology Development Center, which offers support and counseling, counts 20 small businesses, and 400 new jobs, created last year in the three-county area around Detroit, and the center expects that tally to grow as it completes its accounting in the coming weeks. That was down from 41 new businesses in 2008, but on par with the 23 such start-ups in 2007 and 24 in 2006.
At Wayne State University’s business incubator, TechTown, housed in a former auto plant, 150 companies jostle for space — up from one when the building opened five years ago.
“I find it inspiring,” Peter Bregman, the chief executive of Bregman Partners, a New York management consulting firm, said of what is happening in Detroit. “There’s something about that feeling — ‘Maybe America abandoned us, but we’re not going to abandon us.’ ”
Analysts say the entrepreneurs have tapped into buyers’ penchants for spending locally in a bad economy, along with a longstanding void in the service industry.
Some business owners are also capitalizing on a newly energized nostalgia for the vibrant Detroit that used to be, and the more general trend toward urban living.
“This is a passion project for most people,” said Claire Nelson, owner of the Bureau of Urban Living, an accessories boutique, and one of the organizers of a loose network of local entrepreneurs that functions like a support group.
“We’ve got all this empty space in Detroit,” said Ms. Nelson, 33. “If landlords are willing to work with us, we pour our hearts and souls into the place.”
Once the Burton Theater carved out its space in the schoolhouse that closed in 2002 — a 1920s-era building that had receded into the shadows like so many empty spaces in Detroit — the city, which had let the block go dark, turned the streetlights back on. The relighting was a victory felt far beyond the Burton.
“Our business ideas are about taking ownership of where you are and what you have,” said Ms. Willemsen, 29, of Curl Up and Dye. “We want to do right by our neighbors.”
And some customers are going out of their way to support the new city businesses.
“I live in the suburbs where I used to get my hair cut until Jen opened a store,” said Dessa Cosma, a client at Curl Up and Dye. “I’d rather spend my money here. It’s a conscious decision for someone who cares about the city.”

How to Sell Your Business (NYT)

By BARBARA TAYLOR

Quick Tips:

• Put yourself in the buyer’s shoes.
  
• Don’t go it alone. Assemble a team of professionals, most importantly an attorney and an accountant that you trust.
  
• Get a professional valuation of your business.
  
• Make sure your financial house is in order prior to sale.
  
• Familiarize yourself with the entire selling process, from start to finish.
  

Recommended Resources:

• Read a book on selling and valuing a business.
  
• Visit the online marketplaces: BizBuySell, BizQuest and BusinessesForSale.
  
• Learn about business valuation: BizEquity, Business Valuation Resources, or contact a Certified Business Appraiser in your area.
  
• Find an intermediary: International Business Brokers Association, Alliance of Merger & Acquisition Advisors, M&A Source
  
• Plan an exit strategy: Association for Corporate Growth, Exit Planning Institute
  

You only sell your business once.
That thought alone may be enough to keep you up at night when you decide it’s time to cash in on your years of hard work — as if there isn’t enough pressure associated with every step of the sale of a business. But there’s much you can do to prepare for the sale, and it’s not a bad idea to start thinking about it long before the day arrives.
While every transfer of business ownership is unique, there are some important questions that sellers should ask themselves and there is a common process that is used for the sale of most small businesses. The more you prepare, the more successful the outcome is likely to be. What follows is a brief outline of the process for small, closely held companies. Many of these principles apply to larger transactions as well. (You may also be interested in this blog post: Has the Economy Closed Your Exit Door?)
First, ask yourself three questions:
Can Your Business Be Sold?
Many elements of a business make it attractive to buyers. For example, does it have a solid history of profitability, a large and loyal base of customers, a competitive advantage (intellectual property rights, long-term contracts with clients, exclusive distributorships), opportunities for growth, a desirable location and a skilled work force?
Are You Ready to Sell?
Make sure you are ready, both financially and emotionally. Think about what life will be like after the sale. What will you do — not just for money but also with your time? Many business owners suffer real remorse after handing over their business to a new owner.
Here are a few indicators that it may be time to move on:
¶It’s not fun anymore. Burnout is a very real issue for business owners, and an entirely legitimate reason to sell.
¶You’re not inclined to invest in growth. You may be comfortable with the current size and profitability of your business and have no desire to make the capital expenditures necessary to take it to the next level.
¶You feel your management skills are overmatched. It is not uncommon for business owners to build their business to a certain point and then realize they lack the skill set required to go further.
What’s Your Business Worth?
Many owners have no idea. On one end of the spectrum, for example, was a client who owned a professional services firm. She felt the firm was worth more than $1 million. After a lengthy search, a buyer paid her less than half that amount. Then there was a client who was about to sell his I.T. company to an employee for $200,000. After advertising the business for sale nationwide, he sold it for one dollar shy of $1 million.
Selling a business is both art and science, and in no other area is this more evident than the valuation. While every seller wants to achieve maximum value, setting an asking price that is too high signals to buyers that you may not be serious about selling.
While there are a number of methods used to value a business, the most common formula for smaller transactions is a multiple of seller’s discretionary earnings (S.D.E.). This type of market-based valuation involves recasting profit-and-loss statements — adding back owner’s salary, perks and nonrecurring expenses — to find the S.D.E. of the business and then using comparable data for similar businesses to arrive at an appropriate multiple.
Prepare Your Business for Sale (Now!)
Another client owned a popular sports bar and grill. He’d made repairs to some of his kitchen equipment, brought his books current and determined a reasonable asking price. He got an inquiry from a serious buyer — an industry veteran on a nationwide buying spree with his partner. The buyer liked everything about the business, and asked for data from his point-of-sale system, which my client was unable to produce quickly. By the time he assembled the information, the buyer had made an offer on a similar business in another state.
There is no way to overstate the intensity with which buyers will scrutinize your business. But here are things you can do to put your best foot forward.
First, get your books in order. Not being able to provide accurate financial statements in a timely manner can cause a deal to unravel in short order. Be sure to have the following on hand before you go to market:
¶Last three years’ profit-and-loss statements.
¶Last three years’ balance sheets.
¶Year-to-date profit-and-loss statement.
¶Current balance sheet.
¶Last three years’ full tax returns.
¶List of furniture, fixtures end equipment.
¶List of inventories.
¶Commercial property appraisal or lease agreement.
Be ready to furnish other documentation — particularly during the due diligence phase — when you will probably be asked to produce insurance policies, employment agreements, customer contracts, lists of patents issued, equipment leases and bank statements.
You will also want to spruce up your business to make it attractive to buyers. Make any needed cosmetic improvements to the premises, get rid of outdated inventory and make sure that equipment is in good working order.
Spread the Word
Not surprisingly, most savvy buyers use the Internet to research available businesses for sale. The two largest Web sites are BizBuySell.com and BizQuest.com. Some sites specialize in selling certain kinds of businesses like franchises, Internet properties or restaurants. Most of these sites charge a monthly subscription fee to advertise your business for sale.
There are two primary marketing materials that are typically used to describe your business to potential buyers. The first is a one-page document that offers highlights of the business without revealing its identity and is sometimes referred to as a “blind profile.” The second is a comprehensive selling memorandum or prospectus to be sent to serious buyers who have signed a confidentiality agreement.
Make Sure Potential Buyers Are Qualified
There’s no bigger waste of time than working with a buyer who will not be able to complete a transaction. Ideally, you will want all interested buyers to sign a confidentiality agreement before sending out anything other than the “blind profile” for your business. In addition, you should require buyers to submit some basic information:
¶Name and all contact information.
¶Previous employment and business ownership.
¶Educational background.
¶Funds available to invest and sources of financing.
¶Minimum monthly income requirement.
¶Intended timeframe for completing a transaction.
¶Reason for interest in your business.
Negotiating the Deal
After you’ve found a qualified buyer, provided a selling memorandum and had an initial meeting, it will be time to stop the flow of information and ask that an offer be presented. This can take the form of a nonbinding letter of intent or a term sheet. It should spell out the primary terms of a deal so that all parties can move forward in good faith.
My client ended up receiving three offers on her professional services firm. One was from a competitor, one was from an industry expert residing out of the country and one was from a regional firm looking to extend its geographic footprint. While that last offer was the weakest from a financial standpoint, we knew that this buyer would be able to complete a seamless transition and build her business. We decided to negotiate with the regional firm.
The asking price was $500,000. The regional firm offered a disappointing $400,000, with $50,000 down and the balance financed by the seller over five years at 6 percent interest. My client planned to stay with the firm under new ownership and was relatively certain that gross sales would increase substantially when her company became part of a regional brand. She offered a counter proposal: In lieu of financing the balance of $350,000, she asked to receive 10 percent of gross monthly sales for five years. She conservatively estimated that she would realize an additional $108,000 -- over and above the selling price of $400,000 -- at the end of the five-year period using this deal structure. Both parties accepted.
All sellers hope to get a full-price cash offer for their business. But in the real world this rarely happens. More often buyers will make a down payment and then pay some or all of the remainder in installments to either you or a lender. Don’t be dismayed by an offer that doesn’t meet your original expectations. As this case illustrates, a willingness to be creative with the terms of a transaction can go a long way toward a successful sale. Be sure to enlist an accountant and a lawyer to help you assess the tax consequences of the terms you suggest or accept.
Selling a business is largely about setting realistic expectations, avoiding surprises and just plain hanging in there. It can be an arduous journey, but one with a very tangible (and rewarding) light at the end of the tunnel. Once you’ve successfully sold your business, savor an accomplishment that not every entrepreneur gets to enjoy. Whether you’re lying on the beach, retiring by the lake or starting your next venture, you did it!

Barbara Taylor is co-owner of a business brokerage, Synergy Business Services, in Bentonville, Ark.

Entrepreneurship: No Experience Necessary (Entrepreneur.com)

6 tips for starting a business with little industry experience or business know-how

By Amy Reinink   |   January 04, 2010

Timothy Ericson can quickly sum up what he and his business partner knew about the bike-sharing industry before launching a business in the field two years ago.
"We started from nothing," says Ericson, CEO and co-founder of CityRyde, a bike-sharing consulting firm. "We basically spent our first two years becoming experts in an industry that was totally new to us."
Today, the business is expanding with services such as software that tracks everything from usage to cyclists' carbon offsets.
Ericson, who had experience in business and information technology before founding CityRyde, is one of many entrepreneurs to start a business either with no "domain" experience--experience in the industry in which they're looking to start a business--or with strong domain experience but little entrepreneurial know-how.
Experts say entrepreneurs in both scenarios can find success by heeding the tips below.

1. Commit yourself to a market solution, not a pet idea.
   Derek Pedersen says the impetus to create Goal Tracker, which sells record-keeping software for special-education needs, came when his business partner's mom, a speech pathologist, asked her son to create software that would help do her job. Pedersen says focusing on a specific problem, not a pet solution, helped the company find success.
   
   Mark Loschiavo, executive director of Drexel University's Baiada Center for Entrepreneurship, says this can be a stumbling block for entrepreneurs with strong domain experience but no business experience.
   
   "Domain experts often fall so much in love with a product they've created, they become blind to criticism or correction, and they're not flexible in terms of modifying their product in order to meet the needs of the marketplace," Loschiavo says. "They need a passionate belief that there's a problem out there that needs to be solved, and need to be flexible about the solution to it."
   
2. Choose your industry wisely.
   Loschiavo says entrepreneurs should consider entry barriers beyond just startup costs.
   
   For example, those with little business experience may want to steer clear of industries with regulatory hurdles, requirements to hire a sales force or other staff, or a need to navigate vendor relationships.
   
   He says Web 2.0 companies may be well-suited for those with scant business experience: viral marketing using social networks like Twitter eliminates the need for direct-marketing prowess, and the online format eliminates the need for a large staff or a brick-and-mortar location.
      
3. Build street cred.
   According to Loschiavo, even though he was a pro at software and technology solutions when he left IBM to start a business offering tech solutions for contractors who install audiovisual systems, "I didn't have any street credibility,"
   
   "I wasn't embedded in the industry, and I really needed to be," he says. "If no one in the industry knew who I was, the fact that I'd been with IBM and had co-founded another tech business in a different industry didn't carry a lot of weight."
   
   So he started by launching a retail business in the field, learning the industry's nuances and developing relationships with vendors, contractors and retailers before launching his big idea.
   
   Similarly, Ericson spent two years meeting with and learning from bike-sharing companies around the world to determine the best industry practices, gather information for industry reports and otherwise prepare to open a bike-sharing consulting firm.
   
   "Before we started CityRyde, there was very little general knowledge available about the industry," Ericson says. "So we went out and obtained that knowledge directly from the vendors to find out what they needed to be successful in this growing industry."
   
4. Rely on free resources.
   Pedersen says he spent "hundreds" of hours reading all the available literature on his industry and hundreds more networking with other entrepreneurs.
   
   "There were so many free networking tools in the Greenville, S.C. area, we were able to meet people who had been in the industry for many years and get great advice from them at no cost to us," Pedersen says.
   
   Ericson says a similar networking group in Philadelphia has provided CityRyde invaluable feedback. "These are people who are not afraid to pick your idea apart," he says, "which is exactly what you need."
   
   Loschiavo says universities can also be an affordable resource for new entrepreneurs, offering free or low-cost coursework, books or seminars.
   
5. Know when to seek outside help.
   When Evan Solida founded Cerevellum in early 2009 to sell the digital rearview bicycle mirrors he'd designed, he tried to save money by using internet resources to create business plans and draft legal documents.
   
   Solida says he ended up paying for professionals to help with both tasks, making the little money he spent online "a complete waste." Cerevellum recently received its first round of grant funding and investment dollars.
   
   "I know this isn't what entrepreneurs starting on a shoestring budget want to hear, but a lot of stuff I was doing in the beginning trying to save money cost me both money and time in the end," Solida says.
   
6. Put your strengths to work.
   Loschiavo says entrepreneurs' most important tool when branching out to an unfamiliar industry is knowledge of their strengths and how to apply them.
   
   For example, he says, Vernon Hill started Commerce Bank based on the business principles he learned in quick-service retail.
   
   "He didn't understand why banks were only open during business hours, so he made sure his banks were open earlier and later, when people are available," Loschiavo says. "He understood retail and customer behavior, and translated that to the banking world. Most business skills transcend multiple industries."
   
   Ericson says he and his business partner kept their strengths in mind when they expanded CityRyde to include two software programs for bike-sharing companies.
   
   "In the early days, to be honest, it didn't seem like our experience translated much at all," Ericson says. "But by really entrenching ourselves in the industry, we found a gap that seemed to call for exactly our skills and experience to fill."

Cesanteados reciben vales de negocio propio (Endi)

Very difficult to avoid being sarcastic when news like these are published. Comes to show our incapacity to understand the economy, planning, businesses, our reality, and human dignity (among others).

Cesanteados reciben vales de negocio propio

También se beneficiaron servidores públicos que se acogieron al retiro voluntario

Por Daniel Rivera Vargas / drivera2@elnuevodia.com

El Departamento del Trabajo y Recursos Humanos y el Consejo de Desarrollo Ocupacional y Recursos Humanos anunciaron hoy la entrega de 50 vales de $5,000 para establecer negocios propios.

Estos vales son parte de las ayudas que se ofrecen a los empleados públicos cesanteados bajo la Ley 7 o que se hayan acogido al retiro voluntario.

El secretario del Trabajo, Miguel Romero, dijo que este beneficio seguirá disponible para este grupo de servidores públicos, siempre que lo soliciten antes de los 180 días después de su cesantía o retiro.

“Estamos seguros de que más personas se moverán a solicitarlos al conocer estos ejemplos de progreso”, dijo Romero.

Otras ayudas disponibles son vales de relocalización, educativos y vocacionales-técnicos.

Los beneficiados de vales de negocios propios reciben talleres y orientación para preparar su plan empresarial. Los beneficiados presentaron iniciativas que van desde la venta de helados o hotdogs, hasta fabricación de jabones artesanales y siembra de plátanos. Además, un abogado cesanteado abrirá su propia oficina legal y un maestro incursionará en el mantenimiento de áreas verdes

Estos pequeños empresarios cualifican para una ayuda adicional, en la que Trabajo paga el salario de un empleado por un año.

Siete pasos para montar tu negocio (endi)

Sigue las guías para conducirte hacia el éxito empresarial

Por Marian Díaz / mdiaz1@elnuevodia.com
Es probable que usted haya pensado más de una vez en montar su propio negocio. Pero el desconocimiento de cómo hacerlo, unido a la alta estadística de negocios que fracasan en los primeros años de establecido -1 de cada 2 según la Administración Federal de Pequeños Negocios-, le hayan frenado a dar ese primer gran paso.
Afortunadamente, hay varias cosas que usted puede hacer antes de comenzar, sin arriesgar su dinero y su tiempo, y que aumentarían las probabilidades de éxito de su nueva empresa. Aunque cada iniciativa es única, y tiene sus oportunidades y riesgos, hay ciertos pasos básicos que aplican a toda actividad empresarial.
Negocios entrevistó a expertos en la creación y desarrollo de empresas y, a continuación, les presenta una guía con los pasos a seguir:

1
Identificación de la idea del negocio
“Una de las cosas que me he percatado a través de los años es que la gente busca la idea mirando hacia el lado. Se les hace más fácil mirar hacia afuera y copiar lo que al vecino le está funcionando”, dijo Anita Paniagua, consultora y coordinadora del Programa de Certificado Profesional para Emprendedores de Negocios de la Universidad de Puerto Rico en Río Piedras.
Para evitar esa mala práctica, Paniagua recomienda que el futuro empresario comience haciendo una lista de las actividades que disfruta hacer, así como de las habilidades y conocimientos que posee. El negocio que intente desarrollar tiene que convertirse en su proyecto de vida, por eso es crucial que la idea le apasione.
“Cuando esa llamita (la idea) hace click y surge ese proyecto de vida, el resto del proceso es más fácil”, expresó Paniagua.
Hay que aclarar que una idea no es lo mismo que una oportunidad de negocios. “Tener una excelente idea no es nada si no la ejecutas. La idea se convierte en una oportunidad cuando hay un mercado dispuesto a comprar lo que tú ofreces, cuando hay clientes que tienen dinero para gastar en tu producto o servicio”, señaló Francisco Uriarte, principal de ESP Group, una firma local de consultoría financiera y de negocios.
Cuando esa idea resuelve un “dolor de cabeza” a alguien -por ejemplo: reduce costos, ahorra tiempo, alivia un dolor físico, mejora el flujo de efectivo-, entonces, según Uriarte, hay una mayor oportunidad de que ese negocio tenga más éxito que uno que sólo venda productos que dan placer.

2
Diseño del modelo de negocio
Una vez identificada la oportunidad, hay que esbozar cómo ejecutarla. Entre las decisiones a tomar están cuánto tiempo se le dedicará al negocio y si se trabajará a tiempo parcial o a tiempo completo.
Hay varias formas o modelos que puede adoptar, entre ellos, establecerlo como negocio desde el hogar, franquicia, en local comercial, a través de internet, obteniendo la licencia de un producto, o como negocio multinivel.
Cada una de las opciones arriba mencionadas tiene sus pros y sus contras. Por ejemplo, en un negocio desde el hogar la inversión es menor que la de un local comercial, pero tiene la desventaja de que el tráfico de clientes estará restringido y la privacidad del hogar podría afectarse.
Para Alex Ochard, empresario y experto en internet, la web es una oportunidad de montar un negocio rápido, a un bajo costo y no requiere tener un conocimiento avanzado en computadoras. “Todo el mundo puede establecer un negocio por internet. Si sabe enviar emails, puede establecer su propia página”.
Ochard explica que, a diferencia de los modelos tradicionales de negocio donde el empresario busca atraer clientes a su empresa, en internet el cliente es el que te busca a ti.
En el caso de las franquicias y las licencias, el riesgo es menor que si se empieza el negocio desde cero. Sin embargo, la creatividad del empresario está limitada, pues hay que seguir los parámetros de la compañía matriz.
Al definir el modelo de negocios, el empresario tiene que tomar en cuenta cuánto dinero necesitará gastar para poder vender, señala Uriarte. La clave es gastar lo necesario para generar la mayor ganancia posible.
“A veces no hace falta comprar equipos y maquinaria para hacer un producto, se podrían ir $5 millones en eso. Pero con sólo $100,000 puedo buscar el producto en otro país y empezar a venderlo más rápido”, manifestó el también presidente de la junta directiva de Grupo Guayacán.

3
Preparación del Plan de Negocios
“Dedíquele el tiempo necesario a este plan”, recomienda Carlos Jiménez, dueño de la cadena de cambio de aceite y filtro Fast Lane y fundador del “Young Entrepreneurship Education System”. Es aconsejable ponerlo por escrito, pues sirve de guía para dirigir las acciones y pensamientos, y hace visualizar al empresario el futuro funcionamiento y operación del negocio.
Existen muchos formatos de planes de negocio, algunos de los cuales se consiguen a través de internet. En términos generales, todos buscan contestar el cómo, quién y cuándo se establecerá el negocio.
El cómo se refiere a los recursos financieros, ya sea ahorros, ayuda de familiares, préstamos o inversionistas. “Muchas veces no hacen falta préstamos, sino identificar una oportunidad y posibles clientes, pues la creatividad puede más que cualquier préstamo”, dice Paniagua.
Otros datos a incluir en el plan están: la localidad (quiosco, dentro de otro negocio, internet, entre otros), los recursos humanos -ya sea empleados o contratistas profesionales- y el equipo gerencial.
“Para cualquier oportunidad empresarial, el equipo gerencial es crucial. En algunos casos, es más importante, incluso, que la localización”, opinó Uriarte. El líder debe tener afinidad con el mercado que se persigue y el resto de los integrantes del equipo, una experiencia relevante combinada en operaciones, mercadeo, finanzas y en la industria que se interesa entrar.
Paniagua, por su parte, recalca que el líder no puede tener todos los sombreros, por lo que necesita un equipo al cual delegar los aspectos técnicos, según va creciendo el negocio.
“El empresario es el que tiene la visión y desarrolla oportunidades para otros. Él se concentra más en adiestrarse en nuevas técnicas y tendencias en la industria, y en identificar oportunidades para nuevos mercados y negocios”.

4
Selección de la estructura organizacional
Las tres formas básicas de estructurar la empresa son: negocio individual, sociedad y corporación. Todas tienen sus ventajas y desventajas, por lo que es conveniente que el empresario busque asesoría legal y contributiva para que le ayude a determinar la que más le conviene.
“La selección de la estructura legal o la manera de organizar el negocio es importantísimo en el desarrollo de un negocio, entre otras cosas, por el efecto que tendrá en el pago de los impuestos sobre ingresos”, señala José Juan Torres Rodríguez, abogado y contador público autorizado (CPA).
El negocio individual (conocido como DBA, por su acrónimo en inglés) es la más común de todas, ya que es la manera más sencilla de iniciar la empresa, pues no requiere procesos de incorporación y la tasa contributiva es menor que la de la corporación. Pero entre sus desventajas está que el crecimiento de la empresa es limitado, ya que dependerá de la capacidad de financiamiento del dueño.
De acuerdo al negocio y a las destrezas que posea, el empresario debe analizar si lo monta solo o busca socios. Mientras más pequeña la empresa, menos necesitará del socio. Una de las ventajas de la sociedad es que el riesgo es compartido, aunque la desventaja es que las ganancias también.
“Aquí no somos propicios a tener socios porque queremos tener el control de todo, pero así te limitas a crecer. Tú puedes tener el control de la compañía, sin ser dueño del 100% de las acciones”, señala Uriarte.
La corporación es un ente legal independiente de los dueños. La misma se registra en el Departamento de Estado, y requiere la radicación de informes financieros anuales. Como regla general, tiene dos niveles de tributación: la de la entidad legal y la de los socios cuando estos reciben la distribución de la ganancia en forma de dividendos.
Sin embargo, esta doble tributación pudiera, en algunos casos, evitarse al estructurar el negocio como una corporación de individuos, indica el CPA Torres Rodríguez. Agrega que una sociedad especial también evita la doble tributación.

5
Gestión de financiamiento
Aunque la banca atraviesa por una etapa difícil, eso no significa que no esté dispuesta a prestar. Eso sí, ahora está mucho más exigente que antes. Pero los bancos privados no son la única alternativa de financiamiento disponible.
Tradicionalmente, los ahorros personales han sido la primera fuente que utilizan los empresarios incipientes, seguido por los préstamos de familiares y amigos. Otras opciones son las tarjetas de crédito, el Banco de Desarrollo Económico, inversionistas privados, subvenciones federales, líneas de crédito comercial, y ángeles inversionistas.
El Plan de Negocios será requerido por la mayoría de las entidades que ofrecen financiamiento.

6
Diseño del mercadeo
El mercadeo es, tal vez, la parte más importante de la planificación del negocio, ya que sin clientes no hay negocio, según Daniel Nazario, consultor externo del Centro de Desarrollo y Tecnología de Pequeñas Empresas (SBDTC, por sus siglas en inglés) de la Universidad Interamericana.
Nazario recomienda que el empresario evalúe sus fortalezas y debilidades, así como las oportunidades y amenazas externas. “Eso le ayudará a enfocar en qué productos o servicios ofrecer, en vez de intentar ofrecerlos todos a la vez”. Recordó que, en mercadeo, la diferenciación es importante, así como el tener una propuesta de valor añadido.
Basado en la competencia y en la capacidad que tenga el negocio para satisfacer el mercado, se determina cuánto es el volumen de ventas que podría generar. Es aconsejable estimar las ventas para los primeros tres años (segmentadas por mes para reflejar las fluctuaciones, si alguna, de la industria).
En cuanto a la política de precios, Nazario opinó que no siempre es efectivo tener el precio más bajo. Antes de asignarlo, hay que conocer bien la estructura de costos del negocio. Agregó que, a veces, el cliente prefiere pagar más a cambio de recibir un producto de calidad superior o un servicio más completo.
Dentro del análisis, hay que establecer cuánto se quiere ganar el empresario, y basado en esa proyección asignar los recursos. Además, debe calcular cuánto es lo mínimo que tiene que vender cada mes para cubrir los costos fijos, como lo son la renta, la nómina y la factura de los servicios básicos, entre otros.
Otro aspecto del mercadeo es el nombre del negocio. Joan Lavergne, consultora certificada en negocios del SBDTC en San Germán, recomienda que, al seleccionarlo, se escoja uno que refleje lo que el negocio ofrece. Aconsejó también diseñar un logo que refuerce la imagen que la empresa quiere proyectar en el mercado. “El logo ayuda a crear la identidad del negocio y debe usarse en todo, en el papel timbrado, en las etiquetas de los productos, en el uniforme de los empleados”.
Antes de lanzar el negocio, Lavergne le sugiere al empresario que diseñe una campaña promocional para empezar a crear el factor de reconocimiento de marca. Para eso, puede hacer uso de los directorios de negocios de las entidades empresariales, los correos electrónicos, las presentaciones directas a las empresas, el auspicio de actividades, y las redes sociales, entre otras.
“Muchas de las compañías que están comenzando hoy día usan más el mercadeo directo o de relaciones. Ahí las redes sociales pueden ayudarte a llegar a grupo de personas más específicos y de una manera más económica”, dijo, por su parte, Nazario.
Para el presupuesto de mercadeo, la empresa puede asignar entre un 3% y un 10% del total de las ventas estimadas. Lavergne enfatizó en que el empresario esboce una política de servicio al cliente, ya que un buen servicio es una de las mejores estrategias de mercadeo para cualquier negocio.

7
Asesoramiento profesional
Los recursos de apoyo abundan -ya sea gratis o pagando- para ayudar en la creación y desarrollo de un negocio. Entre los profesionales que podría necesitar un empresario figuran abogados, contadores, corredor de bienes raíces, diseñadores gráficos y consultores empresariales.
Entidades como el SBDTC, la Compañía de Comercio y Exportación y el Instituto Empresarial de la Mujer de la Universidad del Sagrado Corazón ofrecen seminarios y asesoría individualizada especializada en temas empresariales.
Además, las universidades, las asociaciones empresariales, los periódicos, las agencias gubernamentales, el Censo Federal, las revistas especializadas y el internet son otras fuentes de información a consultar por todo aquel que interese lanzarse a montar su propia empresa.