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3 Factors That Devalue Your Business

Thinking of selling your business? Maybe you are just feeling the need to move on to something new, or you might want to retire after running your business for many years. Whatever your motivation, the sale of a business can be a long, complicated and emotional process if you are not properly prepared.

It is estimated that 10-15% of the UK’s 3 million businesses are looking to sell or change ownership at any given time. The sad fact is that only one in 10 businesses that go to market will actually end in a sale. To give your business the best chance of a successful sale, at a fair price, you need to ensure that you avoid all factors which could potentially devalue your business.


The sale of a business can often take longer than a year to complete. Openly disclosing the fact that it is in the market can have a detrimental effect on the business. Suppliers might get nervous and doubt the strength of the company’s cash flow, resulting in a reduction of credit lines. People in general have a tendency to expect the worst and your customers are no different. They might think your business is in financial trouble resulting in decisions to rather “jump the sinking ship” before it is too late – thereby taking their business elsewhere. The same can be said for employees. You do not want to find yourself in a position where most of your key employees leave the company before the sale is concluded. Confidentiality is vital for the successful sale of a business.

Changing the way you run the business

Once the decision is made to sell your business, don’t stop what you are doing. It is easy to fall into the trap of leaving issues to be sorted out by the new owner. This can result in the sale of the business falling flat shortly before completion. Buyers are most critical of your most recent activity so don’t cut back on marketing or customer care. Run the business as if you will still own it in another five year’s time. Run your business in the same manner as you did when you built it up to be the successful venture you went to market with.

Taking out too much cash

If you own a cash business, it could be tempting to take out cash which you do not declare. Apart from the legal implications of this action, it also affects the value of your business. In effect you declare that the business turns over less than it does in reality, which means your profit is reflected as being lower than it is. Since the value of a business takes into account the turnover and profit, taking undeclared cash out will have a massively negative impact on the value of your business.

Making the decision to sell your business a few years before bringing it to market is a good idea. This gives you the time to ensure profitability is at a maximum and provides for the time to plan the sale carefully, avoiding all factors which could potentially devalue your business.

Key Facts About Your Business Blueprint

The home business industry is littered with people who have failed in their businesses. The success rates are very low compared to other entrepreneurial industries like franchising. Statistics say that about less than 18% of home business owners earn a consistent cash flow.

Don’t be a victim of the home based business industry. Have you failed in your business before? How many times have you jumped ship? What are your reasons for failing? How many sales did you make? Why have you chosen to work from home? Answer these questions honestly and you are on your way to financial success. I am going to give you a business blueprint.

If your business has a product or service that is in demand, a convertible offer, marketing plan, and follow-up system then you will succeed. The truth is you will win in any niche if you follow successful business models.

Franchises are one of the most successful business models to copy. They have a proven track record of creating cash flow for their franchisees. They provide the training, marketing plan, vendors, and sales support for the owners. Some franchise systems have a 80-90% success rate for their owners.

Duplication is the key for your home business success. Whether you are building a down line or just a one man band you must have a game plan in place. We do not suffer for lack of information. You can find a successful business model to follow.

Find a success system that compliments your personality. Be enthusiastic about your business. Don’t join a fad because everyone else is doing it. Join because you believe you can reach your financial goals with that business.

Key Facts about Your Business Blueprint

Key Fact 1 Find a Product or Service You Can Visualize Selling: Yes you have to sell. Get over it. Every business needs to sell. That is the point of capitalism. Make sure your product are consumable so you can have repeat sales. Investigate your niche. Do people need this product? Can you up sell them to higher priced items?

Key Fact 2 Marketing Plan: I see real estate agents fail at their businesses before they even start. They pay for their real estate license, pay their Realtor dues, and other fees. They have invested over $1000 for their business and don’t have a plan to get customers. They do things like go door knocking, cold calls, and send out letters. They fail to follow the franchise or broker’s plan.

Make sure you have a marketing system in place. Your first goal is to create leads so you will have a list. Your list is the life-blood of your business. Your marketing should have 3-5 techniques for you to generate traffic. A plug and play system is best for the new business owner. A marketing program should teach you marketing strategies while it generate sales for you.

Key Fact 3 Training: In my real estate office our broker provides training every week. Athletes, entertainers, teachers, and blue-collar workers all have to do go through continuous training. The same with your home business. Education is a must for entrepreneurs. Do not slack on your training.

Key Fact 4 Getting Paid: Your home based business needs to pay you enough so you can have a positive cash flow every month. Find products or services that pay high commissions. It is hard to do paid advertising when you are making 15% commissions on a $3 product. Look for products that pay a commission fee of 50% or higher and has residual income.

Action Steps

Spend time putting together your business blueprint. Put these key facts into action. Achieving financial success is the only reason to be in business. Creating and acting on your business blueprint will get you there.

Down Payments On Business Loans And Where You Can Get Yours

All small business lenders – banks, private lenders, alternative financing companies, SBA, etc. – have one major thing in common. They require some form of down payment.

Let’s say that you are requesting an unsecured business loan from your bank. And, you are asking for $80,000 that you want to use to purchase some inventory and supplies as well as to bolster your marketing efforts.

And, your bank approves that request. However, they only approve 80% of your requested amount or $64,000. What?

Or, your business is in need of a new routing machine to handle your ever increasing customer load. The equipment costs $50,000. Your lender approves your request but will only fund $40,000 or 80% of what you need. Huh?

Or, your business has $100,000 in outstanding invoices just waiting to get paid by your customers. Yet, you have new orders coming in everyday that you just do not have the cash on hand to start or complete. Therefore, you approach an asset based lender or accounts receivable factor and ask for an advance on those invoices that will pay within the next 30 days. However, the lender will only fund 80% or $80,000 against those invoices – even though they take control of 100% of their face amount. Really?

Down Payments

Why do lenders require down payments? It all started with banks centuries ago. They determined, through trial and error – mostly error – that if a borrower were to put at least 20% down – have 20% of their own money attached to the loan – then they are 80% less likely to just walk away from that loan should the going get tough.

Thus, they determined that 20% in a down payment was both enough to better ensure that their borrowers will repay those loans – the one thing they want the most – and that 20% was enough of an amount (high and low) that only serious borrowers would and could be able to raise that amount.

In fact, when the government got involved in the banking and lending industries, this down payment figure of 20% was one of the first things that they agreed on as a standard practice and now hold these lenders to that standard.

Bottom line is that having a down payment in nearly all lending – mortgage loans as well as business loans – is now the standard and is already calculated in their underwriting process. Thus, you request a business loan for $100,000 – the lender already marks it down by 20%.

Now, leave it to the SBA to throw a wrench into this discussion. The SBA has a business loan program – their 504 loan program – which helps local small businesses finance commercial real estate or business equipment in their local areas. These loans are secured – 100% – by the real estate or equipment. Thus, with this specific loan program – this secured loan program – the SBA lowered its down payment requirement to 10%. Still a down payment but less of a burden on the borrower.

Types Of Down Payments

Now, there are essentially two forms of legitimate down payments.

1) Simply cover the 20% with your own cash. You need $80,000 for your equipment purchase, the bank will provide 80% or $64,000 and you cover the other $16,000 out of your own pocket.

2) You have built in equity in the item being bought with the loan. Here, you are buying a commercial property to expand your small business (and quit paying outrageous rents). The purchase price is $250,000. Yet, that price is only 80% of its market value – the market value is $312,500. Thus, the difference between the purchase price and the true value of the property is the 20% – 20% equity in the property.

Where To Get That Down Payment

There are several ways that you – the business borrower – can get that required down payment as most small business owners either do not have that kind of cash on hand to cover the 20% or just do not know where to obtain it.

Don’t Pay It:

1) Negotiate with the lender. While this does not provide you the equity to put down – it can alleviate that requirement all together. If your business is strong enough and the lender really wants to work with you – then negotiate that requirement away – and get that lender to cover 100% of your needs.

2) Negotiate with the seller. If you are buying a physical asset like equipment or commercial real estate then negotiate the price to 80% of the asset’s value. Kind of hard to do these days with property values being as low as they are and that most equipment vendors do not have control over their prices – but, if the person wants to sell as bad as you want to buy – then they will find a way to work with you – they always do. MSRP prices are more wish lists then actual prices.

Find The Money:

3) Personal loan. Do you have equity in your home or other personal assets? Can you get a personal loan based on the personal income you do have? Can you tap some other source of personal income or equity – that 1) does not relate to your business and 2) does not put an additional burden on your company?

Most lenders will find out about all of your business debt and most of your personal debt during their approval process. Know that with the business debt, they will include that in their underwriting process when approving your business loan request. And, if they find out that you took another business loan to cover your down payment – they tend to frown on that. But, if they find out that you have a personal loan – even if they know that you did that to cover your down payment – it is still a personal loan and something that ties you personally to that new loan request – means you might get away with it.

Or, try to get a personal loan from a friend or family member. This way, it is not reported anywhere and very hard for the new lender to find out about it. This could be a loan or even an equity injection for stock or ownership in the company. Either way, it should not directly affect your new loan request.

The idea here is simple. Let’s say that you need a business loan for $100,000. You request that amount at 8% for three years. This would set your monthly payment at $3,134. But, if the lender will only approve and fund 80% or $80,000 – then your required payment would drop to $2,507 – leaving the difference of $627 to cover that personal loan you need for the down payment ($627 is more then enough to cover the $20,000 personal down payment loan for the same term at the same rate).

4) Sell off unneeded or unused assets – personal or business. This way you get needed money from assets that you don’t need or want and you don’t have to pay that money back – it is free and clear for you to use. Thus, while you are only getting 80% of your requested loan amount – you only have to pay for that 80%. And, the $627 difference – outlined above – is money that you now don’t have to pay to any lender – it is added money in your pocket or for your business.

5) Lastly, use your business. Let’s say that your business needs a $100,000 to expand. Now, it could get a loan now or it could save up its own money – its own profits – for the next 3 years (your business has to be generating some form of profits for you to be able to afford the loan payments in the first place – thus, it can just save that money itself).

But, not wanting to or not seeing it as a viable option to wait 3 years – your business can just save that money (profits) for that down payment only – save for 7 months or so to get that needed 20% – then request the loan. This would have the same benefits of selling off assets for that needed cash without losing the use of those assets. The only requirement here or burden on the business is time – the 7 months.


Down payments are one of those facts of life like death and taxes. If you are seeking a business loan, you have to think about how you will come up with the down payment.

Know that with anything in business – this challenge can be overcome just like you overcome all other challenges – by working them out. This means that where there is a will there is a way and the best way to handle this financing requirement is to know about it up front and plan for it from the very beginning.

Far too many business owners – who finally get to the point that they can seek outside financing to take advantage of growth opportunities – end up only getting that down payment slap down – having not known of the requirement before applying for their business loan and ultimately getting that request turned down.

Don’t let this happen to you – especially when it is you who can prevent it.