 | Stephen A. English
President of The Trust Company of Kansas (TCK), has worked in the trust business for over 30 years. After graduating from the University of Minnesota-Duluth in 1970, Steve accepted a position as a trust examiner with the Comptroller of the Currency. In 1976, Steve accepted a position as Vice President and Trust Officer for Home National Bank in Arkansas City, Kansas and then went on to work for Southwest National Bank, Wichita. He resigned from SWNB in 1989, and spent several months setting up The Trust Company of Kansas. TCK was officially chartered on May 21, 1990, and has since grown to manage over $260 million in assets.
Steve is a 1978 graduate of the Southwestern Graduate School of Banking at Southern Methodist University, Dallas, Texas. He was a charter board member of the Association of Independent Trust Companies. In 1991, Steve became only the fifth person in the state of Kansas to earn the title of Certified Trust and Financial Advisor, a designation issued by the Institute of Certified Bankers. You may contact Steve by phone at (316) 264-6010. |
Banking & Finance
2002-01-01 14:20:00
Selling a business?
Answer: It's a good idea to ask some basic questions before embarking on a discussion about the "best" way to sell a business. Is the business in question profitable? If not, a "liquidation" may be more appropriate than a "sale". If there is little profit or little potential for profit, then there probably is little to sell. Does the business rely on the unique talents of one individual? If so, there may realistically be little chance that a buyer would be able to continue the business.Let's assume for the sake of discussion that the business is profitable, has a good reputation, and can be operated by new owners.The type of business will dictate the acceptable formula for figuring a "fair" sales price. Some businesses are typically sold at a price based on a percentage of sales, while others are traditionally sold as some multiple of "book value". The people who best know the norm for a particular industry are the owners themselves. Trade groups frequently discuss the latest standards for determining the market value of their similar businesses. The local library and the business school of your local university are also good resources for assistance with determining the industry norms. No profitable business should be sold without first obtaining a comprehensive appraisal from a reputable business appraisal service. There are fees involved, but a professional appraisal may be the best money a seller can spend. The appraisal is the seller's "private" valuation, and can be the seller's starting point for all negotiation. If the valuation is low, in the seller's estimation, it might be wise to re-evaluate the decision to sell before engaging a realtor or business broker and beginning to incur advertising expenses. An appraisal is but one professional's opinion, however, and many factors can affect the ultimate sales price. An important matter to consider is taxation on the sale proceeds. A seller should always think in terms of net proceeds after taxes. A good accountant should be consulted so the owners will understand the meaning of "net-net" proceeds (i.e., proceeds after taxes and expenses of the transaction). Does that "net-net" amount meet the owner's expectations?Once a valuation formula is found and the expectations of the owners are determined to be reasonable, then the next step is to find a suitable and qualified buyer. This can be difficult. Fortunately, professional business brokers are available, and are networked for the purpose of finding viable parties for both sides of business sale transactions. They are also likely to be aware of which banks in the area are willing to lend to qualified buyers. A rule of thumb for sellers: Never sell a business if you cannot retire ALL of the debt of the business. Do not assume the new owners will meet your obligations with regard to any outstanding debt. Too many times, a seller can end up finding it necessary to take back the business just to retire bank and supplier debt. Be cautious if you elect to "carry back" a portion of the sale proceeds, as the new owners will then control a portion of your finances. That's not always the best situation. It is generally preferable to arrive at a sale agreement that results in cash proceeds to the seller for the full expected amount. All of these factors are important when deciding to sell a business. Each business is unique. The bottom line is to receive fair value for your business, and not to have the new owners adversely affect your lives in the future.
