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It’s a phone call that could entirely change the direction of your business, and your life. And the call comes out of the blue. Someone wants to buy your business. Are you ready to respond?

Gilmore Jasion Mahler partner Greg Taylor says he would be surprised if business owners aren’t getting these calls right now and multiple calls every week. Merger & acquisition (M&A) activity is at a fever pitch and there are no indications that a slowdown is on the way in 2022. Taylor helps lead GJM’s Transaction Advisory Services and says he is hearing from business owners receiving these calls on a frequent basis. Here’s what he says they should be doing, and not doing when the call comes in, and before the phone even rings.

Know What You Want

Taylor says you need to have a good understanding of what you want in terms of the longer-term ownership of your business. Do you want to sell your company 100 percent, or do you still want some participation in the business? A sale could allow your ownership to take some chips off the table and get some money in your pockets, so you can invest in a variety of different endeavors and still have some ownership, and then sell the business four to seven years down the road for even a larger payoff. In short: be clear on what you want in the short term as well as the long run before for you entertain an offer to buy your business. As you ponder whether to retain a piece of ownership, keep in mind that you could be reporting to the new owner. Many entrepreneurial owners find this difficult.    

Who’s Calling? 

“Is the phone call coming from a strategic buyer or is it a financial buyer? And how serious are they about potentially buying?” Taylor says once you get those answers, he can offer guidance and help you move toward the next steps. 

“If they are interested in moving a little bit further, it depends on what size business they are, how serious they are, but no matter what, I would recommend they immediately get a non-disclosure agreement or NDA in place to protect themselves. Even with an NDA in place,” he says, “I would be very cautious about what information you are sharing, especially if it is a strategic buyer. You don’t want to expose too much of your information to someone who could use that to compete against you if a deal didn’t go through.”

Don’t Make This Mistake 

Taylor says there are many potential mistakes a business owner can make in responding to a potential buyer. He says one major mistake is failing to get professionals involved sooner rather than later. As the owner, he says, you’re just too emotionally attached to the business you’ve struggled to build, sometimes for decades. You need the right advisors on board from the get-go.

“In fact, I just had a phone call today with one of our clients. They asked if we could help with some of the negotiations. The owner’s comment to me was: ‘You don’t have the bias, plus you don’t have the emotion.’ That’s exactly right. We can look at it based on what we’ve seen deals look like in their industry and help educate them on what a process might look like should they decide to go through a sale process. We could discuss different types of ownership, etc. I also always recommend, besides talking to us, bringing in a good transaction attorney and, depending on the deal size, an investment banker. The team can ensure the NDA is properly addressed regarding sharing financial information and assist in executing a letter of intent (LOI) as you move through a potential transaction and negotiating a purchase agreement.”

Taylor says getting a trusted advisor and an attorney on board is especially important for businesses that don’t have those resources in-house. He says he sees all too often a situation where they reach out to him too late. When brought in early on, he says, these experts can help negotiate and review the purchase agreement before things get too far down the road. 

“Some people are trying to save on fees but obviously this is probably one of the biggest events they’ve gone through, maybe ever, in their business and selling, especially if it’s a family-owned/closely held business. They just don’t have the experience in a lot of situations of going through even a small deal, and it can really cause issues down the road. Obviously, you want to make the process as smooth as possible, so the sooner you’re having some of these discussions the better.”

Know Your Stuff  

Should a business push itself to know certain things about itself like value, and a potential ideal buyer? In a word, yes, according to Taylor. He says you need to have a clear understanding of what your business is worth, ideally before you ever get the call that someone wants to buy your company.

“You don’t want to get in a situation where you must negotiate against yourself, that’s a no-win situation for you. The other side wins. They have the knowledge. They’ve done more deals, they have the ‘one-up’ on you. If you’re starting to try to do it on your own and not following the proper protocols and procedures, it can hurt you,” he says.

“I think also just having these frank discussions and having reasonable expectations. Every business owner probably thinks their business is worth more than it might be. With that said, you want something that’s realistic and not something that’s outside the realm, and there’s nothing wrong with that. If you think your business could be worth 8x multiple of your EBIDTA (earnings before interest, taxes, depreciation, and amortization) but really the market is saying more like a 6x, well you’ve got to be aware of that.”

Keep It Quiet & Stay Levelheaded

Word of a potential buyer for your business is something you’ll want to keep confidential between you and your key trusted advisors. Taylor says you don’t want to get too many people involved because you don’t want to have a potential mass exodus of employees because they hear the business is for sale, even though the sale might be better off for them. He says you could also wind up having a failed transaction, or maybe you were just exploring options.

“Yes, keep it quiet as best you can. But I will say this, expectations should be that more people will find out by the time the deal is close to being closed than not. You just don’t want to expedite that process or open it up too soon.”  

Beware of “Country Club Multiples”

Taylor cautions against what he calls “country club multiples.” Maybe you’re talking to someone, and they tell you they sold their business for 9x. He says that can be misleading, depending on how that individual came up with those numbers.

“Somebody hears that and says well I should be able to get 9x for my business. I am not saying they lied. It’s just that there could be many different factors that go into a sale that could increase that multiple which might not be, at the end of the day, what the real cash return is, and that’s the other thing that can be scary," says Taylor. "And plus, let’s just be honest, people tend to inflate things a little bit to make themselves look better. So, if somebody got an 8+ multiple, they might round up to 9 even though it was an 8.3x or something, and that could also be based on a full expectation on payout. Many times, especially in today’s world, there are many businesses selling with earnouts, or cash that might come down the road based upon expected targets of the business in the future. They might be calculating earnouts, expecting to get full payout. Many times you don’t get a full payout of your earnouts, so that’s another thing that can be very misleading. I always tell people be careful when you just hear something quoted to you without knowing all the facts.”

Weigh Your Options

Keep in mind that a surprise call from someone interested in buying your business could bring other opportunities. Have you considered who else is out there in the market that may be a good owner, perhaps an owner you’d prefer over the current inquiry? Taylor says now is the time to consider these options.

It’s always better to have a couple of interested parties versus one, he says. You’ll probably get a higher price due to the competition. Once you do zero in on a particular offer, Taylor says it’s very important to have an LOI in place.

“Just remember it’s kind of like anytime you’re courting somebody, things are always great in the courting stage, right? And then you move on to the ‘dating period,’ of it, as I would say. Just ask yourself, if you do have a ‘marriage’ with somebody, is this someone you want to be with long-term or not? And there’s nothing wrong with saying I don’t want to work with these people for five years or ten years or whatever, but you need to think through those things. That’s why I always say the highest offer isn’t necessarily always the best offer.”

Consider your Needs

Depending upon the nature and size of your business, Taylor says consider your needs:

• Do you need a valuation, a Quality of Earnings (Q of E) or advisors who are simply familiar with your estimated business value?
• Do you need to hire an investment banker familiar with transactions to expand the list of potential buyers and drive value?   
• Do your homework on experts you pull in. Be careful that you have strong advisors familiar with transactions. This may not include your accountant, just because you’ve worked with them for 30 years. Transactions may not be their area of expertise.
• Research the potential buyer, whether it’s a private company or perhaps Private Equity or PE group. Ask them about other deals they’ve done. Request to interview some of the businesses they’ve bought, especially if you want to “stay in the business” to some extent. View it as asking for references. You may want to consider it a red flag if someone refuses to provide those references. 
• Clearly determine your role post-transaction. What do you want?
• Look at employment contracts. Are there retainer bonuses for the management team? Sign on bonuses? How long will the contracts be? How long is the non-compete agreement?
• If the well-being of employees is a concern, get the answers you need. Will they take care of your people? Change the business name? Many times, these are very important questions, especially if it’s a second, third or fourth generation business that’s been in the family name.
• Understand the difference between a stock/equity deal vs. an asset deal and understand the tax implications. 

Potential Roadblocks

As with any major business decision, you may face some roadblocks. Here are some Taylor says you need to be aware of:

• Watch out for disconnects. Does the buyer clearly understand all facets of the business? A disconnect on value could lead to the deal falling apart or not reaching full potential sale value.
• Skeletons in the closet: A sell-side Quality of Earnings (Q of E) will root out any skeletons that may be lurking in your closet. You want those coming up early, allowing for an open dialogue. Avoid any surprises.
• Knowing your strengths/weaknesses, of your management team, operations, financial, work- force, customers, and supply chain, just to name a few. 
• Ensure a clear understanding of what is going to happen to the business post-transaction, including your role. If you left or were terminated, what does that mean to your equity? Will you get paid out right away or do you have to wait for another transaction?
• The business itself is important, but the management team that runs that business is as critical if not more, depending on the buyer’s expectation and needs.
• If the buyer is a PE group or venture capitalist (VC), understand what type of ownership there will be down the road. Is it a strategic buy to do a so-called “tuck in” of the business to another larger group of businesses? Another scenario is a so-called “roll-up” in which a construction company, for example, plans to buy five similar-size contractors and “roll them up” into a very large company the PE group may try to sell to a very large strategic buyer.
• Be aware of economic impact on deals. Challenging conditions like the current supply chain struggles can have an impact. The seller may be describing a rosy outlook, but the current economy may suggest too lofty expectations. A realistic budget is important. It can have some wiggle room, but at least be able to explain it. 
• Remember that every deal is different.
• Make sure your experts are objective and experienced. A business broker may not be.
• Trust your instincts. If things don’t feel right, sometimes you need to walk away, or maybe hit the pause button for a few months. 
• Keep this in mind: very few deals go as planned, and there are speed bumps along the way that you may need to maneuver. 

Ready to start a conversation with Greg and the GJM Transaction Advisory Services team? Simply fill out GJM’s website contact form. Be sure to note in the message section that you’re interested in GJM Transaction Advisory Services.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.

A lot is going on with SECURE 2.0, a pending piece of legislation built on the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The goal of the bill is to substantially boost the retirement savings of Americans. SECURE 2.0 contains numerous provisions that, if enacted, would affect individuals, employers, and small business owners.

SECURE 2.0 has provisions that bring several important implications for small businesses and would impact their retirement benefits programs, once the pending legislation is passed. These include expanded worker eligibility, automatic plan enrollment, and others. Not to mention the increase in the number of employees your post-employment benefit plan covers.

Sounds like a lot of work, right?

You need not worry.

SECURE 2.0 is designed with small businesses in mind. It will create new tax credits that are specifically designed to help employers.

This blog, the second in our two-part series on SECURE 2.0, post will explore two important and relevant points:

Increased Retirement Plan Start-Up Credit

One of the most significant changes in the retirement law is expanded tax benefits. SECURE 2.0 will double the tax credit for companies starting a retirement plan. Currently, the three-year credit is available for 50% of the qualified startup costs. This is for businesses employing no more than 100 employees.

100% Qualified Start-Up Costs

Eligible small businesses with 100 or fewer workers can claim a credit for 50% of their qualified start-up costs. Effective for tax years starting after 2022, Secure 2.0 would increase it to 100% for employers with 50 or fewer employees.

New Tax Credit

Businesses would also receive a new tax credit. This is a percentage of the employer contribution on behalf of employees, with a per-employer cap of $1,000. This is, however, limited to businesses with 50 employees or less. It will gradually phase out for companies with employees between 51 and 100.

From Less Than 100 to Only 50 Employees

While SECURE 2.0 contains provisions aimed at helping small businesses, it would also bring them some changes that will have negative impacts. In particular, these would be small businesses with 51 to 100 employees.

Because of the stated provisions in the bill, small businesses employing more than 50 individuals cannot take advantage of the total tax credit. Rather, the percentage will gradually phase out as the number of employees increases, as mentioned above.

On the whole, the aim of SECURE 2.0 is to help employers in the U.S. to encourage workers to plan for their retirement. If you are a business owner, the provisions in the bill will definitely impact your business once it’s enacted. This is regardless of whether you’re considering starting a new retirement plan or if you’re already offering one.  

If you’re interested in learning more about whether your small business qualifies for the retirement plan startup Tax Credit, you can learn more here.

An Important Note for the Remainder of 2022

If a plan wants to adopt a new safe harbor 401(k) plan in 2022, the employer needs to adopt that new plan by October 1, 2022 (if the business has a calendar year-end). For a traditional 401 (k) plan, the deadline is based on the employer’s tax status, as shown in the list below:

• S-Corporation (or LLC taxed as S-Corp): March 15 with extension Sept 15, 2023
• Partnership (or LLC taxed as a partnership): March 15 with extension Sept 15, 2023
• C-Corporation (or LLC taxed as C-Corp): April 15 with extension Oct 15, 2023
• Sole Proprietorship (or LLC taxed as sole proprietorship): April 15 with extension Oct 15, 2023

Part one of this 2-part GJM blog series on SECURE 2.0 outlines the changes that may be coming for individuals and how we save for retirement.

GJM’s Molly Wolf contributed this article. Molly has over 15 years of experience specializing in employee benefit plans and is an affiliate member of the American Society of Pension Professionals & Actuaries (ASPPA). She consults with clients on benefit plan design, compliance testing, payroll integration and reconciliation. She also serves as a third-party plan administrator.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.

"We don't have data others would want." 

I hear that statement quite often from executives and business owners regardless of size or industry. It typically prompts several questions from me.

• How do you know?  
• What steps have you taken to understand your data? 
• What information is important to you or your competitors? 
• What information would be most damaging to your business if it became public? 
• How do you plan to stop someone from stealing your data?

While many of the reported stories of data breaches involve large, well-known companies such as Target, Barnes & Noble, Nortel, Nissan, and others, in the world of cyber-crime size doesn’t matter – only information does. Just because a breach isn’t splashed in the headlines doesn’t mean it isn’t happening. Companies large and small across the country and our region deal with this every day and the reality is that your business could be next. One company’s Internet footprint looks the same as another to anyone interested in finding something of value, whether it’s credit information, personnel information, intellectual property such as engineering drawings or processes, technology or other industrial assets.

Cybersecurity has moved to a business imperative that is enabled by IT. No longer is this just an IT issue keeping your CIO up at night. Many boards are finely tuned in to what is going on around the world related to cybersecurity. Executive leadership is increasingly being held accountable for protecting the company’s information assets. Regulators have continued to up their cyber game and pay closer attention to how a company’s information security program could impact the going concern of a business.

A strong information security program can facilitate business growth, create market advantages, and build brand trust. Data privacy and trust have become critical business requirements as exponentially more consumer and business information is generated and shared with your partners. 

What can your company do now?

Your IT team may not have the cybersecurity expertise or the time it takes to monitor cybersecurity threats 24/7. Day to day, the IT team is often focused on supporting the business and projects that drive revenue.

Cybersecurity is everyone's business—including C-level executives, managers, administrative assistants, and even part-time office staff.  Unfortunately, any employee can be a potential cybersecurity attack vector, and cyber breaches don't always come from the outside. You can put all the right traditional cybersecurity measures in place, but all it takes is one employee clicking on a phishing email.

Understanding your organization's cybersecurity maturity, knowing where there may be gaps, and addressing those issues is imperative. Taking proactive steps to mitigate cybersecurity risk can mean the difference between a data breach or business as usual.

GJM’s customized cybersecurity assessment provides you with a high-level view of your organization’s cybersecurity maturity, determines your risk exposure, provides advice on potential process gaps, and helps guide you to realistic action plans.

Rapid Assessment includes:

• Best practices for cybersecurity controls, based on successful strategies from well-known security and compliance frameworks
• Identification of potentially critical security issues
• Actionable, quick-fix opportunities to improve security
• Outline of recommendations and roadmap for remediation
• Guidance for ongoing improvement of the organization’s security 

When it comes to your data, there is no single magic bullet that can protect you from every scenario. But you can improve your overall security posture by taking a closer look at your internal practices. Cybersecurity rapid assessments do more than analyze threats – they help you neutralize threats before they compromise your business. Today, it’s vital that every small to medium-sized business conduct a cybersecurity rapid assessment to ensure that its security is keeping its business, network, and data safe, preventing cyber threats, and meeting regulatory guidelines. If you are interested in learning more about GJM’s cyber risk services, please contact Matt Hoverman at mhoverman@gjmltd.com. 

Matt Hoverman, CISA contributed this article. Matt is a partner with Gilmore Jasion Mahler, LTD and leads the firm’s Risk Advisory practice. He has spent his entire career helping companies of all sizes understand the impact of technology on their business.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.

Small businesses are the backbone of the American economy, accounting for nearly two-thirds of all recent private sector jobs. However, these businesses are often the first to feel the effects of a slowing economy. These uncertain times bring many challenges but, as a business owner, there are several things you can do to protect your business in a down economy.

Here are some things to keep in mind:

Cash Is King

One of the most important things to do in a down economy is to match its pace. You may need to slow down your own operations and expenditures. By avoiding the mistake of continuing to spend at the same rate you were in an up economy, you can maintain a positive cash flow and avoid taking on excessive debt. Consider focusing on the most important investments for now. Be sure to also watch your outstanding receivables. If your customers slow down on their payments, you may need to follow up more often to make sure you’re paid and not left with an uncollectible receivable.

Evaluate Your Supply Chain

Another strategy for weathering a down economy is to re-evaluate your supply chain, something many businesses are already doing in the wake of the Covid-19 pandemic. You could look at both domestic and international suppliers. It’s important to ensure your costs are appropriate and that you’re getting the best possible value. Don’t put all your eggs in one basket, either. You may also want to look for additional sources of supplies to ensure you’re getting the best rate for your supplies, and this could save money in ways you can see more immediately.

Evaluate Staffing Flexibility

You must also prioritize your people in a down economy, even more critical in the current climate, as businesses struggle to bring on new staff. One strategy to consider is cross-training your employees. Cross-training is the practice of training employees in the roles and responsibilities of more than just one position.

If you are a restaurant owner, an example of this might be to make sure all your servers are trained to know how to host the front of the restaurant and that your hosts should know how to wait tables. This way, you’ll have employees who can do more than one job should there be a need due to staffing shortages, layoffs, sick employees, etc.

You might also consider “grading” your employees, protecting your “A” players while making tough decisions about your “B” and “C” players. It may be wise to look at your revenue-producing employees versus your support staff. Should you need to reduce staffing, you’ll want to maintain your ability to generate revenue.

Invest in New Technologies with Immediate Returns

Finally, a down economy can be a good opportunity to invest in new technologies—particularly those that offer immediate returns. Although you may want to avoid making long-term investments right away, you must not let your competition become more efficient while you stand still. Try to look out for technologies that can help streamline your operations and improve your efficiency and integrate them at a slower pace than you might when the purse strings are less tight.

Remember, even if it seems like things aren’t great, every little bit helps. Even if the smallest changes might seem insignificant, a handful of tiny changes is still a handful. Success in an uncontrollable economy essentially lies in how you invest not only your money, but your time and resources, as well.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.  

Technology has led to the development of new accounting tools and approaches that have revolutionized how businesses operate. As a result, the outsourced accounting landscape in 2023 looks promising.

Many businesses have transitioned to cloud-based accounting systems and integrated finance software to manage their books. With many new companies opening and remote work rising, there’s been a tremendous increase in demand for outsourced accounting services.

But with the influx of new accounting service providers in the market, it has become difficult for businesses to choose the right one to fit their needs. Here are five essential tips on choosing the right provider for your business.

#1: Decide What You Need from an Outsourced Accounting Provider

Before you start your search for the right provider, you must first identify what you're looking for in a provider. What type of accounting services do you need? What level of expertise do you require? Do you need a full-service provider or just specific services?

Answering these questions will help you narrow down your search and make it easier to find a provider that meets your specific requirements.

#2: Assess Your Current Accounting Process and Needs

You also need to look closely at your current accounting processes and needs. This will help you understand what areas need improvement and what services you need from a provider.

You should also assess your company's growth plans and decide if you need a provider that can scale with your business. This is important because your accounting needs will change as your business grows.

#3: Research Different Outsourced Accounting Providers 

Once you know what you want and need from a provider, it's time to start your research. There are several ways to do this. You can start by reading online reviews and comparing different providers.

Even more important, ask for recommendations from close business relationships. There’s nothing more valuable than a reference from someone you trust. You can also consult with your current accountant, who may or may not be able to provide these specialized services. Once you have a list of potential providers, you can contact them to get more information.

#4: Interview Potential Outsourced Accounting Providers 

After your research, it's time to start interviewing potential providers. This is crucial because it will help you understand the provider's services, experience, expertise, and approach.

During the interview, you should keep these goals in mind:

• Find out what tools and processes they use
• Check online reviews and testimonials
• Get a sense of their customer service
• Learn about other services they offer

#5: Make a Decision and Implement the New Provider

After you've interviewed different providers and gathered all the information you can, you're ready to decide. Choose the provider that you feel is the best fit for your business and budget.

Once you've decided, it's time to implement the new provider. Make sure to create a plan for how you'll transition and communicate with your team to minimize disruptions to your business and ensure a smooth transition.

The Bottom Line

Choosing the right outsourced accounting provider is a vital decision for any business. By assessing your needs, researching different providers, and interviewing potential providers, you can find the right partner to fit your specific needs and requirements.

GJM outsourced accounting services offer a wide range of specialty services for businesses interested in handing over the accounting function to a provider and advisor they can trust.

RELATED ARTICLE: Is Your Business Data Safe? Are you Sure?

RELATED ARTICLE: Someone Wants to Buy Your Business. Are You Ready?

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management & advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.