Presentation on theme: "Managing Relationships in Brokerage Douglas A. Dickey, CPA DRDA, P.C."— Presentation transcript:
Managing Relationships in Brokerage Douglas A. Dickey, CPA DRDA, P.C.
Agenda Entrepreneurs –Advisors – Allies or Roadblocks –Entrepreneurial Traits Deal Process –Buyers Side –Seller Side Financing the Deal –Equity - BORSA –Debt Due Diligence Closing the Deal
Advisors to Entrepreneurs According to a poll conducted by National Federation of Independent Business and Wells Fargo, 84% of small businesses sought outside advice from: –CPA – 59% (Most Trusted Advisor) –Family – 44% –Attorney – 39% –Other Business Owners – 34% –Suppliers – 31% –Stock Broker – 30% –Insurance Agent – 30%
Managing Key Advisors CPAs - “Most Trusted Advisor” Understanding Typical CPAs Avoids Risks Looks for Problems Focus on Past - Not Future Look for Reasons to NOT Do Something, vs Ways to Get it Done
Traits of Entrepreneurs Action Oriented - Make it Happen Go with their Gut Product and Sales Focus Willing to Take Certain Risks Take Control of Situations
Psychology of Entrepreneurs Entrepreneurs versus Accountants
Communication & Coordination Accountants are from Mars Are backward looking Are recording, organizing & reporting what happened in the past Have knowledge of what has happened Can produce tremendous amounts of data Can produce any type of report you want, but do not know what you need Entrepreneurs are from Venus Are forward looking Envisioning, planning & creating Have knowledge of what is planned. Needs information for decision making, not data Does not know what is available therefore does not know what to request
Securing the Listing Understanding Seller’s Goals Know the Seller’s Team –CPA –Attorney –Other Advisors –This Transaction and Future Referrals Collecting Key Information –Financial and Marketing Information
Appraisals Setting Expectations Dealing with Advisory Objections –Normalized Earnings –Understanding Trends Balancing Expectations with Hope
Relationship Management Avoiding Seller’s Remorse –Keeping the Seller Motivated –Waiting for Offers Managing Information Exchange Letter of Intent –Managing Advisors –Educating / Counseling the Seller
Due Diligence Confirming Known Information –Presentation Creates Image –Working with Professionals Finding Unknowns –Positive Attitude Toward New Info –Put Positive People in Place
Closing the Deal Working with Attorneys –Do Not Change the Deal –No Renegotiation Following up on Details Managing the Buyer and Seller –No Runaway Bride or Groom Keeping the Advisors in Line Positive Attitudes Close Deals
Sourcing Equity and Debt Equity is Ownership –Every Business has Equity –Even if it is less than Zero Debt is Borrowing –Can be From a Bank or Other Places –Debt Pays Interest
Sources of Equity Personal Savings Refinance Personal Residence Friends and Family Private Equity Group Capital Markets Retirement Funds - BORSA
BORSA – Sources of Funds 401(a): Pensions, Profit Sharing, ESOPs 401(k) 403(b) Teachers’ Annuities 457 State, County & City (government) IRAs – most all Traditional IRAs,Rollover IRAs SEPs, SIMPLEs, & Roth IRAs EXCEPT Inherited Non-spouse IRAs
How BORSA™ Works oForm a new corporation - Newco oNewco establishes a BORSA™ Plan oPrior employer plan rolls over entrepreneur’s retirement funds to BORSA™ Plan oBORSA™ Plan invests in stock of Newco and funds Newco oSave Money on Taxes, Penalties and Interest!
BORSA™ Diagram Prior Employer Retirement Plan BORSA ™ Plan Rollover Cash Newco C-Corp. Cash to Purchase Shares Corporate Stock to BORSA TM
BORSA™ Savings BORSA TM Tax Savings Married Filing Joint No Dependents WithoutWithDifference/ Distribution Savings Wages100,000 0 Distribution0150,000 Total Income100,000250,000150,000 Standard Deduction9,700 0 Personal Exemption6,2004,3401,860 Taxable Income84,100235,960151,860 Income Tax14,50658,89244,386 10% Pre-59 Penalty015,000 Total Tax/Erosion14,50673,89259,386
Sources of Debt Credit Cards SBA Loans USDA Business & Industry (B&I) Traditional Bank Financing Asset Backed Loans Equipment Factoring
Deal Structure Type of Transaction Asset Sale Stock Purchase Licensing Debt and Equity Mix Vary According to: Collateral Interest Rate Deal Size
Due Diligence Process Confirming Known Information Confirming Known Information –Presentation Creates Image –Working with Professionals Finding Unknowns Finding Unknowns –Positive Attitude Toward New Info –Put Positive People in Place
Normal Due Diligence Boring Tables of Numbers Boring Tables of Numbers Potentially Confrontational Potentially Confrontational Stressfull Stressfull Negative Impression Negative Impression
DRDA Due Diligence Colorful Colorful Positive Positive Informative Informative
Sample List of Due Diligence Request A CD copy of Quick Books Compensation schedules for employees Bank statements for the previous 12 months Articles of Incorporation Records indicating orders, back orders and WIP Corporate by laws List of all products and their costs List of owners and their percentage of ownership Special discounts Employment agreements written or verbal Profit margins based on wholesale and retail markets Contingent or off balance sheet assets or liabilities Aged Accounts Receivable Any existing buy/sell agreements Aged Accounts Payable options to purchase stock Physical Inventory count rights of first refusal Income tax returns from inception of the company List of current Distributors Equipment list with related depreciation schedules. Copies of Distributor Agreements Copies of all leases and rental agreements.
Buyer Due Diligence People Matter People Matter Buyer Team or Broker Team Buyer Team or Broker Team Recommend Advisors Recommend Advisors –Good Approach –Makes Deals Happen Manage Timeline to Closing Manage Timeline to Closing
Seller Due Diligence Good Preparation Good Preparation –Well Organized –Well Documented –Makes Good Impression –Fewer Problems and Surprises Be Ready Before the Buyer Asks Be Ready Before the Buyer Asks –Avoiding the Deal Killers Keep It Positive! Keep It Positive!
281-488-2022 email@example.com Douglas A. Dickey, CPA 2525 Bay Area Blvd., Ste. 460 Houston, TX 77058 281/488-2022 * Fax 281/488-5764 1011 Tremont Street Galveston, TX 77551 409/765-9311 * Fax 409/765-9393 Managing Relationships in Brokerage