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January 5, 2009

A Look Forward: What BBN Affiliates Might Expect During 2009?

First: A Summary of BBN Affiliate Accomplishments in 2008

• Strong attendance at all five BBN Affiliate Training Conferences.

• Increase in profitability of businesses sold by many BBN Affiliates.

• Establishment of BBN Five-Star Featured Businesses for Sale – An Exclusive Website.

• Plan announced for an Advanced BBN Training Conference scheduled for late summer/early fall of 2009.

• Major improvement of the content and presentation of business data in the BBN Affiliate prepared Confidential Memorandum (Marketing Book).

• Increase in the size of businesses sold by BBN Affiliates:

1. Annual sales volume of businesses listed & sold

2. Valuation amount of businesses BBN Affiliates submitted to RWS for preparation of business valuations.

Next: What May BBN Affiliates Expect in 2009?

• The economy and financial markets will be the major focus of business owners, lenders, business buyers and business brokers in the new year.

• Now that the presidential election is behind us, we expect to see far more focus and action by the U.S. Congress, Treasury Department, the new administration and the financial and banking industries to find new ways to stimulate the U.S. economy. In fact, at the time of this writing, the news topics of the day are about the U.S. economy and the worldwide economic situation.

• Major government expenditures will focus on projects and industries that create and expand domestic jobs.

• Business acquisition loans will continue to get funded for solid deals. More intense underwriting processes have been implemented by lenders seeking solid deals.

• Increased seller financing, especially for marginal deals and deals that do not qualify for SBA financing.

• Flood of opportunistic shoppers for distressed businesses deals. Some shoppers are qualified buyers, but most are just “shoppers.”

• Increased appreciation by selected buyers and sellers for RWS Business Valuations. Such prospects are usually serious clients with access to money to buy a business. The RWS Business Valuation is a good process for both sellers and buyers to help determine that the business is “priced right.”

• Most business transfers will require more of the business broker’s time and attention. Both buyers and sellers will proceed far more cautiously and take meaningful steps to avoid mistakes.

• The amount of time required to complete funding and closing for transactions will take longer and the business broker must be more diligent in managing the process.

• Business brokers must manage their time more effectively now. You will talk to and meet with more distressed prospects and most of them will not be “doable deals”; meaning no pay day for you, the business broker.

• 2009 and beyond can be a highly beneficial and monetarily profitable time for trained, skilled and persistent business brokers. The opportunity is now! The result is up to you. BBN is available to support your efforts: the rest is up to you.

• The best businesses for business brokers to list and sell are profitable and in industries with a future.

• The BBN Proven Process to Market and Sell Businesses has never been more important than at the present time. Following this process produces sellable businesses, which produce more closings, thus producing more commissions for business brokers.

• Sound personal advice for 2009: You Get Up, You Suit Up and You Show Up!

The Business Section of the Dallas Morning News on Sunday, December 7, 2008 featured an article summarizing the comments of leading business people, educators and economist in the region. Mary Francis Burlington, president of Ebby Halliday Realtors, one of the largest and most successful realty firms in Texas and in the nation, offered the following comment which she had shared with her own business group:

“We have some agents who are not smart enough to work hard during this marketplace, but some who are” she said. “I tell people, ‘you get up, you suit up and you show up’; and work smarter than you ever have before.’”

Think about it: BBN Training Conferences Make BBN Affiliates Smarter Business Brokers

2009 Dates for BBN Affiliate Training Conferences

January 27th & 28th

April 7th & 8th

June 23rd & 24th

August 25th & 26th

October 27th & 28th

Note: All Training Conferences in 2009 are on Tuesdays and Wednesdays

Details on BBN Website – Affiliate Members Area (Conference Info)

January Training Conference Program

“Mass Mail Marketing Thru Introduction of the Standard Listing Agreement”

Topics for the January Training Conference Focus Upon Teaching & Learning

the Best Practices Successful BBN Affiliates Use to Locate and Sell Businesses as follows:

1. Motivate Business Owner/Sellers

2. Identify Profitable Businesses to Sell

3. Get a Commitment From the Business Owner/Seller

4. Assist the Business Owner/Seller to know the Current Market Value of their Business:

The Selling Price

5. Recast Financial Statements. (Three Case Studies)

6. Understand the RWS Business Valuation – Market Valuation Analysis

7. Finalize the Business Relationship Between Owner/Seller and Business Broker

*Attendance Certificate: Financial Recasting Analyst (FRA)*

Make Your Plans to Attend!!

2009 New Advanced BBN Affiliate Training Conference in Dallas, Texas

This Advanced Training Conference is designed to provide appropriate training for experienced BBN Affiliates. The material discussed will also benefit BBN Affiliates working to attain the Certified Business Broker (CBB) designation.

The CBB designation is awarded by Business Brokers Network (BBN) to Affiliates that meet the certification criteria requirements listed on the Certified Business Broker (CBB) Application, BBN Form 111.

Affiliate Qualifications to Register and Attend Advanced BBN Training Conferences are as follows:

1. Attendance at any five (5) of the BBN Training Conferences presented in 2006, 2007, 2008 or 2009, and at least one BBN Training Conference each year.

2. Completed the data gathering process for at least 5 (five) RWS Business Valuations and delivered the completed RWS Business Valuation to the business owner.

3. Must List, Market, Sell and Close on at least one business following The BBN Proven Process to Market and Sell Businesses (BBN Form 285).

4. Must be in compliance with the BBN Affiliate Service Agreement and in good standing with BBN.

5. Advanced Training Conference registration fee and date will be announced soon. More information will follow.

Update: BBN’S Five-Star Featured Businesses for Sale

The Five-Star Website is proving to be a great success. At the date of this writing the website displays:

• Fifteen businesses with five contracts pending

• In twelve different industries

• Located in nine different states

• With ten different BBN Affiliate Business Brokers

Important Observations: Five-Star Featured Businesses for Sale Website

• All of the Five-Star Website Businesses for Sale are listed by ten BBN Affiliates that joined BBN in June, 2007 or later.

• Each of these ten Affiliates have eighteen months or less business brokerage experience, but they all follow The BBN Proven Process to Market and Sell Businesses.

• They are achieving success as a result of following The BBN Process.

• The ten BBN Affiliates that represent the Five-Star Businesses for Sale have attended a combined total of thirty BBN Training Conferences. This fact illustrates the benefits of BBN Training Conferences and following The BBN Proven Process to Market and Sell Businesses.

We encourage each of you to follow The BBN Proven Process to Market and Sell Businesses. You can see from the business types and sizes on the Five-Star Website that The BBN Proven Process to Market and Sell Businesses works for all types and sizes of businesses.

Several other Affiliates are now in the process of finalizing information to request entry of their New Businesses for Sale on the Five-Star Website. Plan to participate and benefit from the advantages offered by this exclusive website available to BBN Affiliates only.

The Good News: Benefits for BBN Affiliates

Affiliates benefit from following The BBN Proven Process to Market and Sell Businesses. Those Affiliates that follow the process increase by about ten fold the likely hood that they will sell the business, close the transaction and collect the brokerage commission.

Remember: Learning is a life long process!

The Current Economic & Financial Situation

With the present economic and financial situation in the United States and internationally, only businesses that produce positive cash flow to the buyer are sellable.

• Financing is available to qualified buyers for profitable businesses.

• Marginal businesses are a waste of time for BBN Affiliate Business Brokers.

Financial & Economic Update:

Residential & Commercial Mortgages, Defaults & Their Impact on Buyer Financing

Reporters gather information about current events in various fields of endeavor and share their findings with their audience, whether the audience is readers of newsprint, listeners to radio programs or television viewers. From my observation, many such reporters appear to simply interview someone that has indentified themselves to be knowledgeable about or impacted by the event. The interviewee’s opinion or experience about the subject is the “story of the day” without much, if any further “digging” for validation of the “information” being reported. Unfortunately such reporting occurs concerning business, financial and economic matters as well as other subjects. A significant amount of “information” reported about mortgage defaults is simply misstated.

A brief review of the charts and graphs below were reproduced from an article included in the Editorial Section of the Dallas Morning News on November 30, 2008 and some of the information included in the article is from a study prepared by Professor Stan J. Liebowitz at the University of Texas at Dallas titled “Anatomy of a Train Wreck”.

The charts and graphs on the next page illustrate a significantly different picture than what most news media provide.

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These charts show that in the first quarters of 2007 and 2008 the number of properties with foreclosure filings more than doubled from 306,722 to 649,917; an increase of more than 112%.

As the charts reflect, a relatively small percentage (approximately 7%) of all residential and commercial mortgages in the U.S. are Subprime Adjustable Rate Mortgages (Subprime ARM’s), however this small percentage (7%) accounts for approximately forty three (43%) percent of all residential and commercial foreclosures at this time.

All other loans account for the remaining fifty- seven (57%) percent of foreclosures; that is, approximately 93% of all the foreclosed loans that are not adjustable rate mortgages (ARM’s).

What does all of this analysis mean?

• A close examination reflects the fact that a significant number of mortgage defaults are the result of investor purchases of real estate with the intent to “flip” the property, but the property value stopped rising. In fact, many properties declined in value.

• Many of the properties could not be leased for enough money to cover the mortgage payments or could not be sold. Property price declines and job losses occurred at the same time in certain industries and geographic areas.

• As more workers were out of work, more people could not pay their mortgage payment.

• A close examination of the performance of fixed rate mortgages (FRM’s) versus prime and subprime ARM’s reveals that the current mortgage crisis is not a subprime crisis but is an adjustable rate problem (crisis).

• Starting in mid-2006, foreclosures jumped sharply for both prime and subprime ARM’s, but not fixed-rate mortgages of any kind, including subprime ones.

• In 2005, according to data from the National Association of Realtors, speculative home purchases – that is, purchases of homes for investment purposes that the buyer didn’t intend to live in – amounted to a whopping :

1. 28 percent of all deals in 2005

2. 22 percent of all deals in 2006

• These numbers are large enough that if only a minority of speculators defaulted when housing prices stopped increasing, it could explain all or most of the increases in foreclosures.

• Data suggests that speculation was rampant among the average Joe and Jane; not just something primarily

“high–end buyers” or “yuppie flippers” engaged in as frequently reported by the media.

• Markets where speculative buying occurred such as California, Florida and Texas is a big chunk of the problem. Defaults in just two states, California and Florida, have amounted to 42 percent of subprime ARM defaults nationwide in the second quarter of 2008.

• Rising unemployment may play a role in the next round of foreclosures, especially as the larger implications of this credit mess have spread throughout the economy and driven down the stock market, bankrupted financial institutions and decreased people’s equity in their homes. This statement is speculation about the future of foreclosures, not a description of the immediate past.

• Writer’s Comments: Clearly the reporting media does not investigate very well before reporting what someone has told them:

1. Last month on CCN, John Roberts interviewed Mort Zukerman, a principal of Boston Properties and a major investor in Bernard Madoff’s ponzi scheme. In response to a question posed to him, Mr. Zukerman replies:

“I do not think anyone in the government or in the media actually understands what is

going on in this economic crisis. Roberts then asked Zuckerman if he understood what

was happening in the economy and he admitted he did not know either, but stated that

the total absence of meaningful regulation was a major part of the problem.”

2. Yes, the absence of regulation appears to be a real problem.

3. 24 hour news media appears to have stretched its reporting an excessive limit without regard for meaningful understanding of the issues discussed.

4. Economic and financial reporting by most of the media has fallen to the same level as reporting the relevance of a stray animal on the loose: “In which direction did you last see the animal go? Well, ok!

• Writer’s Conclusion: Business brokers, and other knowledgeable business people, must think clearly and seek useful facts and analysis before acting on questionable presentations and declarations.

• I suggest that Congress and other government representatives and officials that purport to represent taxpayers adopt a similar policy of understanding the facts, get relevant interpretations and ask relevant questions about serious subjects including the impact on economic activity.

• When describing economic and financial conditions, speed kills, so to speak.

The Bottom Line on Business Acquisition Financing:

A. Money is available on solid deals for qualified buyers.

B. Some lenders that were active in business acquisition financing have exited the market.

C. Lender terms and conditions have grown more strict, but not restrictive.

D. In August 2008 the Small Business Administration (SBA) lengthened the pay-back time for business acquisition loans from 7 years to 10 years; an increase in time of almost 43%. This will make buying businesses far easier than before the change.

E. Lender interest rates on business acquisition loans are lower now than at this same time last year; almost to the level of 2005 and earlier. The stated SBA rate of 2.75% over the prime rate on December 19, 2008 of 3.25% results in a rate of 6.0%.

F. By way of reference, today the average 30 year home mortgage rate of 5.47% is the lowest published rate in 37 years, April 1971.

G. Interest rate reduction and the extension of the borrower’s pay back time are major benefits to business brokers selling businesses.

Updated: Sample RWS Business Valuation

In August 2008 the SBA issued revised guidelines for it’s lending. Two important economic changes impact the Sample RWS Business Valuation as follows:

• The loan repayment time period is increased from seven (7) years to ten (10) years; a 43% increase in repayment time. This is a timely and beneficial change with significant advantages to:

1. Business Buyers

2. Business Sellers

3. Business Acquisition Lenders

4. Business Brokers

• The current interest rate used in the new Sample RWS Business Valuation is 7%; not as high as the 9% interest rate used in the previous Sample RWS Business Valuation.

• Cash Flow Coverage on Page 4 of the RWS Business Valuation is larger for all businesses as a result of these two (2) changes.

Contact Don Smith at RWS Business Valuation Services to order your new Sample MVA Report. Don’s contact information is as follows:

Telephone: 1-972-680-3012 Email: don.smith@

• New MVA Report price is $75 each; plus $10 shipping and handling: total amount $85.

Summary: Active Affiliate Status Information

To maintain Active Affiliation Status, Affiliates must be actively involved as a Business Broker and participate with BBN as outlined in detail in your Service Agreement.

Please make certain that you are complying with all terms of your BBN Service Agreement, including payment of Service Fees to BBN. BBN Form 501, Sold Business Fact Sheet, is to be completed and submitted to BBN with your payment of applicable service fees for each closed transaction. Service fees are due and payable immediately following close of the transaction.

Keep up your good work and contact us when you have questions or need assistance.

Regards,

Zack Tannery

Vice President, Affiliate Services[pic]

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