Did You Know…
Roughly 90% of buyers:
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Are 1st time buyers
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Have never been in business before
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Will use financing to purchase a business |
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BusinessQuest Newsletter
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April 2008
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Rethinking Your Retirement Funds
You are interested in buying a business. You have adequate capital to fund the 20% requirement that the Small Business Administration (SBA) requires. You have decided you are ready to meet with a business broker to find a business that matches your finances and personal goals.
While you are sitting down with your business broker, the two of you review your finances. He or she discovers that you also have $100,000 in your 401(k) retirement plan. Your business broker informs you that these funds can be used to buy a business.
Your business broker continues to explain that this can be the best investment opportunity for your retirement funds. Most retirement funds, if invested in the equity market, will never be sufficient to provide adequate retirement benefits. However, investing retirement funds in your own business gives the maximum potential of providing future financial security.
Additionally, using a 401(k) or IRA to fund your business purchase increases the size of the business you can acquire. For example, using your $100,000 401(k) fund can potentially allow you to purchase a business with a fair market value of $500,000 more than you could afford with your savings alone.
Your business broker also explains that both the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 specifically permit a retirement plan participant to invest in employee stock without penalty. Subsequently, this is an IRS-approved transaction.
Buying a business with your retirement funds does require a specific structure to avoid any penalties. The structure of the transaction is as follows:
• A C-Corporation is established.
• The Corporation establishes a profit-sharing plan.
• The retirement funds are rolled over into that new profit-sharing plan.
• You, the participant, direct the funds to be invested as company stock.
The process of establishing the new company structure is quick and is designed not to delay the closing of the transaction. Additionally, you may be able to defer up to $200,000 annually, on a fully tax-deductible basis, into your new retirement plan.
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The Ex Factor
The Ex Factor Excerpted with permission from Family Business Magazine, Winter 2008, www.familybusinessmagazine.com. The end of a marriage between entrepreneurs doesn’t mean their business must be dissolved, too. But trust is essential in maintaining a business partnership after a marital split. By Patricia Olsen
When John and Diana Stepleton divorced in 2004, Diana’s friends assumed she’d leave Research Data Design (RDD), the Portland, Ore., research company she and her husband had owned, and return to the corporate world. After all, her last corporate job had been as a national accounts manager at Lucent Technologies, so she could probably pick and choose among high-level marketing and technology positions. Why on earth, they reasoned, would anyone want to continue in business with a former spouse?
Why indeed. While some friends and family members may have a hard time understanding couples who continue to work together after they divorce, there are a number of compelling reasons for doing so. Hefty revenue figures may be the motivation in some cases, but divorced couples who’ve remained business partners name several other reasons, such as the time and effort they have invested in the company and the qualities that made the other party a good businessperson despite their personal differences. When children are involved, continuing the business for the next generation may also be a factor. Although new agreements may have to be forged, couples like the Stepletons demonstrate that when a marriage ends, it doesn’t mean the business partnership must be dissolved, too.
Julie Mannis Hoisington and David Mannis, co-publishers of the San Diego Community Newspaper Group, have also weathered a divorce and stayed in business together. It never occurred to them to do otherwise, they say. “We made better business partners than husband and wife,” Julie says. “We’re good friends.”
“But we’re very different people,” David adds.
The RDD owners and the San Diego newspaper entrepreneurs are not that different from a number of successful divorced “copreneurs,” according to a 2006 study by Patricia Cole, an associate professor of family therapy and family business at Nova Southeastern University in Fort Lauderdale, Fla., and Kit Johnson, a family therapist in the School of Human Services at Capella University in Minneapolis. “The prevailing wisdom had always been that divorce was a business killer,” Cole says. Yet their study of nine now-split couples found that both the business and the partnership can not merely survive a rift in the relationship—they can thrive. |
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Venture Capital Investment Shows Initial Decline in 2007
The most recent MoneyTree™ Report from PricewaterhouseCoopers and the National Venture Capital Association reported a decrease in venture capital investments. Eleven of the 16 industries reported a decrease in investment dollars, while 14 reported a decline deal volume. The Software sector, earning the highest number of investments for the quarter, represented one-fourth of the deals. Biotechnology garnered the most dollars for the quarter with $1.27 billion invested.
Industries experiencing increases in investment dollars this quarter were Semiconductors, Financial Services, Telecommunications and IT Services. Semiconductors was the only sector to receive more dollars and deals from the previous quarter. Seed/Early and Later stage deals both experienced a decline this quarter, while Expansion stage investing remained steady.
While venture capital investments were down 8.5% from last quarter, the first quarter of 2008 was still the fifth highest quarter since 2001.
Venture capitalists offer no indication of significantly reducing their investing, even showing a continued interest in Life Sciences, Clean Tech and traditional IT sectors. |
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Campaign for Small Business
The National Small Business Association (NSBA) has launched their “Small Business: 70 Million Strong....And Voting” campaign, which is designed to educate lawmakers, political candidates and the public on the importance of small business.
According to the U.S. Census Bureau, the small business community accounts for 33% of the voting population. The NSBA advocates for the interests of small business by helping others understand the size and importance of the small business community.
The campaign hopes to gain momentum through small business owners, their employees, family, friends and customers. Supporters can download a web sticker to link to their website or signature button to add to their emails.
Learn more about “Small Business: 70 Million Strong....And Voting” and the National Small Business Association by visiting the campaign website, www.nsba.biz/vote.
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Website Optimization: Build a Web Presence with Keywords
For many small business owners, having a presence on the web is an important component of informing consumers about their products or services. Anyone can buy a web address and get something out on the web, but being able to be found by search engine users is an important step to taking your URL from just a website to a web presence.
Any search engine optimization (SEO) expert will tell you that content is “king.” But how does a business owner get this ever-important content? One easy way is through product or service descriptions. It is important to write the description using keywords that are important to your consumers. For example, if you make wedding cakes for people getting married in Miami, make sure you website clearly says so.
Some business owners may think, “I don’t have that many products, so I won’t have much content” or, “Nothing I do is tangible, so how can I write about it?” The solution to adding more relevant content can be as easy as adding a business blog. Blogs continue to grow in popularity; Marketing Daily has reported that 8 in 10 Americans know about blogs and about half of them visit blogs regularly.
tart a blog for your business, discussing industry news and “insider tips.” The same rules of using relevant keywords apply and a blog enables you to continually add posts filled with keywords important to your business and clients. A blog provides the added benefit of displaying a level of industry expertise through sharing information that your consumers want to know.
As exciting (and possibly easy) as this seems, the next question is “How does one really know what keywords consumers deem relevant and search for on the web?” For those do-ityourselfers, there are some free keyword tools available to help you get started:
• Overture’s Keyword Selector Tool inventory.overture.com
• Wordtracker’s Free Trial www.wordtracker.com
• Keyword Discovery’s Free Search Term Suggestion Tool www.keyworddiscovery.com/search.htm
• Google AdWord’s Keyword Tool adwords.google.com/select/KeywordToolExternal
Lastly, you may want to consider contacting an SEO consultant. These specialists can help you identify keywords, write an effective blog and employ other useful strategies to improve your web presence. |
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formerly Sunbelt Business Brokerage
