Due Diligence Case Study

Due Diligence Case Study: Poor Bookkeeping Leads to Confusion

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This is a true story of one of my due diligence assignments regarding a thief operating from within a tree trimming and landscaping company in Northern California.

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Finding Out the Seller’s Motivation

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What Motivates a Business Seller?

When working with buyers as a business broker and a CPA doing due diligence, the buyers universally ask one question. “Why is the seller getting out?

This is a good question but the question I ask is, “How do you know if the seller is telling you the truth?” Read more

The 6 Key Items Influencing a Company’s Value with Two Working Owners

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The key issues that influence a company’s value when there are two working owners:

1.    What is the profit level of the business after allowing for the second partner’s salary Sellers Discretionary Earnings (SDE)?

2.    Do a few customers dominate the sales?  I see some great companies where one customer is over 50% of the sales volume. In this case if the biggest single customer left, the company’s value would collapse? Read more

High Yield Trust Deed Investments — How do they work?

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Before we can talk about Investing in Trust Deeds the reader has to know the meaning of some of the key words.

Definitions

  • Hard Money Loan = An investor writes a check to fund the loan. It is real hard cash money that is lent to a real estate owner who is borrowing money.
  • Soft Money Loan = The seller of a piece of real estate carries back part of the purchase price as a First, Second or Third trust deed loan, on a property sold. No check is ever written to fund the loan. Therefore, there is no hard money used.
  • Loan to Value = A financial term used by lenders to express the ratio of a loan to the value of an asset purchased. The term is commonly used by banks and building societies to represent the ratio of the first mortgage line as a percentage of the total appraised value of real estate. Example $100,000 first mtg / $250,000 value = 40% loan to value

Is a Hard Money Loan Like a Bank Loan Made on the Residence you Live in?

It works the same as when you buy a home. The bank makes a First Trust Deed loan on 80% of the sale price or appraisal value -WHICHEVER IS LESS. Read more

Business Fraud

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Are your employees stealing from you? That is a form of business fraud.

If you own a business, of any size, did you ever consider that while you are working hard to make a living to support your family and staff, there are those that are also working very hard against your actions. Read more

Who Can You Trust to Loan Money To?

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True Story:

Glynn was a nice guy who was given $500,000 by his mother to buy a business, since his photography business went into the toilet. The money was burning a hole in Glynn’s pocket.

One evening Glynn met Joe at a local networking group. They started spending time together and became casual friends. Joe told Glynn he was an entrepreneur who owned different successful business in town. At least that is what he said.

One day, Joe told Glynn that he was opening a taco restaurant with two experienced restaurant partners. The business needed a taco machine with cost $10,000 and Joe was tight on cash. He asked Glynn to make a loan, secured by the taco machine. He would pay 10% interest-only payments for one year. Read more

Why Are You Doing Your Auto Body Shop Work for Nothing? A Battle Plan for Raising Your Rates

Why Are You Doing Your Auto Body Shop Work for Nothing? A Battle Plan for Raising Your Rates

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In my 15 years as a body shop broker, I have visited hundreds of body shops across the state. Almost 100% of the owners complain that, if they are being honest with me, they work too hard for too little money.  They want to sell their body shop business to some other poor sucker who will run into the exact same problems.

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Why Don’t More People Buy Businesses?

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Why More People Do not buy a business?

Introduction

You may not believe what they say yourself, but if you have been in the business of buying businesses for a long time you’ve heard someone repeat this time worn statement.

“One in 14 buyers actually buys a business.”

The business brokerage industry throws around this number all the time.

This “1 in 14” number (or only 7% ) is based on statistics gathered from some old-time brokers. They must have actually kept track of how many buyers called their firms versus how many deals they closed. We can’t know how well they tracked this info, or where this data originated from. But, thankfully, the actual number is not the important part. For the sake of solving the problem, we just need to see that it’s low, and really could be better.

Here’s why that number stays so low…

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Buying an Auto Body Shop

Everything You Wanted To Know About Buying An Auto Body Shop

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A body shop can be a great investment, if you are the right kind of buyer. Who is the right buyer? Let’s discuss that in detail. Here is what we will cover in detail.

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Do You Know Why Your Business is Not Making Enough Money?

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Your Company is capable of making money.

Very few business owners think they are making all the income their business is capable of making. In fact this is overwhelmingly the number one complaint that business advisors hear.

Occasionally a CPA will hear a complaint from their client that he is making so much money the government is getting rich off of him. CPAs and tax attorneys love this kind of client because this is what they are trained for. Save the client taxes. Unfortunately many are not experienced in finding out WHY their client is not making enough money.

Have you ever heard the phrase? “If the problem is what you thought it was, it would not be a problem.” What exactly does that mean? It means that asking the right questions will get you the right answers. Let’s look this over very carefully.

For example, let’s take a situation where the profits are down, and the sales are stable. What do you do first? Find out what changed? If you do not know what changed, you cannot put it back the way it was. Conversely if you know what changed you can use your experience to solve the problem and return to affluence.

The normal solution for a business, that is not making as much money as they were before, is to go to their banker and say, “I need money.” But this is not the solution. Find the answers by clicking on this link Read more…

About the Author:

Willard Michlin is a Certified Public Accountant (CPA #106752), Certified Fraud Examiner (CFE) and a Business Broker. He offers assistance in the key areas involved in the buying of a business; due diligence, review of financial reports and business valuation. He is an experienced, honest and trustworthy consultant. His goal is to watch your back. His due diligence clients are located all over the world. He has published many articles and is in demand as a public speaker. See other articles and information about his services at: www.evaluateabusiness.com.
You can call Willard and he will always answer your questions. He can be contacted at his Orange County, California
office by calling 805-428-2063.