Joe Worth, B2B CFO®

Barbara Taylor reported some mostly good news on the small business sale market in the New York Times here. It seems that the market  has started to turn positive for sellers. This was predictable – but not when – and is following the pattern set for the last three decades.

For the tiny minority of business owners who have gone through a holistic exit planning process, this means they are ready to take advantage of this when they want to.

I recently read this news story about a business owner here in New Jersey that made an unusual decision to market his software product through resellers rather than direct to end-user customers. Read the whole article here. This has resulted in building a substantial and successful business, because the owner “thought out of the box” when building his business. This is what owners need to be doing – Finding business rather than Minding the store or even Grinding away at mundane tasks, as described in Jerry L. Mills book, The Danger Zone – Lost in the Growth Transition.

When is the last time you took a big step backwards and looked at your revenue generation from a ground-up, strategic perspective?

My client Gourmet Guru <website> was recently presented the Small Business of the Year Award for the Bronx by Mayor Michael Bloomberg. Read more here. A while ago I helped them get a $6MM bank loan package to finance the purchase and renovation of an enlarged facility, renovate their existing facility for rental and an expanded operating line of credit. We closed that group of loans in the midst of the financial meltdown with a bank that had changed ownership less than a week before. WHEW!

Jeff and Kim Lichtenstein and all the Guru’s have taken these resources, created a beautiful and highly efficient refrigerated warehouse and greatly expanded their business. Super congratulations to them. I’m honored and humbled to have been a small part of such a highly successful team effort.

NJBiz posted this story reporting on the substantial increase in SBA loans approved in New Jersey in the quarter ended June 30th. This is great news for small business, of course.

One of those loans approved was a $500,000 term loan under the SBA 7(a) program to one of my clients! My client’s business is growing fast and in need of working capital to continue their expansion. They are profitable, have positive cash flow and positive equity on their balance sheet. However, it is a relatively new business – not quite old enough to clear banks’ hurdles for traditional lines of credit.

After “shopping” their need to a group of banks, one banker was creative enough to suggest the SBA term loan approach. While the application and approval process was time-consuming and sometimes trying, we got it over the finish line to closing a few days ago. Now my client can enter the second half of the year confident in accepting the major new business their customers are sending their way!

Most small business owners think that bankers are their enemies. Having helped found a new bank and been on a bank Bord of Directors, I have an intimate knowledge of how banks and bankers work and think. This helps me make bankers our friends and allies.

If you or a business owner you know would like to talk about your banking needs and relationships, give me a buzz!

In a recent New York Times Small Business blog, the editors asked this question. They then listed some advice to figure out the answer:

• Be proactive. Get out in front of your lease so you have to time to create options. Start looking a year ahead if possible.
• Hire a real estate broker. A good broker knows the local market and material facts about specific buildings: environmental issues, whether the owner is in bankruptcy, how long it’s been vacant. Those facts can be used as leverage.
• Make sure your current landlord knows that you have hired a broker and that you are serious about getting a better deal — even if you have to move.
• No matter how great the deal, moving can be expensive and cost more than you planned, especially if you have to modify the space. Figure out how many years it will take for the deal to pay off.

These are all right on the money. Perhaps the most important is the advice to hire a commercial real estate broker. Virtually all commercial brokers charge tenants nothing; they get their commissions from landlords when leases are signed. So what do you have to lose by bringing one onboard?

I know some really good commercial brokers. If you’re renting your space, I would be happy to refer you to them.

Bruce Buschel owns a restaurant in the Hamptons that was recently devastated by a fire. He also blogs in the New York Times Small Business “You’re the Boss” section. When I read what he wrote (which every business owner should read!) about the lessons he learned from the fire, it occurred to me to ask:

• How was he able to evaluate the advice he was getting from his insurance agent or broker?
• How did he pick that agent or broker? An old friend? Other business owner referrals?
• Could he have found an agent/broker with deep experience in insuring restaurants?
• Was he qualified and experienced in hiring these kinds of professionals?
• Who was advising him on the risks of his business?

These are all things that I and my Partners help business owners with every day! Every business, regardless of its size, need a Chief Financial Officer^®. We make it affordable by doing it on as as-needed basis.

Robb Mandelbaum blogged for the N.Y. Times that a recent survey by Greenwich Associates shows that lending by banks to small businesses is picking up. Read the blog here. (The N.Y. Times You’re the Boss blogs are my favorite!)

While this is undoubtedly good news, so what? Does that mean that any business that applies for a loan has a better chance of getting approved? While this may be true, I think that any business’s chances of getting a loan are much more dependent on the quality of their preparation, the comprehensiveness of their application package and the way in which the bank is approached.

The loan package should be prepared with complete financial statements and supporting schedules. Did I mention that the financial statements should be up-to-date, be prepared in accordance with GAAP and structured to reflect the real economics of the business? Rather than just submitting financial statements and tax returns, a complete package will contain information that the banker will not ask for, but will appreciate and make it easier to get approval. I love it when a banker gets a package that I’ve prepared for my client and says, “Wow, that’s the best package I’ve ever seen!”

In most cases, multiple banks should be approached, with your current bank being the last. One of my clients was recently approved for a $500,000 loan after we talked to eight banks in New Jersey. Their current bank yawned with disinterest. Now they will be losing a customer who is growing fast and profitably!

Getting money from a bank is actually a sales process! Having founded a community bank and sat on their Board of Directors for years, I have come to know how bankers think and the extremely restrictive regulatory environment in which they work. Sometimes their decisions don’t seem to make common sense or business sense, but when viewed from where they sit, they make perfect sense!

So, while it’s great to hear the good survey news about business lending surging, how well you do with a bank will depend on how well you do for the bank!

Perhaps not! Jim Ethell, one of my B2B CFO Partners in California, recently wrote about forensic accounting being needed when accounting basics break down. (Read his article here.) Often, a “second set of eyes” on the company’s financial statements are enough to set off the alarm and look into problems before a very expensive forensic accounting project is needed. An outsourced, as-needed CFO can be your second set of eyes!

My friend Gene Killian is an insurance litigation attorney with The Killian Firm, P.C. He recently wrote a very good article about business interruption insurance (BI).

One of his points was, “‘Consistent and reliable’ documentation. If you want to win on a BI claim, that’s the key.” He was talking about the books and records of the company.

How are yours?

“Not having a CFO almost cost me my company.” This quote is from a blog on the Chief Executive Boards International website and it really hits home. The well-written article by Terry Weaver goes on the explain the significant value a full-time or part-time Chief Financial Officer can bring to a business over and above their cost. One reason is that “failure to fully understand the company’s financials is one of the top 3 causes of small business failure.” While many business owners rely on their outside CPA to provide financial information, Mr. Weaver explains that most CPAs do not have CFO experience and are usually paid to provide financial statements and tax returns, not to proactively use financial data to guide business strategy and decisions.

This is a great article, available here.