Has Sold More Businesses In The World Than Anyone.®

Business Broker Franchise
Call VR Business Brokers 800-377-8722

2020 Year-End Tax Strategies 
by Suzy Grainger, Sales & Marketing Manager DRDA CPAs & Business Consultants
Tax Reduction Strategies in Light of Biden’s Win
There are many things we know about tax planning between now and December 31, 2020, yet uncertainties abound. The elephant in the planning room is who gets elected in the November third general election and the lingering questions are: when will it be decided, and what does it mean for you? Polls indicate a Democratic victory is likely. One of the things we learned from the 2016 election is that polls can be wrong. So, what does a Biden victory mean for the future and what can you do now to plan during this uncertainty? The time to create these strategies is now as the window of opportunity will be very tight or closed the longer you wait for the smoke to clear.
What a Biden Victory Means
Joe Biden’s tax plan impacts everyone, but the change varies based on your income level.
High income taxpayers earning in excess of $400,000
  1. Increasing individual income tax rates
  2. Ordinary income brackets would go up for individuals increasing the top tax bracket to 39.6%.Additionally, 12.4% FICA tax would be imposed on wages over $400,000 raising the effective rate to over 50%.
  3. Elimination of the Qualified Business Income tax deduction for pass-through business owners. This potentially increases the tax bracket for high earners by 10% (from 29.6% for those eligible for the QBI deduction to the proposed highest rate of 39.6%).
  4. Like-kind exchanges (Section 1031 Exchanges) would be eliminated.
  5. Other issues
  • Long-term capital gains and qualified dividend tax rates would increase to ordinary income tax rates for income over $1 million.
  • The 3.8% Obamacare surtax on net investment income would remain in place.
Middle- and low-income taxpayers
  • Flat retirement contribution credit of 26%. This would eliminate the deduction for retirement plan contributions essentially making them all Roth contributions, but it would provide a refundable tax credit equal to 26% of the contributed amount. In other words, you put $100 into your IRA, you get no deduction, but the government puts $26 into that account as well. This is a benefit to low and middle income taxpayers and puts them on a level playing field with high income taxpayers who received a larger tax benefit because they paid tax and paid it at a higher rate providing significant benefits for retirement plan contributions. Now you get a benefit whether you pay tax or not
  • Enhancements to personal income tax credits
  1. Higher Child Tax Credit (increased from $2,000 for children under 17 to $3,600 for children under 6 and $3,000 for all other children under 17).
  2. Child and Dependent Care Credit (from $3,000 to $8,000 for one child, and from $6,000 to $16,000 for two or more).
  3. The First-time Homebuyer Credit would be reintroduced as a refundable and advanceable credit of up to $15,000, and
  4. A brand-new proposed Caregiver Credit would provide $5,000 for informal long-term caregivers.
Evaluating The Transaction 
By JoAnn Lombardi, PresidentVR Business Brokers/Mergers & Acquisitions
There is no situation where the buyer doesn’t question if they are making the right decision in buying a business. The truth is, every business has its share of both advantages and disadvantages. Regardless of, if the seller had disclosed everything to you is why you perform due diligence.
You want to examine a business to find out what are the problems of the business as well as what is driving its value. You also need to discover what the seller has done over the last few years to dress-up the business in order to maximize earnings:
• Frozen expenditures on capital equipment;
• Cut back on marketing research;
• Withheld introduction of new products.
How you as a buyer will perform due diligence on a business depends on what kind of buyer you are.
Investment and Venture Capital Groups
If you’re a financial buyer such as from a private equity group, the challenge of performing due diligence might be whether they understand the industry or whether they can be sufficiently be educated in a short period of time.
For example, say you are presented with an acquisition opportunity in which the industry and the particular company’s problems were not addressed. The challenge in this case would be to uncover these short comings. You may require the need to retain an industry expert to guide you through the process of due diligence for the business.
As an Industry Buyer
In this scenario, the problems often center on verification of the different elements and resources of the business. In some cases, you may retain the services of an investment bank that specializes in the industry the business in question is in to identify and qualify financially its resources.
Remember when you are looking to buy a business, you are not simply looking at their balance sheet and profit loss statements, you are looking at management/employee capabilities, special skills and know-how. You need to take into account certain erosion of key people leaving, loss of key accounts or delay of new product launches that are placed on hold until the deal is
Stumbling Blocks To Avoid When Selling Your Business
By Peter C. King, CEO VR Business Brokers/Mergers & Acquisitions.
From a lack of preparation to proceeding without the help of a skilled intermediary, these are some of the most common mistakes made by sellers.
Selling a business for a satisfactory return and within your preferred timescale can be a challenging prospect. Attracting buyers requires a focused approach, careful groundwork and realistic expectations.
Here are some common pitfalls you should avoid to boost your chances of a successful outcome. 
Lack of preparation
Owners frequently underestimate the time required to prepare for a business sale. Most business brokers advise allowing significant time to thoroughly prepare for a market listing.
This allows you to formulate a viable exit strategy, which should include an effort to make the business more appealing. For example, cutting wasteful costs, putting your financial history in order and tidying or even renovating your premises will positively influence the selling price. 
As elsewhere in your business activities, confidence can be a useful tool – provided it is grounded in reality. Purchasers will generally only pay what your business is worth – and their assessment of that figure will be based on independent valuations based on profit, asset values and other measurable factors, not on your own personal estimate.
Obtaining a professional business valuation at an early stage will keep your expectations realistic and give you an idea of the work required to realize enough cash to fund your next venture or a comfortable retirement. It’s also useful to research the online marketplace to check the asking price of similar businesses and to ask your VR Advisor about the current sales climate, prevailing trends and the factors driving prices.
Any business valuation must be a logical and transparent assessment of the worth of the enterprise. Prospective buyers will inevitably query the figures in order to understand the applied rationale – so any significant overvaluation will soon become apparent.
How Does Technology Make Your Business Attractive to Buyers?
By Tim Bellon, Owner of VR Office in South Tampa, FL
When Buyers Have Questions, Show Them the Data
If you think selling a business is scary, try being the buyer. It is the buyer that has the burden of trying to figure out if the seller’s sales numbers are inflated and what other answers are an exaggeration of the truth. Nobody wants to be taken advantage of. 
It’s because of this, buyers enter the relationship understandably skeptical, and it’s up to the seller to quickly earn their trust and get to the closing table. 
When a buyer is doing their due diligence, expect them to ask questions like:
• Can you show me year over year revenues by month?
• What is the average sale?
• How many active customers do you communicate with?
• What is your cost of goods sold? 
For some sellers, those questions would be met with a blank stare because they just do not have the answers. That response does not give the buyer confidence that they are buying a solid business with predictable revenues. “Uncertainty is the enemy of any business deal. If the buyer cannot have their questions answered quickly, they frequently have second thoughts and look to get out of the deal altogether. At worst, they are not willing to pay top dollar. My #1 piece of advice to sellers is to know your numbers.
Startup businesses almost always start on a shoestring budget and rely on revenues to fund future growth. As a result, some are slow to adopt modern technology to run day-to-day operations. As these businesses mature, they should consider adding tools to not only operate at peak efficiency but make them more marketable when it comes time to sell the business?
The Fastest Way to Earn Your Earnout
One noticeable impact of COVID-19 on M&A is the increased usage of earnout clauses in transaction structures. Whereas eight months ago, earnouts – a portion of the sale price only paid to the seller once the business achieves specific financial milestones – were rare, nearly every letter of intent we have reviewed since March has included one.
On paper, it makes sense. There is inherent risk in doing deals in today’s environment and that risk needs to be shared. One major question, however, is how should sellers think about hitting those financial milestones, triggering the earnout, when the economic cards of volatility and recession are stacked against them?
One strategy, while simple, is by no means easy to achieve: radical focus on the drivers of value creation while simplifying parts of the business that are unprofitable.
Fortune 200 manufacturing company, Illinois Tool Works (ITW), was the first to institutionalize this approach and the results speak for themselves. At the peak of ITW’s acquisitiveness, the company was purchasing an average of one business a week. During this stretch, none of ITW’s roughly 200 acquisitions had any impaired goodwill and the company generated a 19% compound annual shareholder return.
How did ITW achieve such remarkable and consistent results, and how can middle-market management teams use the ITW approach to trigger an earnout?
The 80/20 Value Creation Playbook
Plumbing Contractor Business | Wilmington, NC
This is a great opportunity to purchase a well-established plumbing business with a mix of both commercial and residential customers in a growing area of coastal North Carolina. Sales consist of new construction as well as a knowledgeable service department that generates approximately 60% of the revenue. This locally owned plumbing business has been serving the Wilmington North Carolina area for over 12 years with steady and continued growth. The success of the business is driven by a commitment to customer satisfaction with unlimited growth potential. 
Sales have continued to thrive this year even during the Covid situation with no slow down it sight. The sale of the business includes everything needed for continued success including modern vehicles with all of the necessary tools and equipment. With excellent books and records this would be a great business to position for a SBA loan. This is an excellent opportunity for an individual with the skill set to own and operate their own plumbing business, or for an established plumbing business wanting to expand to the Wilmington area. The seller will negotiate a transition period depending on the buyer's needs.
For more information contact: Ken Puryear at ken@vrwil.com
VR in Dallas, TX Facilitates Sale of Knowles Wholesale Florist
Knowles Wholesale Florist provides the retail floral sector with the highest quality products and the most professional and efficient service in the industry. Knowles services a large area of North Texas, extending just across the border into Oklahoma. Tim Knowles, the second-generation owner of Knowles Wholesale Florist, has been associated with Knowles Wholesale for over 45 years, and has decided that is long enough. He is ready to enjoy retirement after a fantastic and enjoyable career.
?The business has been purchased by Lone Star Bloom, a real force in the retail floral industry, encompassing over 30 retail floral locations across several states. Through leveraged volume, proprietary analysis, and diligent cash flow controls, Lone Star Bloom is the fastest growing florist in the country.
Congratulations to Larry Lanefor your successful closing.
For more information contact llane@vrdallas.com.
Thinking of selling your business or looking for an established 
business to purchase?Contact a VR Office Near You!
Have You Ever Considered Selling Businesses?
Small businesses make up over 56% of the annual U.S. GDP and every year a large amount of them change hands. VR is the industry leader in facilitating such transactions. Click here for more information on how to join VR.
As a loyal subscriber of Today’s Business Owner electronic magazine, we invite you to click on this link follow us on LinkedIn.
Now you can be updated daily on business sales, valuation techniques, mergers and acquisitions, career opportunities with VR, and much more.
Be the first to find out about new businesses for sale, and what has just sold.
Business For Sale Alert
Business Broker Newsletter
Business Broker Franchise
VR Mergers & Acquisitions
  • +1 (800) 377-8722
  • 2601 E. Oakland Park Blvd, Suite 300 Fort Lauderdale, FL 33306

Copyright © 2019 VR Business Brokers. All Rights Reserved.