What Does the Future Hold for Your Business? Every Business Owner Should Have a Buy-Sell Agreement

In Part 1, we recognized the need to establish a succession plan for your business; and we discussed the importance of identifying and developing individuals to whom the management, executive decision-making, and ownership of your business will pass. Whether you determine that the business should pass to family members, key employees, or will be sold to a third party, it is critical that you document your intentions in a document often referred to as a “buy-sell agreement.”

A buy-sell agreement is an agreement among the owners of a business, or between the sole owner and certain key employees, which sets forth the conditions under which ownership interests in the business may be transferred. One of the goals of such an agreement is to prevent the entity ownership from landing in the hands of the spouse of a deceased owner, the ex-spouse of an owner, or children who are not involved in the business. The agreement lists certain events, e.g. death, disability, departure or retirement of a business owner, the desire to sell to a third party, or the entry of a divorce or bankruptcy court order, which would trigger a buyout by the remaining owner(s) or key employee(s).

The agreement may be in the form of a redemption agreement, under which the business entity itself buys the business interest from the transferring owner. Alternatively, it may be a cross-purchase agreement, under which the remaining owner(s) buy the interests of the transferring owner; or it may be a hybrid agreement, which allows either the entity or individual owners to buy the interest. The agreement may provide for rights of first refusal, or a mandatory buyout by one party of the other party’s interests in the business. There may be put and call options, giving an owner the right to require the other owner(s) to buy his or her interest, or sell their interests to the calling owner. The buy-sell agreement should also address the conditions under which an owner may transfer his or her interests by gift or sale to his or her descendants, or to a trust for their benefit, without triggering a buyout by the other party to the agreement.

A critical component of the buy-sell agreement is the valuation mechanism used to determine the purchase price for the business interest. There may be a specific formula included, or a provision that a valuation will be obtained from a professional valuation expert. Different methods of valuation may be applied, depending on the circumstances of the buyout. For example, book value might be used in a divorce or bankruptcy situation, and fair market value might be used for a death or disability situation. There might be a discount on the buyout price for a “put” and a premium on a “call.” The parties should review the valuation provisions annually to ensure they remain appropriate, given changes in the industry, the market, and the business’ financial condition.

Another critical question that must be considered is how the buyout will be funded. We will address funding in the next installment of this series on business succession planning. Note, however, that the method of funding and the design of the buy-sell agreement must be coordinated, so it is important to consider these issues concurrently.

9 Statistics Every Business Owner Should Know About Marketing Your Local Business Online

As a small business owner you may be wondering if you should invest any time or money on marketing your local business online. After all you are already being pulled in a thousand directions by your business, your staff, your customers; and the last thing you need is another responsibility – especially if it won’t pay off.

I understand your concerns so in this article I aim to give you some facts that will help you make a better decision. To start with I think its important that you realize that search engines are now the number one media type consumers use to find local business like yours.

Your local customers prefer to use Google and Bing over the yellow pages, internet yellow pages, local newspapers, print white pages, television, direct mail, consumer review sites, and even radio.

Here are 9 Statistics To Show The Importance Of Marketing Your Small Business Online

1. “63% of Americans have substituted the internet and local search for phone books.” This statistic shows where your customers are migrating and where you should shift your marketing efforts.

2. “Yellow Page usage has dropped 55% since 1999 and continues to do so by 4% every year.” While advertising in the Yellow Pages may still be profitable, especially since a lot of your competitors are leaving that space, it does show the trend on where your customers are migrating

3. “More than 30% of ALL internet searches are local and include the location in the search.” This shows that your customers are searching for you and your business on their computers and their smart phones.
4. “According to Yahoo 92% of all business searchers start looking online, either at home of on their mobile phones.” This statistic is staggering to me and should highlight the importance of ensuring your business is showing up in the right place and in the right context.

5. “97% of consumers use online searches when researching products or services.” Again, another statistic that should catch your attention.

6. “73% of online activity is related to local content.” This is very impressive and further drives home the point that you need to ensure your business is ready for the internet revolution.

7. “82% of local searches result in an in-store visit, phone call, or purchase.” How impressive is that? This shows how essential it is for you to set up your site so its conducive for local customers looking for you online.

8. “Facebook and Twitter have a combined member base of over 1.5 Billion users and growing.” Your customers are literally spending hours a day on social media. Are you showing up in those locations where they are? Are you showing up in the right manner?

9. “The site ranked at the top of search results gets 42% of all clicks.” If you want to pull in customers from the Internet you want to ensure that you are ranking properly in the search engines.

We are in the middle of an Internet revolution and local business owners like you that want to ensure they are positioned for business success need to take some critically important steps. Being aware of these Nine statistics separate you from most business owners that aren’t even aware that this massive shift is occurring.

Cities Cheating Business Owners For Late Fees

I am a judgment broker that writes often. Usually, I stick to positive or neutral topics. However, I recently figured out that the government of the City of San Jose, CA seems to be purposely making me pay late fees for my annual city business license. I have a stable business with a long-term record, and have had the same address for a decade.

For the last 3 years in a row, I have been mailed a late annual business license tax notice with massive extra late fees added. Each of the last 3 years in a row, I was never mailed the original bill or invoice, nor was I called or emailed. The letters with their demand to pay my annual business license fee and for late fees backed up by law, arrived in the middle of February of each of the last 3 years.

Each year, I called the San Jose business license department and asked them why I never got their original notice, only the late notice. They always said they did mail me their first notice months ago; however after 3 years in a row, I now think this may be a scam. There are very few businesses that could get away with not mailing you an invoice, or reminding you of an upcoming annual payment; and then have the right to send you an invoice with late fees added.

I suspect this is happening to thousands of business owners in San Jose, and perhaps other cities around the country. I know they did not mail me their bill first. I bet that if I asked to speak to a supervisor, they would say budget cuts do not allow them to mail out invoice notices. My opinion is that if they can afford to mail out late notices, they can afford to mail out their invoices before the due date.

I suppose one solution is for me to set an annual reminder on my computer, to drive to their downtown office every year, pay to park, and pay for my business license in person; so I will not get scammed for late fees. The drawbacks are the parking fees, wasted gas, and the time it takes from business-hours.

Another solution would be for the city to put a date on their website, after which a late notice and penalty gets added. That way, no notices would need to be mailed; however it would certainly help if they would mail out invoices before their due date. Alas, the City of San Jose’s website does not even spell San Jose correctly, and is difficult to navigate. I cannot find anything useful at their main site except the address to visit and mail things to.

On their late fee bill, there was another website listed, and that website was better. It seems that local law 4.76.270 is closest to having some useful information. 4.76.270 states “Each business tax payment thereafter is due and payable annually on the fifteenth (15th) day of the calendar month during which the person first engaged in business in the city”.

I guess it is my responsibility, to look at my old business licenses and when I paid by check; back when they used to invoice me, years ago to calculate my annual business tax due date. I think making everyone’s annual business tax license due on the same day every year would be a good idea.