Some like it. Some hate it. It can be lux and wonderful, or fast and furious. But we all do it—business travel!

Each year, more than 40 million visitors come to the greater Los Angeles area. San Diego gets more than 10 million overnighters. And while the vast majority of visitors are tourists, Southern California is one of those areas that enjoys a tremendous amount of business travel as well. San Diego is one a destination that gets “combo” travelers, business travelers who bring the family to enjoy the city (or conversely tourists who book a day or two of business while they are here).

Vacation travel is about getting to a city, seeing and experiencing things in that city, and enjoying your trip. Business travel is a bit different, though, then vacation travel. Business travel has more to do with location, convenience, and ease of work. We all love lux business travel, but it’s not always possible. Business travelers are often restricted by time, location, or budget.

In Southern California, location is arguably the first decision. If you fly into John Wayne in Orange County and have to make it in 90 minutes to the San Fernando Valley, you’ll be hating life as you sit on the infamous 405 freeway. And while LAX and Anaheim may not be your cup of tea for hotels, sometimes a flight or convention dictates there is no better area to stay.

When we reached out to professionals around Southern California to offer suggestions, we knew that each area was unique and serving a different travel purpose. In other words, what a traveler might like in a hotel in San Diego could be different from what he or she wants in a downtown hotel.

There are common traits to most business traveler’s desires in hotels. First, rooms must be clean, convenient, and comfortable. Whether it’s for the night or for a week, business people need to adjust to the locale quickly. There’s no better way to start than by opening a door to a hotel room and feeling good about it. WiFi is a must, and while $16.95 a day won’t kill us, it’s an irritation when there’s free WiFi all around. Food should be good or close, or both. In addition to convenient, you have to have a place you can meet at or grab a meal with a client or co-worker. If you’re wining and dining, assume you are leaving the hotel. But for meetings, you need something on site or very close. And there must be some place or things to do to unwind…pool, spa, bar, lounge, etc.

With that in mind, we present our list of business-friendly hotels for Southern California professionals!

Millennium Biltmore

AREA: Downtown Los Angeles

VIBE: The Biltmore is a Los Angeles landmark. It’s old L.A. at its finest. If you’re doing business downtown, this puts you right in the thick of it. Great restaurants, Metro stations, theaters, Convention Center, and Staples Center are just a short walk or Uber away.

STAY HERE FOR: Great place for meetings, big and small. Downtown renaissance is happening all around with great restaurants, bars and taverns nearby. There is great atmosphere here, something generally lacking in Los Angeles properties. This hotel is old-school class. Not for those wanting the “latest and greatest,” but rather a charming old hotel and Hollywood grandeur.

ALSO NEARBY: The JW Marriott at LA Live, the Ritz Carlton, and the Westin Bonaventure are three great options in downtown.

Web: millenniumhotels.com

Ojai Valley Inn

AREA: Okay, it’s not really “in town” but the Ojai Valley Inn is one of the most used “out of town” hotels for people in Los Angeles. It’s close enough to go for the day, yet perfect to go for the weekend as well.

VIBE: Calm, relaxed, country club atmosphere. Ojai Valley is green and gorgeous. Golf, tennis, spa, cycling, horseback riding, and even watersports are all close by. Call it work, but a retreat or seminar here is as much about relaxing as anything else.

STAY HERE FOR: Get away, without going to far. Great service, excellent food, and easy-going style

ALSO NEARBY: The Fess Parker Inn (Santa Barbara), Embassy Suites Mandalay Bay (Ventura)

Web: ojairesort.com

Westlake Village Inn

AREA: Westlake Village, North of San Fernando Valley.

VIBE: This property is a great option for doing business in the northern part of the city. It’s got nice rooms, great grounds, and very convenient right off the 101 freeway. It’s a family-owned property that offers a personal touch. Also, Stonehaus and Boogies are two destination eateries/hangouts right on the property.

STAY HERE FOR: It’s easy and comfortable here. We stayed there, put up clients there, had meetings there, and held press conferences there. Comfortable enough for several nights, meetings, or a North Los Angeles basecamp.

ALSO NEARBY: Four Seasons Westlake Village Spa

Web: westlakevillageinn.com

Luxe Sunset Boulevard

AREA: This hotel is right off the busy 405 at a geographically strategic spot between the coast, Hollywood, and the Valley.

VIBE: The Luxe has kind of a Hollywood nouveau riche feel. The good news is that it’s away from some of the hubbub, which is good for business travelers. Unfortunately, it’s also the biggest drawback, as there is nothing within walking distance.

STAY HERE FOR: Central West L.A. location, great service, and near lots of things 9beach, Getty Center, Westwood, Century City, and LAX (via 405).

ALSO NEARBY: Look to classic Beverly Hills properties like the Beverly Hills, the Beverly Hilton, the Four Seasons, etc., or the Santa Monica hotels like Lowes and Shutters.

Web: luxehotels.com

Hilton Universal

AREA: This hotel is located in the east part of the San Fernando Valley, on the hill across the street from Universal Studios.

VIBE: Some question this choice…it’s more touristy, because of the theme park…not new…and not overly lux. That said, it’s another strategic choice. If you are doing business in Pasadena, Burbank, Glendale, downtown, Hollywood, the Valley, or Santa Clarita, it’s a great choice.

STAY HERE FOR: Close to Toluca Lake and North Hollywood (NoHo), the two east valley hipster hangouts. Lots of great bars, restaurants, coffee shops, etc. Central to most of the studios like Universal, NBC, Disney, and Dreamworks, or if you need to be close to Bob Hope Airport in Burbank.

ALSO NEARBY: Sheraton Universal, Sportsmans Lodge, and all of the Hollywood hotels are options.

Web: hilton.com

Loews Santa Monica Beach

AREA: Santa Monica (beach)

VIBE: Loews is a quintessential new Santa Monica hotel. Thirty years ago, hotels in Santa Monica were dive motels or airline crew hangouts. Since then, Santa Monica has had a rebirth as one of the area’s hottest hotel areas. Great hotels abound, close to the beach, restaurants, and shopping.

STAY HERE FOR: Venice Beach and the iconic Santa Monica Pier are right there, literally. American Film Market headquarters at this hotel, and it’s great for meals, a stay, or drinks by the beach.

ALSO NEARBY: Tons of options, but consider Shutters, Oceana, and Huntley Santa Monica.

Web: loewshotels.com/santa-monica

The Langham Huntington

AREA: Pasadena, San Marino

VIBE: This is old L.A. wealth. Originally the Huntington, then the Ritz Carlton, it’s a flavor of elegance not found easily in Los Angeles. This is in the northeast end of town, near the Rose Bowl and Rose Parade. Wonderful grounds, restaurants, and service.

STAY HERE FOR: Lots of longstanding business are HQ’d nearby. Also close to downtown. This hotel has unmatched elegance, and is easy to get comfortable in. Lots of Pasadena restaurants and shopping nearby. And don’t miss their $100 martini!

ALSO NEARBY: Lots of chain hotels nearby, but nothing like The Langham.

Web: langhamhotels.com/en/the-langham/pasadena/

Embassy Suites by Hilton LAX North

AREA: LAX

VIBE: The truth is, no one likes to stay near the airport, but often we must. If you have a quick meeting, or and early/late flight, you have to stay close. A hotel 10 miles away could be and hour and a half in bad traffic. LAX is busy, and right on the border of questionable neighborhood. Best bet is drop down the hill to Play Vista and Marina del Rey for meals to the north, or Manhattan and Hermosa Beaches to the south.

STAY HERE FOR: Get in, have a meeting, and get out. Embassy Suites offers clean rooms, good value, free continental breakfasts, drinks in the evening, fitness center, and pool.

ALSO NEARBY: Tons of options near the airport. Choose a Hilton, Westin, or Marriott if you want the miles, or head further away to get out of the airport zone.

Web: laxembassy.com

Monarch Beach Resort

AREA: Orange Country beach area

VIBE: Okay, there are hotels near John Wayne Airport and the business district off the 405, but if you’re in the OC, head to the water. Monarch Beach Resort is stunning. On the hills overlooking the ocean, it feels more like a vacation resort or country club, yet it’s home to board meetings, conventions and retreats all the time. Food is excellent. Views are spectacular. Book near a weekend and enjoy a round or two of golf and a couple of days off

STAY HERE FOR: Views of the Pacific, great weather, luxury accommodations, and excellent service.

ALSO NEARBY: Resort at Pelican Hill, Ritz Carlton Laguna Niguel, or Balboa Ray Resort.

Web: monarchbeachresort.com

Marriott Anaheim

AREA: Disneyland and the Anaheim Convention Center

VIBE: So this area is all about Disneyland and conventions. It’s busy, active, and touristy. But a ton of business happens in the area. Fast food abounds, and while there are good meals to be had, you need to look past the masses seeking quick meals while visiting the Magic Kingdom.

STAY HERE FOR: A decent hotel, walking distance to the hotel and theme park. Honestly, flip a coin between this and Hyatt across the street. Both are right up the street from the Convention Center. The Marriott gets the nod for dealing with crowds better. Able to house meetings, promo suites, seminars, etc. Great hotels are hard to find nearby, so settle for really good instead. This is a “go to” for many local business people staying down there for a day or two.

ALSO NEARBY: If Marriott is full, go to the Hilton across the street. Or, pretty much every hotel and motel chain ever imagined.

Web: marriott.com/hotels/travel/laxah-anaheim-marriott

Marriott Marquis San Diego

AREA: This is another city area you wouldn’t be caught dead in 25 years ago, but is now the hub of downtown. Waterfront walk, restaurants, shopping, and entertainment all close by.

VIBE: Downtown San Diego is now a very cool and hip zone. Lots to do, lots of places to have drinks, hangout, and hop around to when between meetings or events. Cars are not necessary, with tons nearby within walking (or Uber) distance.

STAY HERE FOR: If you need to be downtown, near the city center, Coronado, and airport. Also near Balboa Park, and freeway close if you’re heading north or east.

ALSO NEARBY: Manchester Grand Hyatt, Hotel Del Coronado, or the Patani or Lodge if you want to stay a little north in Torrey Pines.

Web: marriott.com/hotels/travel/sandt-marriott-marquis-san-diego-marina •

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Why video? To some, that may seem like a dumb question, but’s not. In some professional circles, video is what used car salesmen do. It’s what schlocky ambulance chasers use. And it’s what millennials use, not professionals.

According to MWP Digital Media, 55% of people watch videos online everyday.

According to Tubular Insights, 54% of senior executives share work related videos with colleagues weekly.

And according to Wistia, people spend on average 2.6X more time on pages with video than without it.

So, Mr. DeMille, we’re ready for our closeup!

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The are people in companies that feel like outsiders and because of such, their production and participation is not what it should be. Stephen Frueh calls these employees “orphans.” Workplace negativity is an issue many employers face. It leads to decreased creativity, communication, teamwork and motivation. So indentifying what types of negative employees an organization has is important so that business owners and managers can help them achieve goals effectively. Read more about this in Stephen’s article, “Eliminating Negativity In The Workplace.”

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When you have a conversation with Yi Sun Kim, you quickly get the idea of what she is truly passionate about: her family, her pro-bono work, helping people, and the law. People who don’t know her would be mistaken to think she is a shy, demure, easily-swayed attorney that just sits at her desk pushing transactions and settling cases. Once you know her, she is anything but. She is outspoken, has a wicked sense of humor, works extremely hard at maintaining her relationships with friends, colleagues and family, and has just made partner at one of the San Fernando Valley’s premier law firms, Greenberg & Bass. She specializes in bankruptcy, business litigation, business formations and transactions.

In case her law practice is not keeping her busy enough, she volunteers at the Self Help Desk at the San Fernando Valley Bankruptcy Court. She helps individuals who need to file Chapter 7 by giving them free assistance on what the procedure is like and how to fill out their paperwork. This particular Self Help Desk is coordinated by Neighborhood Legal Services of Los Angeles. In 2015, she was the recipient of Public Counsel’s prestigious Lasarow Award for this pro bono service.

Her current involvement as Secretary on the Board of Directors for the San Fernando Valley Bar Association has her on track for what could be the first Asian American President of the SFVBA.

On the eve of her partnership celebration at the firm, we asked her some questions about her path to becoming partner.

You got out of law school just at the beginning of the great recession. Did this have any impact on your choosing bankruptcy as a primary practice area?

Absolutely. While I was awaiting my bar results, Greenberg & Bass hired me as a law clerk to assist with a new, large case in the litigation department. It required reviewing something like 50 boxes of documents, so it initially took up all of my time. Then the economy turned so quickly that the firm’s existing robust bankruptcy department suddenly needed even more assistance. Although I continued to work on business litigation matters, I spent an increasing amount of time focusing on bankruptcy matters, both from the debtor and creditor perspectives. Although the firm handled many business related filings, it was the individual or personal bankruptcy cases that really pulled me in. Helping people go through such a scary process, and seeing how relieved they are afterwards knowing they can move forward with a fresh start for themselves and their families, made me feel like I was actually doing something worthwhile. Therefore, although it started out by necessity, I found that I really enjoyed bankruptcy law and proactively inserted myself into more bankruptcy cases as they came in.

You have been recognized as a Rising Star by several organizations and publications. What do you attribute your success?

The number of people who have helped me and continue to mentor and support me. My family has been my biggest inspiration when it comes to hard work and integrity, which keeps me on the right path. And since Day One, fellow partners James Felton and David Adelman along with everyone at Greenberg & Bass, staff and attorneys, have taught, mentored and pushed me. Law school taught me about the written laws and procedures, but G&B is where I was trained on the practice of law, as well as how to communicate with people. They are also generous when it comes to highlighting me and my practice, making sure that I am seen, so much so that it is hard for people not to notice.

How are the bankruptcy cases you deal with today different from those during the worst of the recession years?

The bulk of the bankruptcy cases I handled during the recession was, understandably, related to real estate: Individuals who could not pay their mortgage, investors whose collateral rapidly depreciated, or vendors in related industries who suddenly lost their client base. There are significantly fewer bankruptcy filings today. The personal filings are usually persons who have experienced an unfortunate change in circumstances, such as a sudden injury or illness resulting in loss of employment and substantial medical bills. The trend in business filings is with retail stores, especially in the apparel industry.

You do business litigation, primarily in the areas of disputes arising from bankruptcy actions. What are some of the typical cases like that go to litigation in this area?

When an individual files for bankruptcy relief, his or her intention in doing so is to eliminate their liability or obligation to pay their existing debts (i.e. have their debts “discharged”). Not all debts can be discharged, and the individual will remain liable to pay those debts even after the bankruptcy case is completed. For example, if the debt was incurred by fraud (e.g. knowingly providing a false financial statement to obtain a loan), then the creditor can file a litigation case within the bankruptcy case to obtain judgment saying the debt cannot be discharged. Therefore, many of the bankruptcy litigation cases I have handled center on fraud.

In addition, if the debtor transfers money or property to a third party just before the debtor filed the bankruptcy case, the debtor or trustee may try to get that money or property back from the third party. In some circumstances, the trustee can lawfully unwind those transfers of money or property by filing a litigation action in the bankruptcy case.

You also work at the opposite end of the business spectrum from bankruptcy. You work on formations and startups. What words of advice do you have for today’s startup companies?

Today there are numerous lenders and investors who are willing to help fund exciting new ventures, especially in the technology field. However, having seen the downturn of the economy before, I would caution against being too overzealous with borrowing and to pay special attention to the penalties or personal exposure that can result if the business proves unsuccessful. One should always have an attorney draft or review an agreement before it is signed—even if (or actually, especially if) the agreement or business venture is amongst friends. There are many deficiencies in the form agreements that are floating around online. If the agreement is not complete, then formerly friendly business parties can face protracted and expensive litigation fighting over what the parties intended the contract to mean or say. If a contract is complete, then the parties cannot dispute what is written there and they can come to a quicker, less costly resolution. And even if a person is handed a well written agreement by a lender or investor, he or she should have an attorney review it since it may have provisions that put the ­person or his or her personal assets at more risk than the person realizes.

As someone who has risen quickly in the legal ranks, now as a partner of your firm and a trustee of the Bar Association, what advice do you have law school students and young attorneys just beginning their careers?

Generally I find that in your first couple of years, you make mistakes or take a long time trying to figure out what you are even doing. As frustrating as it may be, you remind yourself that you are a brand new attorney so it is expected. But in your third year, and forever after, you will continue to make mistakes or face issues or fact patterns that you do not know how to resolve. You no longer have the “excuse” that you are brand new, and it can be a humbling and stressful experience. You have to remind yourself that it’s okay, you’re going to make mistakes or come across challenging issues throughout your career. What makes you a good lawyer is knowing what to do next—how to fix the problem, or what resources to access to get the solution. You’re not meant to be perfect, let alone a walking encyclopedia. You’re expected to be resourceful and a problem solver.

I would encourage new lawyers to be social and open minded. Meet as many lawyers as they can in different fields. For years, I had no idea how many types of law or practices were available, or that each firm has its own unique culture and way of functioning. You may discover a field that you can be passionate about, or a type of firm that is compatible with your working style and particular skills. And even if you are already exactly where you want to be, you can find great mentors who will help you grow that practice or adjust as you progress. The San Fernando Valley Bar Association offers a number of opportunities for new lawyers, including sections that highlight different areas of law, networking and social activities with attorneys of various backgrounds and expertise, and community outreach programs where you can test out your skills while helping people in the community. •

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Knowing that you want to sell is easy. You decide that. Knowing when to sell, well now that’s a bit tougher. Will the market go up, or down? Is your business packaged properly for sale? Can you demonstrate real value and cash flow?
This all brings us back to the core question, is now the time to sell?

What You Need To Know Before You Sell Your Business

Today’s business buyers are much more sophisticated. There is a lot of information out there (internet, books, magazines) that can be good or bad advice on how to buy a business. What is important to understand is that buyers are looking for stable, quality businesses that can demonstrate the success of the business will continue. Buyers put the most weight on “cash flow.” This is also known as Seller’s Discretionary Earnings (SDE) or adjusted net income. It is crucial that cash flow is calculated correctly and that the process of how cash flow was determined can be supported by documentation. Most sellers focus on the multiple, which is important. However, I pose the question, “A multiple of what?” If the historical cash flow is not calculated correctly, then the value may be under estimated. Buyers need to feel 100% comfortable with the historical cash flow figures or trends since this is what will determine what is available to cover debt service, salary and expansion or growth.

The multiple of cash flow used is a function of many things. There are more than 15 characteristics that affect the multiple. Some of these increase the multiple and some of them can decrease the multiple. It is the multiple that takes the good, the bad and the ugly into consideration. Some of the factors that affect the multiple are consistent historical cash flow, type of industry, years in business, the condition of the facility and the furniture, fixtures and equipment (FF&E), key employees in place, terms of the lease, the type of financing available plus many other factors. An experienced Certified Business Broker can discuss this further and assist in establishing the correct cash flow and multiple for your business.

Pricing Your Business For Activity

Pricing a business is part science and part art. It is no secret that sellers aim high and typically overprice their business. What sellers underestimate is when a buyer is looking at multiple businesses for sale and he or she sees that the multiple is out of the normal range, the buyer will then assume the seller is unrealistic and will most likely pass. This means you may have lost an excellent, qualified buyer that would have been interested if the business was priced correctly. Pricing your business should be taken seriously and be treated in a professional manner that can be supported, otherwise everyone’s time is wasted.

It pays to be realistic. Many sellers assume that the amount of money they need to retire or need for their next venture is somehow related to what their business is worth. That is wishful thinking and obviously not how the value of a business is determined. Studies show that there is usually a 10–15% difference between what a seller wants and what the market will bear. A Certified Business Broker has considerably expertise when it comes time to calculate a reasonable asking price for a business. They know that it is essential that they come up with a price that is fair. As a result, a Certified Business Broker will take many diverse issues into consideration.

Being Prepared Pays Dividends Down The Road

The time spent at the beginning of the process of selling a business can pay big dividends down the road. It is important to prepare your business for sale. What does that mean? Don’t be reactive—get your house in order before you put the business up for sale! Spend time to review your overall business. Review your processes, your policies and procedures, company financial statements/tax returns, inventory, accounts receivables and payables, review the condition of your equipment, the condition of your facility, review your lease agreement, your employee records and compensation, etc. Think of what you would want to see if you were purchasing a business and act accordingly. The more you can address upfront the better position you will be in when a buyer is at the table. One common statement I hear from business sellers is how they underestimated the time needed and overall what was involved with the sale of their business. On average, it can take 6–12 months to sell a business. Selling a business is a group effort that will involve you, key executives, and your financial and legal advisors all working in a coordinated manner with your Business Broker. Beginning with the gathering of information, through the transaction closing, you need input about all aspects of the sale. Being prepared up front will help this process go smother and more efficient for everyone involved.

In conclusion, selling a business is a time consuming and complex process. It involves knowledge and expertise in a wide range of fields and topics. It is important to understand the dynamics and the many factors that are involved in the sale or purchase of a business. No two businesses or deals are alike. Working with an experienced Certified Business Broker will help in dramatically increasing the probability of selling your business. An experienced Certified Business Broker will assist the business owner in the proper “confidential” way to prepare the business for sale. In addition, a Certified Business Broker will prepare a financial analysis and opinion of value, professionally package the business, put a professional confidential marketing plan in place to reach a wide audience, negotiate and structure a fair deal for all involved, prepare and manage the due diligence process, prepare certain contracts, handle the transfer or creation of a new lease, assist in financing the transaction and manage the entire process from beginning to end to assure confidentiality and so that the seller can focus on successfully running their business. •

CASE IN POINT:

The Importance Of A Lease Agreement And Timing

A husband and wife owned and operated a highly successful 27-year-old garment manufacturing and wholesale distribution business. The couple discussed several times the possibility of retiring and selling the business since the business was doing well. As the saying goes, time is your enemy. Unfortunately, the couple had personal problems and eventually filed for divorce. In addition, shortly after filing for divorce, the wife was diagnosed with cancer. The business owners were fortunate that they had strong, long terms employees who stepped up and ran the business effectively. The husband checked out and left the wife and employees to run the company. The wife was now dealing with running the business, going through a divorce and cancer treatment. The company was stable for the next couple of years. The ex-husband became difficult and uncooperative with the divorce. The ex-wife wanted to sell the business and went to court to receive a court order for the sale of the business. The courts agreed that this was in the best interest of both parties and ordered the business be sold through my firm.

After several meetings, we moved forward to represent the parties in the sale of the business. As we normally do in the course of our work, we analyzed the lease agreement that was in place. I mentioned to the owners that the lease agreement is going to be an important factor in this transaction. Since this was a divorce situation, the owners would not agree to seller finance. I informed the sellers that since the company tax returns were strong, I felt comfortable that the business would qualify for SBA finance once we had a strong buyer in place. I pointed out that since a SBA loan is typically done on a ten year term and that their facility was crucial to the success of the business, the SBA lender would require the total term, including options for the lease agreement be no less than ten years. The sellers were adamant that I not speak with the landlord until we had a buyer and that there should be no issues with the lease. I explained to them that this was risky and that we should contact the landlord to make sure we would not have any issues. They were insistent and we moved forward.

We spent the next month preparing the business and our package. We then put our marketing plan in place and started speaking with prospective buyers. We had numerous meetings over the next several months until we met with a charming husband and wife team that expressed enough interest for us to move forward. The husband and wife team were both looking to leave corporate America to purchase their own business. They were sophisticated and knowledgeable about the process of buying a business. We had several in person meetings and early on they asked about the lease for the facility. The owner commented that they were currently on a month to month lease and they did not want to contact the landlord until we were in escrow. The buyer expressed concerned since this was an important factor in being able to determine a price and obtain SBA finance. I told the seller that my SBA lender will need to make sure we would not have any issues with the lease and that I should contact him sooner rather than later. If the lease is going to be an issue, then the buyer will need to factor in the cost to relocate the business into the offer and the SBA lender will also need to factor this in.

Once again, the seller was insistent that we should wait until we were in escrow. The conversation continued and eventually the buyer submitted an offer that was accepted.

The buyer started their due diligence and worked with the SBA lender on providing what they needed. The question on the lease came up several times and we had no choice but to respected the owners request to wait until we open escrow. The buyer approved the books and records, we moved to an asset purchase agreement and opened escrow almost a month later. The seller then gave me the thumbs up to contact the landlord. I contacted the landlord and to my surprise, the landlord said that he was doing the owners a favor by not increasing the rent and pushing them to sign a new lease. He informed me that this would not apply to a buyer or new owner. The landlord was clear that he would want to bring the monthly rent up to market rent and that he would only consider a five year term. I explained to the landlord and the owners that this would be an issue. The buyer will now be faced with higher rent (an increase of $1,000/month) and this would decrease the cash flow and therefore decrease the value of the business. Furthermore, the SBA lender would not consider financing unless the terms of the lease (including the options) were the same as the term of the loan, 10 years.

To add insult to injury, the landlord said he was going out of the country, on a 14-day cruise and unreachable. We were now about 8 weeks into this transaction from the first time we met with this buyer. It took another 3 weeks to wait for the landlord to return, work out a 10 year lease (5 + 5 year option) and we unfortunately had to renegotiate the purchase price due to the increase in monthly rent. The buyers were extremely frustrated but in the end, we received a new lease, obtain the SBA financing and closed the transaction. The landlord asked why we did not contact him sooner and I replied the sellers were insistent that I not reach out to you until a buyer was in place because they were fearful of what you would say. His response was, “This could have gone a lot smoother if they would have just contacted me upfront.”

Of course I agreed!—M.C.

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When I meet someone who is very successful and busy making money for someone else, I ask, “Have you ever thought about running your own business?”

More often than not, I hear many of the excuses that Jeff Haden brings up in his post on Inc.com entitled, “15 Worst Excuses Not to Be an Entrepreneur.”

These are some of the classics:

• I’m too scared.
• I don’t have the right connections.
• I’m too late.
• I don’t have the money.
• I can’t take that risk.

and my personal favorite:

• It’s too hard.

Having run my own business for more than 16 years, I have had many times of it being hard. Sure, I’ve had sleepless nights, but when I look at the quality of my life, I wouldn’t trade it for the world. As Haden says, I’m living my life on my own terms. Immense joy and freedom comes from that. You should try it. •

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The Individual Buyer

Third In A Series

Most owners of small- to mid-sized businesses gravitate toward this buyer when it comes time to sell. Many of these buyers are mature (aged 40 to 60) and have been well-seasoned in the corporate marketplace. Owning a business is a dream, and one many of them can well afford. The key to approaching this kind of buyer is to find out what it is they are really looking for.

The buyer who needs to replace a job can be an excellent prospect. Although owning a business is more than a job and the risks involved can frighten them, this kind of buyer does have the “hunger”– and the need. A further advantage is that this category of buyer comes with fewer “strings” and complications than many of the other types. •

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Facebook just went public. Initial valuation estimates were between $90-120 billion. In some people’s minds, this company was worth more than McDonald’s, Bank of America, Kraft Foods and/or CitiGroup before a single share of stock was sold. Really? Yet, look at the hit the stock took on its second day of trading. Where is its real value?

Facebook does have more than 900 million sets of eyeballs that make up its user base. There’s definitely value in that. But how much value? Currently, it’s generating a couple bucks of revenue per user annually. That’s not much, and it’s far below the industry norm. Google generates nearly 8 times that in per-user revenue. What does it mean when General Motors just pulled its plug on advertising on Facebook since it was not helping them sell cars? Certainly nothing good.

Other than users, what are the assets? McDonald’s has recipes, stores, franchise revenue streams, real estate, trademarks and subsidiaries generating tons of revenue. Bank of America has loans, fees, credit cards, mortgages and other revenue sources.

I’m reminded of AOL, which if you recall, was sold in 2000. It was valued somewhere north of $150 billion, only to become one of the largest value declines in history. It’s currently estimated to be valued at around $5 billion or less.

What is a company worth? Or a product? Or a piece or art? Well, the simple answer is, “What someone will pay for it.”

Here at Southern California Professional, it’s fun to follow the rare big business news such as the Facebook IPO, but we live and breathe the realities of everyday business. We’re more concerned with your business, your clients and your products and services.

Maybe you’re an M&A attorney or an accountant helping a client buy a business. Maybe you’re a business owner who someday wants to sell your business, but your biggest concern is making it more profitable now. You live in a more realistic world of day-to-day business.

You’ve come to the right place. We’ve put together another issue full of business, legal and financial insight to help you do better at what you do. The information in this issue will truly help you find and increase the value of your business. So sit back and enjoy another great issue of Southern California Professional Magazine! •

Jerri Hemsworth
Publisher

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Every business owner wants the maximum value when he or she sells a business. Not many succeed. What prevents business owners from generating higher value? By looking at several critical factors, we can see what creates higher (or lower) value in a business.

The problem stems from the fact that most sellers do not fully comprehend what drives value for buyers of a particular business. More importantly, they do not usually consider or know the best “windows of opportunity” for selling. Many sellers today are fixated on terms and conditions that will never be accepted, rather than trying to understand the nuances of legitimate compromise.

Sellers today are also usually not prepared to fully support the mercurial adjustments to EBITDA (Earnings before interest, taxes, depreciation and amortization, or the cash-flow basis to which a pricing multiple is applied). Private firms typically co-mingle some personal and business expenses. The true reflection of EBITDA would include adding back “personal” items not readily apparent in the financials. These items can have a dramatic impact on the true financial picture of a company.

Finding Value Drivers

So, how does a seller prepare for and execute the appropriate deal? The first step is to assemble competent and trusted advisors. Using a well-qualified valuation firm and investment banker (IB) are often necessary. Together, they can determine the exposures and carry-over liabilities most acceptable to the seller, as well as understand and explain the value drivers to the buyer(s).

A value driver is one aspect of a business that is crucial to overall value. Somewhat in order of importance are the following:

1. Management: A well-run firm has experience and expertise at several levels. In addition to the visionaries and top-level leaders, mid-level executives are key to effective, daily operations and execution of business strategy. If one or more persons in senior management does not remain after the sale, the buyer typically wants the next layer of leadership to fill that void. The key aspect of the post-sale transition is the meshing of cultures. Nothing harms or destroys an organization faster than in-fighting or politics and a culture of uncertainty and negativity.
2. Cash Flow: A strong gross margin (GM) is a key ingredient of a high-value company. Has the seller improved the GM in the last few years? Solid and flat is fine for established sellers; but nicely growing firms should find methods to improve gross margins. Is the seller affected by seasonality of sales? For some buyers, this is a detriment to business value. Adequate working capital is another key aspect, as is the growing (or declining) need for capital expenditures. Solid growth in cash flow or EBITDA (and not peaks and valleys) is probably the most important factor among value drivers, after the breadth and depth of management.
3. Market Share: The position in the industry (ranking in terms of revenue) or industry niche is a critical aspect of value. In addition, how strong is that position? Is the firm strongly affixed at ­Number 2, for example, or is it on the decline? The intensity of current competition could detract from one’s value, as well as the ease of entry for fast-charging newer firms.

A More Complete Picture

While the management of a company, its cash flow, and its market share are critical value drivers, there are more. So to paint a more complete and accurate picture of the value of a business, let’s look further at some additional value drivers and factors.

Product/Service Uniqueness: If a seller has very distinct products or services, the company should ensure that the intellectual property (IP) is protected. That protection should include all locations where revenues are generated (U.S. states and foreign countries). IP protection encompasses many facts—from patent applications to copyrights; from brand names to goodwill; from proprietary technology (not patented) to R&D; and from clear ownership positions to restricting employee access to or theft of IP.

Well-documented and secure IP allows for and enhances the seller’s increased value. It may preclude easy entry to a market, as well as lengthen the time it takes for a competitor to capture profitable market share. The longer the length of time a company has been in business is just another feather in the hat of the selling candidate.

Issues of Size: Larger companies usually have more customers and are better able to lose a few than a smaller competitor. For example, companies larger than $25 million in revenues command higher multiples than those below this level. Again, without significant customer concentration, larger firms are usually more stable and less risky.

Diversification: Diversity of products or services is usually a plus, in that product life cycles overlap and revenue growth can be sustained. Other factors that drive or detract from value are the size and prior years’ volatility in the industry, as well as long-term prospects and viability. Buyers always want more stable, predictable outcomes, with improving metrics for per-customer revenues, costs and profits.

Systems and Pro­­cedures: Buyers do not expect the ideal systems and procedures (S&P) will be in place at the seller. ­However, without solid and viable S&P, there is an added cost to improve them, and probably a loss in value. More important to the buyer is that the lack of good S&P is a red flag for other potential problems. Possible questions a buyer will raise include:

The list goes on from here, but you get the idea.

Selling In Today’s Environment

Several factors bode well for selling a business today. The sale cycle has elongated since 2008, likely adding three months to the 6- to 12- month norm. However, there are these very positive reasons for deciding to sell your business now:

While this is not exactly the perfect M&A storm, it is likely the economic environment we have seen in the past four years. Business owners who have been waiting on the sidelines can be more confident of sale intentions, but still have to take adequate steps to building a strong advisory team, and building strong value in their companies.

By understanding what drives value, particularly from the buyer’s perspective, business owners can seek to maximize business value and thereby maximize the sale potential. •

CASE IN POINT:

Turning Value Drivers Into A Successful Sale

The owners of a company in business for more than 40 years recently made the decision to begin positioning the company for sale. They knew that they would need a year or so to prepare the company for sale. The powers that be began the process of organizing and improving internal affairs to maximize the sale price.

The company provided specialized, high-quality products and services for a sector within the construction/remodeling industry. Products included many types of sealants for retaining inside temperatures; heat/cold; fire retardation; driveways and pavements; and general caulking. In addition, the company manufactured specialty and ornate doors and windows, framing products, industrial ramps, and mechanized inventory access systems.

The company enjoyed steady growth in revenues and profits the last five years, and integrated several acquisitions into their national firm. The Mentor Group was first engaged by the company to help identify and analyze the company’s value drivers and understand their impact on a sale. After thorough research in the company’s financial aspects as well as their industry standards, we looked at management and operations. ­We provided suggestions to improve operations and consolidate the diverse but related business lines. We also counseled them to put in place the appropriate senior- and middle-level management to make potential buyers more confident of a purchase.

Once our initial business and IP valuation was complete, the company hired us to initiate the sale process and execute a sale of the company. Our first task was to raise $20 million of senior debt to retire the unfunded ESOP repurchase liability and improve working capital. From there, we were then able locate potential buyers, negotiate terms of the transaction, and complete the successful sale of the business This was accomplished largely based upon the clear presentation of the value drivers and EBITDA add backs.—D.B.

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Whether you are just opening a new business, or are already established and need to do some budget-crunching, there are several options to consider and decisions to make.

As a business owner who is constantly juggling and ensuring the right business decisions are made, your biggest goal is to have your products or services benefit clients and customers in a way that differentiates your company from your competitors.

These days, a new company is typically a one- or two-person operation that attempts to effectively cover all aspects of running a business. More often than not, this is the first step toward failure. Many of us know firsthand that a bad customer experience is extremely hard to erase. Delays in customer order deliveries, customer service phones that go unanswered, a website that does not represent a new company appropriately are all instances that make a bad, yet crucial, first impression. A great customer experience sets your new business apart from other companies.

An established company can face the same struggles. A large time-sensitive project, employee turnover, and/or extremely high overhead expenses will all have an impact on the work that must get done and the deadlines met. On top of all that, the revenues are not absorbed in the day-to-day operations. What needs to be done for both new and established companies is to provide a benefit to your customers that is not offered by your competitors.

Outsourcing many of your day-to-day operational functions can help resolve these issues.

Outsourcing Your Call Center

The support of an outsourced call center can provide consistent and continued customer service, no matter what size your company is. This allows you to devote your time and efforts to marketing and building your business. You can relax knowing that customers will experience prompt and professional service. The responsibility of hiring, educating and maintaining a professional customer service department in your company is eliminated; it’s now the responsibility of the outsourced call center management. Think about the expenses that are eliminated when contracting such a service:

No staffing and management wages. Salaries are one of the largest expenses incurred by business owners. This includes the time needed to interview, hire, educate and even replace employees. Employee turnover and absences result in this being a continuous cycle and expense.

No employee benefit expenses. The cost of employee benefits equals an average of 29% expense over and above the actual wages paid.

No office space, telephone, or systems overhead expenses. To effectively manage customer calls, a system is required that can direct and manage large volumes of calls.

No excessive customer wait times during high-volume call periods. ­Centers have the flexibility to increase staffing during peaks in call volumes much easier than you adding staff in your business.

No lost calls during emergency ­situations. An effective outsourced call center maintains business continuation during emergency situations.

Outsourcing Product Fulfillment

Another valuable outsourcing option is product fulfillment. Whether your business is brick and mortar or an online business, your product orders MUST be shipped in a timely manner in order to provide a benefit to your customer. Once more, think about the expenses that are eliminated or reduced when contracting such a service:

Reduced warehouse expense for housing your product. Normally the charge for floor space in an outsourced warehouse is far less expensive than you would pay to lease or purchase your own warehouse. This is a result of expenses being shared across all of the outsourced fulfillment clients.

Reduced shipping expenses. An effective outsourced fulfillment center will provide the best options for shipping your product. They can protect against any losses due to damage of lost shipments. The outsourced center is able to order shipping materials in bulk, thus reducing your cost of raw materials and postage.

No mailroom staff wages. You pay for the processing and shipping of orders. When there are no orders, you won’t have employees sitting around on the clock waiting for something to happen.

Reduced or eliminated customer compaints due to unfulfilled orders. A quality fulfillment center normally ships orders on the day they arrive or the next business day. While some fulfillment centers will have an early afternoon cut-off time for processing orders, look for the fulfillment centers that will ship orders up to 4 p.m. PST, so the majority of the orders received are out the door the same day.

There are multiple savings in time, money and stress from outsourcing operational functions. Can you think of good reasons why you should NOT outsource those day-to-day functions that can take you away from your successes? •

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