1. Resell Rights
Resell Rights let you sell a product and keep all of the money. It’s an ideal way to start. Usually you’ll need your own payment system to accept the money and your own webspace to sell it – but that’s very cheap to do these days.
Resell Rights can be free, or cost anywhere up to $1000 and beyond. The free Resell Rights are usually not worth bothering with. You want to sell items that have LIMITED distribution – quite simply because you’ll have less competition!

2. Master Resell Rights
Unfortunately these are bad news. With the Master Rights you can pass on Resell Rights yourself. This means one thing – thousands of competitors in a very short time.

3. Reprint Rights
These are sometimes confused with Resell Rights but they are usually used to describe hard-copy material. For example, printed books, tape sets, CD’s or Videos.

You usually have to handle the duplication yourself but sometimes the company will provide copies, and even ship them for you, for a small fee.
These products usually cost more to acquire the rights but can be very profitable. As the old saying goes, it’s easier to sell 10 copies at $1000 each than it is to sell 1000 at $10.

4. Affiliate Programs
When you enter into an affiliate agreement you are sharing the cost and effort of promoting a product. You will take a percentage of the sales in exchange, so you want at least 50% for it to be worth your while.
With an affiliate program you can usually join at no cost, but will make less money – and have more competitors!
One other advantage, the company provides the site and the collection of payments. All you do is promote and cash your check.

5. Drop Shipping
This makes the traditional form of selling easier for the information age. Profit = Cost – Selling Price , and with a Drop Shipper you merely take the money from your customer and tell the shipper to send them the product. You then pay the shipper their price. For example, you can buy a Widescreen TV for $1299 but you are selling it for $1499. You make $200 per sale but never get involved in the distribution at all.
This method is used extensively on eBay and in online shopping malls.

6. Joint Ventures
These blur the line between the other processors. Basically, you connect those who make products with those who sell and promote them. You can acquire resell rights, or create your own product, or be part of an affiliate network. You then contact possible sellers, for example Ezine Owners, who may be interested in selling the product for a cut of the profit.
This way you can connect BIG sellers with BIG products and slice of some of the profit for yourself!

7. Branding Rights
These can be combined with Resell Rights but sometimes are offered as an extra. With Branding Rights you can make some or all of the links within a product possible money-spinners for yourself.

For example, you can take a book on copywriting and give it away, or sell it. But within this book are other links to further services, all that could make extra back-end sales for you.

As you can see there are plenty of ways to make money WITHOUT the expense of time of building your own product!
by Stuart Reid

http://www.netpreneurnow.com

About The Author

Stuart Reid is an ezine publisher and webmaster. Try the new “Any Brander” Software and brand ANY product, old or new, with your own link – even if you didn’t create it!

http://v3k.net/anybrander

The Hollywood portrayal of Mergers and Acquisitions on Wall Street is that the money guys come in and slash the staff, do their financial gymnastics, show impressive short term profits, and then flip the company to a new buyer and pocket millions on the backs of the loyal displaced employees. Does this really happen? Unfortunately is does happen, but the circumstances are generally the result of industries becoming bloated with legacy costs and wages and benefits at a level not competitive with the world economy. We have seen it with the steel industry, airlines, and now the auto industry.

However, for the family business, the backdrop is much different. The organizations are generally very lean. The employees are not constrained in their job description by union rules. They do what is necessary to get the job done. They often can perform multiple jobs and get plugged in where needed. Every employee is vital to the company’s performance.

Business buyers are generally pretty smart folks. If they aren’t, pretty soon they will find themselves in trouble from poor acquisition choices. They recognize the value that the employees bring to the table. These employees are keepers of the customer relationships, they are the well of knowledge about the company’s products and competitive advantage, they know all the gotcha’s to avoid. They are the new buyer’s path to business continuity post acquisition and they are valued.

Business buyers look to mitigate risk by keeping these employees in place and will attempt to access the likelihood of key employees staying on post acquisition. We have heard from business buyers that if they feel like key employee A and key employee B leave, then we are not interested in the acquisition. As business sellers it is important to recognize this and to take necessary steps in advance of your sale to help the key employees stay.

At a point where the sale is ready to close, it is important to make sure employees have some reassurances that the ownership change will improve their situation. Often times the benefit package from the large company buyer is superior to the current package. Buyers will often incorporate a salary increase after the merger or acquisition. Owners may elect to share some of their gains with key loyal employees through a stay on bonus or some lump sum payment recognizing the years of loyal service.

The finance and administrative area is the one exception to this rule. These functions are often a total duplication of those functions in the buying company and these employees are most vulnerable to a cut. These employees have contributed greatly to the company and have been loyal. The seller, unfortunately, can not dictate to the buyer that these employees have to be retained, so he must make accommodations on his own. He should attempt to get an understanding from the buyer, their plans for these employees and arrive at a joint proactive communication plan with the buyer. If the news is bad for the employee, the seller, at the very least should give the employee as much advanced notice as possible. The seller will often implement some severance package, if one was not already in place to give the displaced employee a chance to seek a new opportunity without financial hardship.

Most of the employees will be vital to the post acquisition success of the new company. If they interface with customers and/or suppliers they will be needed. If they are in possession of key knowledge about the company, products, industry, technology, etc., they will be valued and will have a solid job post sale.

About the Author:
Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, representing owners in the sale of privately held businesses. We provide Wall Street style investment banking services to lower mid market companies at a size appropriate fee structure.

The story does however raise an interesting point about mergers and acquisitions and that is that they often take place for the right reasons, not just as some people believe, purely to get rid of competition and monopolise a particular market.

Mergers and acquisitions have a colourful past to say the least. By the man in the street they are seen as either the big boys of the business world bullying their way to becoming bigger than everyone else or just, plain and simple, the pursuit of excessive wealth. Sony’s merger with Columbia and Tri-Star Pictures is one such incident that gives the process a bad name. Eventually Sony wrote off $2.7m to sort out all the legal problems.

But for every case where it appears vast sums of money have been wasted or lost there is a case where an acquisition actually works. The partnership between BMW and Rolls Royce was beneficial to both parties and AOL’s acquisition of Time Warner has mean that in the long term Time Warner was able to weather some particularly bad storms without disappearing completely.

So what does it all mean? What is involved?

There are subtle differences in mergers and acquisitions. An acquisition, which is also known as a takeover, takes place when one company is bought by another company. There are two types of acquisition and it is the confusion between the two that often results in the bad press that the process is often given.

A hostile takeover takes place when a company does not want to be taken over. It’s this type of merger that people seem to remember as it’s often the type of story that makes the papers and receives the most coverage in the media. Hostile takeovers occur for various reasons but money and competition are usually at the heart of the decision. A larger company may feel threatened by the potential of a smaller company to take a share of a particular market. In such a case the larger company would be seen as using its power to intimidate and unfairly control the market.

A friendly takeover involves more of a process of negotiations and most of the time is beneficial to both parties. A smaller company might be struggling but have valuable resources and talent that could be utilized elsewhere. In such a case a large company can help out by buying the smaller company. The process is often also started by the smaller company. Very often they have reached a point where they can go no further with the tools at their disposal and need help to expand and move forward. Sometimes the only way to get this help is through the process of being acquired by a bigger entity in the same field of business.

A merger differs slightly to an acquisition in that it is the combination of two or more companies to form a completely new company. With an acquisition the companies involved either keep their names or disappear. In a merger the parties involved emerge under a new banner with a new identity and name. Although mergers have a better reputation than acquisitions there is still room for abuse and they are looked at closely by the authorities to determine what impact they will have on a market.

So on the face of it the CH4 and FIVE merger would appear to be an interesting proposition; one helping out the other in light of difficult times for TV companies. However I’m sure it’ll be closely looked at before any decision is made. Only time will tell.

We were recently engaged to sell a medical products company. In our process we will identify 50 to 150 companies that would be likely buyers based on similar products, services or markets served. When those targets are approved by our seller client, we get on the phone and contact the buying prospect to see if we can generate some interest and get confidentiality agreements executed.

We were able to identify several interested buyers and were at the stage where they were submitting their qualified Letters of Intent. The LOI basically says that if we complete our due diligence and we find that everything is as you earlier presented it, we will pay you $XXX under these terms and conditions.

We got one offer from a perfect fit buyer and we determined that it was well short of our seller’s expectations and well below what our view of the price for similar companies in this market niche. We called this buyer to discuss his offer.

When we told him our client’s range of expectations, he said that it was way too expensive. We asked him what basis he had for that conclusion, he replied that he was looking to pay 5 X Cash Flow for a business. We told him that recent transactions indicated that similar companies were selling for 2.5 times revenues and not a price based on a cash flow model.

Let’s take this a little further with some ball park calculations based on our transaction. For example, if our client had $5 million in revenue and a 20% cash flow margin, his cash flow is $1 million and according to this buyer, his company should sell for 5 X $1 million or $5 million. The market view, however, is that this company is worth $5 million X 2.5 or $12.5 million. When we dug a little deeper into our buyer’s offer we found out that he currently was in the process of buying another similar company.

When we inquired for more detail we found that this other company was a long time competitor, the owner was getting ready to retire and approached this buyer to see if he would be interested in acquiring them. We asked the buyer if the seller was represented by an investment banker, business broker or merger and acquisition advisor. He said that the seller was not. I asked him if there were any other buyers involved in the process. He said that as far as he knew, he was the only buyer. I asked him how the selling price was determined. The buyer said that he set the price based on, you guessed it, 5 X cash flow.

Let’s see what this seller’s approach is going to cost him. If we assume that he was very similar in size and cash flow to our client. A competitive market price in a formal merger and acquisition process would be $12.5 million. Our buyer will pay him only $5 million and the seller will close thinking he got a fair deal without any market validation. This is a $7.5 million mistake that could have very easily been avoided by hiring a business sales professional that would have invited in multiple buyers and multiple competitive bids.

Well, at least the seller avoided all investment banker fees. This is a sad end to a 25 year history of business excellence. Unfortunately it happens all the time.

The motive to find the value of a business might range from buying/selling business decisions, raising capital through borrowings, planning strategic mergers and acquisition plans etc.

The below article throws light on some of the major issues faced during business valuation and tips on how to deal with such issues.

Issue 1: How to select the right business evaluator?

Ask this simple question “Am I qualified and experienced to evaluate my own business?”

If it is an unchartered territory seek business professionals listed below who usually offers such services:

1.CPAs offer business valuation services. The knowledge gained from handling various accounting, finance and tax work allows an experienced CPA to gain knowledge that is well suited for valuing a business
2.Financial experts/consultants (Non-CPA) can also lend their expertise, but their background and experience needs to be investigated carefully before hiring them.
3.Business Brokers are an obvious choice to value the businesses for sale as they have many years specialization in buying business and selling business which involves business valuation
4.Commercial Real Estate Brokers/Agents are good at appraising real estate, but lack skills and experience to properly value intangible assets like goodwill.

Issue 2: What are the most commonly followed business valuation techniques?

There are many methods to find the value of business but the most popular methods adopted by professional and experienced business brokers are the following:

Letter of Opinion:
The Letter of Opinion is a restricted use valuation intended for small companies with sales less than $250,000. The basis of this valuation is a market comparison with like companies within an industry.

Value Analysis:
The Value Analysis is a discretionary cash flow, since most Main Street businesses are bought and sold on a multiple of annual cash flow.

Formal Business Valuation:
It involves financial analysis, review of the Balance sheet with support documents containing reviews of companies historical and project earnings.

M&A Valuation:
The Mergers and Acquisitions Valuation is a comprehensive business valuation for transactional purposes and is developed in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP).

IRS Revenue Ruling 59-60:
A USPAP governed valuation developed for litigation focusing on US Court Reviews, Cited Court Precedents, and in-depth analysis and research of minority and marketability discounts.

Issue 3: What are the preparatory information and documents required for business valuation?
Following is a checklist of documents and information that professional business advisors ask prior business valuation:

Financial Statements:
These includes balance sheets, income statements, statement of changes in financial position, stockholder’s equity or partner’s capital holdings statements for last 5 fiscal years, list of subsidiaries, list of equipments, depreciation schedule, aged accounts receivable or payment, prepaid expenses, inventory list, leases (if any), existing contracts with employees, suppliers, franchise agreements, customer agreements, royalty agreements, equipment lease or rentals, loan agreements, labor contract, employee benefit plan, compensation schedule for owners, insurances in force, budgets of projects, if available.

Company Documents:
These includes, articles of incorporation (if any), by-laws, any amendments to either, corporate minutes, partnerships, articles of partnerships (with any amendments) along with list of existing buy/sell agreements, options to purchase stock or partnership interest , or rights of first refusal.

Other Information:
Also keep ready details of company history, changes in ownership and /or bona-fide offers received. Also describe the position as compared to competitors or any other factor making the business unique, relevant marketing literature like brochures, advertisements, list of location where company operates, details in terms of size, and whether it is fully owned or leased. List of states in which the company is licensed to do business, list of current customers, suppliers, major accounts. Resumes of, or list of, key personnel, with age, position, compensation, length of service, education and prior experience. List of memberships with Trade associations or would be eligible for membership. List of any patent, copyright, trademark, and other intangible asset along with correspondence with regulatory agencies for issues related to business.

Issue 4: How is the business valuation undertaken?

Adopting a right business valuation process ensures the sale of business will bring in a better sale price compared to arbitrary valuation of business.

Step 1: The Broker meets with the client to determine what type of valuation is required.
Step 2: During the meeting, the Broker will assist in the completion of the Company Profile information needed for the type of valuation selected.
Step 3: Once the Company Profile has been completed the package of information is mailed, faxed, or emailed to third party Valuation Analyst.
Step 4: The Valuation Analyst will review the documents and begin the valuation.
Step 5: A completed Company Profile is then generated, and all questions that arise are answered.
Step 6: The Analyst will issue a preliminary review of the valuation. It assures that all details have been considered and allows for any adjustments based on new information or further clarifications.
Step 7: Once the review with the business broker has been conducted, the Analyst will finalize, print, and send the final valuation report.
Step 8: The Broker will receive hard copies and an electronic copy (if requested) of the final report. This report is sent to the business seller/owner.

A planned business valuation involves lot of procedures and systematic planning to ensure the right value is found out to help sell business.

Article Source: http://www.ArticleBlast.com

Yet people often get overlooked and they are much more than a detail. Like a recipe provides a chef with a list of ingredients that has already anticipated how the ingredients interact, employee assessments provide managers with a recipe for employees that can be useful intelligence for such times.

The post-merger phase requires adjustments and every angle of the businesses must be inspected. People are not typically excited about the idea of change. Therefore, it is crucial that managers view the post-merger phase as an adjustment period for their employees. Assessments can ease the struggle of the adjustment phase by:

- Identifying employee’s strengths and areas to develop
- Identifying which employees would make an effective team
- Identifying each employees aptitude for change and communication style

When managers can easily identify these elements, they can then cater their management style to the needs of their employees. By communicating to the needs of their employees managers alleviate the potential for reduced productivity.

Assessments can identify employee’s strengths and weaknesses. Just as ingredients rely on other ingredients to taste good, some employees require extra coaching to me more productive. Managers should be willing to coach their employees; the difficulty lies in identifying which employees require coaching. Once employees are assessed, their managers then have the ability to identify where an employee naturally excels, and where an employee requires development.

If you know your employee’s strengths and weaknesses post-merger, you can determine job descriptions, positions, and teams. Mergers are an opportunity to discover the talent that has been available, as well as new talent from another company, and how they can be combined to create an even more productive business.

The next aspect is to identify which employees would make an effective team. You wouldn’t randomly mix two ingredients together in hopes that the end result is edible, and the same idea should be applied when building teams. The concept of being re-grouped can be difficult for employees, but with the help of assessments managers can place people based on their behaviors and personalities in order to make productive and enjoyable teams.

Managers should remember that grouping people based on their similarities is not always the best plan. Just because people are similar does not mean they will be productive on the same team.

The key to building successful teams is to create balance between team members. Assessments identify a person’s natural behavioral tendencies and attitudes. Managers should review each employee’s assessment, and then group the employees based on their results. Each team should have a member that is strong where another member needs development. This will ensure that all of the necessary details have been taken into consideration, and that groupthink will not ruin a team’s efforts.

The post-merger phase can be stressful for employees. Too much change at once can feel overwhelming, which can lower morale and productivity. Assessments will indicate how employees cope with change. Some employees will require more in-depth communication than others, and some will require more coaching in order to successfully transition into their new role. Assessments will reveal the needs of employees, and make it easier for managers to attend to those needs.

Mergers do not have to be as stressful as one might think. Assessments are the recipe for a fortuitous merger. They give managers the tools and understanding necessary to transition employees into new roles, while developing them at the same time. Employee assessments, coaching, and engagement make for a recipe that will result in a thriving business, and will enable managers to create work environments that benefit the employees and the company.

Time:
6 to 12 months

Cost:
$175,000 to $500,000. (The company will be out of pocket at least 50% of this amount prior to completion.

Capital:
Typically raises more capital than other types of transactions.

Problems:
Underwriting may be delayed or canceled. Issue Price may be changed by market conditions or underwriter.

Reverse Merger or Buy an Existing “Public Shell”

Time:
2 weeks to 60 days

Cost:
$150,000 to $400,00

Capital:
Does not raise money but stock is now valued and tradable

Problems:
Potential “skeletons” in acquired shell. Control shareholders of operating company may receive restricted shares.

Advantages:
Typically Reverse Merger or Public Shell Merger is the quickest way to get public. Non-control investors may receive registered or trading shares.

Merge with a Brand New Flex Financial Public Company

Time:
4 to 8 months

Cost:
$75,000 to $150,000

Capital:
May raise money and stock is now valued and tradable

Problems:
None

Advantages:
Public company can be “Custom Designed” to the operating companies specifications. Shareholders of operating company receive registered shares. New corporation so no “SKELETONS” in the company. Financial expertise during the transaction. Market support after the transaction. Automatic shareholder base friendly to the “Small Cap” market.

Preparation for a
Reverse Merger or Public Shell Merger

Locate a Suitable Public Shell – Public shells can often be found by consulting with securities law firms or CPA – Audit firms that deal with public companies.

It is important to start with a clean shell: Due diligence on the public shell cannot be over emphasized, advice from your securities counsel, auditors, and a financial consultant should be utilized. As was mentioned, many shells are created for the express purpose of merging with a private company. These shells have no predecessor entities, and, as a result, little baggage in the way of a business failure or other skeletons in the closets.

Comprehensive Business Plan – Potential investors, public shareholders, auditors, securities counsel, brokers and market makers will want to see a well documented business plan.

Strong Management Team – Public investors demand strong management teams.

Convincing Marketing Plan – Public companies need the ability to show good sales and earning growth.
Product or Service – Public companies should be able to develop strong or dominant position in their business segment.
Financial Audits – SEC qualified audited financial statements for your last two fiscal years.

Experienced Securities Counsel – Your attorney must be qualified to deal with regulatory compliance, and the ongoing reporting requirements of all public companies.

Have Public Company Experience: Your company should have at least one person in senior management that has significant public company experience. Financing consultants such as Flex Financial Group, can often assist management in the complex issues of being a public company and maintaining a good relationship with the financial community. In fact, many actually have a couple of shell corporations and, upon request, can manufacture a clean public shell. A made-to-order shell without the baggage of a business failure in its background can sometimes be the way to go, but there’s often a cost involved. You will most likely end up with the financing consultants as minority shareholders in the new company, holding between 2 percent and 5 percent. However, in almost any reverse merger transaction, the principals of the shell company keep a small equity position in the company going forward. Therefore, this surrender of equity is simply a cost of doing business.

Devise your financing strategy: A reverse merger is an indirect route to raising capital.

Entrepreneurs must first consider how additional capital will be raised after the deal is done. An experienced financial consultant can be very beneficial in this area.

Requirements Necessary to
Close a Reverse Merger or Public Shell Merger

Business plan of merger partner. Sufficient information to complete and file the required 8-K with the SEC.

Management information, including completion of the “Officer and Director Questionnaire,” for all Officers and Directors designated by the private company merger partner.

Agreement on structure and terms of merger.

Letter of intent with escrow payment made to public company or its principal shareholders. (This must happen for the public company to cease negotiations with other merger prospects.)

Audited Financial Statement, conformed to US, GAAP for the private merger partner. The audit statements of the private company have to be consolidated with the public company’s financial statements.

Agreed merger fee in escrow with the securities attorney representing the merger partner.

Consent from the majority, preferably 100%, of existing shareholders of the private company to merge or exchange their shares for shares of the public company.

Agreement for the Officers and Directors of the public shell to be replaced with the Officers and directors designated by the private company merger partner.

List of all shareholders in the private company that will make the share exchange.

Number of shares to be outstanding “post merger”, and a complete breakdown of share ownership post merger. Note: It is often necessary for the public shell to do a reverse split and/or cancel shares owned by the affiliates of the public share prior to completing the merger.

Agreement on state the company will be domiciled in post merger.

Satisfaction of warranties and representations between public shell and merger partner.

Designation of securities attorneys and SEC qualified auditors that will represent the private merger partner.
Preparation of the share exchange agreement, stock purchase agreement, definitive merger agreement, and all other documents necessary to complete the merger.

Final preparation of the 8K that is required to be filed with the SEC within 15 days of closing the merger. As stated earlier this is required to contain consolidated audited financial statements, but the SEC will allow an additional 75 days to file and amended 8K with the audited statements.

It has been our experience that the private company’s ability to deal with all these issues is instrumental in determining the timing in closing the merger, and the long term success after closing a reverse merger or public shell purchase.

Examples of Successful
Reverse Mergers with Public Shells

Armand Hammer, world-renowned oil magnate and industrialist, is generally credited with having invented the “Reverse Merger”. In the 1950s, Hammer invested in a shell company into which he merged multi decade winner Occidental Petroleum.

In 1970 Ted Turner completed a reverse merger with Rice Broadcasting, which went on to become Turner Broadcasting.

In 1996, Muriel Siebert, renown as the first woman member of the New York Stock Exchange, took her brokerage firm public by reverse merging with J. Michaels, a defunct Brooklyn Furniture company.

One of the Dot Com fallen angels, Rare Medium (RRRR), merged with a lackluster refrigeration company and changed the entire business. This was a $2 stock in 1998, which found its way over $90 in 2000.

Acclaim Entertainment (AKLM) merged into non-operating Tele-Communications in 1994.

Contact LAUNCHfn to learn more at http://www.launchfn.com/id51.html

The market looks at what the ROI is for its investment in a company. If you are fortunate enough to have a technology that can be leveraged, the market may look at the future returns of that technology in stronger hands.

For most businesses, there are benchmarks that are often used as a starting point. The most common in a merger and acquisition situation is an EBITDA multiple. That is the gold standard for privately held companies, similar to what a PE multiple is as a business valuation metric for publicly traded stocks. One of the measures that has come into vogue on Wall Street is a PEG multiple or Price Earnings Growth. It is essentially a way to attempt to quantify the difference in PE multiples between two firms in the same industry that have a much different future growth scenario.

A very interesting discovery that we have made in engagements to sell a company that is privately held is that buyers attempt to ignore this factor when making their purchase offers.

We recently represented a company in an M&A deal that was in an industry characterized by slow growth of about 4%, had commodity type products and consequently very thin gross margins, and had little pricing power. Our client introduced a new product that was unique, had very healthy margins, retained some pricing power, and was experiencing 50% year over year growth.

The industry benchmark valuations were at 4.5 X EBITDA. We had the three largest players in the industry all interested in the acquisition and each one put out an initial bid that was, surprise, about 4.5 X EBITDA. Another factor was that our client was in rapid growth mode so a good deal of their costs were front end loaded as they launched a few big box retailers during this period. The effect of this was to depress their EBITDA performance. This made these offers even more inadequate.

The result is that we have a classic valuation gap between business buyer and business seller. This is the biggest reason that many merger and acquisition transactions do not happen. Our clients are terribly disappointed and suggest that these buyers “just don’t get it.” Our buyers have experience in making several acquisitions in their space and have their business valuation metrics pretty much in stone and think our sellers are being unreasonable in their expectations. Game over, right?

Not so fast. One of the most important roles of a business broker, merger and acquisition advisor or investment banker is devise a transaction value and structure that works for both parties. We go to the buyers and point out that their traditional way of looking at these transactions is appropriate for their prior acquisitions with standard growth metrics, lack of pricing power, and commodity type products. We go to our business sellers and point out that as a small company with a few big box retailers comprising 80% of company sales with essentially one main product, that they have a great deal of small company risk. For example, if the retail buyer from xyz Big Box Retailer changes and is replaced by a buyer that has a consolidation of vendors bias, then they could lose 30% of their business with one decision. A bigger company, however, with 30 SKU’s would be much harder to replace with a change in buyers.

We have established a platform with both buyer and seller to consider alternatives to their hard and fast business valuation positions. Here is an example of a business sale transaction structure that could be a win for both buyer and seller:

1. $1,000,000 Cash at Close which is approximately a 4 X EBITDA multiple for the year 2007.

2. An Earn out (Additional Transaction Value) based on Seller Company’s Sales Revenue beginning in year 1 and ending at the end of year 5. The earnout is at risk, but is set to net the shareholders a 6 X EBITDA multiple on 2008 projected sales (sales $6 million and EBITDA margin of 16.67% or EBITDA of $1,000,000).

This is the transaction structure we are recommending to balance a low EBITDA valuation on a company that will grow revenues by 50% next year. If they don’t, then the earn out will be less. Most of the transaction value is in future performance based earn out. Our projection is that with Buyer Company cost efficiencies, Buyer Company can improve operating performance by an amount that covers the entire earn out amount and maintains or even improves Seller Company’s historical margins.

Most business buyers that approach a company with an unsolicited interest in acquiring them are bottom feeders and will attempt to buy way below the market. They will attempt to draw out the process and pursue several acquisitions simultaneously hoping that one or two sellers just cave and sell out at a discount. They may start out at a decent valuation, but as they go through their due diligence process will find one issue after another that makes them reduce their offer. They often throw out the term “material adverse change” in an attempt to justify their value reducing behaviors. Some business development directors get judged or paid bonuses on how much below the original offer they can ultimately close the deal.

What is the way to combat this bad buyer behavior? The best way is to have options. Those options are multiple interested buyers. We feel very uncomfortable when we are engaged to sell a company that is difficult to sell. We have taken them through the entire marketing phase and end up with only one legitimate interested buyer. You bet that buyer recognizes the issues and the likelihood of limited interest and will attempt all of the maneuvers to drive down the buying price and terms. Our negotiating position on behalf of our seller client is severely weakened and we struggle to preserve value in spite of doing this every day. Think about how effective you will be in this single buyer scenario. We tell our prospective clients that contact us after an unsolicited offer, “When it comes to business valuation, if you have only one buyer, he is right.”

In the world of internet marketing, joint ventures are what separate the big boys from the newcomers. You will very rarely come across a big earning internet marketer who has not, at some point, joined forces with a friend or acquaintance with the objective of selling more of their product or service. Sure, you can get rich while never partaking in a joint venture. However the road to riches can be cut that much shorter with a little help from your friends.

A joint venture works best when you team up with someone who is well known and respected in their field. Yes, getting on side with the big guns can be akin to trying to get a date with your favorite movie star – it’s not impossible, but you have to make yourself noticed to get there! The best way to go about requesting a joint venture with someone is to spell out the benefits for THEM. What will they get out of it? Perhaps you have a list of subscribers that your JV partner can promote themself to in return for promoting your product to their list.

If you are new and have only a small list of email subscribers, consider offering your potential joint venture partner a free product, such as an ebook, which he can give away to his subscribers. This has the dual benefit of allowing him to engage his subscribers with a freebie, whilst allowing you to expose yourself to his mega-list of members. You did of course insert your own promotional text in the free ebook didn’t you?

The benefits of a joint venture are obvious. You can simply double or triple your exposure to a group of potential customers in an instant. Even more so, if just a small percentage of your new audience subscribes to your email list as a result of your joint venture, you’ve just increased the size of your own email list and cut into the market of your partner (who is often also a competitor) as well!

JV partners can be found absolutely anywhere. You can traverse related forums in your niche to track down people who you know are actively promoting products that you’d like to associate yourself with. Another great way to find a JV partner is to join some lists in your niche (you should have already done this!). After some time you will get a general idea of who is actively promoting to their list on a regular basis. It is these enthusiastic list owners who will be most keen to joint venture with you.

There is no need to write an essay when you are requesting a joint venture with someone. A few simple sentences with your idea, the benefits for THEM and what you can offer in the JV, is more than sufficient.If they are interested, they will ask you for further information. Don’t be dismayed if you don’t receive a ‘yes’ to every single JV request you submit – just move on to the next person. You can always go back to your most preferred partners later on, perhaps once you have developed more of a presence in your niche.

Joint ventures are the ultimate way to take your income to new levels. Ideally, you should be endeavouring to contact at least five people every month to joint venture with – the more the better!

Developing Criteria

Before making any inquiries into potential acquisition candidates, develop your set of criteria, which allow you to focus time and energy toward the type of candidates that will best meet your objectives. Consider the following: type of business, minimum (and possible maximum) revenues, minimum earnings, geographical location, geographical coverage, years established, post-merger management in place, ability to relocate the business, turn-around situation (if looking at under-performing companies as possible acquisitions), capital requirements to grow the business further, and product and/or service line complement to your existing business.

Financial Resources

Prior to proceeding with any conversations, determine your financial resources to acquire the potential candidate. Do you have cash and committed capital on hand or easily accessible or do you have to review each deal on a case-by-case basis? Speed of financing can determine success of the acquisition.

Required Initial Information

Companies are, at times, reluctant to divulge information. Determine in advance the required information you need to make an informed decision. Only deal with companies willing to comply with your realistic requirements; their responsiveness and ability to provide the information you need also is an indicator of how serious the seller is.

Communication

Good communication between both parties moves the transaction forward; poor communication (by either party) hinders success. Before implementing a plan to grow through acquisition, form your internal deal team. Establish who the points of contacts will be when you are searching for and reviewing acquisition contacts. Outline their responsibilities so that you have a strong flow of information and follow up accountability. Make one person the key interface with the acquisition candidates; they should manage the details of your interaction with the business that is being considered. These things are essential in order to have a solid communication plan in place so that suitable acquisition candidates are handled in the most efficient and professional way possible. How the communication is handled between the two companies is important; often the selling company is being pursued by other buyers; an efficient and professional process by you (as a potential buyer of the sellers business) can only increase your chance of success.

Post-Merger Integration Plan

Determine what you are going to do with the business after you have bought it; this is as important as finding the business to buy. The plan will have to be modified and tailored to specific acquisition candidates, but having a template to work from will allow you to integrate your acquisitions more smoothly and leverage acquired assets, technology and techniques to grow both businesses. Without a plan or template you have to identify and manage the integration on the fly and by the seat of your pants. Since the acquisition may represent a sizeable investment of capital, resources and time – it is in your best interest to make the integration go as smoothly as possible.

Acquisition Team

As mentioned above; establishing your deal team is very important from a communication standpoint. Throughout the entire process questions will arise that may be outside your area of expertise; have internal and external team members to cover areas in which you are not proficient. Team members may not just consist of you and your internal management but also outside consultants experienced in areas of need. They can assist in your plan to grow through acquisition, manage the search, coordinate the teams efforts, cover things that are not in your area of expertise and help the entire process become more efficient and productive.