The $15/Hour Minimum Wage Debate

A provision to gradually increase the federal minimum wage to $15/hour was recently removed from a budget reconciliation bill in Congress.  While that pay increase doesn’t look like it will be coming at the federal level this year, the debate around the topic isn’t going away and has already led companies like Amazon and Target to announce their own moves to at least $15/hour for all new employees.  In the same vein, the State of California has announced a state minimum wage of $15/hour effective January 2022.  Whatever the starting pay is for your employees, you should know and understand the talking points of this debate.

Stats and Guesses

As part of the legislative process, the Congressional Budget Office (CBO) put out some projections on the effect of the move toward $15/hour:

  • The cost to the government would be $54 billion dollars over a ten-year period
  • 30 million Americans would get a pay raise
  • Of those 30 million, 900,000 would be lifted out of poverty
  • Possible job cuts as a result of this could be close to 1.4 million workers (.9%)
  • Labor costs/Purchasing power (depending on your perspective) would increase by $333 billion over the same ten-year period

While the CBO is a nonpartisan body, that doesn’t shield them from criticism, and these numbers received their fair share of disagreement from both sides of the aisle.  What is clear already is that more than 29 states have minimum wages that are higher than the federal minimum wage, which was last adjusted in 2009 to $7.25/hour.

Your Business

We’ve talked before about different ways to financially reward employees and why hiring for cultural fit is an important part of making sure that your team isn’t only money motivated.  While not every business has the resources to simply double starting pay, and while the vast majority of our clients don’t have a single team member on minimum wage, it’s important to realize that such a dramatic change will affect everyone and every business.  Questions you should be asking include:

  • Do any of my key vendors employ minimum wage workers?  Have they forecast how our prices would change if that minimum wage would change dramatically?  Do I have contingency plans in place in case they decide to cease operations?
  • Using answers from the first set of questions, how would you deal with increased costs?  Would you pass that on to the customer?  If so, what percentage?  How does your business change as a result?
  • How closely are the lowest-paid members of your team compensated in relation to the minimum wage?  What adjustments would you need to make to their salaries as a result?

Sometimes we can forget that changes we don’t think will affect us or our businesses will indeed affect us and our businesses, and in profound ways.  Rather than passively wait for changes to occur, the best business owners proactively attack challenges before they become problems.

Are you and your team happy with the compensation plan you have in place?  Have you thought about that plan in relation to a possible future sale?  Give us a call to talk about it.

Case Study #43: From Painting Stripes to a Ten Figure Exit

Sir Lines A LotWhen Lee Gregory first started Sir Lines A Lot, it was as a part-time business.  He had a regular job and spent his nights drawing the lines in the parking lots of banks and fast food restaurants.  He had to stand out in a crowded field and did so with great customer service.  That meant when he started bidding for larger city and state contracts, he had developed a competitive advantage.  That advantage took him all the way to a ten figure exit.

Getting Creative with Capital Needs

You may not realize it, but one of those trucks that puts yellow and white lines down onto the road costs $700,000 new.  Lee didn’t have those kinds of funds, but he did have a crew that had some mechanical skills.  So he went around the country buying used trucks.  Most municipalities who owned them would normally sell them after 10-15 years.  Lee and his team put a lot of sweat into reconditioning these trucks and making them last longer.  Average cost of these used trucks?  $70,000.  With some elbow grease and creativity, Lee and the Sir Lines A Lot team essentially paid 10 cents on the dollar for these assets.  Cost of capital isn’t always a barrier, it turns out.

Differentiating with Governmental Bids

When Lee started bidding for jobs at the city and state level, he went from the dozens of competitors he faced when servicing small retail businesses to roughly three.  Lee always wanted to build his business with integrity so he wasn’t interested in backdoor deals with government officials.  He wanted to earn the business fair and square.  Turns out his competition wasn’t doing a good job, as simply showing up and doing what he said he was going to do on time earned him a great reputation among municipalities.  

Once he had that reputation, he started suggesting to those who were in charge of putting together bids to consider putting stipulations into the bids.  These stipulations simply revolved around follow up and customer service that he knew he offered but that his competitors didn’t.  Those working in government saw those features as valuable additions for no additional price to the taxpayer, and soon Lee was winning some of those big jobs.

This didn’t guarantee he would always get the job: the law stipulated that the bid always had to be awarded to the least expensive bidder, and Lee recounts that he once lost a $4,000,000 job by $50.  “I’d rather lose a bid fair and square than cheat to win one,” he noted.

Mindset Shift

Due to the seasonal nature of the business, especially in Minnesota where the company was based, Lee (and his team) was able to count on 3-4 months off every year, and he was making a comfortable living, with the business throwing off between 20-40% margin of EBITDA.  But one day he was at a meeting with some colleagues in business and some basic questions led to a broker sharing the thought that Lee could be looking at a ten figure exit.  

While Lee knew the assets of the business alone were worth $4-5M, he had no idea the business could command such a premium.  He had also started to realize the stress of running the company, particularly the HR issues which he didn’t care for.  Maybe it was time to look at a sale.

As he did, he realized that his value wasn’t in fire fighting and dealing with the HR issues, it was, as we often discuss in these case studies, removing himself from the scaffolding.  He worked hard to make the company an attractive turnkey asset to buy but still with plenty of growth upside.

Better Books

As he prepared his business for sale, Lee realized that he had been lazy with books.  He didn’t actually know the average margin he made on any given job.  As he painstakingly went back through all the numbers and the cost of every can of paint, he realized that the work he was doing would not only offer potential buyers a much better look at the state of the company at present, but could also offer insight into growth opportunities that he hadn’t considered simply because he was comfortably cruising with the business as it was.  The marginal extra revenue in investing in a new truck here or a new process there wasn’t worth it to him, but it could easily be worth it to a new owner with fresh eyes and plenty of energy.

When his books were better Lee went back and engaged with the broker who had first shared the possibility of a big exit with him.  He ended up with four genuine offers and closed with the first one, though there were parts of the diligence that were challenging enough that he almost gave up.  But he saw his way to the finish line and the ten figure exit he was chasing.


Lee’s story offers some important lessons for those building a business to sell:

  • When you’re in a crowded marketplace, find a way to stand out with customers
  • If capital is an issue, find a creative solution
  • Beware complacency: this can lead to businesses plateauing in value
  • Keep better than average books: if you don’t you’ll have to spend a lot of time getting them ready when you do want to sell
  • Keep focused during diligence and don’t let its difficulties keep you from getting to the finish line

Have you been thinking about getting a valuation or selling your business?  Give us a call.  We’d love to help!

What to Look For (and Avoid) in a Business Broker Listing Agreement

Business Broker Listing AgreementBehind all our business broker listings, there is a business broker listing agreement. This spells out mutual responsibilities between us and our clients. As with any contract, this is something that deserves your undivided attention, as we’ve said many times before that a business transaction may be one of the most important events of your life. In this article we’ll discuss the various provisions of any given business broker listing agreement and what you should consider before signing one.

Why Have a Business Broker Listing Agreement?

The short answer? To protect you, your business, and your broker. Remember that ultimately, contracts are not there in case everything goes right, but in case even one thing goes wrong.

Key Elements of a Business Broker Listing Agreement

While every agreement may vary, these are the elements you must have for any serious agreement to list your business.

  • Duration. This is the amount of time your business is listed for. As we’ve said in a previous article, selling a business can take between two months and two years.
    • Under twelve months: this is often pitched as offering more flexibility for the seller, but really, it puts undue pressure on a broker and as we’ll point out below, it may not really offer you the flexibility that it promises.
    • At least twelve months: this is pretty standard, as this recognizes that (and mentally prepares you for the fact that) this is a marathon, not a sprint.
    • Keep in mind that just because your engagement has passed doesn’t mean you won’t owe a commission to your broker. We keep records of everyone we introduce to a potential seller and if they conclude a transaction within a certain time period of the end of the engagement, a commission may still be owed. That’s why you need to be very clear on the details here, not just for your sake, but for your broker’s.
  • Right to Sell. In this section you are going to give us the exclusive right to represent you in a business transaction. We’ve talked before about the sorts of things we do to market your business.
  • Representation. Are you who you say you are? Do you actually own the assets you are purporting to sell?
  • Protection/Indemnification Clause. Should anything go wrong during the transaction, this section addresses the legal and financial rights and obligations of all parties.
  • Dispute Resolution Terms. Should significant problems arise during the transaction, how will these problems be cured? Will you use arbitration or litigation?  In which jurisdiction will the dispute be dealt with?
  • Commission. This varies per broker and agency but here at Apex we settle this at closing.

We’re Here to Help

In a world in which we so often click past “terms and conditions” because we don’t want to bother to read them, it can be hard to sit down and work through a document like a business broker listing agreement. But you don’t have to do it alone! We’re here to help and are want you to be comfortable as you pursue a transaction. Give us a call today!

Deal Points: Getting to the Finish Line

Getting to the Finish LineIn any business transaction, there are going to be key deal points that are deal breakers for the buyer or the seller. As brokers, we’re going to represent our client to the best of our ability. We also have one eye on the greater picture, the deal itself. And sometimes, we can come up with creative solutions to get a deal to the finish line and make both parties happy.

Real Estate

Sometimes a seller wants to include the real estate of a business along with the sale. But if it’s bundled together, it becomes too much for the buyer to take on. Sometimes the financing won’t cover it. Sometimes because the cash flow isn’t there. Owners will sometimes not pay themselves rent on the property and thus create an unattractive proposition to buyers who don’t have the luxury of owning the building the property is housed in.

A win/win solution can be to carve the real estate out of the deal and make the seller a landlord. In this way, the buyer doesn’t have to deal with the cost of the real estate. And the seller is incentivized to make sure the buyer succeeds so he gets additional cash flow via the tenancy.


We’ve discussed the risks of an earnout on numerous occasions.  Sometimes a seller who isn’t happy with this option can ask for a royalty on a specific product or in a specific division of the company. The principle of the earnout is the same: money later instead of at the time of closing.  

This can be a win for a seller who doesn’t want to go down a  traditional seller financing route (for whatever reason) and for the buyer who can see that the seller believes in the product/company enough to defer compensation and base it on performance.


Over the years, the seller may have acquired assets that are either superfluous to the business (additional trucks that are simply being kept as “spares”) or not part of the buyer’s vision for the company. The seller doesn’t have to “take a loss” on these assets. He/she can simply carve them out of the transaction and sell them separately. The buyer wins by not paying for assets that he/she doesn’t feel the business needs going forward.


Sometimes a buyer might only be interested in a particular part of the business. This could be the fastest growing segment of the business. Or it might feature a method or technology that he/she is particularly interested in. This presents an opportunity to spin off that part of the company either as an entity owned solely by the seller or in some kind of partnership (allowing the buyer to fully buy out the seller at some point.)  This can allow the seller to take some money off the table and/or use some of those proceeds to package up the rest of the business for sale on its own.

There are many bespoke possibilities to get to the finish line of a transaction. But you can’t get there if you’re overly focused on “winning” a deal point and ignore its role in the transaction as a whole. That’s where we can (and do) help. Want to know more? Give us a call!

Case Study #40: A Covid and Due Diligence Casualty

Case Study #40: A Covid and Due Diligence CasualtyAna Chaud started Garden Bar some years ago in Portland as a fast casual restaurant which featured salads only. While such chains as Chopped and Sweetgreen existed on the East Coast, nothing comparable existed in Portland, and Ana pioneered the market.

While Ana had some background in nutrition, she had no restaurant experience. She partnered with someone who had fine dining experience and in the first year they did well. They brought in $500,000 in top line revenue, doubling that in the second year. They had a “clustering” strategy similar to Starbucks, in which a commissary location supplied all the produce for a group of stores.


The very first store was completely self-funded by Anna, and the second store was covered by a small SBA loan and some funds from friends and family. This type of business needed to scale to really make great margins (not just to achieve economics of scale in purchasing, but in sales). To add four more stores, Anna took $500,000 in funding from eight investors, yielding them 20% in equity.

To add more stores and inject more working capital, Ana went to another set of angel investors and raised $1.1M in the form of a convertible note. At this point, Ana made a mistake in her due diligence. She allowed one of the investors to draw up the note and didn’t hire someone to represent her interests. If she had, she might have seen one of the terms that would have given her pause: if the company was acquired prior to the note converting, the investors would get a 2.5X return on the original investment.

The Acquisition Clause Became Important

As Ana grew Garden Bar, it became a very attractive acquisition opportunity for a company who had a similar concept in Seattle. And they were looking to become a regional player in the Pacific Northwest. She wasn’t aware of this prior to getting an extension on the convertible note, with no change to the return clause she had missed. Three months after that acquisition, she was looking at an LOI.

While the note holders had liquidation preference in a sale, the preferred shareholders, the original investors that funded stores 3-6, had to approve the increased payout to the convertible note holders. You might guess they were not too keen to do so. That said, everyone who had invested in Ana and Garden Bar up to that point were angel investors, people generally more interested in helping entrepreneurs get up and running, rather than a high rate of return. Everyone put their heads together to negotiate, and Anna gave up all her immediate upside to make sure that all the investors were at least made whole. And then they would profit via an earnout mechanism over a couple years.

It might have been an improbable happy ending if it weren’t for the arrival of COVID-19. In Portland, this meant an extreme lockdown. While the first part of the transaction had closed and her investors had been mostly made whole, Ana’s earnout is now at best in jeopardy, and in the worst case, completely gone. Only time will tell.

Key Takeaways:

  • Get help with due diligence.  If you’re going to need investors, get representation. Have a professional with your interests in mind look over any document that gives away equity or indebts you or the company.
  • Accept risk. At one point, Ana had personally guaranteed almost all the leases for the stores, simply because she was still considered “risky” for the banks, despite being able to show strong cash flow.
  • Remember that earnouts are never a sure thing. While we’ve discussed the risks of an earnout in ordinary situations, COVID-19 has added one more possibility into the mix.

Office Space and Remote Work in the “New Normal”

Apex Business Advisors: Office Space and Remote WorkThe COVID-19 epidemic has had far reaching consequences for businesses worldwide, some of which remain to be discovered. But when businesses were forced to close, commercial real estate took a big hit. As the lockdown continues and businesses adjust, a new normal has begun to take shape. This may shape the direction of commercial real estate and how companies work for a generations.


Before Covid-19, commercial real estate continued record year-on-year growth. With steady cash flows, it provided an attractive investment alternative for conservative investors to corporate debt. The returns were significantly higher, but with only slightly more risk.

While remote work had been steadily growing, it wasn’t growing at anywhere close to the demand for commercial real estate space. And remote work didn’t show any signs of hockey stick growth in the near future. There were companies that publicly stated seeing great value in their teams physically working together and had no interest in moving to remote work.


Needless to say, those companies who resisted remote work found themselves with no choices in the face of governmental orders. Overnight, people who had no idea that “Slack” was a software program or that “Zoom” was something you used to meet with others got acquainted with both of them, and many other programs.

Then days turned into weeks and many of those managers’ concerns turned into unexpected surprise. Their teams were perfectly capable of working online, despite having never done so before. It wasn’t perfect, and maybe it wouldn’t be a forever solution, but a line had been crossed that couldn’t be uncrossed.

This led to serious thoughts for business owners who routinely cut five and six figure monthly rent checks. Why pay for all this space if my team can effectively work from home? It left them free to rethink the future of their office space.


One of those shifts in office space could be re-imagining it as a place for meeting clients and for occasional team meetings. There could be some dedicated shared space for various team members who still wish to come in to a separate office. For some companies, this wouldn’t necessarily change their footprint that much. For other companies, it would be game-changing. Freeing up revenue to spend on attracting customers or building products during a particularly challenging economic climate.

With a change in the footprint of their office space, there will need to be more acceptance of the culture of remote work and incorporation into how the company does business. No more painful minutes spent learning Zoom on the fly. There will be established systems and procedures that existing and new employees have to understand. And they will be trained to make sure that the new remote version of the company is as good or better than the pre-Covid version.

Instead of waiting for things to go “back to normal” (whatever that means) the best business owners are proactively managing the situation as it unfolds. They’re not content to be passive receivers of changes. They are dealing with the changing landscape with flexibility. They’re anticipating all that might come with the knowledge of what’s happened in first half of 2020.

Are you thinking about making changes to how your team works and how your office is configured? We know people who can help. Give us a call!

Business in 2020: Catching a Falling Knife

Here at Apex, we’ve been proactive in advising our clients as 2020 has unfolded. We began the year by discussing issues that might come in an election year. As the first wave of lockdowns occurred we encouraged people to look at federal funds (and followed up with detailed information on PPP). As the lockdowns continued we shared our long term outlook (don’t panic) while offering short-term changes that could help businesses adapt to the continuing chaos.

But now it’s the second half of 2020 and there’s no “normal” in sight.  What now?

We’ve heard many business owners say “2020 is a write-off.” While we understand that thinking, there’s also a danger in the phrase… It assumes that events know when December 31st comes and hence switch off just because it’s a new year. A new year may be something that we as humans pop champagne over, but the universe is indifferent. It just keeps going. Hence, with months of an unprecedented business climate, we should have more wisdom under our belts, and more importantly, we should use that wisdom.

Our position at Apex is unchanged. We look at the fundamentals and the transactions that we continue to handle. Our business has not stopped. There are still buyers and sellers looking to do deals. Every industry is different. While food and beverage and entertainment may be tougher to sell at the moment (yet some of them still continue to move), some businesses have temporarily put their listings on hold as they experience record years.

However, your position may have changed.

Leaving the Corporate World

You may have been someone who was already looking to leave the corporate world and enter business ownership, but now you have cold feet.  Is having a job any more secure in this environment? While business owners are indeed facing challenges, they do so knowing they have the most control over their destinies. They can live and die by that self-determination, and that’s preferable to waiting for an ax to fall. Does COVID-19 really change whether a business is the best vehicle to determine your own destiny?

Selling a Business

You might have been someone looking to sell a business. You still need to do what’s necessary to prepare that business for sale. And that includes guiding it through challenging circumstances. As we’ve discussed before, companies who showed good performance in 2009 and 2010, following the 2008 financial crisis, made for even more attractive acquisition targets. Those companies showed resilience, not just doing well when the sun was shining, but when the storms hit. Has COVID-19 changed your desire to sell your business, or just demanded more perseverance and resilience from you?

Falling Knives

In this second half of the year, we aren’t waiting for events to “happen to” our clients. We are encouraging them to take matters into their own hands. If it feels like you’re trying to catch a falling knife, get some gloves on and reach those mitts out. Success in life doesn’t come to those who passively wait in fear for the next disaster, but those who, amidst setbacks and challenges, fill sandbags for what may come next. They keep their eyes on their environment close and far, watching for opportunities.

Feeling paralyzed about what to do in 2020? Talk to one of our advisors. While this is all of our first time through COVID-19, it’s not our first major financial shock. We have great advice and guidance for you.

Book Club #23: Tribe of Mentors, by Tim Ferriss

Tribe of Mentors, by Tim FerrissTim Ferriss is most known for his bestselling The Four Hour Work Week, but most recently has been compiling books that have been enabled by his top-rated podcast. The newest one is Tribe of Mentors, which has the subtitle of “Short Life Advice from the Best in the World.” At almost 600 pages, the book is not meant to be read straight through, but in 4-5 page increments as you peruse the answers to a set of questions Tim posed to one hundred different high achievers.

The Questions

Not every person answers every question listed below, and some bend and re-frame the question to go down a more interesting path, but to give you a frame of reference, here they are:

  • What is the book (or books) you’ve given most as a gift, and why? Or what are one to three books that have greatly influenced your life?
  • What purchase of $100 or less has most positively impacted your life in the last six months (or in recent memory)? 
  • How has a failure, or apparent failure, set you up for later success? Do you have a “favorite failure” of yours?
  • If you could have a gigantic billboard anywhere with anything on it — metaphorically speaking, getting a message out to millions or billions — what would it say and why? It could be a few words or a paragraph. 
  • What is one of the best or most worthwhile investments you’ve ever made? (Could be an investment of money, time, energy, etc.)
  • What is an unusual habit or an absurd thing that you love?
  • In the last five years, what new belief, behavior, or habit has most improved your life?
  • What advice would you give to a smart, driven college student about to enter the “real world”? What advice should they ignore?
  • What are bad recommendations you hear in your profession or area of expertise?
  • In the last five years, what have you become better at saying ‘no’ to?
  • When you feel overwhelmed or unfocused, or have lost your focus temporarily, what do you do? (If helpful: What questions do you ask yourself?)

The Answers

We obviously can’t go through all the many answers that were given in the book, but here are a few.

On Advice to Recent Grads

Developer of “smart contracts” and the precursor to Bitcoin, Bit Gold, Nick Szabo offers the following: “The less you need positive feedback on your ideas, the more original design regions you can explore, and the more creative and, in the long term, useful to society you will be.” Unlike the “plastics!” advice of previous generations, this challenges those coming up in society to be willing to take more risks.

Ben Silbermann, CEO and co-founder of Pinterest, adds: “I feel like a lot of people in Silicon Valley serialize their lives. They think, ‘First I’ll do college. Then I’ll do a startup. Then I’ll make money. Then I’ll do X.’ There’s some truth in that approach, but most of the most important stuff has to be parallel-processed, like your relationships and your health, because you can’t make up the time by doing more of it later. You can’t neglect your wife for four years and then say, ‘Okay, now it’s my wife years.’

Relationships don’t work that way, and neither does your health or your fitness…Figuring out a system, so that the stuff you need to do all the time happens, even while you might be placing disproportionate focus on one thing, is pretty important. Otherwise, you’ll be setting yourself up to be lonely and unhealthy in your future.”

On New Beliefs

Arianna Huffington became more intentional with her time: “Before, I separated time into work time and non-work time, and I always wanted to maximize work time. Now I realize that you can’t separate the two — time spent taking breaks, taking a walk, unplugging, meditating — that’s all work time, too, in the sense that time spent unplugging and recharging makes me better, more effective, and happier in my work and in my life.” 

Saying No

Josh Waitzkin, a chess prodigy whose life was the basis for the film Searching for Bobby Fischer, has an extreme take on saying “no” more often: “I say no to just about everything public. I say no to more than 99 percent of professional opportunities that people approach me with.” This is echoed by tech founder Muneeb Ali later in the book: “External meetings should be initiated by me…and not initiated by others.” Now, not all of us are as busy as these people might be, but surely we could audit how and where we are spending our time to be of greater personal benefit to ourselves and those we love.

Regaining Focus when Overwhelmed

Maria Sharapova shared a quote of Hal Boyle’s to help her when she’s feeling lost or unfocused: “What makes a river so restful to people is that it doesn’t have any doubt – it is sure to get where it is going, and it doesn’t want to go anywhere else.”  

Of course there are literally hundreds more answers in the book, and if you’d like to listen to some of them free, you can check some of them out in the short audio series Tim released just for the book

In the meantime, it might be a fun exercise to do these questions yourself and share them with your friends and colleagues.  You’ll learn plenty about yourself and them in doing so.

Paycheck Protection Program: The Latest

PPP Loans UpdateSome time ago, we noted that funds were going to be available for small businesses and in the intervening weeks the Paycheck Protection Program (PPP) story has developed significantly. We wanted to give you some updates, as well as encourage you to apply if you need to, as there is still money available after an originally botched launch.

First Round: $349 Billion

Government isn’t ordinarily known for efficient launches of large scale programs, so we shouldn’t have expected anything different in stressful circumstances. Some of the lowlights included:

  • The funds ran out in 13 days.
  • Many small businesses were only able to apply one week after the program opened.
  • Some very large companies with significant financial resources, like Shake Shack, Ruth’s Chris, and you can’t make it up, the Los Angeles Lakers, received loans. After massive public backlash, they all returned the money, though we suspect that they wouldn’t have if no one had found out.

It was a banner day for the banks, who netted 10 billion dollars in fees alone, and all for underwriting SBA-guaranteed loans, which means almost no risk.

Second Round: $321 Billion

Alas, the website crashed the day the second pot of funding was made available. After enough complaints, banks with under $1B in assets were given some windows to apply (unsurprisingly, the largest banks had been getting preferential treatment). After the blowback from the first round, there are still some clouds hanging over this round of funding:

  • Secretary Mnuchin noted that all loans over $2M will be audited, but didn’t say who would be doing that auditing. Banks? The SBA?
  • Treasury did provide guidance on how loans could be forgiven:
    • Loan proceeds must cover payroll costs, mortgage interest, rent, and utility costs over the eight week period after the loan is made.
    • Employee and compensation levels must be maintained.
  • But it didn’t give guidance as to how the retained portion of the loan would be categorized on a balance sheet.
  • The IRS managed to mobilize in time to let us know that expenses normally deductible would not be so if they were used to trigger forgiveness of a loan.
  • But the IRS hasn’t given guidance on how a forgiven loan amount will be dealt with either, but knowing the IRS, they won’t have our interests at heart.
  • Thankfully a non-government agency, the American Institute of CPAs, has put together a helpful guide to help you track and calculate your path to PPP loan forgiveness.

There haven’t been the absurd cases (like the Lakers) in this round, but what seems to be clear is that without guidelines, loans are not merely being given for rescue. Some companies are taking the loans to fund growth. It could be argued that the intention of the funds was to rescue small businesses that were on the verge of going under, but there doesn’t seem to be restrictions in the funding policy requiring clear proof of that, and given the current business atmosphere, there doesn’t really seem to be a moral problem with making sure your business survives during a time which may be tough on many.

Our Recommendation

As of the time of this article, there’s still more than $100M available in funding. As we’ve said previously, our long-term outlook for the economy, not just in the US, but worldwide, is positive. We also think that political circumstances are such that decisions concerning the finer points we’ve highlighted above are likely to go the way of small business owners.

We encourage small business owners who think they could put this funding to good use, even if not in immediate danger of going out of business, to give their bankers a call to see if it makes sense to apply. If you’re one of the many business owners unhappy with their banking relationship, give us a call. We’ve got some solid names to share with you.

Don’t Panic: Business Buying and Selling in the Age of COVID-19

Don't PanicSome time ago we wrote about adjustments you could make proactively in your business as COVID-19 started to make larger waves in the global economy. As the crisis grows and lingers, dynamics necessarily change for both buyers and sellers in the marketplace. What we continue to tell our clients here at Apex is: don’t panic. Those who can keep their heads when everyone is losing theirs will prosper when conditions improve. With that spirit of calm, let’s consider some things.

Short Term (the next 90 days)

We have deals in the pipeline and some of them will collapse due to a change for either buyer or seller that was unforeseen prior to these past few weeks. This has nothing specifically to do with the business but more to do with the general business climate. For example, a buyer may get cold feet about buying now or watched income which was going to be cashed out of stocks to finance the sale crater in value. They may see waiting as the best option.

That said, many deals will close, regardless. We saw some of this in 2008 during the financial crisis as well.

While the media may make it seem that fire is raining down from heaven, the reality is that business does go on in many sectors. And not just in the US but worldwide, including the supply chain for all businesses marked as “essential”. Indeed, some businesses are seeing their most profitable months in some years even as they move towards acquisition. Some of those sellers might delay a sale just to continue to ride some of those record profits a couple more months.

Medium Term (the next 6 to 18 months)

Should some kind of lockdown become national in the United States as it has in much smaller countries in Europe, there could be a hit to valuations of businesses, as those are based on earnings including the most recent financial statements.

On the other side, borrowing will be historically easy, as the Treasury and SBA make unprecedented guarantees and funds available. Rates are at historic lows. Some banks may put some additional provisions in the paperwork in relation to COVID-19 and its impact on certain types of businesses. But banks want businesses to move forward, not to freeze up, so they will likely be encouraging rather than discouraging.

Long Term (the next 24-48 months)

As with any shock to the economy of any country, there will be some necessary recovery time. But the realities of life go on.

The Baby Boomers continue to retire, and in record numbers, and many own businesses that have to be sold. Many people will begin to see their jobs through new lenses in a period of remote work. And the idea of buying a business, with its levels of control and opportunities for growth, may become even more appealing.

This isn’t to say that we don’t see some challenges ahead, but we tend to take the long view, because this isn’t the first economic shock we’ve experienced as advisors. Life does go on, despite great uncertainties, and indeed, this time, as any time in life and in business, is only as good as what you choose to do with it.

We look at facts and history and combine them with what we hear from our buyers and sellers and that leads us back to what we started this article with: not panicking.

Do you have questions about buying or selling a business right now?
We’re happy to talk through some of the challenges (and opportunities) with you!