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American Business Brokers & Advisors Founder & President PROFESSIONAL INTERMEDIARY & MARKET MAKER FOR PRIVATELY HELD COMPANIES Author of ‘The Art of Buying and Selling a Convenience Store’ & ‘Hidden Wealth’ Involved in the Sale of 800+ Businesses Advisor • Consultant • Speaker
Have Store Values Finally Peaked? WWW.TERRYMONROE.COM AUGUST 2021 Why Now is the Best Time to Sell Your Business
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At the time I am writing this article, the financial markets are in flux. A year and a half ago, a pandemic struck the world, and the U.S. government took it upon themselves to decide which businesses were “essential,” and which ones weren’t. Fortunately, the people I work with in the convenience store business were considered essential, and all of the business owners I have spoken with had a better than usual year in regard to profitability. However, their increased profits came at the expense of other businesses not faring so well. Today, things are getting even more confusing. The economy appears to be heating up with more people traveling and consuming more goods and services. However, the prices for these goods and services are increasing, leading to inflation. The government has different ways of gauging and reporting inflation, but the most obvious way to do so is with your own pocketbook. The prices of gasoline, food, other consumable products, and, of course, labor have all increased. The fact that we’re paying more for these things is a sign of inflation. The Federal Reserve, which controls the cost of money, has said these price increases are temporary. However, when you increase the cost of labor, those increased costs get passed on to the consumer. So, if the cost of labor doesn’t go down, neither will the cost of consumer goods. Inflation decreases the value of your dollar to buy certain items. A good example of this is the cost of a cheeseburger at McDonald’s. As McDonald’s franchises have raised their wages over the past six months from $11.50 per hour to now $13.00 an hour, the price of a cheeseburger has gone from $1.19 to $1.49. There is a direct correlation between the cost of producing the cheeseburger and the cost of the cheeseburger itself. So, how do you stop inflation? Well, if you were around in the 70s or 80s, you’ll remember what happened. Inflation was getting out of control and the Federal Reserve began raising interest rates to stop the rise of inflation. Did it work? Well, technically yes. Interest rates on loans spiked around 20%, and many businesses shuttered because the cost of keeping things running was just too much. Now, our situation isn’t directly analogous to the situation in the 70s, but we are experiencing the cheapest cost of money our economy has ever seen. One benefit of this cheap money has been the tremendous increase in the value of a business. With the stock market soaring, you
can sell a convenience store today for more than ever before. Plus, cheap money helps you buy a more expensive house, a nicer car, and basically gives you more bang for your buck. However, if money starts to cost even a little bit more, its effect on the market value of your business will be immediate and detrimental. That’s because, regardless of what kind of business you’re selling, its net cash flow is still the most important thing. If the cost of money increases, the amount of net cash flow a business generates will decrease, and the market value of the business will decrease too. We like to think business is linear, meaning things continue in a straight line, when in reality, business always experiences a cycle of ups and downs. If interest rates start to rise, be prepared to experience a new cycle in which interest rates go up and the market value of businesses goes down. I’m not trying to be Chicken Little, crying out that the sky is falling. However, one good thing about being old is that you live through times in history (like the 70s) and learn from them. The lesson that I took away from that time, which I think is applicable today, is that it’s better to sell your business while market values are up and the cost of money is cheap, rather than wait until this part of the cycle is over. –Terry Monroe
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It’s Time to Diversify Your Banking!
5 Reasons Not to Keep All of Your Money in One Place
You’ve probably heard the expression, “Don’t put all of your eggs in one basket.” But what about “Don’t put all of your dollars in one bank”? Banking at a single institution is the default for most people, but just because something is the typical strategy doesn’t mean it’s the best one for you! Here are five reasons to consider taking the road less traveled. 1. Different banks have different perks. Credit unions are member-run nonprofits and often don’t have minimum balance requirements. Traditional banks have cutting-edge financial technology and more loan options. Some banks offer high-yield checking accounts while others don’t, and online banks can have interest rates on savings accounts up to 15 times higher than brick-and-mortars. By banking with more than one institution, you can get the best of both (or three!) worlds. 2. You’ll have a backup if one bank fails. According to Bankrate, 511 U.S. banks failed between 2009 and 2020. That’s not nothing! If your bank isn’t insured by the Federal Deposit Insurance Corp (FDIC) and it fails, you could lose your entire balance, so diversifying your accounts (or choosing only FDIC-insured banks) is a good backup measure.
high-value accounts, depositing with multiple banks can ensure all of your money is covered.
4. The more accounts you have, the more withdrawals you can make penalty-free. Many money market and savings accounts have limits on how many times you can pull money out each month. If you bank with several institutions, you can make a few withdrawals from each of them, stay under the limits, and avoid fees. 5. You’ll have access to more banks and ATMs. Do you travel across your city, state, or the country regularly? If you do, it can be beneficial to bank with several institutions so you’re always close to an ATM or bank branch. For example, you may want to use a local credit union at home for the member benefits but bank with a national bank for out-of-state emergencies.
3. You can make sure ALL of your money is insured. The FDIC only covers up to $250,000 per depositor, per bank. So, if you have
The Capital Gains Tax Dilemma
How to Protect Your Heirs from Inheriting a Massive Tax Burden
The Biden administration has proposed an enormous increase in the capital gains rate (as high as 56.7% in California and no lower than 43.4% in a few states when state income tax is factored into the calculation) along with the elimination of the step up in basis. That means your heirs will owe an immediate capital gains tax on the value of your assets in excess of $1 million. Suppose your business is worth $10 million at your death before accounting for $5 million of debt. The capital gains tax would be due at your death and based upon the $10 million in value and not the net value of $5 million. So, even if your heirs did not sell your business at your death, they still owe the capital gains tax. That’s why the proposed capital gains rate and the elimination of the step up in basis should get your immediate attention. So, what can you do? There are two schools of thought. The first is that you could sell an appreciated asset (such as your business) with the 2021 lower capital gains rate in place and help your heirs avoid inheriting your business and owing a huge capital gains tax. While the Biden administration’s plan for capital gains tax increases could end up being retroactive, there is no support for a retroactive tax increase among Republicans, and some moderate Democrats are against it, making this action less likely.
The second school of thought is to wait it out until there is a change in administrations so that the current capital gains rates are reinstated and step up in basis is once again part of the tax code. This second school of thought is fraught with too many “ifs” and too many uncertainties to make this school of thought the preferred choice If you’re a business owner, and you’re concerned about how the capital gains tax increases will affect your plans for your business, I would recommend getting in touch with Phil and Andy Kaiser at The Kaiser Law Firm in St. Louis. They’re experts in helping you protect your assets, and they would be pleased to share their in-depth thoughts with you. Contact them today at Phil@KaiserLawFirm.com or Andy@KaiserLawFirm.com. You can also contact them through their website at KaiserLawFirm.com.
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Take a Break!
How to Change a Person’s Mind EVEN WHEN IT THEY DON’T WANT TO
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In the world of business ownership, you tend to deal with a lot of big personalities — people who have an ego and who believe that things should be done their way or no way at all. And why wouldn’t they think that way? After all, if they’re a successful business owner, their tenacity and confidence might have been what led to their success in the first place. As much as everyone would love to be right all the time, that doesn’t happen to anyone. Sometimes, when we follow our own advice and reject the more sensible counsel of others around us, we get burned. That’s why it can be a major asset to surround yourself with smart people who can disagree with you. On the other hand, what if you find yourself in the role of the “smart person who disagrees with something”? How can you break through a person’s ego without arguing with them and making them plant their feet further? Well, there are four strategies you can try: Ask them to explain how things work. Sometimes, we know a lot more than we think we know. In order to shatter that illusion, have a know-it-all write down the exact steps to the process that they claim to know intimately. Chances are, that will help them realize the gaps in their knowledge. Let them have some control over the process. If you try to forcefully fight for a fully formed idea, you’ll probably get some pushback from more stubborn leaders. However, if you can give them a general idea with some room to toss around their input, they tend to be more accepting of new ideas. Sprinkle your criticism with praise. If you want a person with a big ego to accept criticism, speak a little bit to their strengths as well. If a person has a high but fragile opinion of themselves, this is a great strategy for getting them to accept criticism while maintaining that high self-esteem. Fight for your ideas and be willing to tweak them. If a person continually disagrees with you, stand up for your idea, but also take their objections into account. Tweak your idea as necessary and re-present it as many times as it takes. Eventually, no matter how stubborn the person, you’ll break through.
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INSIDE 7824 Estero Blvd., 3rd Floor Fort Myers Beach, FL 33931 1 2 Have Store Values Finally Peaked? 5 Reasons to Diversify Your Banking
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The Capital Gains Tax Dilemma
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Strategies for Changing a Stubborn Person’s Mind
Go Back-to-School Shopping for Your Home Office!
Is Your Home Office Missing Something?
Everyone loves back-to-school season because of the shopping spree! Students can get tools they’ll actually use for the entire year while they’re on sale while saving a few extra dollars in the process. But you can get that very same feeling as an entrepreneur, too. Here’s how you can make the most of back-to-school deals this year for your home office. Upgrade your home office’s amenities. Are you a seltzer water fan? Every year, Amazon almost always has an “Off to College” sale, featuring various products that make dorm life a little bit easier and more convenient. If you want to do the same for your home office, look into a tabletop fridge — or an electric tea kettle, if tea is more your style. Some affordable decor, like wall art or small potted succulents, can spruce up your office without making a mess. If you’re looking to organize your space, consider buying desktop shelves to free up clutter. Then, you won’t have to leave your desk to stay in the zone! Look out for Apple and PC sales! Replacing your current technology can be expensive, but back-
to-school sales are the perfect way to spare your wallet. Have an amazing computer already? You can still benefit majorly from staying tuned! During last year’s back-to-school sale, Apple offered 20% off their AppleCare+ service, which gives you two incidents of accidental damage protection every 12 months. Dropped your laptop or spilled coffee on it? They’ll fix it, no questions asked. Invest in the new office chair you’ve been wanting. Don’t sacrifice your posture just because you’re working from home. Whether remote working has turned into a permanent or a part-time solution for your job, you deserve an office chair that can help keep your back straight, preventing pain and slouching. Many big-box stores will be offering sales on office chairs, so take the opportunity to sit in a healthier way today — before the expensive holiday season rolls around! Just because you’re an adult doesn’t mean you can’t have the joy of back-to-school shopping too. We hope you treat yourself to something that’ll make your remote routine even better.
Top 3 Tips to Take Advantage of Back-to-School Deals
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