Center for Rural Affairs Business Update

M i c r o B u s i n e s s S u p p o r t & I n f o r m at i o n E x c h a n g e | V o l . 2 3 , N o . 3 | w w w. C F R A . o r g / R E A P

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Sioux City, IA 511

Jeff Reynolds, REAP Program Director,jeffr@cfra.org.

Monica Braun, Women’s Business Center Director, monicab@cfra.org.

Juan Sandoval, Hispanic Business Center Director, juans@cfra.org.

Dena Beck, Senior Project Leader & Southwest/Central Loan Specialist, denab@cfra.org.

Gene Rahn, Northeast/Central Senior Loan Specialist, gener@cfra.org.

Jerry Terwilliger, Panhandle Loan Specialist, jerryt@cfra.org.

Janelle Moran, Southeast Loan Specialist, janellem@cfra.org.

Nancy Flock, Hispanic Rural Loan Specialist, nancyf@cfra.org.

Imelda Catalan, Southeast Hispanic Loan Specialist, imeldac@cfra.org.

Peggy Mahaney, REAP Administrative Assistant, peggym@cfra.org.

Kim Preston, REAP Administrative Assistant,kimp@cfra.org.

Questions?

Strengthening rural communities through small, self-employed business development.

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Center for Rural Affairs

Contact one of our helpful staff below!

R u r a l E n t e r p r i s e A s s i s ta n c e P r o j e c t1 4 5 M a i n S t r e e t, P O B o x 1 3 6 | Ly o n s , N E 6 8 0 3 8 - 0 1 3 6

c f r a . o r g | i n f o @ c f r a . o r g

Address Service Requested Summer 2014E x i t P l a n n i n g 1 0 1

What Do You Do When It’s Time to Go?B y O d e e I n g e r s o l l , N e b r a s k a B u s i n e s s D e v e l o p m e n t C e n t e r , i n g e r s o l l o @ u n k . e d u

How do small business own-ers successfully get out of their business when the time comes?

There are nine possible ways to leave a business,

and several alternative deal struc-tures that can help the process be successful – even in difficult mar-kets or industries. We don’t have time to discuss each in detail.

What’s important is that owners understand they have more op-tions than listing with a business broker or planning a liquidation event. And with each combined exit method and deal structure, the value of the result that we term as cash-to-the-seller changes.

The most effective exit will be accomplished by beginning pur-poseful planning at least three years in advance of a proposed sale or retirement. Reasonable results can sometimes be obtained in a shorter period of time, but the owner’s goal should be maximum value, maximum exit opportunities, and minimal cost.

These three desired outcomes require additional time to accom-plish. Reduce the time available to plan and, as a result, owners begin to remove or reduce one or more of these desired outcomes.

Existing exit programs and many advising professionals often focus on tax strategies or supple-mental investment or risk vehicles when tasked with exit planning. Important to the exit process, but business improvement, reposition-ing, and deal structure can provide

far more cash-to-the-seller than tax strategies can save.

Owners generally operate with two goals in mind. First, maximize the annual financial benefits they or their family received in various forms. Secondly, they are counseled to effectively reduce tax obligations to their lowest level – even to the point of showing an operating loss.

These strategies can have a significant and negative impact on business value when the owner decides to sell. Owners can’t accept that they have actually been de-stroying their own business value. If not corrected, the business will not command or support the price they “think” they should be receiving.

It doesn’t matter how much work and effort they have put into building their business. It doesn’t matter how it started or how many years it has taken to find success. Buyers are only willing to pay (and banks finance) in today’s dollars, the discounted value of future earnings adjusted for perceived risk. And the buyer or a profes-sional decides on the level of risk present, not the seller.

Another complication for owners is that they really don’t want anyone to know they’re considering leaving their business: employees, suppli-ers, customers, competition – even their lender. They resist talking with the professionals who could help them. They wait and they put off making a decision until time is against them. They hope for the best all the time playing a part in further reducing their odds of success.

If you would like to confiden-tially discuss planning a business exit or succession event, contact me, Odee Ingersoll, statewide at 308.865.8344. You can learn about a nationwide exit program to assist small business owners and learn if your business would qualify to be accepted into the program.

C o n t r i b u t e d b y O d e e I n g e r s o l l , D i r e c t o r o f t h e N e b r a s k a B u s i n e s s D e v e l o p m e n t C e n t e r at t h e U n i v e r s i t y o f N e b r a s k a K e a r n e y. R e a c h h i m o n l i n e at i n g e r s o l l o @ u n k . e d u o r v i s i t n b d c . u n o m a h a . e d u / k e a r n e y.

While in Washington DC, REAP Senior Project Leader Dena Beck (back row, 5th from the left) and Center for Rural Affairs board member Connie Harvey (front row, far left) visited Congress to share the real-life stories of Nebraska small businesses.

R e a d m o r e o n p a g e 3 .

R E A P G o e s t o Wa s h i n g t o n t oS h a r e S m a l l B u s i n e s s S u c c e s s e s

W h at D o e s Y o u r B u s i n e s s N e e d i n 2 0 1 4 ?We’ll find out soon! The 2014 Small Business Needs Assessment of over 500 business

owners and those who serve them is nearly done. It should be available in late summer. For the results, please contact Dena Beck at 308.528.0060 or denab@cfra.org.

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2 •REAP Business Update • Summer 2014 Summer 2014 • REAP Business Update • 3

The REAP Women’s Business Center is funded in part through a cooperative agreement with the US Small Business Administration. All opinions, conclusions, or recommendations expressed are those of the author(s) and do not necessarily re-flect the views of the SBA.

REAP and the Women’s Busi-ness Center and the His-panic Business Center are programs of the Center for Rural Af-fairs. The Center for Rural Affairs is a private, non-profit organization.

REAP Goes to Washington to Share Small Business SuccessesB y D e n a B e c k , S e n i o r P r o j e c t L e a d e r , d e n a b @ c f r a . o r g

Small business and rural liv-ing are two of my passions. That’s why I was delighted to be in the nation’s capitol during National Small Busi-ness Week.

I went to share what we have learned in 20 plus years working with entrepreneurs in small towns and rural communities.

REAP is part of “The Friends of the SBA Microloan Program.” The friends’ network supports a strong and effective Microloan Program at the Small Business Administration (SBA).

Through the network, organiza-tions like ours keep policymakers updated on how SBA resources are being used to finance, support, and grow small businesses and create jobs in communities across the country. REAP was one of the first batch of programs chosen to

run a pilot microlending program back in 1991.

I had the good fortune of travel-ing with Connie Harvey. Connie owns Efficiency Counts, a small business based in Hastings, Ne-braska. She is also a board mem-ber of the Center for Rural Affairs.

Connie helped us develop a QuickBooks training specifically for rural small businesses. Her own business benefited from SBA Microloan funds when she needed to expand.

While in Washington D.C., we spoke to Congressional staff and key SBA staff. We talked about the importance of small business and alternative lending sources.

It’s always good to connect with folks in D.C. and tell the stories of our businesses, share our successes as a program, and talk about the economy and the

changing needs of our customers. This year was special with Connie along. Hearing from people work-ing out in the field is one thing. But when a business talks about their journey, struggles, and suc-cesses, it makes it very real.

Connie “gleaned a lot about how advocating in Washington works. I was really impressed with the cali-ber of REAP and the other inter-mediaries that came from all over the United States. ... Real-life sto-ries are the most effective means of getting our points across.”

I was astonished to learn that 8,000 small and micro business owner credit applications are de-clined each business day. That’s why programs like REAP and the SBA Microloan are so vital to build-ing assets, jobs, and communities.

W o m e n ’ s B u s i n e s s C e n t e r U p d at e

REAP Now Offers Online CoursesEspecially for Your Small BusinessB y M o n i c a B r a u n , W B C D i r e c t o r , m o n i c a b @ c f r a . o r g

We’re pleased to an-nounce a new program to make it easy for you to take high-quality, noncredit online cours-es no matter where you

are located. Through a partnership with ed2go, we are offering hun-dreds of courses.

Through well-crafted lessons, expert online instruction, and interaction with fellow students, you’ll gain valuable knowledge at your convenience. You’ll have the flexibility to study at your own pace. The courses can be accessed 24/7 from anywhere with an Inter-net connection.

New sessions of each six-week

course start monthly. Each course includes lessons, quizzes, assign-ments, and a discussion area. Instructors facilitate every course; pacing learners, answering ques-tions, giving feedback, and facili-tating discussions.

Popular courses include: Ac-counting Fundamentals, Microsoft Office, QuickBooks, Marketing

Your Business on the Internet, and more. New courses are introduced monthly, so there’s surely some-thing to fit your needs.

To learn more, visit our online training center at www.ed2go.com/reapwbc. If you have any questions, please get in touch with me, Monica Braun, monicab@cfra.org, 402.643.2673.

H i s p a n i c B u s i n e s s C e n t e r U p d at e

Statistics Show Challenges MicroBusinesses Face in Accessing CapitalB y J u a n S a n d o va l , H B C D i r e c t o r , j u a n s @ c f r a . o r g

Last May, REAP Hispanic Business Specialist Imelda Catalan joined me at the As-sociation for Enterprise Op-portunity (AEO) Conference in New Orleans, Louisiana.

AEO is the nation’s leading voice for microenterprise development, serving the needs of U.S. micro-entrepreneurs who lack access to traditional sources of business education or capital.

Several important items caught our attention during the con-ference. We learned that 8,000 micro businesses get declined by financial institutions daily in the United States.

Business ownership is a ma-jor economic engine – the second largest source of household wealth in this country. It’s also an impor-tant strategy through which low- and moderate-income people can achieve financial success.

There are about 26 million mi-cro business owners (those with 5 or fewer employees) in the U.S. Yet almost 13 million have house-hold incomes below the national median of just over $50,000. A 2013 study by the Corporation for Enterprise Development in Wash-

ington DC found that:• 53 percent of small business-

es who have been in business less than a year had difficulty access-ing credit. Reasons included no credit history or a bad credit his-tory. In comparison, only 19 per-cent of small business with more than 10 years experience had that difficulty.

• 61 percent of lower-income business owners experienced trouble getting financing, also due to no or a bad credit history. They faced higher interest rates than individuals who made more than $150,000.

• Ethnicity is also a barrier for African American and Hispanic business owners since they are more likely to experience difficulty accessing credit. Respectively, 32 percent of African American busi-ness owners reported difficulty, 22 percent of Hispanic business owners, and 9 percent of white business owners.

Cash flow problems are key drivers of financial insecurity for

micro business owners:• A business’ operating cycle

– the timing of payments and receipts – can play a significant role in either causing or resolv-ing cash flow problems. Cash flow difficulties can also be linked to inadequate tracking of income and expenses.

• 23 percent of respondents identified cash flow pressure at tax time.

• Micro business owners’ cash flow problems can also drive fi-nancial vulnerability at the house-hold level. Data showed that 66 percent skipped salary payment, 72 percent delayed salary pay-ment, and 60 percent reduced salary.

As a program that supports micro enterprise in Nebraska, this data motivates us to con-tinue serving individuals who lack financial support from lending institutions.

To find more information about REAP, please visit cfra.org/REAP.

4 1 % o f p a r t i c i p a n t s w o u l d u s e p e r s o n a l s av i n g st o p ay f o r a b u s i n e s s e m e r g e n c y

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